The US Court of Appeals for the 10th Circuit has reinstated litigation filed by an insurer against its policyholder for settling a case without the insurer's permission. The case is Auto-Owners Insurance Co. v. Bolt Factory Lofts Owners Assn., Inc.; Sierra Glass Co., Inc. D.C. No. 1:18-CV-01725-RBJ.

Bolt Factory Lofts Owners Association Inc. sued six contractors for alleged construction defects at a Denver condo development. Two of those contractors then brought third-party claims for negligence and breach of contract against three subcontractors, including Sierra Glass, which had a commercial general liability (CGL) policy through Auto-Owners, and a second CGL policy through AMCO. Both insurers agreed to defend and indemnify Sierra Glass for any damages covered under the policies. Before trial, Sierra Glass agreed to pay Bolt Factory $350,000 and to essentially confess judgment by not presenting a defense at trial.

Auto-Owners attempted to intervene in the suit to stop the trial and contest the settlement agreement, arguing that Sierra Glass settled the case without Auto-Owner's knowledge or consent. The state trial court denied the motion and went on to a two-day bench trial. Sierra Glass failed to put up a defense, and judgment was entered for Bolt factory.