In a recent Massachusetts insurance dispute, the state’s high court found that consent-to-settle clauses are enforceable and do not violate public policy. The decision came in response to an engineering malpractice lawsuit that Massachusetts homeowners filed against a professional home engineer.
According to the court’s opinion, the homeowners hired the engineer to design and construct portions of their new home. The engineer signed an agreement with the town but underestimated the number of loads in his calculations. The engineer filed several inaccurate control reports and falsely certified that they complied with the applicable building codes. Shortly after construction, the defects became apparent, and after a confrontation, the engineer admitted to his miscalculations. The homeowners filed several claims against the engineer and his insurer.
The insurance company and the engineer had an agreement that the insurance company would not settle any claims without his consent. The homeowners asked for over $1 million in damages, but the engineer refused to settle for more than $100,000, despite the insurance company advising him that he faced a seven-figure settlement. The engineer was found liable for $460,000, which was paid partially by his insurance company. The homeowners then amended their complaint against the insurance company, arguing that they violated a state law that requires prompt settlements.