During the 2012/2013 fiscal year, the vast majority of civil cases before California’s Superior Courts – 88.97% – were disposed of before trial. (Judicial Council of California, 2014 Court Statistics Report at p. xv; see also Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 659 (“a large percentage of the claims covered by insurance are settled without litigation and [] this is one of the usual methods by which the insured receives protection.”).) That year, the National Center for State Courts estimated the median cost for litigation from initiation through post-trial disposition to range from $43,000 for a “typical” automobile tort case to $122,000 for a “typical” malpractice suit. (Paula Hannaford-Agor & Nicole L. Waters, Estimating the Cost of Civil Litigation, National Center for State Courts, Court Statistics Project, Caseload Highlights, Vol 20, No. 1, Jan. 2013, at 7.) Costs drive litigation outcomes, even for litigants whose defense and/or indemnity is covered by insurance.

But the prospect of settlement can be a delicate endeavor for insureds, particularly when their interests diverge from those of the insurer. The omnipresent priority of the insurance carrier is to minimize cost exposure. The priorities of the insured, however, can vary and are not always exclusively limited to exposure. The insured may prioritize vindication, the prosecution of cross-claims, and/or other forms of non-monetary resolution over the bottom-line cost of defense.

Insurance struggles in the settlement context more typically arise when an insurer refuses to agree to the proposed settlement. But insurance disputes can also arise where an insurer seeks to settle over the insured’s objection. In these instances, settlement becomes a question of obligations and priorities. This article explores some of the parties’ respective obligations and factors to consider when disputes arise between insureds and insurers during the settlement process.

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