Tricked into signing away legal rights or just careless?
Cedric Stephens, Contributor
Question: A truck rear-ended my friend's motor car on July 14, 2010. The car was badly damaged and my friend received serious injuries. A police report was sent to the third-party insurers a few weeks later which advised them of these facts. The third-party insurers sent a release to my friend's insurers. At around the same time, he was still receiving medical care. His insurers were aware of this. My friend signed the release on the advice of his insurers without reading it. He subsequently received a cheque. After he recovered from his injuries, his attorney filed a claim with the third-party insurers. The company refused to entertain that claim. They cited the "full and final settlement clause" in the release that he had signed earlier. The third-party insurers were dishonest. They committed an injustice against him. He was tricked into signing away his legal rights to make a claim for personal injuries when he was paid for the damage to his car. What is your opinion?
HELPLINE: Your criticisms against the two insurers - particularly the third party's - are very, very serious. Also, there are many sides to your friend's problem. For these reasons, I decided to give the insurers a chance to tell their side of the story. An unedited copy of your email was sent to officials of the two companies with the following comments: "The allegations that are being made are quite serious and, if true, have the potential to tarnish the reputation and brands of your companies. May I please, and very urgently, have your comments?"
On May 16, the third party insurer's lawyer - or general counsel and manager, claims legal, to use her official title - gave a timeline of the events leading to the preparation of that company's form of release.
The company denied being aware of any personal injuries. However, it confirmed that the terms of the release that was sent to your friend's insurers "were full and final" and that "it absolve(d) her company and the insured from liability for property and personal injury".
She further stated that "we were surprised upon our recent review of the file, that [your friend's insurers] should have accepted and not return our ... release to be modified or alternatively request a partial release, if there was knowledge ... that [your friend] had sustained injuries and intended to pursue a claim for damages for personal injury".
The company was therefore "constrained to respect the ... release as executed and are therefore not in a position to entertain any further claims".
The CEO of your friend's insurer admitted that there were errors in the handling of the claim and took some responsibility for the problem.
She wrote to me on May 16 saying: "I discovered that (my company) in handling the property damage (claim) did not exercise due diligence and return the ... incorrect release for full and final settlement (despite writing ... that an injury claim will follow) for a partial payment release and inadvertently contributed to this state of affairs".
She ended by undertaking to appeal to her counterpart CEO.
Two days later the third-party insurer's CEO reaffirmed the company's position that was earlier stated by its in-house lawyer.
The company had no knowledge that the person driving the car when it was hit by the truck had suffered any injuries. The letter that was reportedly sent to them by your friend's insurers stating that a personal injury claim was forthcoming was never received.
The CEO sent me an email on May 21 that was copied to his claims manager. It read: "We will address this matter on behalf of our insured up to the limit under our policy. The third-party insurer should have ensured that the terms of release be amended given their knowledge of the matter before having their client execute."
WILLING TO REOPEN THE CLAIM
Frankly, I am not sure what that statement means. I am ignorant about the details of the third party's policy. I do not know the size of your friend's claim. To take an optimistic view, it seems that the third-party insurers may be willing to reopen the claim, even though they are not legally entitled to do so.
I suggest out of an abundance of caution that your friend ask an attorney to contact the third party's insurer's claims manager to negotiate a settlement. Use a copy of this article to brief the attorney.
Final words: I criticised the Financial Services Commission's "Market Conduct Guidelines on Best Practices For Motor Claims in the article that I wrote on May 6. I said that the guidelines were completely useless and not worth the paper on which they are written.
These comments were harsh and unfair. As things have turned out, I have to eat those words. The guidelines speak directly to this case. They make a distinction between a partial release and discharge and a third-party release.
Based on the details of the accident, it appears reasonable to conclude that your friend should have been sent the former release to be signed instead of the latter. He should also learn from this experience not to sign anything without first reading it.
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Email email@example.com or SMS/text message to 812-7233.