Now let’s assume you are the CEO of a major pharmaceutical company that has released a defective drug and has been faced with a swarm of lawsuits amounting to $5,000,000. You immediately enter into a settlement agreement without consulting your insurance company, expecting them to cover the full amount you owe. After all, if they refuse to cover the $5,000,000, then you could take them to court on a bad faith claim, right? This is not how it works. If your insurer can show that you entered into a settlement agreement without their consent, they may be released from their duty to pay.