In West Bend Mutual Ins v. Arbor Homes, (the plumber forgot to connect the home’s drainage system to the city’s sewer.  Arbor worked on fixing the problem with the homeowner.  A settlement agreement was reached, and Arbor thought that Westbend was told about it and did not object.  Westbend insured the plumber and Arbor was an additional insured.

The voluntary payments provision states: 

No insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.

The purpose of this provision means that  West Bend must have the opportunity to protect itself and its insured by investigating any incident that may lead to a claim under the policy, and by participating in any resulting litigation or settlement discussions. Any insured that settles a claim without West Bend’s knowledge or consent does so at the insured’s own expense under the express language of this provision.

Yet neither Arbor nor plumber obtained West Bend’s consent before settling. Instead, Arbor relied on Plumber to place West Bend on notice and then construed the insurer’s subsequent silence as a lack of objection to the settlement. Arbor now can produce no evidence that West Bend consented to Plumber’s settlement with Arbor or Arbor’s settlement with the homeowner. West Bend has produced uncontroverted evidence that it knew nothing of the damage to the home until after Plumber and Arbor agreed on their respective liabilities to each other and to the Homeowner. And West Bend knew nothing of the terms of the settlement agreement until after Arbor’s lawsuit against Plumber was underway. There is no evidence that West Bend “consented” to any settlement as required by the voluntary payments provision. Although Arbor behaved admirably in expeditiously resolving the matter for the homeowners, it failed to protect its own interests when it relied on Plumber to notify West Bend about the incident, and failed to obtain West Bend’s consent for any settlement. Having no opportunity to participate in the investigation or settlement, West Bend is entitled to enforcement of the plain language of the contract: Arbor’s settlements with Plumber and with the Homeowner without the consent of West Bend is at Arbor’s own expense.