A covenant not to execute lets a claimant obtain or accept a judgment against an insured while agreeing not to enforce it against the insured's personal assets. In exchange, the insured typically assigns its claims against its insurer, including any bad faith claim.
The arrangement commonly follows a coverage denial or a refused within-limits demand, and it is often combined with a consent judgment or a stipulated damages amount.
Alternative Names:
Agreement Not to Execute, Non-Execution Agreement
Why it Matters?
This is the mechanism that converts a coverage dispute into a bad faith case with the claimant as the real party in interest. For carriers, the risk is that the insured and claimant together fix a judgment amount without adversarial testing, and the carrier then faces that number as its exposure. Whether these arrangements are enforceable, and whether the stipulated amount binds the insurer, are among the most consequential state-law variations in insurance litigation.
Frequently Confused with
Related terms
Frequently asked questions
Why would a defendant agree to a judgment against itself?
Is the stipulated judgment amount binding on the insurer?
