Insurance Code Section 11580 Interpretation
Insurance Code section 11580 requires insurance policies to contain certain provisions, including "A provision that whenever judgment is secured against the insured in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment."
As required by section 11580, Maryland's insurance policies recognize the right of a third party to bring an action directly against Maryland.
The policies, however, limit this right, providing, as relevant here, "No person or organization has a right under this Coverage Part . . . to sue us on this Coverage Part unless all of its terms have been fully complied with.
A person or organization may sue us to recover on an agreed settlement or a final judgment against an insured obtained after an actual trial; but we will not be liable for damages that are not payable under the terms of this Coverage Part that are in excess of the applicable limit of insurance.
An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant's legal representative."
The Fifth Division of this court recently explained that a limitation such as that in Maryland's policies (sometimes called a "no action" clause 4), "gives the insurer the right to control the defense of the claim--to decide whether to settle or to adjudicate the claim on its merits.
When the insurer provides a defense to its insured, the insured has no right to interfere with the insurer's control of the defense, and a stipulated judgment between the insured and the injured claimant, without the consent of the insurer, is ineffective to impose liability upon the insurer." ( Safeco Ins. Co. v. Superior Court (1999) 71 Cal. App. 4th 782, 787.)