Coordination Agreement

MODEL CONTRACT

COORDINATION AGREEMENT

USE NOTES: The policyholder’s insurer has denied all coverage. The policyholder and the plaintiff has agreed to cooperate and to enter into a reasonable, non-collusive settlement. Several of the following paragraphs suggest alternative language. Adapt the contract below by using the Legend. Before sending the text below, delete everything above this line.

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COORDINATION AGREEMENT

RECITALS

1.    Parties

This Coordination Agreement (Agreement) is between &Client& (“&Client&”), &IndependentCounsel& (“&IndependentCounsel&”), &Plaintiff& (“&Plaintiff&”), and &PlaintiffCounsel& (“&PlaintiffCounsel&”) (collectively “Parties”). &Plaintiff& and the &Client& may each be referred to as “Client”.

2.    Liability Dispute

&Plaintiff& has sued the &Client& in an action entitled &Plaintiff& v. &Client& (“Liability Action”). &Plaintiff& and the &Client& are adverse to each other in the Liability Dispute.

3.    Coverage Dispute

The &Client& warrants that it is a policyholder of each of the policies described in paragraphs ___ immediately below.

A.    (“&InsCo&”) issued a policy of liability insurance bearing Policy no. 103754176 to the &Client& with limits of liability of $1 million by which &InsCo& agreed to pay on behalf of the &Client& amounts that the &Client& becomes legally obligated to pay as the result of claims made against it for any error, act, omission, neglect, or breach of duty by the &Client&.

B.    &InsCo& has denied coverage to the &Client& in the Liability Action and has not agreed to defend the Liability Action, and none of the insurers has agreed to pay &Plaintiff&’s claim, thereby creating a dispute between the insurers, the &Client&, and &Plaintiff& regarding the defense and resolution of the Liability Action. (“Coverage Dispute”). &Plaintiff& and the &Client& are not adverse to each other regarding the Coverage Dispute.

4.    Common Interests

Although the &Client& and &Plaintiff& are adverse to one another in the Liability Action, they are not adverse to each other in the Coverage Dispute. They have common interests in securing insurance coverage for the Liability Dispute and intend to cooperate with each other to achieve their shared goals, namely a joint response and joint prosecution or defense in any coverage litigation, the reduction of the financial burden on the &Client& and &Plaintiff&, the shifting of liability to the insurers, and the minimization of legal fees and expenses. To promote these common interests, the &Client& and &Plaintiff& wish to cooperate with each other as memorialized in this Agreement.

AGREEMENT

5.    Cooperation

The Parties agree to cooperate fully with each other to implement this Agreement and to accomplish the goals outlined in each of the Related Documents described in the next paragraph. The Parties acknowledge that although they are adverse in the Liability Dispute, they are not adverse in the Coverage Dispute. Each Client Party expressly agrees that each owes to each other Client Party a duty of good faith and fair dealing regarding the Coverage Dispute. Each Attorney Party’s duty to others is limited by the duty of undivided loyalty to a client. The Parties agree to give truthful testimony and to assert claims with probable cause.

6.    Related Documents

Simultaneously with the execution of this Agreement, the Parties are entering into the following related contracts, pleadings, and other documents:

• Privilege Non-Waiver Agreement;

• Complaint;

• Cross-complaint;

Policy Limit Settlement Offer;

• Stipulation to Streamline Trial;

• Assignment and Covenant.

7.    Inconsistencies Among Related Documents

This Agreement is intended by the Parties to modify certain terms of the Related Documents. Any conflict or inconsistency between the terms of this Agreement and any Related Document shall be resolved by enforcing the terms of this Agreement.

8.    Confidentiality

This Agreement, the Assignment and Covenant, the Option, and all communications among the Parties relating to the preparation of all Related Documents are confidential “Joint Defense Information” as that phrase is described in the Joint Defense Agreement. However, the Joint Defense Agreement, Cross-complaint, Policy Limit Settlement Offer, Stipulation to a Reference, and Stipulation to Streamline Trial are not confidential. While the Assignment and Covenant is currently confidential, it shall no longer be confidential and may be freely disclosed if the Option, described below, is exercised. The effective date of the Assignment and Covenant shall be the date that this Option is exercised. The Parties agree that confidential documents and communications relating to them are confidential and none of the Parties nor any subsidiary, corporate affiliate, or other related entity of any of them, or their respective officers, directors, shareholders, trustees, agents, employees, or attorneys shall disclose such information to any person without the prior written consent of the other Parties to this Agreement. However, such information may be disclosed in the following circumstances:

A.    To a Party’s officers or directors. However, the party making any such disclosure of any terms of this Agreement shall obtain from the person and entity receiving the information a written commitment to maintain its confidentiality;

B.    In an action to enforce the terms of this Agreement;

C.    In connection with a judicial determination of the reasonableness or fairness of this Agreement or the good faith of the Parties hereto in reaching this settlement; or

D.    When disclosure is required by law or sought in litigation or other adversarial proceedings. If this Agreement, or its provisions are sought, the Party receiving such a demand shall provide the other Parties with immediate written notice of such demand. If this Agreement, or its provisions, are produced, the producing Party will produce same under a protective order protecting its confidentiality or seek such an order from the court in question. The disclosing Party shall give at least ten (10) court days written notice to the other Parties prior to disclosing such information, setting forth all information that it proposes to disclose, the identity of each person to whom the information is to be disclosed, the reasons for such disclosure, and the circumstances pursuant to which disclosure is proposed to be made in order that the other Parties may review the request or demand and determine whether they will challenge the disclosure of the terms of this Agreement.

9.    Cross-Complaint

The &Client& and &IndependentCounsel& agree to file a cross-complaint in the Liability Action no later than &Date& substantially in the form of Exhibit A attached hereto. &Plaintiff& and &PlaintiffCounsel& agree to transmit the cross-complaint to AIG no later than &Date& and to request that the insurer agree to defend and indemnify the &Plaintiff& in the Liability Action.

10.  Policy Limit Settlement Offer

&Plaintiff&, and &PlaintiffCounsel& agree to transmit a policy limit settlement offer to the &Client& and &IndependentCounsel& no later than &Date& substantially in the form of Exhibit B attached hereto.

11.  Lien Upon Payments by Insurers

A.  Preservation of Policy Limits

The &Client& agrees to preserve the policy limits of each of its insurers and to do nothing to reduce said policy limits prior to the expiration (including any extensions granted) of the Policy Limit Settlement Offer described in the immediately preceding paragraph. The &Client& grants to &Plaintiff& a lien upon any payments by &InsCo&, received by the &Client& prior to the expiration (including any extensions granted) of the Policy Limit Settlement Offer.

B.  Partial Settlements with Insurers

The &Client& grants to &Plaintiff& a lien upon any payments by &InsCo&, Philadelphia, or Zurich paid after the expiration (including any extensions granted) of the Policy Limit Settlement Offer to or on behalf of the &Client& in settlement between the &Client& on the one hand and &InsCo&, or any of them, on the other hand. Following the expiration (including any extensions granted) of the Policy Limit Settlement Offer, this lien shall not apply to payments by &InsCo&, or any of them paid to or on behalf of the &Client& for costs of defense of the Liability Action.

12.  Stipulation to Streamline Trial

The Parties agree to execute a Stipulation to request that the trial judge order a consensual general reference pursuant to Code of Civil Procedure § 638 et. seq. substantially in the form of Exhibit C attached hereto. However, the Stipulation shall not be filed earlier than &Date&. If no insurer has agreed to defend the &Client& in the Liability Action by &Date&, then upon written notification by the &Client& to &Plaintiff&, the &Client& may withdraw its consent to the Stipulation by written notice to &Plaintiff& and &PlaintiffCounsel&, who agree not to file the Stipulation requesting that the trial judge order a consensual general reference. The Parties agree to use their best efforts to streamline the trial.

13.  Option

The &Client& and &Plaintiff& agree that upon entry of judgment or other resolution of the Liability Dispute, whether or not an appeal is taken from such resolution, either the &Client& or &Plaintiff& may exercise an option to enforce the Assignment and Covenant described in the immediately following paragraph by providing written notice to the other.

14.  Assignment and Covenant

The &Client& and &Plaintiff& agree to execute an Assignment and Covenant substantially in the form of Exhibit D attached hereto. The attached Assignment and Covenant is not dated. The Parties agree that the effective date of the Assignment and Covenant shall be the date that the option described in the immediately preceding paragraph is exercised and that date may be inserted into the Assignment and Covenant.

15.  Coverage Action

The &Client& agrees to commence suit against &InsCo&, in Los Angeles Superior Court not later than &Date& (Coverage Lawsuit), to use its best efforts to secure coverage for the &Client& in the Liability Action, and to require each Insurer to pay up to its policy limit to resolve the Liability Action. The &Client& also agrees to cooperate fully with &Plaintiff& with respect to the Coverage Dispute and the Coverage Lawsuit, to voluntarily appear without service of a subpeona to testify and give truthful testimony at deposition and trial of the Coverage Lawsuit, to do nothing to impair the &Client&’s rights under each policy nor to impair &Plaintiff&’s rights pursuant to the Assignment and Covenant. The &Client& also agrees not to settle all or any portion of the Coverage Dispute nor the Coverage Lawsuit without &Plaintiff&’s written consent.

16.  Indemnity

Any Party who violates the confidentiality of this Agreement or any confidential Related Document agrees to indemnify and hold harmless all other Parties for all resulting loss and damage and all attorney fees reasonably incurred to protect the confidentiality of this Agreement. Any Party who fails to timely complete any obligation set forth in this Agreement or any Related Document agrees to indemnify and hold harmless all other Parties for all resulting loss and damage and for attorney fees reasonably incurred to remedy such breach.

17.  Miscellaneous

A.   Truthful Testimony

The Parties agree to give truthful testimony upon reasonable notice without the necessity of service of legal process, e.g., a subpoena in deposition, at trial, upon any court hearing or legal proceeding in each Action.

B.   Additional Documents

The Parties agree to sign all papers and to execute and deliver such other additional documents as may be required to effectuate each of the terms of this Agreement. This Agreement is not the only agreement among these Parties.

C.  Costs

Except as otherwise provided, each Party shall bear his or its own respective costs and attorneys’ fees incurred in connection with preparation and execution of this Agreement.

D.  Binding Effect

This Agreement and all the terms, conditions and obligations contained herein are binding upon and inure to the benefit of the heirs, executors, administrators, personal representatives, successors in interest and assigns of each Party.

E.   Warranty of Authority

Each Party executing this agreement directly or in a representative capacity represents and warrants that he or it has the authority and is empowered to do so.

F.   Attorneys Fees and Costs

The Parties agree to pay their own costs, expenses, and attorneys’ fees incurred in connection with negotiation and execution of this Agreement. Should any Party hereto institute any legal action or proceeding to enforce any provision of this agreement or for damages by reason of any alleged breach of any provision of this agreement, the prevailing Party shall be entitled to receive from the losing Party all of its costs and expenses, including, without limitation, reasonable attorney fees, court costs, and disbursements actually and reasonably incurred in connection with said proceeding.

G.  Time Is of the Essence – Condition

Time is of the essence in this Agreement. This Agreement is conditioned upon acceptance of these terms by all parties in writing no later than &Date& and completion of all obligations by the dates specified in this Agreement and Related Documents. The signatures of each Party to this Agreement shall constitute his or its signature, where required, to each of the Related Documents.

H.  Construction

This Agreement shall be construed without regard to who drafted same, and shall be construed as though all hereto participated equally in the drafting of the Agreement. The Parties agree that any rule pertaining to the construction of contracts to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement.

I.    California Law

This Agreement, including matters of construction, validity and performance, shall be interpreted, governed by and construed in accordance with the laws of the State of California. If any provision of this agreement is invalid or contravenes California law, such provision shall be deemed not to be a part of this Agreement and shall not affect the validity or enforceability of the remaining provisions. Any action arising out of this Agreement shall be brought in the Superior Court for the State of California, County of Los Angeles.

J.   Counterparts

This agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which together shall constitute one document. A facsimile, scan or PDF copy of an originally executed counterpart signature shall be afforded the same validity as the originally executed counterpart.

K.  Headings

The paragraph headings contained in this Agreement are for convenience only and shall not be considered for any purpose in construing this Agreement.

L.   Number and Gender

As used in this Agreement, the singular shall include the plural, and the masculine shall include the feminine and neuter gender.

M.  Amendment

This Agreement may not be modified, amended, supplemented, or terminated, and no provision of this Agreement shall be waived, except by a writing executed by all of the Parties to this Agreement.

N.  Notices and Demands

Any notice or demand hereunder shall be made in writing mailed by certified mail, return receipt requested, or hand delivered, to the Parties addressed as follows:

&Client&

care of

&IndependentCounsel&

&Plaintiff&

care of

&PlaintiffCounsel&

I.     Effective Date

This Agreement is executed at Los Angeles, California and shall be effective on the following date.

IMPORTANT: DO NOT SIGN THIS UNLESS YOU HAVE CAREFULLY READ IT AND ITS TERMS HAVE BEEN THOROUGHLY EXPLAINED TO YOU BY YOUR ATTORNEY.

Dated: &Date&

&IndependentCounsel&                                             &PlaintiffCounsel&

_____________________________                          __________________________   By:                                                                          By:

&Client&

_____________________________                          __________________________

By:                                                                              &Plaintiff&

&CoverageCounsel&

 

 

_____________________________

By:

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