194 F. Supp. 3d 1224
M.D. Fla.2016Background
- ATIF (Attorneys’ Title Insurance Fund) was sued in state court over title-related fraud; Section 10 counterclaimed and later amended counterclaims, leading to consolidated litigation including a malicious-prosecution claim.
- ATIF had CGL coverage from Travelers and umbrella coverage from St. Paul for the 2007–2012 policy periods; ATIF sought coverage for renewed counterclaims and a later-filed malicious-prosecution action.
- ATIF and Section 10 negotiated a Coblentz agreement: ATIF consented to a judgment (~$40M) in favor of Section 10 but assigned its insurance claims to Section 10 so enforcement could be pursued solely against ATIF’s insurers.
- Travelers and St. Paul offered a defense under reservation of rights after ATIF tendered the renewed claims; ATIF rejected the defense and executed the Coblentz agreement shortly thereafter.
- Plaintiffs filed this declaratory-judgment action seeking summary judgment that (1) they wrongfully did not refuse to defend, (2) they had no duty to indemnify because exclusions and ATIF’s lack of cooperation bar coverage, and (3) the Coblentz agreement was not made in good faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurers wrongfully refused to defend ATIF | Plaintiffs argue offering defense under reservation of rights is not a wrongful refusal | Section 10 argues reservation does not squarely resolve wrongful-refusal element for enforcing Coblentz | Court: Genuine issue exists whether Plaintiffs ‘‘wrongfully refused’’ to defend; prior holding that reservation-of-rights is not dispositive — issue remains factual |
| Whether policies require indemnity (coverage exclusions) | Exclusions for financial services/insurance-company activities bar coverage because ATIF’s salvage/recovery (lawsuit to recover payments) is claims-handling | Section 10 contends exclusion should not be read so broadly and limiting language (e.g., “to others”) narrows scope | Court: Policies unambiguous; ATIF treated salvage/recovery as claims handling (per ATIF rep), so exclusions apply and bar coverage |
| Whether ATIF breached cooperation clause | Plaintiffs: ATIF withheld material information, colluded with Section 10 to create live claims and negotiated the Coblentz secretly, materially prejudicing insurers | Section 10: ATIF never accepted the reservation-of-rights defense; mediation privilege and claims-administration notice rules bar or excuse alleged failures | Court: ATIF materially failed to cooperate, insurers exercised diligence, and were substantially prejudiced; statutory notice and mediation-privilege arguments rejected |
| Whether the Coblentz agreement was reasonable and made in good faith | Plaintiffs: Agreement was not in good faith (no negotiation of damages; $40M was manufactured and excessive) | Section 10: Settlement was bargained and reduced from higher earlier figures; factual disputes preclude summary judgment | Court: Agreement not made in good faith — damages figure appears unnegotiated and ATIF made no effort to minimize liability; enforcement barred |
Key Cases Cited
- Coblentz v. Am. Sur. Co. of New York, 416 F.2d 1059 (5th Cir. 1969) (establishes doctrine allowing assignee to sue insurer on insured’s behalf where insured covenants not to execute judgment)
- Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318 (11th Cir.) (elements required to enforce a Coblentz-type agreement under Florida law)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard regarding genuine issue of material fact)
- Mid-Continent Cas. Co. v. Am. Pride Bldg. Co., LLC, 601 F.3d 1143 (11th Cir.) (insurer may defend under reservation of rights without breaching duty to defend)
- Jimenez v. Gov’t Emps. Ins. Co., 651 Fed.Appx. 850 (11th Cir.) (reasonableness and good-faith standards for settlements with insureds)