In Nat'l Trust Ins. Co. v. Savoy Hotel Ptrs., LLC, ___ F. Supp. 3d ___, No. 23-20860-Civ-Scola, 2023 WL 8018880 (S.D. Fla. Nov. 20, 2023), a federal judge in the Southern District of Florida followed and extended Florida law treating a Coblentz agreement as a special kind of settlement agreement.
A Coblentz agreement is only enforceable in a case where an insurance carrier wrongfully refuses to defend its insured, the Court pointed out. A settlement agreement is allowed under Florida law in such a case, whereby the insured settles the case itself with the underlying plaintiff, and the underlying plaintiff agrees to collect the amount of the settlement only from the insurance carrier. Called a Coblentz agreement after an early case in which these arrangements were approved, the Court summarized the legal requirements of a Coblentz agreement as follows:
The enforceability of a Coblentz agreement depends on whether a plaintiff can show that (1) there was coverage under the policies at issue, (2) the insurance company wrongfully refused to defend, and (3) the settlement amount was both “reasonable” and made in “good faith.”
National Trust Insurance Co., 2023 WL 8018880, at *2.
In the National Trust Insurance Co. case, the Court granted the insurance company's motion to dismiss on the grounds that the plaintiff had not adequately alleged either that the settlement amount was reasonable or that the settlement was made in good faith. However, the Court was not done in this case. The Court granted the motion to dismiss with prejudice. In case that was not enough, apparently, and since the plaintiff Savoy Hotel Partners, LLC had not asked for leave to amend, the Court added that dismissal was without leave to amend.
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