control of settlement

Because an insurer’s promise to indemnify requires that a judgment be entered against its policyholder “the insurer has the right to control settlement of the third party action against its insured.” (Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1407 (ellipsis omitted).) However, “when a liability insurer wrongfully denies coverage or refuses to provide a defense, then the insured is free to negotiate the best possible settlement consistent with his or her interests. Such a settlement will raise an evidentiary presumption [the effect of which] is to shift the burden of proof to the insurer to prove that the settlement was unreasonable or the product of fraud or collusion.” (Pruyn v. Agricultural Ins. Co. (1995) 36 Cal.App.4th 500, 509 (ellipsis omitted).)

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