Dr. Ellen Johnson was sued for medical malpractice. She was insured by Proselect. A jury found against Johnson and awarded her patient $5 million in damages.
The Proselect policy gave Proselect the right to settle a case after verdict without the consent of the insured. Proselect chose not to file post-trial motions or to appeal. Instead, it settled the case for $3.75 million, an amount within Johnson’s $4 million coverage limit.
Johnson then sued Proselect, alleging that it breached its duties to her by settling the case without her consent. She asserted that the settlement harmed her professional reputation and her career prospects and caused her emotional distress.
In Johnson v. Proselect Ins. Co., 92 Mass. App. Ct. 1118, 2017 WL 6327844 (unpublished), the Massachusetts Appeal Court affirmed summary judgment to Proselect. Applying New Hampshire law, it held that the duty of reasonable care in the defense of a claim applies only where the insurer’s misconduct exposes an insured to personal liability. Because the settlement extinguished the excess judgment, Proselect had met its duty of reasonable care and did not violate the covenant of good faith and fair dealing.
The lesson here: If you want to have control over whether or not a case against you will be settled, buy a policy that gives you that control.