In a case recently decided in the United States District Court for the Eastern District of Texas, the trial court granted summary judgment in the insurance carrier’s favor regarding the policyholder’s lawsuit seeking "additional damages" in a commercial policy fire loss.1 This blog post discusses the court’s ruling, and then addresses points that policyholders should consider prior to signing any release in the insurance carrier’s favor.
Pertinent Facts Outlined In Court’s Decision
During the claim adjustment, the policyholder signed a Policyholder’s Property Damage Release ("the Release") that stated she accepted the settlement of all claims, but reserved the right to pursue “a supplemental claim for additional damages, if discovered, and to review and revisit the depreciation calculation."2 Pursuant to a Sworn Statement in Proof of Loss and the Release, the insurance carrier made actual cash value payments of almost $430,000 and withheld $134,296.29 in recoverable depreciation.
Almost a year after signing the Release and accepting the carrier payments, the policyholder filed a supplemental claim for additional damages and asserted claims against the carrier for breach of contract, Texas Insurance Code violations, and for violating the Texas Deceptive Trade Practices Act.
Trial Court Analysis And Decision
Although the policyholder claimed that carrier mathematical errors constituted "additional damages" pursuant to the Release, the Court held that the policyholder “signed a release legally waiving her right to bring causes of action against [the carrier]."3
Importantly, the Release stated:
[The Policyholder] releases [the carrier] from “any and all claims, demands, actions, liens or causes of action of any kind whatsoever, founded in tort, common law, statute, contract or otherwise, including common law and statutory bad faith claims and claims arising under the Texas Deceptive Trade Practices Act and Sections 541 and 542 of the Insurance Code.4
Finding that the release complied with Texas contract law for interpretation "to extinguish the claim or cause of action as effectively as would a prior judgment between the parties and is an absolute bar to any right of action on the released matter,” the court held:
[The carrier’s] miscalculations are not additional damages because the [policyholder] was aware of all estimates involved in the negotiation of the payment and agreed to the calculations. Moreover, it was the intention of the parties when signing the release for the [policyholder] to absolve [the carrier] from all liability, but still retain the option to pursue claims should there be a possibility of additional damages. These calculations are not additional damages because the [policyholder] was involved in the negotiations of the payments and was aware of the calculations to reach the final payment.5
What Does This Mean For Me?
As a policyholder, we encourage you to seek advice from a policyholder professional prior to signing any documents from your carrier during the claim adjustment. Further, this case reminds that there is no substitute for doing the math to make sure no mathematical errors exist in your carrier’s damages estimate.
Motivational Poster Of The Day
1 O’Quinn v. General Star Indemnity Co., 1:13-cv-471, 2014 WL 3974315 (E.D. Tex. Aug. 5, 2014).
3 See Id. at *9.
5 See Id. at *6.