Civil Liability Insurance and litigation management: the insured's refusal to settle must comply with good faith according to Judgment no. 31158/2025
In the landscape of insurance law, the relationship between the insured and the insurer is characterized by a delicate balance of interests, especially in the management of compensation disputes with injured third parties. The Court of Cassation, with judgment no. 31158 of November 28, 2025, intervened to clarify a crucial aspect: the litigation management agreement and the limits on the insured's power of veto regarding a settlement proposal. The ruling, which involved A. P. and F. M., provides guidance on the application of the principle of good faith in the performance of contracts.
The litigation management agreement and the role of good faith
The litigation management agreement is an ancillary clause frequently found in civil liability (RC) insurance contracts. Under this agreement, the insurer assumes control of the dispute, acting also in the interest of the insured. However, the contract often stipulates that any settlement with the injured party must be authorized in advance by the insured. According to the Supreme Court, such a power of veto is not absolute: it must be exercised in compliance with the duties of fairness and good faith (Articles 1175 and 1375 of the Italian Civil Code).
The principle of law established by the Court of Cassation in judgment no. 31158/2025
To understand the scope of this decision, let us analyze the official principle of law expressed by the judges of the court of last resort:
In the context of a civil liability insurance contract, where the ancillary litigation management agreement—which has a mixed cause, attributable to mandate, settlement, insurance, and service contracts—makes any settlement with the injured party subject to the insured's authorization, the latter's refusal must be expressed in accordance with the standard of good faith, meaning that it must also take into account the insurer's interest in avoiding the possibility—which offers no benefit to the insured—of paying a higher indemnity for the portion of risk not covered by the contractual deductible.
The Court highlights the complex (or mixed) nature of the agreement, which combines elements of mandate, settlement, and service contracts. This complexity requires the parties to act with transparency and mutual cooperation.
Practical consequences for insured parties and insurers
The decision establishes that the insured cannot oppose a settlement if their refusal unjustifiably harms the insurer without offering any real benefit to the insured. The key points established by the Court include:
- Mixed nature of the agreement: Litigation management is also governed by the rules on mandate (Article 1711 of the Italian Civil Code).
- Reviewability of the refusal: The insured's refusal may be challenged if it is contrary to good faith.
- Balancing of interests: It is necessary to assess whether the refusal exposes the insurer to a greater expenditure not covered by the deductible, without any advantage for the insured.
Conclusions
Judgment no. 31158/2025 represents a turning point for the balance in insurance contracts. It reaffirms that the contract requires both parties to safeguard the other's utility within the limits of reasonableness. This ruling encourages more collaborative litigation management, reducing instrumental disputes.
