When it’s time to settle your accident or injury claim with an insurance company, the company most likely will ask you to sign a release. Almost always prepared by the insurance company or its attorney, a settlement release is typically structured to contain all the legal formalities to make it a legally enforceable contract. So, a release is not something that you should sign without reading. It goes without saying that you should never sign a release if you do not understand the included terms. Below are some of the common clauses included in settlement releases, and the potential pitfalls that go along with them.
Are you really ready to settle your injury or insurance claim? Before you sign a settlement release it is important to know whether you really know of all your injuries and recoverable damages. The insurance company wants to close out your claim quickly and permanently. So, a settlement release will likely release the insurer and at-fault party from all claims “known or unknown,” and leave you to assume the risk that your past, present and future injuries and damages may be greater than currently believed. While there are some limited exceptions, a release with this provision will generally preclude the injured party from seeking further compensation for injuries or damages from the at-fault party or their insurance company named in the release.
“A settlement release will likely release the insurer and at-fault party from all claims “known or unknown,” and leave you to assume the risk that your past, present and future injuries and damages may be greater than currently believed.”
Often an insurance company may agree to settle part of a claim or a claim for one injured party but not others. For instance, an insurance company may not contest the property damage portion of an injured party’s claim, but may contest the nature and extent of the injuries alleged in a bodily injury claim. Or, in an accident involving multiple family members, the insurance company may accept one injured party’s claim, but contest the injuries alleged by another family member. In these situations, it is important to make sure that the release includes only those claims that are specifically included in the settlement. Otherwise, you or your loved ones may lose the ability to recover for injury claims or damages not intended to be included in the settlement.
Commonly, a settlement will be made without an admission of fault by any party. It is critical that a release be made without any admission of fault or liability on your part if someone else may have a claim against you for damages arising out of the same accident.
Most releases include standard provisions requiring the injured party to “indemnify, defend, and hold harmless” the at-fault party and her insurer. Written many different ways, these provisions essentially require the injured party to pay any amount the released parties have to pay after the release is signed, preclude the injured party from seeking further compensation from the released parties after the release is signed, and can require the injured party to pay the released parties in the event litigation arises out of claims covered by the release. In a typical accident case, this clause pertains to any outstanding liens for medical care that may need to be paid from the settlement proceeds. If those liens do not get paid, the insurance company does not want to be responsible to pay them. Hence, the inclusion of the “indemnification and hold harmless” clause in the release.
Caution must be exercised when reviewing an indemnity and hold harmless clause to ensure it is not worded so broadly to potentially include claims other than your claim. You do not want to be on the hook to pay on behalf of or defend an at-fault party or insurance company for any liens or claims arising out of an accident, except your own.
Did Medicare or Medicaid pay for any of your accident-related treatment? If so, like any medical insurer, they have a right to be reimbursed. Most insurance companies will ask you to certify whether you were or were not Medicare eligible on the date of your accident prior to signing a release. But they will usually also include a provision in the settlement release stating that you affirm you were not eligible for Medicare and/or Medicaid. If you are mistaken about your Medicare or Medicaid status, and either entity attempts to collect its reimbursement from the insurance company, the indemnity and hold harmless provisions discussed above could put you on the hook for the amounts paid by the insurance company, any fines or penalties it incurred, as well as attorney fees.
The above examples are just a few of the potential clauses that may be included in a settlement release. As the above examples demonstrate, settlement releases are not routine documents that should be signed without careful reading and understanding. For this reason it is best to retain a qualified attorney to represent you through the claim process, even if you do not think you will need to file a lawsuit. Contact Axion Law Group to speak with an attorney experienced in negotiating claim settlements and settlement releases today.
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