When Are Insurance Companies Obligated To Honor A Coblentz Agreement?
Insurance companies have a duty to act in good faith when handling an insured party’s claims. This often includes defending the insured against lawsuits that are within the scope of a policy. If an insurer wrongfully refuses to provide such a defense, the insured can settle the case themselves in exchange for the plaintiff promising to only seek collection from the insurance company. This is known as a Coblentz agreement based on a 1969 federal appeals court decision. The problem with Coblentz agreements is they are susceptible to collusion between the insured party and the person suing them. For this reason, courts will only enforce such agreements if the plaintiff–the party seeking to collect against the insurer–can show that coverage existed, the insurer wrongfully refused to defend the insured defendant, and that the terms of the ultimate settlement were reasonable and made in good faith. Appeals Court: Insurer Not Liable for Policyholder’s Negligent Management of Citrus Grove A recent decision from the U.S. 11th Circuit Court of Appeals, Travelers Indemnity Company of Connecticut v. Richard McKenzie & Sons, Inc., illustrates a case where the plaintiff failed to make these required showings. This case involved a Florida citrus grove. The owner of the grove–the plaintiff in the underlying lawsuit–hired the defendant to manage the grove on his behalf. Essentially, the plaintiff was a hands-off absentee landlord who trusted the defendant to plant and maintain the trees on the grove. The arrangement soured, however, when the plaintiff said he discovered the defendant billed him for trees that were never planted, stealing his supplies, and in general damaging the groves through negligence. The plaintiff fired the defendant and sued him for breach of contract. The plaintiff subsequently added a negligence claim after discovering the defendant had insurance that might cover such damages. The plaintiff and defendant eventually settled their non-negligence claims for $200,000, which the defendant agreed to pay personally. The parties also included a Coblentz agreement with respect to the negligence claims in the amount of $2,965,750 in damages. The plaintiff then asserted the right to collect this amount from the insurer. Understandably, the insurer balked. The insurance company filed its own lawsuit in federal court seeking a declaratory judgment that it had no duty to defend or indemnify the defendant against the plaintiff’s original negligence claims. The insurer further maintained this was a case of improper collusion between the plaintiff and the defendant. A federal judge granted summary judgment to the insurer. The 11th Circuit affirmed that decision on appeal. The main issue, the Court of Appeals noted, was that the insurance policy contained an exclusion for any “property damage” caused by the defendant “performing operations.” Here, the defendant’s negligence occurred while performing operations on the plaintiff’s citrus grove. His actions therefore fell within the exclusion and the insurer had no duty to indemnify or defend. Speak with a Florida Insurance Bad Faith Attorney Today Insurance companies are required to pay legitimate claims. But they are certainly under no obligation to honor Coblentz agreements that attempt to circumvent the clear language of a policy exclusion. If you represent an insurance company looking to defend against such bad faith lawsuits, contact the Tampa bad faith insurance lawyers at HD Law Partners today to schedule a consultation. Source: https://scholar.google.com/scholar_case?case=813-253-5333403336909 Posted in Insurance Bad Faith | No Comments » Connect with us Archives May 2026 April 2026 March 2026 February 2026 January 2026 December 2025 November 2025 October 2025 September 2025 July 2025 June 2025 January 2025 January 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 June 2023 May 2023 April 2023 March 2023 February 2023 January 2023 December 2022 November 2022 October 2022 September 2022 August 2022 July 2022 May 2022 April 2022 March 2022 November 2021 October 2021 September 2021 August 2021 July 2021 May 2021 April 2021 March 2021 February 2021 January 2021 December 2020 November 2020 October 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 November 13 Categories Alimony Appellate Arbitration Auto Accidents Auto Insurance Business Corporate Business Insurance Law Child Custody Child Support Criminal Law Divorce Family Law FEMA Insurance Payments Florida’s Mandatory 2‑Hour Legal Professionalism CLE: Foreclosure Defense Fort Myers Hurricane Insurance Attorney General Guardianship HD Law Partners Service HOA/Property Management Homeowners Association Homeowners Insurance Hurricane Claims Hurricane Insurance Insurance Bad Faith Insurance Claims Insurance Defense Insurance Litigation Landlord Tenant Law Enforcement Liability Loan Modifications Mold Water Damage Parental Rights Paternity Personal Injury Premises Liability Law Prenuptial Agreements Private Security Property Distribution Property Owner Law Sarasota Insurance Litigation Attorney Slip Fall Tampa Business and Corporate Attorneys tampa family attorney Tampa Insurance Attorneys Timeshare Timesharing Uncategorized HD Law Partners is proud to be your trusted full-service law firm Quick Links Property & Casualty Business & Corporate Litigation Family Law Contact Us Careers Get In Touch 2002 North Lois Avenue Suite 510 Tampa, FL 33607 813-253-5333 Contact Us