## Facts

- Patrick McKinney was shot and killed while driving his truck.
- The McKinney family sued teenage defendants and Paul and Deborah Read (homeowners), alleging liability tied in part to drinking at the Reads’ home and negligent supervision/entrustment.
- The Reads were insured under a Safeco homeowner’s policy containing a motor-vehicle-related exclusion and a no-action clause requiring either a trial judgment or Safeco’s written consent to any settlement before suit on the policy.
- Safeco accepted the Reads’ defense subject to a reservation of rights; a separate auto insurer (Mercury) also defended, and separate counsel acted as cocounsel.
- While the wrongful-death action was pending, the Reads and another defendant stipulated with the plaintiffs—without Safeco’s consent—to a $645,000 judgment that included admissions supporting liability.
- The agreement provided Mercury would pay $145,000; the insureds assigned to the plaintiffs all rights under the Safeco policy; the plaintiffs agreed not to execute beyond $145,000 and contemplated expungement of the judgment after resolving claims against Safeco.
- The plaintiffs (as assignees) sued Safeco to recover the unpaid portion of the stipulated judgment and asserted related theories tied to alleged deficiencies in the insurer-provided defense.
- The trial court denied Safeco’s motion for summary judgment; Safeco sought writ relief.

## Issues

1. Whether an insurer that is providing a defense under a reservation of rights is bound to pay a stipulated judgment entered without its consent when the policy includes a no-action clause.
2. Whether alleged inadequacies in insurer-appointed defense counsel’s handling of the defense excuse compliance with the no-action clause and permit enforcement of a nonconsensual consent judgment against the insurer.

## Decision

- The Court of Appeal granted Safeco’s petition for writ of mandate.
- The court held Safeco was not bound by the insureds’ stipulated judgment entered without Safeco’s consent while Safeco was providing a defense.
- The court directed the trial court to vacate its order denying summary judgment and to enter summary judgment for Safeco.

## Legal Principles

- A policy no-action clause barring suit against the insurer absent a trial judgment or insurer-consented settlement is enforceable when the insurer has accepted and maintained the insured’s defense.
- An insured generally may not unilaterally settle in a manner that binds a defending insurer; the insured’s ability to protect itself through a nonconsensual settlement typically arises when the insurer wrongfully refuses to defend or abandons the defense.
- Allegations that insurer-appointed counsel provided a negligent or inadequate defense may support separate malpractice or bad-faith theories if proven, but do not, without more, nullify the insurer’s no-action clause or bind the insurer to a consent judgment reached without its approval.

## Conclusion

Because Safeco was defending the insureds and had not wrongfully refused to defend, the insureds’ nonconsensual stipulated judgment and assignment could not be used to fix Safeco’s indemnity obligation; the no-action clause controlled, and Safeco was entitled to summary judgment.


Safeco Ins. Co. of Am. v. Superior Ct., 71 Cal. App. 4th 782, 84 Cal. Rptr. 2d 43 (Ct. App. 1999)