Release Means What It Says and Says What it Means
When an insured and insurer cannot agree on the amount of a loss sometimes an insurer will pay more than it believes it owes in exchange for a general release that releases all claims, known and unknown, to obtain peace and eliminate future claims from the insured. Such a release is a binding contract on both parties and any additional claims are barred even if they would have been covered by the policy if a release had not been signed.
In Giaccone v. Canopius US Ins. Co., Slip Copy, 2015 WL 3954143 (D.N.J., 6/29/2015) insureds and their public insurance adjuster learned the hazard of signing a release without carefully reading it with the advice of counsel. Defendant Canopius U.S. Insurance Company’s (hereinafter, “Defendant”) refused to pay insurance benefits to Plaintiffs Antonio Giaccone and Rita Giaccone (hereinafter, “Plaintiffs”) for their claim that a January 31, 2013 storm severely damaged their commercial and rental property in Pleasantville, New Jersey.
Defendant specifically asserts that the parties entered into a Release and Settlement Agreement (hereinafter, the “Settlement Agreement” or “Agreement”) on November 27, 2013, concerning Plaintiffs’ claim for property damage that occurred during Hurricane Sandy on October 29, 2012.
The provisions of the executed Agreement, however, release Defendant from “any and all claims” arising out of damages “that occurred on or about October 29, 2012 (the ‘Subject Loss’),” and from “any and all” other claims that Plaintiffs could have asserted against the Policy, including unknown claims and those not expressly mentioned in the Settlement Agreement. Indeed, the Agreement contains a specific covenant that Plaintiffs had, at the time of the Agreement’s execution, “no remaining claims of any kind” under the Policy.
As a result, Defendant asserts that Plaintiffs’ supplemental claim for property damage that occurred on January 31, 2013, approximately ten months prior to execution of the Settlement Agreement, constitutes an impermissible attempt to recover “in contravention of the clear and unambiguous terms” of the Agreement.
Plaintiffs own a commercial and rental property in Pleasantville, New Jersey. On May 31, 2012, Defendant issued Plaintiffs a “Commercial Lines” insurance policy for the period of May 2, 2012 to May 3, 2013.
On October 29, 2012, however, Hurricane Sandy “ripped the roof completely off of the building,” allowing water to flood the property. As a result, Plaintiffs, through their licensed Public Adjuster, Michael DeRita, submitted an insurance claim to Defendant for the losses associated with Hurricane Sandy. In investigating the claim, Defendant’s claims agent represented that 80% of the damages to Plaintiffs’ property resulted from a subsequent storm, rather than Hurricane Sandy. Defendant’s agent, in making the final offer, indicated that the offer was more than it would have been for just Sandy related damage alone.
Nevertheless, Defendant offered to settle Plaintiffs’ claim in its entirety and, on October 31, 2013, forwarded a four page proposed settlement and release through Raphael & Associates, Defendant’s claims administrators, in order to resolve the claim. The Agreement, which Plaintiffs executed on November 27, 2013, provided that Plaintiff would receive a total payment of $458,446.11 in full satisfaction of their outstanding insurance claim.
In executing the Settlement Agreement, Plaintiffs acknowledged, before a Notary Public, that they read and reviewed the Agreement in its entirety and fully understood its provision. Nevertheless, on January 16, 2014, ten months after executing the Settlement Agreement, Plaintiffs submitted a second claim under the Policy for damages allegedly sustained to their property during a subsequent storm on January 31, 2013.
For the reasons that follow, however, the Court finds the limited terms of the Settlement Agreement to be remarkably clear on their face. A settlement agreement constitutes a simple legal contract subject to enforcement through the application of basic principles of state contract law. Clear and unambiguous contracts leave no room for interpretation or construction and must be enforced as written. Sheet Metal Workers Int’l Ass’n Local Union No. 27, AFL–CIO v. E.P. Donnelly, Inc., 737 F.3d 879, 900 (3d Cir.2013)
Moreover, it is well settled that a party who enters into a contract in writing, without any fraud or imposition being practiced upon him, is conclusively presumed to understand and assert to its terms and legal effect. Rudbart v. N. Jersey Dist. Water Supply Comm’n, 605 A.2d 681, 685 (N.J.1992). Indeed, signing a contract creates a conclusive presumption that the signer read, understood, and assented to its terms. Nevertheless, a narrow exception arises in the face of evidence that the contract resulted from fraud, duress, and/or misrepresentation. Indeed, under such circumstances, even the clearest of contracts may prove voidable and rescindable.
The Settlement Agreement Broadly Waives Any and All Claims under the Policy
Here, Plaintiffs do not point to any ambiguity in the Agreement, nor do they suggest that the Agreement otherwise lacks sufficient clarity as to its effect. Rather, based upon a single provision of the Settlement Agreement, Plaintiffs insist that it “solely” concerns “damage stemming from” Hurricane Sandy.
The Settlement Agreement defines, at the outset, the damage caused on October 29, 2012 as the “Subject Loss,” and specifically provides that Plaintiffs forever release Defendant from “any and all claims” associated with this Loss. Nevertheless, the Agreement goes on to provide that Plaintiffs also agreed to release Defendant from “any and all claims and rights which [they] may have against [Defendant],” including those of which Plaintiffs were “not aware and those not mentioned in” the Settlement Agreement. The Settlement Agreement then reinforces the broad scope of this release by reiterating that Plaintiffs “specifically release[ ] the following claims: Any and all claims that were made or could have been made under or against [the] insurance policy issued by” Defendant. Indeed, Plaintiffs “specifically agreed” that, as of the date of execution, they had “no remaining claims of any kind” under the Policy.
In arguing that the Settlement Agreement possesses a limited scope, Plaintiffs assert that the Agreement’s identification of the October 29, 2012 Hurricane Sandy damage as the “‘Subject Loss’” necessarily dictates that the Settlement Agreement covers only Plaintiffs’ claims related to this Loss. Plaintiffs’ narrow interpretation would impermissibly render multiple provisions of the Agreement meaningless.
These all-inclusive provisions therefore provide a clear and express indication that the Agreement required, by its very terms, the release of all potential claims against Defendant, regardless of whether they arose from Hurricane Sandy or any subsequent storm. In other words, these provisions make plain that the Settlement Agreement subsumed and covered all of the damages to Plaintiffs’ property up to the November 27, 2013 Settlement date since both parties were aware, at the time the Settlement was signed, of both the Sandy related damages and the January 2013 storm damage.
Here, based upon the circumstances leading up to their receipt and execution of the Settlement Agreement, Plaintiffs assert that they understood the Agreement to concern only damages arising from Hurricane Sandy on October 29, 2012. Indeed, Mr. Giaccone specifically testified during his deposition that he believed the Settlement Agreement only covered “certain damages that occurred during the Sandy storm,” and not any damage caused by storms following Hurricane Sandy. Mr. DeRita, Plaintiffs’ Public Adjuster, similarly certified that he received the Settlement Agreement from Defendant on October 31, 2013, and forwarded the Agreement to Plaintiffs “with the understanding that [it] released only claims arising from damages sustained as a result of the storm on October 29, 2012 (referred to as the “subject loss”) in the Release.” Despite these assertions, Plaintiffs nevertheless executed an Agreement that included a release with a much greater breadth.
Plaintiffs’ challenge to the Agreement’s enforcement therefore amounts, in essence, to a request that they be excused from the preclusive effect of the Settlement Agreement as a result of their own failure to review its limited and clear provisions.
Having prevailed in its motion, the Court will permit Defendant to file its affidavit of costs and attorney’s fees in the format required by Local Civil Rules, in accordance with the terms of the Release contract. A judgment for attorney’s fees and costs will be entered if these submissions are timely made and approved by the Court.
This is an example of buyers remorse. The Plaintiffs had two claims pending with the Defendant insurer. One for hurricane Sandy and one for a later storm for which coverage was not available. The insured, through its public adjuster, negotiated a settlement for amounts greater than the loss caused by hurricane Sandy and signed a complete release knowing, at the time, that there were two claims pending. Then, after receiving payment in accordance with the Settlement they attempted to go around the Release. They failed and will now be required to pay Defendant’s attorneys fees and costs. All of which could have been resolved if they had a lawyer review the contract. They are not without a remedy – they can sue their public adjuster for advising them to sign the release.
Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.
He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.
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