What Agreements Are Known As Coblentz Agreements ?
The opportunity for a settlement without the agreement of the insurer traditionally has occurred where an insurer breaches its duty to defend, leaving the insured "to its own devices" to settle the case or proceed to trial.
In those circumstances, the insured is left unprotected and may enter into a reasonable settlement agreement with the third-party claimant and consent to an adverse judgment for the policy limits that is collectable only against the insurer. Coblentz v. Am. Surety Co. of N.Y., 416 F.2d 1059, 1063 (5th Cir. 1969); Steil v. Fla. Physicians' Ins. Reciprocal, 448 So. 2d 589, 591 (Fla. 2d DCA 1984) ("By refusing to defend Steil's claim, the carrier left Walker to his own devices to protect himself in the best way possible.");
See also Chomat v. N. Ins. Co. of N.Y., 919 So. 2d 535, 537 (Fla. 3d DCA 2006); Gallagher v. Dupont, 918 So. 2d 342, 348 (Fla. 5th DCA 2005).
These agreements are known as Coblentz agreements, based on the United States Fifth Circuit Court of Appeals case.
Florida courts have also extended the reasoning of Coblentz to allow agreements by the insured to a judgment in excess of the policy limits against an insurer who wrongfully refuses to defend and acts in bad faith. See Shook v. Allstate Ins. Co., 498 So. 2d 498 (Fla. 4th DCA 1986).
No Florida case, however, has reached the issue of whether and under what circumstances a Coblentz agreement is valid and enforceable when an indemnity policy that does not include the duty to defend is involved. Cf. U.S. Fire Ins. Co. v. Hayden Bonded Storage Co., 930 So. 2d 686, 690 (Fla. 4th DCA 2006) (recognizing an issue of whether a Coblentz agreement may be enforced when there is no duty to defend but deciding that the issue was moot because the insurer did not breach its duty to indemnify).
Implicit in these decisions is a recognition that the insured would not have entered into the consent judgment but for the bad faith of the insurer and that the insured would otherwise have been exposed to personal liability as a result of the insured being left to "its own devices."