What is a Coblentz Agreement?

Imagine this scenario:

You sue someone or a company, for a significant amount of money. You have concern about the other side’s viability, finances, or ability to pay any kind of significant judgment or settlement. But you do know that they are insured, so at least you have a pocket that will pay you your damages, should you win your case.

But then you get some bad news: the other side’s insurance is denying coverage to their insured. Both you and the other side obviously disagree with this decision, and want to fight it. The other side–the insured being sued by you–could fight his or her own insurance company, but they have neither the money nor the will to do so. But you do.

The Coblentz Agreement

Enter the coblentz agreement.

The other side agrees that they won’t fight you–they’ll actually agree to you entering a judgment against them for whatever you claim that your damages are.

Additionally, they assign you the ability or rights to sue the insurance company for coverage, the way that they could, if they wanted to fight their own insurance company. You will have to waive the right to collect from the Defendant; whatever you can’t or don’t get from the insurance company, you can’t get back to collect from the Defendant, so the risk of the insurance litigation is on you.

The judgment is entered, and now you go after the insurance company for coverage, as if you were the insured, because you now, by way of the assignment, have all the rights that the insured would have had.

Legal, But Be Careful

These agreements are legal in Florida. Because so many rights are changing hands–such as the right to sue the insurance company, or the waiver of the right to pursue the Defendant for the agreed to judgment amount–these documents must be specific and detailed to preserve rights and to be enforceable.

The Plaintiff–the person or entity now with the right to pursue the insurance company for the judgment entered against the Defendant–must show that the amount of the agreed judgment was a reasonable amount taking into account the amount of damages. In other words, the parties can’t just agree to a random and excessive, say, ten million dollar judgment and then pursue the insurance company for that amount.

Of course, the party getting the judgment, with the right to pursue insurance, does have to show coverage. Which is why any party in this situation should do a full review of the other side’s policy to see whether the insurance company’s denial was legitimate.

Bad Faith

Because enforcing the coblentz agreement is essentially a bad faith litigation claim–that is, an insured suing its insurance company for acting in bad faith–in some instances, even attorneys fees can be obtained from the insurance company as damages.

Collectability and insurance are major parts of your business litigation claim. Call our West Palm Beach commercial litigation attorneys at Pike & Lustig for help.

Source:

americancollegecoverage.org/assets/CommitteeNewsArticles/ACCC_Articles_ConsentJudgmentsWCovenantsNotToSueEnforce_20221128.pdf