What Does the Legal Language in an Insurance Company Release really Mean?
Once you have negotiated a settlement of your personal injury claim with the at-fault driver’s insurance company, you will be sent a Release document by the insurer, along with a letter asking you to sign the Release and return it before receiving your settlement check. Release documents are drafted by lawyers and for lawyers. They make little sense when read by anyone else. In an effort to demystify the language most often found in insurance company Releases, we have provided several typical Release paragraphs (bolded below) and explained their intended meaning.
All Releases are written a little differently, but these paragraphs should be recognizable in most insurance company Releases for auto accidents occurring in Georgia. We hope that this will allow the reader to feel more comfortable (or certainly, more knowledgeable) when signing an insurance company Release.
For and in consideration of the sum of Twenty Thousand Five Thousand and 00/100 dollars ($25,000.00), the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby acknowledge full accord, satisfaction, and compromise settlement of any and all personal injury actions, personal injury causes of action, personal injury damages, or claims of personal injury damage of every character whatsoever by reason of any accident which occurred at or near its intersection with Medlock Bridge Road and Skyway Road in Johns Creek, Fulton County, GA on the 10th day of February, 2009, in which accident the undersigned claim to have been injured and damaged, and for which the undersigned claim John Smith and ABC Insurance Company to be liable, John Smith and ABC Insurance Company expressly denying liability.
This introductory paragraph includes the amount of the settlement, the name of the person(s) receiving the settlement funds, and the names of the person(s) and insurance company being forever released from further liability from the person(s) receiving the settlement funds. The final piece of key information typically found in this paragraph is the description of the type of claim(s) being settled. This is an extremely important detail and must be read carefully to make certain that the injured party is not giving up any claims that he does not intend to. In the paragraph above, the claims being settled are for “personal injury actions, personal injury causes of action, personal injury damages, or claims of personal injury damage of every character whatsoever by reason of any accident which occurred at or near . . .”
This language makes clear that claims being settled relate only to personal injuries (which includes medical bills, lost wages, and pain and suffering). The Release does not settle any property damage claim arising from the collision. Most insurance company Releases will have language that includes property damage as part of the settlement. If this is not what you agreed to, you must make sure to have the insurance company agrees to remove that language before you sign the Release.
The undersigned, having received and acknowledged the above-stated consideration as full compensation for and on account of any and all injuries and damages which they claim to have sustained, hereby satisfy and settle all such claims and hereby satisfy, release and forever discharge the said John Smith and ABC Insurance Company, and their attorneys, employees, heirs, administrators, executors, successors, assigns, agents and/or insurers from any and all actions, causes of action, damages or claims of personal injury damage which the undersigned have or may claim to have against the said John Smith and ABC Insurance Company.
This is another paragraph describing what claims are being released. Insurance Release documents often contain multiple sentences (or even paragraphs) that mean essentially the same thing. This is an example of such duplicative language. As in the opening paragraph of the Release, this one also makes clear that the only claims being settled are personal injury claims, and not, for example, property damage claims. Again, you must carefully read each paragraph to make sure that the Release is accurately describing the claims being settled.
This release is intended to and does cover, but is not limited to, all cost, expense, hospital, doctor and treatment bills for the past, present and future; for pain and suffering, past, present, and future, loss of consortium, and any other personal injury damages arising out of said accident or its results, including all claims against any policy of personal injury liability insurance issued by ABC Insurance Company to John Smith.
This paragraph continues to refine the description of the claims being settled by this Release. Although personal injury claims are commonly understood to include medical bills and pain and suffering claims, this paragraph seeks to clarify that fact beyond any shadow of a doubt. It also clarifies that the injured person’s spouse’s claim for loss of consortium (loss of the injured spouse’s “services”) is being settled.
The undersigned hereby further represent and warrant to the persons and entities hereby released that the undersigned have the full legal capacity to make and execute this release and settlement agreement, that the undersigned are not laboring under any legal disability in the execution of this agreement, that the undersigned were husband and wife on 10/24/2009, and no other person has any claim for loss of consortium, that there has been no assignment of benefits or proceeds, that there are no hospital liens against the parties released or the undersigned, who have no bankruptcy pending, and that no person through the undersigned has any valid claim, valid lien or valid subrogation claim, for the funds tendered herewith or for any injuries and/or damages which are released hereby.
This paragraph establishes that the person signing the Release (and getting the settlement money) is legally permitted to do so (i.e. that he is not legally incompetent). It further clarifies that the two people signing the agreement are married to each other (and that they were not married to anyone else at the time of the accident). Finally (and most importantly), the paragraph declares that there are no hospital liens (for unpaid medical services), no pending bankruptcy (by the person receiving the settlement funds) and no other valid claims, liens or subrogation claims relating to the accident in question. The injured person receiving the settlement funds should call each and every medical provider who treated him to make certain that all bills have been paid. If all bills have been paid, the injured person may also have to negotiate a reimbursement deal with his own health insurer. Certain health insurance policies (governed by federal ERISA law) have a right of recovery if you collect money for medical expenses that the health insurer paid for. The key is to fully understand whether you owe any money from the proceeds of the settlement.
The undersigned hereby further promise to indemnify and hold harmless the persons and entities hereby released from any valid claim for contribution or indemnity that any medical providers, Medicaid, Medicare, or Self-Funded ERISA Health Insurance Plan may make against John Smith and ABC Insurance Company for medical services arising out of the motor vehicle collision described in this release. Notwithstanding any claim for contribution or indemnity, the parties hereby released will not be liable for any amounts arising out of claims related to the above described accident, in excess of the sum paid pursuant to this Release and Indemnification Agreement.
This paragraph sets forth the obligation of the person getting the settlement money (and signing the Release) to legally protect the insurance company and the at-fault driver from any claims or law suits brought by medical providers or certain insurers (Medicaid, Medicare, and ERISA Health Plans) that paid for health care arising from the auto accident. Because the person receiving the settlement money (and signing the Release) is agreeing to protect the other parties from any such claims, it is crucial that you understand whether these claims exist in the first place (as we discussed in relation to the prior Release paragraph, above). If any medical provider sues the at-fault driver or his auto liability insurance company for unpaid bills arising from your treatment, you will have to pay the claim yourself, and may also be responsible for any attorney fees and expenses incurred by the person being sued.
We understand that the parties hereby released admit no liability of any sort by reason of said accident, and regardless of the amount of consideration paid herein. Said payment and settlement is a compromise and is made to terminate all further controversy and litigation respecting all claims for damages that we have heretofore asserted or that could have been assert because of the said accident or its results.
This paragraph (or one like it) is found in almost every insurance company Release. It establishes that, although money is being paid for injuries arising from a particular incident (in this case, a car crash), neither the insurance company nor the at-fault driver are admitting fault (or legal liability) by the payment of the settlement money. This allows the auto insurer and the at-fault driver to defend themselves if other parties subsequently make a claim against them as a result of the same collision.
The parties acknowledge that the amount paid is in compromise settlement and the consideration provided will not fully compensate the undersigned for all injuries and damages, and the undersigned have not been made whole by the receipt thereof.
Unlike the paragraph immediately before this one (about not admitting fault by paying money), this paragraph is usually not contained in a standard insurance company Release, but probably should be. If it is not found in the Release in your case, you should ask for it to be added. This paragraph establishes that the injured person receiving the settlement money (and signing the release) is not being fully compensated for the full value of his injuries. Why should this matter? If you are satisfied with the terms of the settlement, what difference does it make whether you believe that the settlement amount fully compensates you for all of your damages? It matters because the requirement of being “fully compensated for all economic and non-economic losses” is a prerequisite to allowing certain health insurers (and all workers’ compensation insurers) to recover any money from the proceeds of your settlement. In other words, until the injured person has been “made whole” by a settlement, workers compensation insurers and certain other health insurers cannot collect the money they have paid for related medical care from the proceeds of the settlement. While merely declaring in a Release that the injured person has not been fully compensated for his losses does not automatically make it so, it is one piece of evidence that a court might look to when deciding the issue. If it costs nothing to add this paragraph to a Release, why would you not do so?
Pursuant to OCGA 33-7-12, notice is hereby given that this release is taken and the consideration stated is by the liability insurance carrier of a party released hereby. In taking this release, the said insurance carrier is acting as an independent contractor and not as an agent of any party released hereby. The undersigned understand and agree that this release is taken without the knowledge or consent of a party released hereby and does not preclude the assertion of any claim that any such party may have against the undersigned, and the undersigned acknowledge prior written notice of the absence of such knowledge and consent and waive all further notice thereof.
This standard insurance company Release paragraph confuses more non-lawyers than any other section. It appears to suggest that the at-fault driver is free to sue the person receiving the settlement money (and signing the Release) for the very collision that the at-fault driver caused. It also references a Georgia law (O.C.G.A. 33-7-12) that almost no one has ever heard of. The simple truth is that this paragraph is always included in a Georgia insurance company Release because the law of our state requires that it be included. A Release without this language is not technically valid and therefore potentially unenforceable.
This is merely a required notice letting the injured person know that he is actually settling his claim directly with the auto insurance company, and not with the at-fault driver. The at-fault driver is not playing any role in the settlement and could even file her own claim against the injured person if she had a reason to do so. This paragraph does not mean that anyone (and most especially, the at fault driver) is actually contemplating a law suit against the injured person. It is merely a legally required recital informing the person signing the Release that they are making their deal only with the insurance company and no one else. Do not fear this paragraph.
Understanding the meaning of Insurance Company Release language is crucial in order to establish that the terms of the deal are the same as you have been lead to believe. The language is often written in dense and confusing legalese. Hopefully, this article will help to translate the most commonly used paragraphs so that the true meaning can be better understood by those who are being asked to sign on the dotted line.