What is a Coblentz Agreement?

A Coblentz agreement is a type of settlement recognized under Florida law that allows an insured person or business to resolve a legal claim when their insurance company has wrongfully refused to defend them. The name comes from the 1969 federal case Coblentz v. American Surety Co. of New York. When an insurer denies coverage or refuses to defend its policyholder in a lawsuit, the insured may enter into a Coblentz agreement with the plaintiff. This agreement typically involves a consent judgment—meaning the insured agrees to a judgment against them—and an assignment of the insured’s rights under the insurance policy to the plaintiff. In exchange, the plaintiff agrees not to pursue the insured personally for payment. Essentially, it shifts the focus of litigation from the insured to the insurer, allowing the plaintiff to seek payment directly from the insurance company.

To enforce a Coblentz agreement, the plaintiff must later prove three main elements in court: (1) that the insurer wrongfully refused to defend the insured, (2) that the settlement was reasonable and made in good faith, and (3) that the claim was actually covered under the policy. These agreements can be powerful tools for both plaintiffs and insureds, but they are also closely scrutinized by Florida courts to prevent collusion or inflated settlements. For insurance law firms, understanding the nuances of Coblentz agreements is essential—they often become pivotal in coverage disputes and bad faith litigation, shaping the outcome of whether an insurer is ultimately held responsible for a denied defense or claim.