Should I Cash the Insurer’s Check? Update

By | June 5, 2019

In an April 10, 2019 post, Katie Bechina and I explained how cashing the insurer’s check might eliminate rights to additional insurance proceeds under a legal doctrine called  “accord and satisfaction”. See [permalink] In short, we said that, if the insurer and the insured have a bona fide dispute and the insurer provides a check with a “conspicuous offer of an accord”, then the insured may forfeit rights to additional insurance proceeds by cashing the check. A notation of “payment in full” in the check memo or a similar communication in a cover letter may suffice as a “conspicuous offer of an accord”. A late May 2019 decision by the United States Court of Appeals for the Tenth Circuit illustrates accord and satisfaction in action. See Mischek v. State Farm Mut. Auto. Ins. Co., No. 18-1156, __ Fed. Appx. __, 2019 WL 2233629 (10th Cir., May 23, 2019).

In Mischek, the two plaintiffs claimed underinsured motorist insurance (UIM) benefits from State Farm, but they disagreed with State Farm on the amounts due. Ultimately, the plaintiffs each negotiated separate settlements with State Farm. Instead of documenting those settlements more formally in a written agreement and release, State Farm merely sent letters to each plaintiff confirming their agreements, and it enclosed checks for the settlement amounts. Id. at *1; see also Mischek v. State Farm Mut. Auto. Ins. Co., Nos. 16-CV-3208 and 17-CV-0041, 2018 WL 1569754, at *2-3 (D. Colo. Mar. 30, 2018). The plaintiffs cashed their checks, and the dispute between the plaintiffs and State Farm seemed to be resolved. But then the Colorado Supreme Court ruled in a separate case  that insurers are prohibited from reducing UIM benefits by offsetting amounts paid under medical payments coverage. See Calderon v. American Mut. Family Ins. Co., 383 P.2d 676 (Colo. 2016). Based on the allegation that State Farm used this prohibited offset in determining the amounts due to them, the plaintiffs sued State Farm seeking additional money. State Farm moved for summary judgment against the plaintiffs’ claims based on accord and satisfaction, and the district court granted  State Farm’s motion. 2018 WL 1569754, at *8.

The Mischek plaintiffs then appealed. On appeal, the Tenth Circuit affirmed the lower court. The district court and the Tenth Circuit both relied on substantial evidence showing that State Farm had offered each plaintiff an accord to settle their respective UIM claims, including the letters accompanying the settlement checks. The plaintiffs accepted and satisfied those offers of accord by cashing State Farm’s checks: “‘because [the Mischek plaintiffs] accepted payment from State Farm to settle their UIM claims, the doctrine of accord and satisfaction bars them from seeking additional UIM benefits that they allege were unlawfully withheld.'” 2019 WL 2233629, at *2 (quoting the lower court opinion, Mischek, 2018 WL 1569754, at *8).

Scott Hecht

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