Pay attention to the release you execute! This includes the release that is executed in consideration of insurance proceeds where the release will likely include a full release of all claims and the parties forbear from pursuing legal claims against one another. Such claims would include the insured / party receiving insurance proceeds releasing its right to assert claims for additional proceeds arising from same incident and the insurer releasing its right to assert a claim that the insured breached the insurance policy and/or that there is no coverage under the policy. This is besides the fact that the monetary payment should constitute sufficient consideration for a full release of any and all rights / claims relating to the incident.
In Crystal Colony Condominium Ass’n, Inc.v. Aspen Specialty Ins. Co., 2014 WL 1116881 (S.D.Fla. 2014), an insurer issued a property insurance policy to an association. In October 2005, the insured-association experienced severe damage due to Hurricane Wilma. Due to the damage, the insurer agreed to pay $1,071,359.52 to its insured-association in consideration of a full release from the insured. The insured-association agreed and a release was executed that read:
“In consideration of the sum of [$1,071,349.52], to me/us [Plaintiff] paid, the receipt whereof is hereby acknowledged, l/we, [Plaintiff] (being of lawful age) do hereby release and forever discharge [Defendant, its] heirs, administrators, executors, successors and assigns, from any and all action, causes of action, claims and demands whatsoever for, upon, or reason of any damage, loss or injury and all consequential damage, which heretofore have been or which hereafter may be sustained by me/us [Plaintiff] in consequence of windstorm damage during Hurricane Wilma, 10/24/05.”
It is being further agreed and understood that the payment of said amount is not to be construed as an admission of liability, but is a compromise of a disputed claim and that this release is executed in full settlement and satisfaction of rights of the undersigned under Policy No. BP000106 arising out of said hurricane damage above referred to.”
Crystal Colony, supra, at *2.
Approximately six year later, the insured-association advised the insurer that it disagreed with the quantum of insurance proceeds it received and filed a declaratory action. The insurer moved for summary judgment based on the full release it received for the incident (the hurricane). The insured-association argued that the release was not enforceable because it lacked consideration since the money it received was only a partial payment and did not cover future damages the association incurred. The insurer argued that the release included language where there was a mutual forbearance from pursuing legal action against the other party and this constituted more than sufficient consideration.
The Southern District agreed with the insurer (entering summary judgment against the association-insured) and held: “Florida law provides that a promise, no matter how slight, can constitute sufficient consideration so long as a party agrees to do something that they are not bound to do. Forbearing the pursuit of a legal remedy constitutes such a promise.” Crystal Colony, supra, at *3 (internal citations and quotations omitted).
Unambiguous releases will typically be deemed enforceable since it will clarify the intent of the parties. Whether it is a release given in consideration of insurance proceeds or a release given in consideration of a progress or final payment, if the party giving the release wants to ensure certain rights are carved-out or preserved, they need to do so. If the other party is unwilling to accept such carved-out language, the party giving the release, at a minimum, needs to preserve its rights by sending contemporaneous documentation that they are signing the release because the other party will not accept a release with carve-outs for the following specific issues. And, as seen from this case, if a mutual release is given where both parties forbear from pursuing claims against the other, this consideration will be more than enough consideration to support the release and courts will not delve into the type of claims that the parties are potentially releasing each other from. Thus, pay attention to the release you execute so that it does not come back to haunt you later!
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