Opinion ID: 1702044
Heading Depth: 1
Heading Rank: 8

Heading: Did USF & G Breach Its Obligation to Consent To The Settlement?

Text: ¶ 30. Under ordinary contract law, where parties negotiate and enter a contract at arm's length, courts will enforce clear, unambiguous provisions exactly as written. Thus, where one party is granted absolute discretion to exercise a right, and has given consideration for that right, there is no requirement that the party give a good reason or reasonable explanation for withholding consent. The same basic concept prevents this Court from inquiring into the adequacy of consideration. ¶ 31. However, insurance policies (while technically contracts) are different. Insurance companies and their insureds have a different relationship than most contracting parties. For instance, both share the same agent. And other than speaking to and through the common agent, they seldom communicate. ¶ 32. Certainly, insurance policies are to be enforced according to their provisions. And insurance companies must be able to rely on their statements of coverage, exclusions, disclaimers, definitions, and other provisions, in order to receive the benefit of their bargain, and to ensure that rates have been properly calculated. A rate calculated in reliance on an exclusion will, in most instances, be incorrect where courts invalidate the exclusion. But where the policy grants discretion to the insurance company, it must be exercised reasonably. ¶ 33. Today, we reaffirm and expand this Court's previous holding in United States Fidelity and Guaranty Co. v. Hillman, 367 So.2d 914 (Miss.1979), where we held that where the uninsured motorist statutes grant an insurer the right of subrogation and a provision in the policy precludes settlement with an uninsured motorist without the consent of the insurer, the provision of the policy is valid and will be upheld. Id. at 921. ¶ 34. We further hold that, so long as an insurer provides an arguable basis for its refusal to consent to the settlement, its right to subrogation will be protected. However, should an insurer withhold consent with no reasonable basis for doing so, it will lose its subrogation rights. And where an insured demonstrates that the insurance company withheld consent with no arguable basis, solely for the purpose of gaining some new advantage not provided under the policy, such as coercing a settlement, the trial court may consider whether to submit the matter to the jury on punitive damages.