Cashing Settlement Check Defeats Bad Faith Suit
Almost every insurance claim is resolved by settlement. The few that are not resolved become lawsuits. Almost every lawsuit is settled and become judgments. When there is a dispute over payment bad faith suits are filed. In Arthur Deal v. Farm Bureau Casualty…, Court of Appeal of Louisiana, 2017 WL 23993572016-1647 (La.App. 1 Cir. 6/2/17) two years after a settlement was reached and paid – but not cashed – the plaintiff asked for a new check which was delivered to him and cashed 33 days after the request.
To punish the insurer for taking 33 days to reissue a check that could have been cashed two years before, the plaintiff sued the insurer for the three day delay.
Arthur Deal appealed a judgment in favor of the defendant, Louisiana Farm Bureau Casualty Insurance Company (“Farm Bureau”), sustaining Farm Bureau’s peremptory exception raising the objection of res judicata and dismissing the plaintiff’s petition for damages, penalties, and attorney fees against Farm Bureau for its alleged bad faith in connection with the settlement of the plaintiff’s underlying personal injury claims.
In 2012 the plaintiff was involved in an automobile accident with Billie Fortenberry. As a result of that accident, the plaintiff filed suit seeking damages from Mr. Fortenberry; Mr. Fortenberry’s liability insurer, Farm Bureau; and the plaintiff’s uninsured/underinsured motorist (“UM”) insurer, State Farm Mutual Automobile Insurance Company (“State Farm”). The plaintiff subsequently settled his claims with both Farm Bureau and State Farm. In connection with the settlement of his claims, the plaintiff agreed to dismiss his claims and a judgment of dismissal, which dismissed the action “in its entirety, with prejudice” was signed in 2015. This judgment contained no reservation of any rights against Farm Bureau or any other party.
In regards to Farm Bureau, the plaintiff settled for the insured’s policy limits of $25,000.00. Farm Bureau originally issued a check for $25,000.00 to the plaintiff and his attorney which check was “In Full Payment for ANY AND ALL CLAIMS” arising from the accident with Mr. Fortenberry. However, this check was not negotiated by the plaintiff or his attorney. Subsequently, the plaintiff hired a new attorney. Almost two years after Farm Bureau issued the original check, on September 23, 2015, the plaintiff’s new attorney sent a letter to Farm Bureau, which provided, in its entirety, as follows: “I am ever so pleased to advise that we have settled the case with State Farm based on [the] payment of your policy limits. As your old check is probably stale and the check is not cashed, do you want us to use the old check how long would it take you to reissue a new one? [sic]”
In response to this letter, Farm Bureau requested that the old check be returned, stating that upon receipt, it would issue a new check to the plaintiff and his new attorney. The plaintiff forwarded the old check to Farm Bureau and subsequently Farm Bureau issued a new check to the plaintiff and his new attorney for $25,000.00, which check was “In Full Payment for ANY AND ALL CLAIMS” arising from the April 27, 2012 accident with Mr. Fortenberry. This check was negotiated by the plaintiff and his attorney.
The plaintiff filed a petition for damages against Farm Bureau alleging that the replacement check was not delivered within the 30 days required by statute. Essentially, the delay was the basis for the suit, and the plaintiff claimed that the thirty-day delay for paying a settlement agreement commenced to run with the letter from the plaintiff’s attorney to Farm Bureau, and thus, Farm Bureau’s payment thirty-three days later on October 26, 2015, was untimely and rendered Farm Bureau liable for penalties and attorney fees under Louisiana statutes.
Farm Bureau maintained that the claims made in the instant suit were extinguished. From this September 20, 2016 judgment, the plaintiff now appeals, challenging the trial court’s ruling on the objection of res judicata.
LAW AND DISCUSSION
In Louisiana, except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review.
Additionally, the trial court correctly noted that “a valid compromise may form the basis of a plea of res judicata.” The trial court also noted that the negotiation of a settlement check “alone is sufficient to establish the requirements of a valid compromise agreement.” The the trial court concluded that any potential claims for bad faith that the plaintiff had in connection with the settlement of his underlying suit were barred by res judicata.
The court of appeal found no error in the trial court’s judgment. The plaintiff’s claim for damages, penalties, and attorney fees against Farm Bureau arose from the settlement of claims related to the April 27, 2012 automobile accident.
Any claim the plaintiff may have had against Farm Bureau for its purported bad faith or its failure to pay settlement within 30 days of the September 23, 2015 letter was compromised when the plaintiff and his attorney negotiated the October 26, 2015 check for $25,000.00 that was “In Full Payment for ANY AND ALL CLAIMS” arising from the April 27, 2012 accident with Mr. Fortenberry. Therefore, the plaintiff’s claim is barred by res judicata.
This crazy lawsuit is the type of abuse of the tort of bad faith suits that caused me to write that it is still time to put a stake through the heart of the tort of bad faith here. This is an abuse of the reason for bad faith cases by suing for a delay in presenting a replacement check that the plaintiff intentionally failed to cash only to seek damages for what it claimed was a three day delay by the insurer rather than its own error.
This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, 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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide
The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972
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