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(Article from Insurance Law Alert, July/August 2015)

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A New York federal district court refused to invalidate a consent-to-settle provision on public policy grounds, noting that to do so would “revolutionize” New York insurance law.  SI Venture Holdings, LLC v. Catlin Specialty Ins., 2015 WL 4191453 (S.D.N.Y. July 10, 2015).

SI Venture Holdings discovered soil contamination at its property.  Based on its understanding of applicable environmental law, SI transported the contaminated soil to an out-of-state disposal site.  Thereafter, it sought coverage for the clean-up costs from Catlin Specialty Insurance.  Catlin denied coverage, citing SI’s failure to comply with the policy’s “Consent Provision,” which required SI to obtain consent prior to incurring clean-up costs.  SI brought suit, arguing that the Consent Provision was unenforceable as against public policy because it “impede[d] compliance with environmental regulations.”  The court disagreed.

Addressing this issue of first impression under New York law, the court concluded that the Consent Provision should be enforced as written.  Emphasizing that consent-to-settle clauses are routinely enforced, the court declined to take the “radical step” of invalidating the unambiguous provision absent any supporting precedent.  In addition, the court noted that voiding the Consent Provision would be inequitable because it would “effectively strip Catlin – and, by extension, all insurers – of the ability to reasonably object to compliance-related expenditures that an insured party intends to make.”  The court therefore granted Catlin’s summary judgment motion, but noted that on appeal, SI could request certification of the issue to the New York Court of Appeals.  We will keep you posted on further developments in this matter.