No Pay, No Indemnity: Assignment-Only Settlement Does Not Trigger Coverage

In ISMIE Mutual Insurance Co. v. Pergament, an Illinois appellate court reaffirmed a core principle of professional liability insurance: indemnity is not triggered unless the insured becomes legally obligated to pay damages. The court held that where a doctor assigned his policy rights to a claimant but was expressly relieved of any payment obligation, the insurer had no duty to indemnify.

Background

The case arose from a claim against a geneticist for alleged negligent medical advice following a misdiagnosis of a rare genetic disorder. The insurer acknowledged the claim but reserved its rights regarding coverage. Two years later, the insured settled the claim by assigning his policy rights to the claimant. Crucially, the settlement agreement provided that the insured would pay nothing towards the resolution of the claim.