Insurer Acted Within Policy When It Settled Despite Insured’s Protest

By Don R. Sampen, published, Chicago Daily Law Bulletin, March 24, 2026

The 1st District Appellate Court recently held that an insurer justifiably settled a case on behalf of its insured even though it did so contrary to the insured’s wishes.

The case is Dan Express, Inc. v. Artisan, 2026 Il App (1st) 240138-U (Feb. 11). The insured was represented by Anthony J. Peraica & Associates Ltd. of Chicago. Heyl, Royster, Voelker & Allen P.C. of Chicago represented the insurer, Artisan and Truckers Casualty Co.

In 2022, trucking company Dan Express was named a defendant in federal court in Illinois in a suit brought by England Logistics Inc. The complaint alleged that Dan Express was liable for damages by failing to ship a load of turkey products at the required temperatures, causing the product to be too warm upon delivery.

Dan Express had a commercial auto policy with Artisan requiring the insurer to pay damages for, among other things, property damage for which the insured became legally responsible. The policy further provided that Artisan “will settle or defend, at our option, any claim or lawsuit” covered by the policy.

The parties also agreed to a cargo liability coverage endorsement covering damage to cargo damaged by the insured. It, too, gave Artisan “the option to settle or defend any claim or lawsuit” covered by the endorsement.

Artisan’s attorney entered an appearance on behalf of Dan Express in the federal lawsuit but did not file a responsive pleading or discovery. Rather, within three months after suit was filed, Artisan and England Logistics entered into a settlement agreement without giving notice to Dan Express.

A few months later Dan Express filed suit against Artisan. It alleged that it was not at fault for the spoiled turkey products, that Artisan knew it was not at fault, that the settlement was reached without its consent or notification, that it suffered economic harm in the form of increased insurance premiums and damage to business reputation, and that Artisan breached its duty of good faith.

Artisan subsequently moved for judgment on the pleadings, which was granted, and Dan Express brought this appeal.

Analysis

In an opinion by Justice Freddrenna M. Lyle, the 1st District affirmed. She began by observing that an insurer owes its insured an implied-in-law duty of good faith and fair dealing. She further noted that where a party has contractual discretion, it must exercise that discretion in a manner not inconsistent with the reasonable expectation of the parties.

In addition, however, Lyle wrote that the implied covenant of good faith cannot overrule or modify the express terms of a contract. She also cited Cernocky v. Indemnity Insurance Company of North America, 69 Ill. App. 2d 196 (1966), for the proposition that as long as the recovery sought in an action does not exceed the policy limits, an insurer need not consider the interests of the insured in conducting the defense.

In this case, the terms of the policy were unambiguous in that Artisan was given the authority to settle or defend at its option, and no notification of settlement was necessary. Moreover, Dan Express did not claim that it was prevented from advocating its interests when negotiating the insurance contract at the outset, Lyle said. Nor did the settlement result in retrospective premium charges for Dan Express, which distinguished this case from situations where such charges could limit an insurer’s discretion to settle.

As for Dan Express’s lack-of-good-faith argument, Lyle found that Artisan’s discretion to defend or settle a claim within policy limits was clear and enforceable. Its good faith therefore was not a matter that would preclude judgment on the pleadings.

Accordingly, the court affirmed the judgment in favor of Artisan.

Key Point

An insurer’s contractual right to settle a case on behalf of an insured without the insured’s consent may be exercised within the insurer’s complete discretion so long as the settlement is within policy limits.