Woodland Hills personal injury attorney Barry P. Goldberg is an expert on all things “Uninsured” and “Underinsured.” The problem with Uninsured and Underinsured Motorist claims is that there is no integrated statute and procedural guidelines for properly handling these claims. It is a patchwork of statutes, rules and contractual provisions. Many, if not most, personal injury attorneys make a colossal mistake when it comes to resolving these claims—-they allow their clients to sign “Releases.”
There are several problems with signing an UM/UIM Release, not the least of which is that it is not even required. At best, an insured claimant need only sign an acknowledgement or receipt for funds stating that they are accepting a certain amount of money to satisfy the UM or UIM claim, only. Instead, routinely, personal injury lawyers are allowing their clients to sign a “Full Release of All Claims.” This “Release” is also unwittingly releasing the insurance company for all bad faith and unfair claims practices. Most personal injury attorneys do not have the authority to settle or release subsequent “bad faith” claims; to do so, is arguably malpractice.
This is a critical mistake these days. My anecdotal experience is that most insurers are unnecessarily delaying these “first party” claims and are trying to force the same “low ball” claims practices we see in a typical “third party” claim. The standards are different and an insurer should not be permitted to delay and low ball its own insured. However, the insurers are receiving a “Get Out of Jail Free” card from personal injury attorneys that think they must sign a “Full Release” in order to get paid. There has been a series of unpublished cases that back this theory up.
The UM/UIM Release cases inevitably rely on Edwards v. Comstock Insurance Co. (1988) 205 Cal.App.3d 1164, 1166, 1169 (Edwards), which held that a release of all claims is unambiguous and precludes a bad faith claim. The insureds in Edwards were injured in an automobile accident and presented a claim to their insurer under the uninsured motorist provisions of their policy. (Id. at p. 1166.) Later, the insureds filed a bad faith action against the insurer alleging that it acted according to a preconceived scheme to delay and underpay valid insurance claims. (Id.) The insurer filed a motion for summary judgment on the basis that the insureds, before filing their bad faith action, each accepted settlement payments and signed a “ ‘Release of All Claims’ in which they agreed to release respondents ‘from any and all rights, claims, demands, actions, causes of action and damages of whatever kind whatsoever including general, special, compensatory and punitive damages known or unknown, whether in contract, tort or otherwise resulting from the loss sustained by [the insureds] which occurred on or about May 2, 1984 at or near Los Angeles County, California.’ ” (Id., italics added.)
The courts have held and are holding that this is a release of any and all “Bad faith” claims associated with the handling of the UM/UIM claim.
I strongly recommend personal injury attorneys refer to Burton v. Lumbermans Mutual Casualty Company (N.D.Cal. Nov. 15, 2004, No. C04-01614 HRL) 2004 U.S. Dist. LEXIS 23609. In that case, the federal district court held that Edwards did not apply because the definition of the “claims” to be released was limited to “all claims or demands for underinsured motorist benefits under [the policy] . . . to recover for damages Releasor alleges he suffered in the motor vehicle accident that occurred on May 22, 1999.” (Italics added.) The insurers’ pre-printed releases are not limited to claims for damages suffered in the motor vehicle accident.
In fact, if an insurer has been dilatory in handling a first party UM/UIM claim, it is likely that the insurer will continue with bad conduct by insisting that an insured sign a “Full Release” of the UM/UIM claim. I contend that this is further evidence of the breach of the covenant of good faith and fair dealing in light of the Edwards v. Comstock Insurance Co. (1988) 205 Cal.App.3d 1164, 1166, 1169 case. I strongly recommend that personal injury attorneys document the attempts by the insurers to obtain a “Full Release.” Given the position the insurers are taking in the Courts of Appeal, a subsequent jury will see the insurer’ attempt as an “I got you moment,” increasing the chances of a bad faith verdict.