January 8, 2010
Car crash gets costly in botched settlement
By ANDREW BERGH
Special to the Journal

I wonder how Martin the Geico gecko reacted to the bad news.

I'm referring to the ruling eight days ago by a Florida appeals court in Gonzalez v. Claywell. Thanks to a botched settlement, a Geico insured is now saddled with a judgment for almost $400,000.

The Geico insured, Roger Gonzalez, was involved in a two-car collision that seriously hurt the other driver, Dawn Claywell. Unfortunately, Gonzalez only had $25,000 in liability insurance under his car policy.

In late September 2005, Claywell's lawyer sent a settlement proposal to Geico.

The letter offered to settle the case for $26,336.16, consisting of $25,000 for Claywell's injury claim and $1,336.16 for property damage. In no uncertain terms, it said Claywell was willing to sign a release form that released only Gonzalez and any co-owners of the car he was driving. The letter also advised that the offer would remain open until Oct. 31, 2005, and that it could only be accepted by “complete performance.”

Four days before the deadline, the Geico adjuster sent a check for the requested amount to Claywell's lawyer, along with a release that also named Geico. The accompanying letter said the settlement check couldn't be negotiated until after the release was signed and returned.

But the deal promptly went south.

The day after the offer expired, Claywell's lawyer returned the check to Geico, telling the adjuster that Claywell wouldn't sign the release because it deviated from the terms of her offer. The attorney also advised that he would be filing suit against Gonzalez.

Less than two weeks later, Claywell sued Gonzalez for damages in Escambia County Circuit Court.

So how did Geico respond? By sending a new check for $26,336.16 and a release that this time only named its insured. The first release was an error on his part, the adjuster said, because he had meant to delete Geico as requested by Claywell's lawyer. But a few days later, the lawyer wrote back to inform the adjuster that his “offer” had been rejected.

Gonzales later moved for summary judgment on the defense of “accord and satisfaction.” The lawsuit was unnecessary, the defendant in essence claimed, because the parties had reached a binding settlement agreement.

But the trial court said not so fast.

The condition that Geico be released from liability wasn't contemplated by Claywell's offer, said the court. As a consequence, the court ruled that instead of constituting an acceptance, Geico's initial response was in the nature of a counteroffer which Claywell had expressly rejected.

To say Gonzalez fared poorly at trial would be an understatement, as an Escambia County jury later found him guilty of negligence and fixed Claywell's damages at just over $394,000. The next thing he knew, Gonzalez had a judgment entered against him for almost 16 times the amount of his Geico liability coverage.

In the ensuing appeal, Gonzalez once again argued that the parties had entered into an enforceable settlement agreement. This was so, the defendant claimed, because it's “customary” to release the insurance company in a personal injury case — and because Claywell had “no good reason” for insisting that Geico be omitted from the release.

But by a 2-1 margin, a Florida appeals court recently disagreed.

It's true, said the court, that the insurer is ordinarily included in the release as part of a settlement. The court even hinted that if Claywell's settlement offer had said nothing about the release language, the inclusion of Geico in the release might've been an implied term of her offer.

But those weren't the facts.

Instead, the court observed how Claywell had “made it clear” that she would only release Gonzalez and the owner of the car — and that her offer required “complete acceptance.” On top of that, she had immediately rejected Geico's counteroffer by returning its check and declining to sign the proposed release. So since there was never any meeting of the minds on the language of the release, the majority concluded that the parties had failed to reach a binding settlement agreement.

So what's the most likely outcome? Good question.

What's known, though, is that Gonzalez, instead of being released from any further liability at no personal cost, is now exposed to a judgment for almost $400,000. So unless Geico wants to be sued for bad faith, I suspect the company will protect Gonzalez (and his assets) by writing a much larger check to Claywell.

Whether this decision will be easy — so easy that even a caveman could make it — remains to be seen.