Bad Faith Insurance Settlement Language Shouldn’t be Ignored

If you are in an accident, and sue for your injuries, your case may not get to trial. In fact, few do. Many settle out of court, and when they do, there are settlement agreements to consider. In many cases, a settlement agreement may be exchanged early in the lawsuit process. Injury victims should be aware of what could happen if offers to settle injury lawsuits are exchanged before a lawsuit is actually filed.

A new case, Thompson v. Estate of Maurice, is a reminder of some potential problems that could arise in these cases.

Attempted Settlement Before Suit

In Thompson, a minor was a passenger in a vehicle that sped out of control and hit a tree, killing him (along with every other member of the vehicle). The minor’s estate wanted to sue the driver’s estate and the driver’s parents.

It appears that there was minimal insurance coverage for the accident—only $20,000. So, the minor’s estate sent a demand letter to GEICO, the insurer for the driver, demanding the policy limits, and making a few other demands. The goal was to get GEICO to immediately tender that amount, and if GEICO did not, to sue for the full value of the claim (this is allowable under insurance bad faith law, which we’ll talk about in a later post).

Well, GEICO did tender the full $20,000. Except with their tender, they required that all parties, including someone that was not an insured, be released, and that the minor’s estate indemnify GEICO.

In other words, GEICO added additional requirements to the settlement agreement that the minor’s estate did not include in their offer.

The Lawsuit and Appeal

The minor’s estate sued in court, presumably for the full value of the injuries and death. GEICO of course defended by saying a settlement had been reached. The trial court agreed, and kicked the case out of court, finding that the minor had made a settlement offer, GEICO accepted, and that was the end.

The minor’s estate appealed the decision. The appellate court had to determine whether the parties had actually reached a pre-suit agreement, despite GEICO’s inclusion of the additional requirements.

The appellate court noted that settlements are interpreted like basic contract law. Under contract law, when a party makes an offer, the offer must be accepted almost identically to the terms to the offer. If someone accepts but adds requirements or changes material features of the offer, there is no acceptance—just a counteroffer.

The court sided with the minor’s estate, finding that GEICO’s requiring indemnification and  releases of parties that were not even insureds was simply a counteroffer. Because GEICO just counteroffered, and did not actually accept, the appellate court held the victim’s family could go forward with the lawsuit.

This case resulted in a favorable decision for the injured party. They don’t all do. It’s vitally important that you or your attorney understand the ramifications of partial settlements or bad faith settlement attempts in order to make sure that you don’t lose vital rights later on.

There are important steps in an injury lawsuit, even before a lawsuit is filed. Talk to the Miami personal injury attorneys at Gerson & Schwartz, P.A. today for a free consultation about your injury case.


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