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Appeals Court Says Insurance Check Created Binding Settlement Agreement

It is common for victims in automobile accidents to reach out-of-court settlements with negligent drivers or their insurance carriers. But victims should always be mindful of Georgia law governing such settlements. If you make a “final” demand to an insurer for money, and the insurer accepts and agrees to pay the specified amount, that is enough to create an enforceable legal contract even if the insurer subsequently seeks to negotiate additional terms. That is to say, even if you believe no “final” settlement agreement exists between you and an insurer, the courts may see it differently, as a recent Georgia Court of Appeals decision illustrates.

Tillman v. Mejabi

The victim in this case suffered serious injuries in a 2011 automobile accident. There was no disputing the other driver was at fault. The victim’s attorney therefore sent a demand letter to the other driver’s insurance company, seeking to recover the maximum benefit available under the driver’s policy, which was $25,000. (The plaintiff’s actual damages were significantly higher, about $70,000.) The attorney’s letter said payment of the $25,000 would constitute “full and final settlement of this matter.”

The insurance company promptly responded with an acceptance and a check for $25,000. The insurer’s letter to the plaintiff attorney acknowledged the payment was “in full and final settlement of your client’s claim.” The insurer further requested the plaintiff sign an enclosed “general release of all claims,” including any medical liens.

Some of the release’s terms were unacceptable to the plaintiff. The plaintiff’s attorney insisted this constituted a counter-offer by the insurance company, which was squarely rejected. The plaintiff then sued the other driver in Georgia state court. The insurer defended its policyholder and asked the court to treat its previous $25,000 check to the plaintiff as its acceptance of a binding settlement agreement between the parties. The trial court agreed and ordered the plaintiff to sign the release. The plaintiff appealed, but the Court of Appeals sided with the defendants and the lower court.

Presiding Judge Sara L. Doyle, writing for the Court of Appeals, said the law is well-settled in Georgia on this subject. When a plaintiff makes a settlement offer to a defendant (or the defendant’s insurer), there is an “implicit” promise to sign a release of all outstanding legal claims. Such a release “is necessary to effect the full purpose of the contract and is so clearly within the contemplation of the parties that they apparently deemed it unnecessary to state it,” according to a 1994 Court of Appeals decision. Judge Doyle cited that decision, noting it was clear the parties in this case had reached a “meeting of the minds on the essential terms” of a settlement agreement notwithstanding the insurer’s inclusion of a release that contained some terms objectionable to the plaintiff. The form of the release only addressed the “defendant’s performance” of the agreement, not the fact an agreement was made through the defendant’s acceptance of the plaintiff’s offer.