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Sweeney Law, PA Fort Lauderdale Business Lawyer
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What Is A Coblentz Agreement?


Let’s say that you are sued by another company or person. You have insurance, usually inc construction, a General Liability Policy, and you give the claim to the insurance company. The insurance company alleges that there is no coverage, or that an exclusion applies, which means that there is no coverage.

The other side knows that without coverage, you cannot pay the judgment. But your insurance company could, if there was coverage. So you agree to do this:

  1. You and the party suing you will agree to a judgment amount, or a settlement amount, setting the amount of damages.
  2. You give the other side permission to sue your insurance company or you—essentially, you are assigning the right that you would have to sue your insurance company for coverage of the claim, to the other side.
  3. The other side agrees to go after your insurance company for the amount of the judgment or settlement amount, and not pursue you for that amount.

The Coblentz Agreement

This is known as a Coblentz Agreement, and it can be useful if your company is sued, and there is some denial of coverage, or an insurance coverage issue. Alternatively, if you are the one suing, such an agreement can provide you an avenue to recover, where you would otherwise be left with a Defendant with no funds and no insurance to pay a judgment.

Good Faith Is Required

One catch is that such an agreement has to be entered into in good faith. In other words, if a claim had a value of, for example, $100,000, an uninsured party could not enter into an agreement with the Plaintiff to settle the case for a million dollars. The two parties to the lawsuit cannot collude with each other or conspire, knowing it’s the “deep pocket” insurance company that will potentially have to pay.

Insurance Companies Fight These Agreements

As you can imagine, insurance companies don’t like Coblentz agreements. To them, it allows two parties to negotiate on their own, without the insurance company being involved, for a figure that the insurance company will ultimately be sued for. The two parties, who are supposed to be adversaries in the litigation, are actually partners, now coming up with a figure that the insurance company will be held responsible for paying if the Coblentz lawsuit is successful.

Before entering into a Coblentz agreement, the parties have to show that they made some effort to conduct discovery, so that the ultimate settlement or judgment figure is supported by fact or substance.

There has to be a showing that the (possibly) insured party negotiated in good faith, to lower the settlement figure as much as possible. The (possibly) insured party cannot just “lie down,” and surrender to whatever figure the suing party wants.

Do you have an insurance problem with a construction related claim or lawsuit? Call our Fort Lauderdale construction attorneys at Sweeney Law P.A. at 954 440-3993 for help today.


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