The Court of Appeals rejected this
argument and instead reasoned that under general indemnity principles, subject
to a determination of the reasonableness
of the settlement, stipulated judgment
agreements could be binding in non-in-surance contexts. 31
In Webb v. Gittlen, 32 the Arizona Su-
preme Court analyzed the applicability of
stipulated judgment agreements to
claims against insurance agents. In Webb,
the Liquor Vault sold alcohol to a minor,
who gave the liquor to another minor,
who then drove his car into a cement
barrier, killing his passenger. The Liquor
Vault’s insurer denied coverage because
the policy excluded coverage for liability
arising from the sale of liquor. The dece-
dent’s father settled his wrongful death
claims against the Liquor Vault by stipu-
lating to entry of a $3 million judgment
not to be executed against the Liquor
Vault, and accepting the assignment of
the Liquor Vault’s claims against its in-
surance agent for professional negli-
The Court reasoned that although the
Liquor Vault’s negligence claims against
its insurance agent could be assigned to
the decedent’s father, the agent could
not be bound by the stipulated judgment. 33 This conclusion is premised on
the notion that an insurance agent—
unlike an insurer—generally has no contractual duty to defend and indemnify the
insured. Accordingly, absent such a contractual relationship, there is no basis for
binding an insurance agent to a stipulated judgment entered in a proceeding to
which the agent is not a party. 34
Under Damron, stipulated judgment
agreements evolved as a tool to protect
insureds from exposure to personal liability when the insurer did not unconditionally provide defense and indemnity under
the insurance policy. Where the goal is to
shield insureds from the “sharp thrust” of
personal liability, such agreements have
generally met with judicial approval. But
when the assignment-for-judgment agreement is used as a sword in an attempt to
create coverage where none exists under
an insurance policy, or is constructed for
unfair advantage or profit, it will be closely scrutinized by Arizona courts. In such
cases, the parties’ saber-rattling in the
shadow of Damron will likely be deemed
collusive and ruled ineffective against the
1. For an excellent summary of
such agreements, see the article in this issue on page 10
by William Sandweg III and
John Ager: A Primer on the
Cooperation Clause: Damron
v. Sledge and Its Progeny,
ARIZ. ATT’Y, March 2016, at
2. Damron v. Sledge, 460 P.2d
997, 999 (Ariz. 1969).
3. United Servs. Auto. Ass’n v.
Morris, 741 P.2d 246 (Ariz.
5. Arizona Prop. & Cas. Ins.
Guar. Fund v. Helme, 735
P.2d 451 (Ariz. 1987).
6. State Farm Mut. Auto. Ins.
Co. v. Peaton, 812 P.2d 1002
(Ariz. Ct. App. 1991).
7. Arizona Prop. & Cas. Ins.
Guar. Fund v. Martin, 113
P.3d 701 (Ariz. Ct. App.
8. Id. at 702.
9. Id. at 704.
10. Id. at 705.
11. 334 P.3d 719 (Ariz. 2014).
12. Id. at 721.
14. Id. at 726.
15. Id. at 728.
16. 178 P.3d 485 (Ariz. Ct. App.
2013.); cf. Penn-America Ins.
Co. v. Sanchez, 202 P.3d 472,
478 (Ariz. Ct. App. 2008)
(“[U]nreasonable delay without prejudice to the insured
will not cause loss of the
insurer’s coverage defenses.”)
17. Pueblo, 178 P.3d at 487.
18. Id. at 494.
19. Id. at 491.
20. Id. at 493.
21. Accord, Colorado Cas. Ins. Co.
v. Safety Control Co. Inc., 288
P.3d 764 (Ariz. Ct. App. 2012)
(“By contrast, the agreement
in this case assigned nothing
more than an indemnity claim
that may be enforced against
EMC only if the stipulated
judgment proves to be a liability that is within the scope
of the coverage that EMC
promised to provide to DBA.”).
22. 247 P.3d 180 (Ariz. Ct. App.
2011); cf Monterey Homes
Arizona Inc. v. Federated
Mut. Ins. Co., 212 P.3d 43
(Ariz. Ct. App. 2009) ([C]
onsistent with the principles
established in Morris we hold
the insurer’s subrogation rights
will not limit the insured
from entering into a settle-
ment that releases those rights
when, as here, the insured is
being defended under a
reservation of rights.”).
23. Leflet, 247 P.3d at 183.
24. Id. at 185.
25. Id. at 184-85.
27. 357 P.3d 170 (Ariz. Ct. App.
28. Id. at 176.
29. See also In re Alcorn, 41 P.3d
600 (Ariz. 2002) (The integrity of judicial proceedings is
affected by the non-disclosure
of Damron- and Morris-style
agreements because they may
result in a “sham” trial that
is inherently collusive. Such
agreements, which have the
potential to skew a supposedly
adversarial trial, may encourage wrongdoing and must be
disclosed to the trial judge
and all litigants.)
30. 204 P.3d 1051 (Ariz. Ct. App.
2008); see also MT Builders
LLC v. Fisher Roofing Inc.,
197 P.3d 758, 769 (Ariz. Ct.
App. 2008) (“Although [ ]
Damron do[es] not, as MT
Builders argues, hold an
indemnitee’s settlement with
a third party will control the
existence and extent of the
indemnitor’s indemnity liability, they are in accord with
the approach taken by many
courts regarding the right
of an indemnitee to recover
against an indemnitor when,
as here, before liability is
determined, the indemnitee
settles an action against it by
a third party.”).
31. A-Tumbling T, 204 P.3d at
32. 174 P.3d 275 (Ariz. 2008);
cf. Botma v. Huser, 39 P.3d
538 (Ariz. 2002) (holding
that assignment of a legal
malpractice claim in any
situation is not permitted,
even where the insurance bad
faith claim arises out of an
attorney’s supposed wrongful
conduct in representing the
tortfeasor on the underlying
33. Webb, 174 P.3d at 281.