In Villare v. Geico, the plaintiff was injured in a car accident when he was struck by another driver.  The plaintiff alleged that the other driver’s insurance policy did not provide full compensation for plaintiff’s injuries.  As such, the plaintiff sued his insurer seeking underinsured motor vehicle coverage under his own policy.  Subsequently plaintiff settled his suit with his insurer and signed a release.  When his insurer refused to pay the settlement proceeds, plaintiff initiated suit to enforce the settlement.

The insurer argued that it was not required to pay the plaintiff the settlement amount as the plaintiff had not fulfilled his obligations under the agreement.  Specifically, Geico contended that the release agreement included a provision in which the plaintiff was required to verify that all liens had been settled or satisfied, and that plaintiff was to verify that he would not become Medicare eligible in the next 30 months.  However, before signing the release, plaintiff removed the sentence regarding his Medicare eligibility, and took steps to show that there were no Medicare liens.  Thus, the plaintiff argued his insurer was contractually obligated to pay him the settlement amount.  The court agreed that the release as signed did not include any specific terms regarding Medicare liens.

Thus, this case shows that when drafting releases it is extremely important to explicitly include any preconditions to payment – to fully protect an insurer – as a court interpreting a release could strictly construe the release’s terms and provisions – regardless of what the drafter may have intended the release would cover.

Thanks to Colleen Hayes for her contribution to this post.