Wright

The Fireman’s Fund Insurance Companies (Fireman’s Fund) appeals from a judgment entered after the court granted a summary judgment motion in favor of David and Lorraine Wright, husband and wife (collectively the Wrights). The judgment was based upon a stipulated judgment the Wrights had obtained against an insured of Fireman’s Fund, Paul Overlie (Overlie) in an earlier action. In exchange for the stipulated judgment the Wrights covenanted not to execute against Overlie personally. We are presented with the question whether an insurer that defends an insured can be bound by such a stipulated judgment entered against that individual without the insurer’s consent or participation. In light of the potential for collusion and abuse presented here, we answer that question in the negative and accordingly reverse the judgment.

Factual and Procedural Background

The Accident and Rental

On April 13, 1984, David Wright was injured and his passenger killed in a head-on collision with an automobile driven by Paul Overlie (Overlie). The accident occurred when the Overlie vehicle crossed over to the wrong side of the road. Overlie later entered a plea of guilty to a charge of felony…