The insured stipulates to a judgment in an agreed amount, the claimant covenants not to execute against the insured's personal assets, and the insured assigns its claims against the carrier. The claimant then pursues the insurer for the stipulated amount.
Names vary by jurisdiction, including Damron agreements in Arizona and Morris agreements where a reservation of rights applies.
Alternative Names:
Stipulated Judgment with Covenant, Damron Agreement, Morris Agreement
Why it Matters?
These agreements typically follow a coverage denial or a refused within-limits demand, and they convert a coverage dispute into a bad faith case with a pre-set damages figure. The central defense is that the stipulated amount was not the product of adversarial testing and is unreasonable or collusive. Whether the carrier may contest the amount, and what showing it must make, is the question that determines the exposure.
Frequently Confused with
Related terms
Frequently asked questions
Is the stipulated judgment binding on the insurer?
When do these agreements arise?
