356. In failing to assume this responsibility, "it would in effect [leave] its insured defenseless or seriously hampered in its ability to protect itself." Id. As a result, "an insured tortfeasor should be able to reach an agreement relieving it of liability when its carrier wrongfully declines to defend. In this way an insured is able to retain the protection of its insurance, while the injured party obtains a potential remedy against the insurer who has wrongfully removed itself from the suit." Id. at 370.
Finally, that American Reliance is now obligated to defend this action, pursuant to Judge Fisher's decision, does not give it an independent or superior right, under the Griggs standard, to repudiate the settlement agreement. Initially, Pennsbury turned to its insurer, American Reliance, to defend against all claims. At the time, American Reliance refused to defend, leaving Pennsbury to protect itself against all of the claims being asserted against it by Excelsior. While this action was pending, Pennsbury filed a third party declaratory judgment action against American Reliance seeking a determination that the third party defendants have a duty to defend. Subsequently, Pennsbury, represented by its own counsel, entered into a binding settlement agreement with Excelsior, whereby Pennsbury was exonerated of all liability in exchange for an assignment of Pennsbury's interest in the third party action against American Reliance. After the parties had finalized the agreement and completed the first day of the Griggs hearings, Judge Fisher held that American Reliance had a duty to defend Pennsbury in this action.
The question then arises, can American Reliance now assume responsibility over Pennsbury's defense and attempt to relieve Pennsbury from the settlement agreement which was entered into on April 21, 1995, but not yet formally approved by the court pursuant to Griggs? Having already concluded that the settlement agreement was binding and enforceable on the parties on April 21, 1995, the answer is clear. When Judge Fisher ruled that American Reliance is obligated to defend Pennsbury, American Reliance became obligated to assume Pennsbury's defense in this matter and stood in Pennsbury's shoes. At the time of Judge Fisher's ruling in November, 1995, Pennsbury had already entered into a binding agreement with Excelsior. Although the agreement required court approval pursuant to Griggs, the parties were nonetheless bound by it barring this Court's veto.
Moreover, despite Judge Fisher's determination that American Reliance was obligated to defend Pennsbury, American Reliance continued to challenge this obligation. American Reliance filed a motion for reconsideration of Judge Fisher's Order on December 6, 1996. Thus, American Reliance gave Pennsbury and this Court no assurance that it would assume its obligation to defend until it exhausted its legal remedies. On January 16, 1996, while the Griggs hearings were proceeding on schedule, Judge Fisher denied the motion for reconsideration. American Reliance's continued failure to provide a timely defense to its insured makes Pennsbury's decision to settle with Excelsior eminently reasonable under the Griggs standard.
Based upon the foregoing, American Reliance's motion to set aside the settlement agreement between Pennsbury and Excelsior is hereby denied. An appropriate Order shall follow.
ORDER - ENTERED on THE DOCKET on 11-14-1996
This matter having been opened to the Court by Michael Marone, Esq. of McElroy, Deutsch, and Mulvaney, counsel for third party defendants, American Reliance Insurance Company and Vik Brothers Insurance Company as successor to American Reliance Insurance Company, seeking an Order setting aside the settlement agreement between Pennsbury Pain Center and Excelsior Insurance Company, and the Court having considered the moving, opposition, and reply papers, as well as the supplemental briefs and certifications submitted by all parties, and having heard oral argument on September 30, 1996, and the Court having entered a Memorandum on this day setting forth the Court's decision in this matter, which is being considered pursuant to Fed. R. Civ. P. 78, and for good cause shown,
IT IS on this 13th day of November, 1996,
ORDERED that third party defendant, American Reliance's motion to set aside the settlement between Pennsbury Pain Center and Excelsior Insurance Company is denied; and it is further
ORDERED that the settlement agreement between Excelsior Insurance Co. And Pennsbury Pain Center, pursuant to Griggs v. Bertram, 88 N.J. 347, 443 A.2d 163 (1986), is hereby approved.
Freda L. Wolfson
United States Magistrate Judge