District Court Held That Insurer Had No Duty To Defend And Indemnify Under A Coblentz Agreement

Sinni v. Scottsdale Ins. Co.

(United States District Court, Middle District of Florida, December 18, 2009)


This action arises out of a slip-and-fall suit that culminated in a “Coblentz agreement” between the parties binding the insurer to the terms of the agreement (i.e., where an insurer has wrongfully refused to defend its insured and there is coverage under the policy, the insurer may be bound by the terms of a negotiated final consent judgment entered against its insured. Coblentz v. Am. Sur. Co. of N.Y., 416 F2d 1059 (5th Cir. 1969).  Specifically, approximately on year after filing suit, plaintiff resolved all of her claims against the underlying defendants by entering into and “Assignment, Settlement Agreement and Covenant Not to Execute.”  Pursuant to the agreement, plaintiff agreed to the entry of a $300,000 judgment against the underlying defendants.  They further agreed, however, that plaintiff would not attempt to record or execute against the judgment.  Instead, the defendants assigned all rights in their commercial general liability policy to plaintiff so that she could enforce the judgment against defendant’s carrier.  Thereafter, plaintiff filed an “amended” complaint seeking to enforce the consent judgment against the insurer. 


The District Court noted that under Florida law, a party seeking to recover under a Coblentz agreement must prove (1) coverage; (2) a wrongful refusal to defend; and (3) that the settlement was objectively reasonable and made in good faith.  The court further noted that the mere entry of a consent judgment does not establish coverage and an insurer’s failure to defend does not estop the insurer form raising coverage issues in a subsequent suit to satisfy a judgment entered pursuant to a Coblentz agreement.  Thus, to properly bind the insurer under such an agreement, the facts alleged in the complaint must state a claim that falls within the coverage for the policy (i.e., duty to defend) and the allegations in the complaint or the stipulated facts in the consent judgment must actually come within the coverage of the policy. 


Here, the District Court held that based on the exceptional circumstances of the case, the insurer was relieved of any obligation to defend.  Specifically, the court concluded that it was obvious that the actual facts put the matter outside the scope of coverage where plaintiff filed suit even though she had already applied for and was receiving workers’ compensation benefits.  Thus, had plaintiff not concealed that fact from her complaint, her claim would clearly have been barred by the workers’ compensation immunity.  Also, after the insurer received notice and denied coverage, plaintiff recast her claims and mislead the court by alleging she was simply a “business invitee” and then kept the insurer in the dark for nine months after executing the Coblentz agreement while the insurer was still attempting to determine whether it had a duty to defend. 


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Paul Steck and Joanna Roberto




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