Opinion ID: 2610859
Heading Depth: 2
Heading Rank: 3

Heading: the reasonableness of the settlement.

Text: Progressive argues that, even if we find it had a duty to defend and American General can assert subrogation, it is subrogated only to the extent that the settlement with Michael was reasonable and we must remand for such a determination. American General and Wade notified Progressive of the original suit, and American General made demand upon Progressive to assume Wade's defense. Progressive refused to defend, breaching its duty to Wade. An insurer suffers serious consequences upon its unjustified failure to defend after demand, including loss of the right to claim the insured settled without its consent and liability for a judgment entered against the insured or good faith settlement agreed to by the insured. State Farm Fire & Casualty Co. v. Price, 101 N.M. 438, 684 P.2d 524 (Ct.App.) (unjustifiable failure to defend subjects insurer to liability for good faith settlement), cert. denied, 101 N.M. 362, 683 P.2d 44 (1984). However, the settlement must be reasonable, and the insurer is not precluded from asserting as a defense that the settlement was unreasonable. See id.; Lujan v. Gonzales, 84 N.M. 229, 501 P.2d 673 (Ct.App.), cert. denied, 84 N.M. 219, 501 P.2d 663 (1972). There are no indications that American General settled the claim with Michael in bad faith or unreasonably  at the time of settlement it was not clear that American General would not be liable for the settlement and costs of defense. Moreover, Progressive had the opportunity to participate in the defense and settlement negotiations, yet waived its right to participate and breached its obligation to defend. However, Progressive is only liable for a reasonable settlement, and on remand the reasonableness of the settlement shall be determined.