This article originally appeared in Anderson Kill's Energy and Chemical Insurance Advisor (Spring 2006).

Settling a liability claim requires serious consideration and often extensive negotiation. On the eve of such a settlement insurance companies have been advancing arguments regarding so-called “consent to settle” and “cooperation” clauses that leave policyholders in a quandary: (i) settle and face insurance company arguments about losing insurance coverage; or (ii) refuse to settle and agree with your insurance company (which is contesting coverage) and thereby face the risk of proceeding as a defendant in a lawsuit. This Catch-22 is a tactic being used more commonly by insurance companies.