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Georgia Judge’s Decision Highlights the Importance of Reading a Limited Liability Release

If you’ve been in an automobile accident due to another driver’s negligence, and that driver’s insurance company asks you to sign a limited liability release in exchange for receiving compensation, it’s important you understand exactly what future legal rights you may be signing away. Even if you think a release may not cover some future claims, a judge may not see it that way. A recent case in a Georgia federal court helps illustrate this point.

Watford v. Cowart

This case began with a car accident in Cook County in late 2012. The plaintiff accused the defendant of negligence and sought punitive damages and attorney’s fees in addition to compensatory damages. The defendant admitted negligence (and operating a vehicle under the influence of alcohol) and her insurance company paid the plaintiff $300,000, the coverage limit on the policy. The plaintiff also has separate uninsured motorist coverage. In exchange for the $300,000, the plaintiff signed a limited liability release applicable to all claims for damages and injuries arising from the automobile accident, except to the extent provided by the plaintiff’s uninsured motorist policy.

At the outset, the defendant challenged the plaintiff’s decision to file her lawsuit in federal, rather than state, court. On the day of the accident, the plaintiff resided in Georgia and held a Georgia driver’s license. However, she subsequently moved to Florida. When a plaintiff and defendant reside in different states, a federal court may exercise jurisdiction. Accordingly, the judge denied the defendant’s motion to dismiss the case on jurisdictional grounds.

The judge did, however, grant the defendant partial summary judgment on many of the plaintiff’s damages claims. As noted above, the plaintiff signed a release that covered all claims except those covered by her uninsured motorist policy. Under Georgia law, an uninsured motorist carrier is not not liable to their own policyholders for any punitive damages. And although the limited liability release did not expressly mention punitive damages, the judge said that was looking at things backwards. The release applied to all claims except those specifically excluded. Indeed, the release specifically said it did not cover “property damage.” Similar language could have been inserted to cover punitive damages if that had been the parties’ express intentions.

Likewise, Georgia law precludes recovery of attorney’s fees from an uninsured motorist carrier. Again, the plaintiff argued that such claims were not expressly mentioned in the release and, again, the judge said that was the incorrect reading of the agreement and the law. The judge further held that any compensatory damages awarded to the plaintiff would be offset by the $300,000 previously paid by the defendant’s insurance company. On top of that, collection of any award could not include a lien on any of the defendant’s personal assets, as they were expressly protected under the terms of the limited liability release.

Perhaps not surprisingly given all these caveats, the plaintiff ultimately opted to settle her remaining claims with the defendant. The judge issued an order tentatively dismissing the case on December 6th, 2013. The terms of the settlement are unknown.