On October 30, 2014, a Michigan federal court held that an excess insurer was required to fund a settlement even though it did not consent to the insured's settlement of claims that eroded, but did not exhaust, the primary layer of coverage. Stryker Corp. v. XL Ins. Co., Inc., No. 1:05-CV-51 (W.D. Mich. Oct. 30, 2014). The insured ("Stryker"), a manufacturer of medical supplies, settled product liability claims with plaintiffs arising out of an allegedly defective knee replacement implant. Stryker's excess insurer ("TIG") denied coverage, arguing that its coverage was not triggered because the TIG policy required Stryker to obtain TIG's prior consent to settle even the claims that only implicated Stryker's primary layer of coverage. The court, applying Michigan law, held that the excess policy's consent provision was ambiguous as to whether it required consent for all settlements, or only settlements within TIG's layer, and accordingly construed the provision against TIG and in favor of coverage. The court further noted that the settlements were not shown to be unreasonable, so TIG would not have had good reason to withhold its consent in any event. Finally, the court rejected TIG's late notice defense, holding that TIG's assertion of that defense nine years after the litigation commenced was too late.
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