Background
Zhiwei Chen, proceeding pro se, appealed from a district court judgment on the pleadings that dismissed his diversity action. The underlying suit alleged state law claims arising from an automobile accident against Allstate Northbrook Indemnity Company.
The court’s reasoning
The panel reviewed the case de novo. It found that the district court properly denied Chen’s motion to remand because the district court had subject matter jurisdiction under the diversity statute. The panel also held that the district court properly granted judgment on the pleadings because the relevant insurance policy granted the defendant the authority to settle any claim or suit. Under California law, where a policy provides discretion to settle claims, the insurance company generally has no liability to the insured for settling within the policy limits. The court rejected Chen’s contention that the district court abused its power as unsupported by the record.
What it means going forward
The decision reinforces that insurance companies with settlement discretion in their policies are generally not liable for settling claims within policy limits, even if the insured disagrees with the settlement.
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