In a case of first impression, the state Superior Court has ruled that when an insurer agrees to defend an insured subject to a reservation of rights, the insured may either accept the insurer's defense and remain bound by a consent-to-settlement clause while allowing the insurer to control the litigation, or furnish its own defense and retain control of the litigation, the costs of which may or may not be covered by the insurer depending on whether those costs are deemed fair, reasonable and non-collusive.
In arriving at this holding, a three-judge panel in Babcock & Wilcox v. American Nuclear Insurers ruled unanimously to reverse an Allegheny County trial judge's ruling that two insurers — American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters, referred to collectively in the court's opinion as "ANI" — must indemnify Babcock & Wilcox Co. for the $80 million plus prejudgment interest it paid to plaintiffs to settle claims over radiation exposure against ANI's protests.
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