The Southern District Court of Florida will have to determine whether an insurance company appropriately obtained a policy release from a condominium association involving a Hurricane Wilma claim in a case that is pending before it. Continuum Condominium Assoc., Inc. v. Mt. Hawley Ins. Co., No. 10-23550, 2011 WL 2214810 (S.D. Fla. June 2, 2011). It can be a questionable practice for insurers to demand that their policyholders sign a release during the adjustment of a claim before obtaining insurance benefits, particularly when the policyholder is not represented by counsel. The court’s analysis may balance public policy in favor of releases, which encourage parties to resolve their disputes, with the potential over-reaching or inappropriate means with which this release was obtained.
Continuum sustained severe property damage as a result of Hurricane Wilma and filed a claim with Mt. Hawley. During the claim adjustment, Continuum requested that Mt. Hawley tender payment for undisputed portions of the claim so that Continuum could carry out some repairs. Mt. Hawley disbursed $45,064.78 to Continuum, and the parties executed a policyholder’s release on June 1, 2007. The June 2007 release stated that Continuum released Mt. Hawley from “any and all actions, causes of action, claims and demands whatsoever” for “business income only.”
Interestingly enough, the insurance policy between the parties did not provide coverage for “business income,” and no claim for “business income” was ever made by Continuum. Mt. Hawley claims the reference to “business income” in the June 2007 release was a mistake, so Mt. Hawley asked Continuum to sign a second policyholder’s release that would release Mt. Hawley from “any and all actions, causes of action, claims and demands whatsoever for all loss and damages arising from Hurricane Wilma on or about October 24, 2005.” Mt. Hawley claims that Continuum’s Board President signed the second release and that it is a valid release of all claims. Continuum asserts in the lawsuit that the second release is fraudulent, and it was never authorized by Continuum or signed by its president. Continuum alleges that it never settled all of its claims with Mt. Hawley, and that it is entitled to payment for the disputed portion of the claim.
Continuum filed this action for declaratory judgment and breach of contract to determine the effect of two releases. Mt. Hawley raised settlement as an affirmative defense in the lawsuit, and even requested the court “reform” the first release to reflect the true intent of the parties if the court found the second release unenforceable.
At a later date in the litigation, the court will decide whether either release is valid; whether the first release contained a mutual mistake by both parties or a unilateral mistake on the part of the insurer. The case poses an interesting factual scenario which will require the court to rule on the sufficiency or appropriateness of the releases. Generally speaking, adjusters in Florida are guided by the Administrative Code and need to follow the Rules during a claim adjustment. The Florida Administrative Code has certain provisions related to releases during the claim process and an approval process that could be analyzed under facts such as this case. Also, some insurers have claim guidelines for their adjusters/examiners that may address when to use a policyholder release. We will update this case as it progresses through the litigation.