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Unhappy claimant rejects settlement

Unhappy claimant rejects settlement

Unhappy claimant rejects settlement
March 01
12:51 2022

INSURANCE-RELATEDCOURTCASES

Digested from case reports published online

COURT DECISIONS

Unhappy claimant rejects settlement
Raed Hodroj was a passenger in a Jeep Cherokee when he was injured in a single-car accident. The driver was insured by CSAA Insurance Exchange.
Hodroj retained an attorney, who wrote to CSAA offering that Hodroj would settle his claim for bodily injuries in exchange for the driver’s policy limits, so long as certain conditions were fulfilled. The conditions were that CSAA provide a copy of the face page of the policy and a sworn declaration confirming the policy limits, and deliver a check in the amount of the policy limits within 21 days of acceptance of the offer. The offer noted that CSAA could condition its acceptance on Hodroj’s signing a written release of all bodily injury claims against CSAA’s insured. The offer also was conditioned on written acceptance within 21 days.
Fifteen days later, CSAA sent written acceptance of the offer and enclosed a written release of all claims to be signed by Hodroj. A $100,000 check was sent separately, with the proviso that it should not be presented until the release was signed.
The next day, Hodroj reneged on the settlement. According to a letter from his attorney to CSAA, the reason was “the release you required our client to sign introduces significant and material new, additional and different terms and conditions” beyond the offer of settlement. Among them was that the release required Hodroj to release all his claims, including for property damage, whereas the settlement offer contemplated only claims for bodily injury. Hodroj later filed suit against the driver for the injuries he sustained in the accident and for property damage.
In response to Hodroj’s suit against its insured, CSAA sued Hodroj for breach of contract, alleging his settlement offer and its written acceptance in response created a binding agreement to settle the injury claims, which Hodroj breached by suing the driver. Hodroj cross-complained for declaratory relief confirming no binding contract between him and CSAA.
Both parties moved for summary judgment on their respective causes of action. The trial court granted CSAA’s motion and denied Hodroj’s, and entered judgment in favor of CSAA. Hodroj filed a notice of appeal referencing a “‘[j]udgment after an order granting a summary judgment motion,’” which CSAA asserted was insufficient to preserve Hodroj’s right to appeal the adverse ruling on his cross-complaint. Hodroj appealed.
On appeal, the court noted that the parties did not dispute the facts. What they disagreed about was the legal significance of the facts, making this matter an appropriate candidate for summary judgment, as demonstrated by the parties’ cross-motions. Hodroj contended that CSAA’s purported acceptance was actually a counteroffer he was free to reject because it included a request that he sign a written release containing different terms than were in his settlement offer. CSAA argued that a binding contract was formed when it accepted Hodroj’s offer to settle his claim for the insurance policy limits and fulfilled all conditions stated in the offer, and the written release was simply an effort to reduce the terms of the agreement to a formal writing.
A well-established principle of contract law dictates the result here: When parties agree on the material terms of a contract with the intention
to later reduce it to a formal writing, if the parties do not agree on the content of the formal writing (for example, because one party wants to include something not agreed on in the first place, as Hodroj says happened here), the proposed writing is not a counteroffer; rather, the initial agreement remains binding and a rejected writing is a nullity.
Given that rule, the propriety of the summary judgment comes down to one question: Would a reasonable person looking at the parties’ communications think they intended to be bound by a settlement agreement that would later be reduced to a more formal writing? The court concluded that the communica-tions between Hodroj’s lawyer and CSAA reflected a settlement that later could be memorialized in a formal writing.
Hodroj’s offer communicated that he agreed to settle his personal injury claim for the policy limits, provided his offer was accepted within 21 days and provided that CSAA show proof of the policy limits and that there was no other potential insurance coverage. The offer expressly anticipated another instrument: “You may further condition your acceptance of this offer by requiring that our client execute a Release of all Bodily Injury Claims against your insureds and their heirs only, which Release is not inconsistent with the terms and conditions of this offer.” CSAA’s timely written response communicated that the offer was accepted. CSAA provided the requested documentation and conditionally tendered payment in the amount of the policy limits. Like the offer, the acceptance also contemplated a formal release and proposed one for Hodroj to sign.
The court was confident that an objective observer would conclude from those communications that the parties intended to settle Hodroj’s bodily injury claim for the amount of the policy limits ($100,000) and to later memorialize those terms in a formal document. That the proposed document contained terms materially different from what had been agreed to does not change the binding effect of the initial agreement. Hodroj was under no obligation to sign a release that was inconsistent with what he agreed to. But a proposed writing that does not accurately reflect the terms of an agreement does not unwind the entire deal. The contract formed by the parties’ offer, acceptance, and consideration is still enforceable. Hodroj breached the contract by filing suit on the bodily injury claims he had agreed to settle.
The judgment of the trial court was affirmed.
CSAA Insurance Exchange v. Hodroj—California Courts of Appeal, Sixth Appellate District—December 1, 2021—No. H046475.

 

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Jim Brooks

Jim Brooks

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