Arbitration & Mediation

Facing "Bad Faith" Demand Letter, Insurance Company Can Require a Release

By Christopher B. Hopkins, Esq.

Many a lawyer has sought to transform a standard car accident case into a bad faith claim against the would-be defendant's insurance company. The plaintiff makes a demand for policy limits, the insurance company accepts, and then presents a general release. Is that a counter-offer?

No, says the Third DCA (Cortinas, Rothenberg and Lagoa) relying on its own precedent as well as a Fourth District case. In Mercury Insurance Co. of Florida v. Miguel A. Fonseca, the plaintiff made a policy limits demand and the insurance company accepted but stated, "also enclosed is a proposed settlement release which is not intended to be a final instrument until you have approved. If you should require any changes or additions, please advise. Otherwise, please see that [plaintiff] executes the release..."

We sense the insurance company's language is intentionally deferential to the plaintiff in terms of sounding agreeable to revisions to the release. Perhaps, in other nominal-value car accident cases, they've been done this, uh, road before. Be that as it may, we now have the Third District essentially approving that "we accept but here's a release" language. Likely, that will become a boilerplate form.

How is that not a counter-offer? ("yes we agree to pay the money but we need you to agree to this non-monetary term of signing this release") The court appears to find the plaintiff's letter to be "not unique" and simply an invitation to settle. Citing prior cases, the court found that signing the release "was implicit as part of the tender and not an additional element of the agreement." In fact, a release under these circumstances was "the kind of usual settlement document implicit in any settlement agreement."

Careful readers will note that timing may play a role, since here an offer was made and two days later there was an acceptance and proposed release; it was then 60 days thereafter that the plaintiff objected to the release. Also, we wonder if, at some point, expansive or invasive terms in the release might lead it to be a counteroffer.

Full post as published by Florida Arbitration Law on February 11, 2009 (boomark / email).