Gray

While this case presents a somewhat tortured procedural history, it also presents a significant question in the field of insurance litigation. When an insurer provides an insured a defense under a reservation of rights, and the insured subsequently reaches a private settlement with the third party claimant without the participation of the insurer, may the insurer intervene in the underlying action brought by the claimant to protect its own interests—including the right to seek a setoff of the judgment against the insured based on a prior settlement by the claimant with another party? We conclude that it may.

Plaintiff Steven W. Gray was injured in an automobile accident. The other driver was Dameon L. Begley, who was employed by Granite Construction Company (Granite). Gray brought suit against Granite and Begley for compensation for the injuries he had suffered in the accident. Granite was insured by Continental Casualty Company and Valley Forge Insurance Company (collectively CNA). Granite’s excess insurer was Westchester Insurance Company (Westchester). CNA and Westchester reached an agreement with Gray on behalf of Granite, but not on behalf of Begley, whereby CNA and…