imagesSince insurance, particularly liability insurance, is such an important component when it comes a construction project, understanding certain nuances such as a Coblentz Agreement (a what kind of agreement agreement?!?—keep reading) becomes helpful.  


If there is a construction defect claim / lawsuit, the implicated parties (e.g., contractor, design professional, subcontractor, sub-consultants) are going to tender the claim / lawsuit to their respective liability insurer.  This is what they should be doing – notifying the insurer so that the insurer can defend them from the claim / lawsuit and indemnify them from covered damages associated with the claim / lawsuit.  


And, if a contractor is an additional insured under an implicated subcontractor’s liability policy, it is going to demand that the insurer defend it (or share in the defense costs with other implicated subcontractors) and indemnify it based on the negligence of the primary insured-subcontractor.


This is all par for the course in a construction defect lawsuit–really, any construction defect lawsuit.


But, there may come a point where a liability insurer denies coverage meaning they are declining to defend their insured in connection with the claim / lawsuit.    In this situation, the claimant may consider entering into a Coblentz agreement with the insured.  This was the topic in a recent non-construction case in In Re: The Estate of Jorge Luis Arroyo, Jr. v. Infinity Indemnity Insurance Co., 42 Fla. L. Weekly D192a (Fla. 3d DCA 2017), when a personal injury negligence lawsuit was brought against an Estate as the result of a deadly car accident.  The Estate tendered the defense of the negligence lawsuit to the decedent’s insurer, but the insurer declined to defend the Estate of the insured.  The Estate and the personal injury claimant then entered into a Coblentz agreement where the Estate (1) agreed to a consent judgment entered against it, (2) assigned its rights under its liability policy to the claimant, and (3) the claimant agreed not to pursue the consent judgment against the insured.  The Coblentz agreement and consent judgment gave the claimant a path to sue the insured’s liability insurer based on the liability against the insured as set forth in the consent judgment.  (The consent judgment establishes the liability of the insured.)


In order to enforce a consent judgment entered pursuant to a Coblentz agreement, the assignee [claimant] must bring an action against the insurer and prove: (1) insurance coverage, (2) the insurance company wrongfully refused to defend its insured, and (3) the settlement was reasonable and made in good faith.”  In Re: The Estate of Jorge Luis Arroyo, Jr. supra.


[W]hen an insurer refuses to defend its insured from a lawsuit, and the insured later settles the suit by entering into a Coblentz agreement, the insurer is precluded from relitigating the issue of its insured’s liability in subsequent proceedings.”  In Re: The Estate of Jorge Luis Arroyo, Jr. supra.   Stated differently, the insurer is precluded from later raising defenses on behalf of its insured that it could have previously raised had it simply defended its insured. 


In this case, the insurer ultimately tried to intervene in an underlying lawsuit once it was sued per the Coblentz agreement.  Although the trial court permitted this intervention, the appellate court reversed because the insurer couldn’t relitigate issues it could have raised had it not declined to defend its insured– it was this declination that gave rise to the Coblentz agreement in the first place.   The consent judgment established the insured’s liability to the claimant; thus, the issues to determine were (1) was there coverage, (2) did the insurer wrongfully refuse to defend the insured; and (3) was the settlement reasonable.  As this case shows, sometimes a claimant needs to consider entering into a Coblentz Agreement to pursue recourse against an insurance policy.


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


A Coblentz AgreementI previously discussed Coblentz agreements.  A Coblentz agreement is an agreement between a claimant (e.g., property owner) and a third-party (e.g., general contractor that caused construction defects and damage) when the third-party’s liability insurer denies a defense (and coverage) to the third-party.  The claimant and third-party enter into an agreement where a) the claimant obtains a consent judgment against the third-party, b) the third-party assigns its rights under its liability policy to the claimant based on the insurer’s refusal to defend and indemnify the third-party, and c) the claimant releases the third-party from any individual liability irrespective of whether the claimant recovers from the third-party’s liability insurer. (Check here for a presentation on Coblentz agreements.)


One of the key components of the Coblentz agreement is the consent judgment given by the third-party to the claimant.  It is always a good idea to allocate between damages covered by insurance and damages not covered by insurance.  The reason is that liability insurance is not designed to cover defective workmanship.  Rather, it is designed to cover damages resulting from defective workmanship.  In a construction defect dispute, the consent judgment should reasonably allocate the covered damage (damage caused by defective workmanship) and uncovered damage (the cost solely to repair defective workmanship).  These amounts should not be arbitrarily decided but should be supported with expert opinions since this point would be litigated against the liability insurer when the claimant tries to recover from the third-party’s liability insurer. 


For example, in the recent opinion of Bradfield v. Mid-Continent Casualty Company, 2015 WL 6956543 (M.D.Fla. 2015), an aspect of the opinion dealt with the lack of an allocation of damages in a consent judgment given in consideration of a Coblentz agreement.  The contractor gave the owner a consent judgment in the amount of $671,050.  But, there was no allocation of this lump sum amount for covered and uncovered damage or what this lump sum was designated for.   The consent judgment was based on an estimate prepared by an expert but the estimate included costs to repair defective work, or work that was not covered by the liability insurance policy.  The Middle District of Florida found that this failure to appropriately allocate covered verses uncovered damage was fatal to the owner’s claim against the third-party contractor’s liability insurer to recover the amount of the consent judgment. The court explained: “Florida law clearly requires the party seeking recovery…to allocate any settlement amount between covered and noncovered claims.” Bradfield, supra, at *24.


Even if damages were allocated, the consent judgment still needs to be reasonable and entered in good faith. The court discussed this aspect of the Coblentz agreement despite finding that the failure to allocate was fatal to the owner’s claims against the contractor’s liability insurer.  As to the reasonableness of a consent judgment, the court importantly maintained:


When an injured party wishes to recover under a Coblentz agreement, [t]he claimant must assume the burden of initially going forward with the production of evidence sufficient to make a prima facie showing of reasonableness and lack of bad faith, even though the ultimate burden of proof will rest with the carrier. The courts impose good faith and reasonableness requirements in these cases due to the risk that the settlement of liability and damages in a settlement agreement may have little relationship to the strength of a plaintiff’s claim where the insured may never be obligated to pay and has little to lose if he stipulates to a large sum with the plaintiff.


In Florida, the test as to whether a settlement is reasonable and prudent is what a reasonably prudent person in the position of the defendant [the insurer] would have settled for on the merits of plaintiff’s claim. Objective and subjective factors are considered, including the degree of certainty of the tortfeasor’s subjection to liability, the risks of going to trial and the chances that the jury verdict might exceed the settlement offer. [P]roof of reasonableness is ordinarily established through use of expert witnesses to testify about such matters as the extent of the defendant’s liability, the reasonableness of the damages amount in comparison with compensatory awards in other cases, and the expenses which have been required for the settling defendants to settle the suit. Bad faith also may be established by evidence of the absence of any effort to minimize liability.

Bradfield, supra, at 27 (internal quotations and citations omitted).


When considering a Coblentz agreement on behalf of a claimant, make sure the judgment allocates between covered and noncovered claims / damages and is reasonable.  The same experts utilized to support the allocation can be utilized to support the reasonableness of the allocation for covered claims / damages.


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




images-1Understanding when an “occurrence” under a CGL policy occurs is very, very important for purposes of submitting claims to insurers. It is important relating to its duties to defend and indemnify the insured.


The opinion in Trovillion Const. & Development, Inc. v. Mid-Contintent Cas. Co., 2014 WL 201678 (M.D.Fla. 2014), is a good opinion that discusses liability insurance considerations in a construction defect dispute including the triggering of liability insurance. In this case, a general contractor built a condominium over a multi-year period. Construction commenced in 2003. From 2003 through 2009, the contractor’s CGL carrier was Mid-Continent. Towards the end of 2009, it switched carriers to Endurance.


In 2009, the developer turned over control over the condominium to the unit owners. The association hired a company to perform an inspection of the condominium which revealed certain defects and building code violations (i.e., structural framing failure, organic growth, damage to interior finishes, etc.). The association sued the general contractor and developer in 2010 for violations of the building code, breach of statutory warranties, and deceptive and unfair trade practices.


The general contractor, as it should, notified and tendered the defense of its lawsuit to Mid-Continent and Endurance. Mid-Continent denied coverage and refused to participate in the defense. As a result, the contractor sued its insurer Mid-Continent for breach of contract and for a declaratory action arguing that Mid-Continent has a duty to defend and indemnify it in the association’s lawsuit. While this lawsuit was going on, the association’s lawsuit against the contractor was proceeding to trial. The contractor’s insurer, Endurance, was providing a defense. Right before trial, the association and the contractor (with the agreement of Endurance) entered into a consent judgment (known as a Coblentz agreement) for $1,800,000 which was entered in favor of the association against the contractor. The settlement provided that the association would not execute against the contractor. Following the court’s entry of the judgment, the contractor amended its complaint against Mid-Continent arguing that Mid-Continent is obligated to indemnify the contractor for the $1,800,000 judgment.


A Coblentz agreement is a settlement agreement between a third-party claimant and an insured to resolve a lawsuit where the insured’s liability insurer has denied coverage and its duty to defend. “Under Florida law, a party seeking recovery from an insurer under a Coblentz agreement must provide: (1) a wrongful refusal to defend; (2) a duty to indemnify; and (3) that the settlement was objectively reasonable and made in good faith.” Trovillion Const., supra, at *3. “In a traditional Coblentz agreement, the insured: (1) enters into a consent judgment establishing its liability and fixing damages; and (2) assigns any cause of action it has against its insurer to the claimant [in consideration of the claimant not executing on the judgment against the insured].” Id. at n.2.


In order to determine whether Mid-Continent had a duty to defend, the Court needed to determine what legal theory triggered the occurrence under the CGL policies. Numerous Florida courts have applied the manifestation theory meaning that the occurrence is triggered when the damage is discovered. There are courts that have applied the injury-in-fact theory meaning that the occurrence is triggered the moment there is actual damage irrespective of whether that damage is actually discovered. This is a significant difference and important for parties in liability-related disputes dealing with property damage to understand.


The underlying complaint the association asserted against the contractor alleged that the defects were causing ongoing damage and was silent as to the specific date the defects began to damage the condominium. But, the association’s inspection report after the developer turned the association over indicated that damages started to occur between the time construction commenced in 2003 and the 2009 inspection performed for the association. The report further alleged that the defects were not discovered until expert consultants were retained, i.e., in 2009. Mid-Continent argued that it had no duty to defend under the manifestation theory because the complaint alleged that the manifestation (when the defects were discovered) was 2009 at a point when it was no longer insuring the contractor. However, the court applied the injury-in-fact theory in this case. This meant that Mid-Continent’s policies were triggered because the triggering point was when actual damage started to occur, and not when it was actually discovered. Again, this is a crucial distinction–for this reason the Court found that Mid-Continent had a duty to defend.


Finding that a duty to defend existed, the Court’s next analysis was whether Mid-Continent had a duty to indemnify based on the actual coverage in the policies. An insurer’s duty to defend is much broader than an insurer’s duty to indemnify. Under a CGL policy with a “subcontractor” exception to the “your work” exclusion, a contractor’s insurer is not liable for the defective work caused by a subcontractor, but it is liable for the repairing the damage caused by the subcontractor’s defective work. (See the “subcontractor” exception to the “your work” exclusion in the CGL policy.)


Interestingly, in this case, of the six annual policies Mid-Continent issued between 2003-2009, only one policy contained the “subcontractor” exception to the “your work” exclusion. The other policies, through endorsement, eliminated the “subcontractor” exception. Without the “subcontractor” exception to the “your work” exclusion in CGL policies, the insurer is able to exclude coverage for damage arising from a subcontractor’s defective work. But, with the “subcontractor” exception, the insurer is liable for damage caused by a subcontractor’s defective work. Stated differently, without the “subcontractor” exception, the contractor is probably not getting the CGL coverage it thinks it is getting or needs when constructing a project with the potential for claims down the road (such as condo projects).


Because only one policy contained the “subcontractor” exception, the contractor needed to establish when the property damage occurred. Obviously, it is in its best interest to have expert testimony establishing that the date the damage occurred / was occurring was with the policy period where there was a “subcontractor” exception to the “your work” exclusion. Otherwise, Mid-Continent had no duty to indemnify!


Furthermore, Mid-Continent argued that even if the contractor proved that damage occurred within the policy period with the “subcontractor” exception, the consent judgment did not allocate covered damage to uncovered damage. In other words, the consent judgment did not allocate the portion of the damage attributable to repairing damage caused by subcontractors’ defective work. “Florida law requires Trovillion [contractor], the party seeking recovery, to allocate the settlement amount between covered and uncovered claim [and] [i]nability to allocate precludes recovery.Trovillion Const., supra, at *8.


The contractor, unfortunately, presented no evidence that it could apportion damages. Based on this issue, the Court ruled:


Trovillion is not relieved of its duty to apportion damages, and its failure to make any effort to do so or to produce evidence suggesting it is capable of doing so is fatal to its indemnification claim. For that reason, and because Trovillion has failed to produce more than a scintilla of evidence suggesting that non-excluded property damage occurred at the condominium community during the MCC [Mid-Continent] policy periods, MCC’s motion for summary judgment is due to be granted….”



There are quite a few important take-aways from this case. First, know what argument needs to be made to trigger an occurrence under a liability policy. Whether it is the manifestation theory or injury-in-fact theory, consider both theories when presenting an argument and claim to a carrier. Second, know that an insurer’s duty to indemnify is much narrower than its duty to defend which is based on the allegations of the complaint. Third, if entering into a Coblentz agreement and corresponding consent judgment, include something that apportions damage between uncovered damage (a subcontractor’s defective work) and covered damage (damage caused by a subcontractor’s defective work). And, fourth, know whether your liability policy has a “subcontractor” exception to the “your work” exclusion or whether the carrier issued an endorsement that eliminated that exception. This “subcontractor” exception is important to contractors in Florida so if the endorsement that eliminated this exception was issued, make sure that you know your risks. Insurance is a critical part of risk assessment. Know your rights and appreciate your risks!


For more on construction defect insurance considerations, please see


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