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Morris agreement. Under such an agreement, an insured being defended under a reservation of rights can properly enter a settlement agreement with the aggrieved party and stipulate to a judgment without breaching the cooperation clause contained in the insurance contract. Morris, 154 Ariz. at 119, 741 P.2d at 252. Such agreements are proper only if created fairly, with notice to the insurer, and without fraud or collusion on the insurer. Id. Assuming the insurer eventually loses the coverage contest, the plaintiff can collect its judgment against the insurer if the plaintiff proves that the judgment was not fraudulent or collusive and was fair and reasonable under the circumstances. Id. at 121, 741 P.2d at 254.

See  Strojnik v. General Insurance Company of America, No. 1 CA-CV 0-0209 (Ariz.App.Div.1 12-18-2001 for a good description of various aspects of insurance coverage disputes and reservation of rights in AZ

Botma v. Huser, No. 1 CA-CV 01-0003 (Ariz.App.Div.1 02/05/2002) has reaffirmed the Arizona position that a legal malpractice claim cannot be assigned.  In Botma, the plaintiffs had packaged the legal malpractice claim with a bad faith claim against the insurance carrier which had hired the defendant attorney.  The Arizona court decided that allowing assignments of legal malpractice claims would encourage driving wedges between attorney and client, even though it would be alright to assign claims against an accountant or other professionals.