14.18.3 Claim Assignments Against Producers.

• Jurisdiction: Arizona

14.18.3 Claim Assignments Against Producers. When the insurer fails or refuses to defend the insured despite notice of the claim and an opportunity to defend, the insured may protect himself from the “sharp thrust” of personal liability by settling with the claimant and assign his potential claims against the insurer.²⁵² This usually involves the insured agreeing to allow a stipulated judgment to be taken against him, with a covenant by the claimant not to execute that judgment against the insured.²⁵³ In exchange, the insured assigns his potential claims for breach of contract and bad faith against the insurer to the claimant.²⁵⁴ The assignee still must prove his claims of breach of contract and bad faith to recover against the insurer.

The Arizona Court of Appeals initially declined to allow such assignments against insurance producers, even where the producer’s alleged negligence arguably caused the insured’s lack of coverage.²⁵⁵ However, the Arizona Supreme Court in Webb v. Gittlen...