Kelly v. Iowa Mutual Insurance Co.

TERNUS, Justice.

This case requires the court to decide whether an insured being defended under a reservation of rights breaches his duty of cooperation by agreeing to a stipulated judgment with the claimant. We hold that if the insurance company has breached the contract by wrongfully rejecting a reasonable settlement offer, the insured may accept the settlement offer over the insurer’s objection without breaching policy duties and losing his right to seek coverage. Because the record before the district court was insufficient to allow a resolution of this issue, we reverse the court’s…