Clyde and Eileen Damron (plaintiffs) got into a car accident with Ples Sledge (defendant), who was driving a car belonging to Perel Polk (defendant). The Damrons sued Sledge for damages. Both State Farm, Sledge’s insurance company, and National Union Insurance Company, Polk’s insurance company (collectively, the insurance companies), believed that Sledge was driving the car without Polk’s permission. If this were true, the insurance companies had no duty to defend Sledge and Polk under their policies. Prior to trial, the Damrons and Sledge reached a settlement. The Damrons paid Sledge’s attorney’s fees and agreed to not execute any judgment against Sledge; in exchange, Sledge assigned to the Damrons any claim he had against the insurance companies for a bad-faith failure to defend the defendants. The trial court granted Polk’s motion to dismiss, finding that the settlement was collusive and against public policy. The Damrons appealed.