INSURERS’ RESPONSES TO INSUREDS’ CLAIMS UNDER THE INSURANCE CONTRACTS AMOUNTED TO A DENIAL OF LIABILITY, INSUREDS NOT OBLIGATED TO COOPERATE OR OBTAIN CONSENT TO SETTLE. ​

The First Department determined the insurer’s responses to the insureds’ claims amounted to a denial of coverage. Therefore the insureds were not obligated to cooperate with the insurers or obtain the insurers’ consent to settle:

Defendants’ [insurers’] unreasonable delay in dealing with plaintiffs’ claims under the insurance contracts, consistently stated position that the various regulatory investigations and civil actions concerning plaintiffs’ alleged late trading and marketing-timing transactions did not constitute claims under the contracts, and insistence that in any event disgorgement payments such as those demanded by the regulators were not insurable as a matter of law constitute a denial of liability under the contracts that justifies plaintiffs’ settlement of those claims without defendants’ consent… . The record does not support defendants’ contention that plaintiffs breached their obligation to cooperate, but in any event defendants’ repudiation of liability for plaintiffs’ claims also excuses plaintiffs from performance of that obligation … . The “reservation of rights” language in defendants’ letters to plaintiffs does not change this result … .  J.P. Morgan Sec. Inc. v Vigilant Ins. Co., 2017 NY Slip Op 05181, 1st Dept 6-27-17