If your insurance company sends you a check for partial damages, partial coverage, or an amount lower than the full amount claimed, think twice before accepting. Policyholders should be aware that accepting such payment may bar their right to dispute the claim and later seek recovery of full policy benefits.
The theory that may bar your recovery is known as accord and satisfaction. “An accord and satisfaction results when: (1) the parties mutually intend to effect a settlement of an existing dispute by entering into a superseding agreement; and (2) there is actual performance in accordance with the new agreement.” Martinez v. S. Bayshore Tower, L.L.L.P., 979 So. 2d 1023, 1024 (Fla. 3d DCA 2008) (holding that acceptance of checks, without protest, operated as an accord and satisfaction). “It would be unjust to allow a party to accept a check as an accord and satisfaction, and then later permit that party to sue under the same rights and obligations that the accord and satisfaction was intended to release.” Id.
For example, if you receive a check marked as “final” or “settlement,” or an instruction accompanying the check that indicates the payment is offered as a full and final settlement of your claim, and you endorse and deposit that check, you may be barred from any further recovery.
In United Prop. & Cas. Ins. Co. v. Valladares, 73 So. 3d 310, 311 (Fla. 3d DCA 2011), the insureds submitted a claim to their insurer for a broken pipe that caused property damage. After the insureds accepted payment of $23,000 to repair their home, they filed a lawsuit against the insurer for additional payments relating to loss of use under the same claim. The Third District Court noted:
The $23,000 check specifically referenced the [insureds’] claim for damage resulting from the broken water pipes, the sole pending claim from [insureds] under the [insurance] policy. [The insureds] accepted this payment without reserving any rights to other claims for damages resulting from the broken water pipes. Thus, the facts indisputably show [the insureds] accepted an offer for settlement of that claim. [The insureds] could have objected to the settlement payment and reserved their rights to claim further damages due to loss of use, but they did not.
Because the payment was intended to resolve the coverage dispute arising from the water pipe loss, and was accepted without reservation, the payment was an accord and satisfaction as to the losses known and alleged at that time. Having accepted the benefits of the payment, [the insureds] cannot now disclaim the settlement. [The insureds] did not allege additional facts or losses that were not at issue in the original claim, and thus it is evident the accord and satisfaction covered fully the pending coverage dispute.
How can you protect your rights? If a check is not marked as a settlement or final payment, it is a good practice to notify the insurer that the policyholder’s acceptance of the check is not intended to release the insurance company from liability for the claim. Before depositing the check, notify the insurer that the policyholder is considering the funds as a partial payment and not as a final settlement of the claim unless the insurer advises otherwise.
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