Make Sure Damages that Form the Basis of Your Coblentz Agreement are Covered Damages and Reasonable

You are considering entering into a Coblentz agreement because the liability insurer for the party that you have sued has refused to provide a defense and, thus, denied coverage for that party.  You are considering the Coblentz agreement because the party that you have sued does not have the financial wherewithal to pay for your damages.  Hence, you need that party’s insurance proceeds to pay for your damages, specifically, damages resulting from defective workmanship.  

Two important points to remember with the Coblentz agreement.

First, make sure to allocate the covered and noncovered damages / claims in the consent judgment.  A liability insurance policy is not a bond and is not designed to pay for the costs to repair defective workmanship.  Allocating damages between covered and noncovered damages will be important when you sue the liability insurer for wrongfully defending and denying coverage.  

Second, make sure the damages are reasonable and can be supported in good faith (which also goes to the allocation of damages).  The way this should be done is with expert testimony, and ideally, the same expert you are using to support the damages allocated to support covered damages.  

Without appropriately allocating damages, and without ensuring the damages in the consent judgment are even reasonable, you are risking rendering your Coblentz agreement inconsequential.  

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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