What Is A Cunningham Agreement

Kenneth Dale Cunningham and Teresa Marie Cunningham suffered injuries and property damage following a collision with Joseph Grant James. The Cunninghams filed a claim for damages against James, claiming that the accident was caused by James` negligent driving of a motor vehicle. James` auto insurance policy with Standard Guaranty Insurance Company had a personal injury liability limit of $10,000 and a property damage liability limit of $10,000. After the lawsuit went for several months without settlement, the Cunninghams added Standard Guaranty as a party to the lawsuit, claiming that Standard Guaranty acted in bad faith by failing to settle the claim. Standard Guaranty and the Cunninghams then reached an agreement to attempt the lawsuit in bad faith before attempting the underlying negligence claim. The parties further determined that if no bad faith was established, the Cunninghams` claims to political boundaries would be settled and James would not be subject to excessive judgment. After other settlement negotiations failed between the auto owners, Ledford, Bob`s RV and Cawthorn, Cawthorn and Ledford continued settlement talks without the participation of the car owners. Eventually, Cawthorn and Ledford reached a definitive settlement agreement under which the auto owners would provide Cawthorn with $3 million to release Bob`s RV. Ledford and Cawthorn also agreed to register a $30 million approval judgment against Ledford, and Ledford transferred to Cawthorn his rights to sue car owners for bad faith.

Although Auto-Owners was not a signatory to the final agreement, Auto-Owners offered its limits to Cawthorn and Cawthorn agreed and released Bob`s motorhome. Cawthorn then filed a bad faith lawsuit against auto owners to recover the $30 million approval decision against Ledford. The plaintiff then sued the policyholder. The insurer contacted the claimant`s lawyer several times to inquire about the $10,000 cheque, but received no response. More than a year and three months after the insurer announced the policy limits, the plaintiff`s lawyer sent the policyholder a letter about a “settlement option.” The letter proposed an agreement between the applicant, the policyholder and the insurer to (1) issue a consent judgment of $150,000 against the policyholder; and (2) determine the insurer`s liability for the recovery of damages beyond the limits of the policy. The policyholder was informed of the offer, but the insurer did not accept the offer. The trial judge excluded any evidence in support of the letter about the “possibility of settlement” because he agreed with the insurer`s argument that he was not required by Florida law to participate in such an agreement. The jury heard only evidence of Powell`s theory. The jury found that the insurer acted in bad faith by offering the policy limit only 37 days after the accident, but concluded in favor of the insurer on the affirmative defense that there was no realistic way to settle the claim within the limits of the insurance. As a result, the Court of First Instance issued a judgment for the insurer. In Cawthorn`s case, the validity of his bad faith claim revolved around whether the requirement of excessive judgment was satisfied by the $30 million approval verdict between Cawthorn and Ledford. The court first analyzed whether the consent judgment fell within one of the exceptions to the judgment-on-judgment rule and ultimately concluded that this was not the case.

In the Court`s view, the consent decision was not a cunningham agreement because Auto-Owners was not a party to the consent judgment, not a Coblentz agreement because Auto-Owner defended its policyholders, and did not fall within the third exception because it was not true that an excess carrier sued a primary carrier […].