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Is a Settlement Binding if the Insurer Mails the Check to the Wrong Address?

Dealing with insurance companies following a car accident often involves a good deal of back-and-forth negotiations. If you are the victim seeking compensation, you have the right to make a conditional offer, that is, to release some or all potential claims against the insured person in exchange for a timely payout. Typically this payout will be for the maximum benefits provided under the insurance policy.

Grange Mutual Casualty Company v. Woodard

What if you condition a settlement offer on receiving payment the insurer sends but is not received by the specified deadline? A federal appeals court in Atlanta recently addressed this question in a case arising from a tragic 2014 car accident here in Marietta.

We previously discussed this accident in the context of a related lawsuit. A father and his adult daughter were traveling down an interstate when their truck was hit by another vehicle. The daughter was killed and the father, the defendant in the present case, was seriously injured.

The driver of the other vehicle was insured up to $50,000 per victim and $100,000 per accident. The defendant’s attorney made a settlement offer to the insurance company, which is the plaintiff here. According to court records, the offer was for the policy limit and “contained an 11-item list of requirements.” As relevant here, the insurer had to make payment “within 10 days” of its written acceptance of the offer. To emphasize this point, the defendant’s offer letter said, “Timely payment is an essential element of acceptance.”

Although the insurance company sent the checks, they were improperly addressed and never arrived at the defendant’s attorney’s office before the expiration of the 10-day deadline. The insurer mailed new checks, but the defendant “rejected this as an untimely settlement offer.”

The insurance company then filed suit in federal court, alleging there was a binding settlement agreement between it and the defendant. A trial court ruled against the insurer. On appeal, the 11th Circuit asked the Georgia Supreme Court to clarify several points of state law. The Supreme Court replied that under Georgia law, a person making a settlement offer “may demand acceptance in the form of performance before there is a binding, enforceable settlement contract.”

Applying that interpretation to this case, the 11th Circuit agreed with the trial court that there was no agreement between the parties as a result of the improperly addressed checks. It was “undisputed” that the original checks were never received by the defendant. The settlement offer itself referred to “payment,” which the 11th Circuit said “requires the ‘delivery’ of money, and ‘delivery’ requires an actual transfer” of funds. Since no money ever changed hands within the 10-day period, the insurer “did not make timely payment and, thus, did not accept the [defendant’s] offer.”

The Court also rejected the insurer’s argument that its actions fell within the “mailbox rule.” This is a principle of Georgia contracts law that states an agreement is “complete and binding” once it is “deposited in a properly stamped and addressed envelope.” In this case, the “improperly addressed envelope forecloses any reliance on the mailbox rule.”