Covenant Not to Enforce Judgment and Release
Below is a case I handled wherein the negligent driver was operating a car dealer's vehicle and then was involved in a drunk driving accident. There were multiple insurance policies, the insurer for the car dealer (which also had to cover the driver) wanted to settle for their policy limits, however, the driver's personal insurance did not want to settle. Therefore, we settled with the car dealer insurance dismissing the dealer but kept the individual in with a promise that we will not enforce an excess personal injury judgment against him personally in exchange for assignment of any bad faith claim against his insurer for failure to settle within policy limits.
These agreements require careful review and drafting as a mistake on drafting these personal injury releases could inadvertently release the other defendant or insurance company if the intent of the agreement and the language is not very clear and in line with state law.
These agreements require careful review and drafting as a mistake on drafting these personal injury releases could inadvertently release the other defendant or insurance company if the intent of the agreement and the language is not very clear and in line with state law.
COVENANT NOT TO ENFORCE JUDGMENT AGAINST
DEFENDANT ONE AND RELEASE OF DEFENDANT TWO AND INSURANCE ONE
This Settlement Agreement is entered into between NAME PLAINTIFFS (collectively “Plaintiffs”) and NAME DEFENDANT (“DEFENDANT ___________”), NAME DEFENDANT (“DEFENDANT _______________”) and INSURANCE COMPANY ONE and its related companies (“__________INSURANCE COMPANY”).
RECITALS:
1. Whereas, Plaintiffs filed a cause of action for personal injuries in the Circuit Court of _____ County, Case # ________ (the “Plaintiff's Action”), alleging multiple counts of negligence against multiple Defendants, including ____ and _______. Specifically, Plaintiffs claim that DEFENDANT __________, HERE DESCRIBE SPECIFIC ACTS OF NEGLIGENCE CONSTITUTING THE PERSONAL INJURY CLAIM OR LAWSUIT.
2. Whereas, there are multiple insurance policies which indemnify DEFENDANTS for damages arising from the _______ Action. Specifically, NAME INSURANCE COMPANY and POLICY policy (#00-0000000) and NAME ADDITIONAL INSURANCE auto policy (# 00-000000) provide liability coverage for the ________________ Action.
3. Whereas, all of the parties named above are desirous to reach an agreement wherein: INSURANCE COMPANY ONE pays its policy limits to plaintiffs to be divided as set forth herein; DEFENDANT TWO is dismissed from the case with prejudice; plaintiffs can proceed against DEFENDANT ONE but be limited to execution, collection and levy only upon DEFENDANT ONE's insurer, INSURANCE TWO or it’s related companies; and DEFENDANT ONE will not have his personal assets levied or executed upon in case a judgment is taken against him in excess of the INSURANCE TWO policy.
4. Whereas, INSURANCE TWO is not participating in the settlement or contributing towards this settlement, and plaintiffs are reserving all of their rights to collect against the INSURANCE TWO policy by pursuing the _____ Action against DEFENDANT ONE.
5. The parties desire to have a good faith determination that this settlement herein is not in violation of law or public policy, and each party herein is acting in their respective individual best interests and their conduct is not collusive.
Therefore in consideration of the above recitals and other valuable consideration the parties hereby agree, covenants release and contract in accordance with the following terms.
COVENANTS:
6. The parties hereby agree to a limited settlement of the _______ Action for the following terms. In consideration of the covenants herein, INSURANCE ONE shall forthwith pay its policy limits of the INSURANCE ONE Policy, being in the amount of $500,000.00. The settlement shall be divided among the plaintiffs as follows: ___________________________________.
7. This agreement has no affect on DEFENDANT ONE's ability to defend himself as this litigation continues, there are no express or implied agreements between the parties that DEFENDANT ONE will in any way depart from the expected role of a defendant in the above mentioned litigation. DEFENDANT ONE still has a duty to cooperate with INSURANCE TWO in the defense of the ______ Action, and hereby agrees to reasonably cooperate with INSURANCE TWO and the lawyers appointed to represent him in the _________ Action.
8. In consideration of the partial settlement of $500,000 under the INSURANCE ONE Policy the Plaintiffs enter into a covenant not to enforce, execute or levy upon DEFENDANT ONE's personal assets for any judgment entered against D1 within the policy coverage of INSURANCE TWO, but to limit collection by any legal means only upon and against his available insurance coverage except for INSURANCE ONE. Additionally, if a judgment or verdict is entered against D1 in excess of both the INSURANCE ONE and the INSURANCE TWO policy then the Plaintiffs agree not to enforce any excess judgment against D1's personal assets, if D1 then transfers, assigns or otherwise gives over any cause of action he may have against INSURANCE TWO, for bad faith or tortuous failure to settle the ____ Action, to the Plaintiffs who may pursue INSURANCE TWO for recovery of an excess judgment or verdict should one occur. The plaintiffs agree that they shall make any allocation of that cause of action in accordance with the excess judgment. If no viable claim exists for tortuous failure to settle, the transfer of such cause of action will still preclude any enforcement of the Judgment against D1’s personal assets.
9. In consideration of the payment called for herein and the assignment discussed above, Plaintiffs hereby completely release and forever discharge DEFENDANT TWO and their “predecessors and successors,” defined as their past, present, and future officers, directors, stockholders, attorneys, agents, servants, representatives, employees, subsidiaries, affiliates, partners, predecessors, insurer Sentry, heirs, executors, successors in interest, and assigns, with the express exception of DEFENDANT ONE from any and all past, present or future claims, demands, obligations, actions, causes of actions, rights, damages, costs, losses, lost services, expenses and compensation of any nature whatsoever, whether based on tort, contract or other theory of recovery, and whether for compensatory or punitive damages, which Plaintiffs had, now have, or which may hereafter accrue or otherwise be acquired, on account of, or in any way growing out of, or which are the subject of, or which could have been included in, the Complaint and all related pleadings, or the occurrence alleged in the Complaint including, without limitation, any and all known or unknown claims of Plaintiffs which have resulted or may result from the alleged acts or omissions of Defendant DEFENDANT TWO arising from their conduct (hereinafter “All Claims Against DEFENDANT TWO”). This agreement in no way releases DEFENDANT ONE or INSURANCE TWO or its associated insurance companies or the INSURANCE TWO policy referenced above from any liability.
10. Payment. In consideration of the release set forth above, Defendant DEFENDANT ONE and DEFENDANT TWO, by and through their insurer INSURANCE ONE, will pay to Plaintiffs the sums outlined in this section below:
11. Delivery of Dismissal with Prejudice. Concurrently with the execution of this Release and the finding of good faith settlement and Order by the court, counsel for each party has stipulated to a dismissal with prejudice as to Little Jess.
12. Good Faith Settlement. The parties hereby agree to present a motion for Good Faith Settlement to the court for approval and entry of an Order thereon. Said Motion and Order to be consistent with the terms and agreements contained in this agreement. This agreement and release is contingent upon the court entering an Order finding that this settlement agreement is entered into in good faith.
IN WITNESS WHEREOF, the parties have caused this Covenant Not To Enforce and Release to be executed on the date set forth underneath their respective signatures
RECITALS:
1. Whereas, Plaintiffs filed a cause of action for personal injuries in the Circuit Court of _____ County, Case # ________ (the “Plaintiff's Action”), alleging multiple counts of negligence against multiple Defendants, including ____ and _______. Specifically, Plaintiffs claim that DEFENDANT __________, HERE DESCRIBE SPECIFIC ACTS OF NEGLIGENCE CONSTITUTING THE PERSONAL INJURY CLAIM OR LAWSUIT.
2. Whereas, there are multiple insurance policies which indemnify DEFENDANTS for damages arising from the _______ Action. Specifically, NAME INSURANCE COMPANY and POLICY policy (#00-0000000) and NAME ADDITIONAL INSURANCE auto policy (# 00-000000) provide liability coverage for the ________________ Action.
3. Whereas, all of the parties named above are desirous to reach an agreement wherein: INSURANCE COMPANY ONE pays its policy limits to plaintiffs to be divided as set forth herein; DEFENDANT TWO is dismissed from the case with prejudice; plaintiffs can proceed against DEFENDANT ONE but be limited to execution, collection and levy only upon DEFENDANT ONE's insurer, INSURANCE TWO or it’s related companies; and DEFENDANT ONE will not have his personal assets levied or executed upon in case a judgment is taken against him in excess of the INSURANCE TWO policy.
4. Whereas, INSURANCE TWO is not participating in the settlement or contributing towards this settlement, and plaintiffs are reserving all of their rights to collect against the INSURANCE TWO policy by pursuing the _____ Action against DEFENDANT ONE.
5. The parties desire to have a good faith determination that this settlement herein is not in violation of law or public policy, and each party herein is acting in their respective individual best interests and their conduct is not collusive.
Therefore in consideration of the above recitals and other valuable consideration the parties hereby agree, covenants release and contract in accordance with the following terms.
COVENANTS:
6. The parties hereby agree to a limited settlement of the _______ Action for the following terms. In consideration of the covenants herein, INSURANCE ONE shall forthwith pay its policy limits of the INSURANCE ONE Policy, being in the amount of $500,000.00. The settlement shall be divided among the plaintiffs as follows: ___________________________________.
7. This agreement has no affect on DEFENDANT ONE's ability to defend himself as this litigation continues, there are no express or implied agreements between the parties that DEFENDANT ONE will in any way depart from the expected role of a defendant in the above mentioned litigation. DEFENDANT ONE still has a duty to cooperate with INSURANCE TWO in the defense of the ______ Action, and hereby agrees to reasonably cooperate with INSURANCE TWO and the lawyers appointed to represent him in the _________ Action.
8. In consideration of the partial settlement of $500,000 under the INSURANCE ONE Policy the Plaintiffs enter into a covenant not to enforce, execute or levy upon DEFENDANT ONE's personal assets for any judgment entered against D1 within the policy coverage of INSURANCE TWO, but to limit collection by any legal means only upon and against his available insurance coverage except for INSURANCE ONE. Additionally, if a judgment or verdict is entered against D1 in excess of both the INSURANCE ONE and the INSURANCE TWO policy then the Plaintiffs agree not to enforce any excess judgment against D1's personal assets, if D1 then transfers, assigns or otherwise gives over any cause of action he may have against INSURANCE TWO, for bad faith or tortuous failure to settle the ____ Action, to the Plaintiffs who may pursue INSURANCE TWO for recovery of an excess judgment or verdict should one occur. The plaintiffs agree that they shall make any allocation of that cause of action in accordance with the excess judgment. If no viable claim exists for tortuous failure to settle, the transfer of such cause of action will still preclude any enforcement of the Judgment against D1’s personal assets.
9. In consideration of the payment called for herein and the assignment discussed above, Plaintiffs hereby completely release and forever discharge DEFENDANT TWO and their “predecessors and successors,” defined as their past, present, and future officers, directors, stockholders, attorneys, agents, servants, representatives, employees, subsidiaries, affiliates, partners, predecessors, insurer Sentry, heirs, executors, successors in interest, and assigns, with the express exception of DEFENDANT ONE from any and all past, present or future claims, demands, obligations, actions, causes of actions, rights, damages, costs, losses, lost services, expenses and compensation of any nature whatsoever, whether based on tort, contract or other theory of recovery, and whether for compensatory or punitive damages, which Plaintiffs had, now have, or which may hereafter accrue or otherwise be acquired, on account of, or in any way growing out of, or which are the subject of, or which could have been included in, the Complaint and all related pleadings, or the occurrence alleged in the Complaint including, without limitation, any and all known or unknown claims of Plaintiffs which have resulted or may result from the alleged acts or omissions of Defendant DEFENDANT TWO arising from their conduct (hereinafter “All Claims Against DEFENDANT TWO”). This agreement in no way releases DEFENDANT ONE or INSURANCE TWO or its associated insurance companies or the INSURANCE TWO policy referenced above from any liability.
10. Payment. In consideration of the release set forth above, Defendant DEFENDANT ONE and DEFENDANT TWO, by and through their insurer INSURANCE ONE, will pay to Plaintiffs the sums outlined in this section below:
11. Delivery of Dismissal with Prejudice. Concurrently with the execution of this Release and the finding of good faith settlement and Order by the court, counsel for each party has stipulated to a dismissal with prejudice as to Little Jess.
12. Good Faith Settlement. The parties hereby agree to present a motion for Good Faith Settlement to the court for approval and entry of an Order thereon. Said Motion and Order to be consistent with the terms and agreements contained in this agreement. This agreement and release is contingent upon the court entering an Order finding that this settlement agreement is entered into in good faith.
IN WITNESS WHEREOF, the parties have caused this Covenant Not To Enforce and Release to be executed on the date set forth underneath their respective signatures