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evaluating release from property insurer

Evaluating a Release From Your Property Insurer

All too often, an insurance company will request its insureds to sign a release as part of the claims process.  Very rarely, if ever, does the insurance company tell you what that really means.

A “release” is a legal document that ends a property insurance claim, in whole or in part, on a permanent basis. After a release is signed, no further claim for the damages or claims released may be made. This includes newly discovered or previously unknown damages. In addition, once a release is signed, no lawsuit can be filed for the damages or claims released. For this reason, you should always be cautious when you are asked to sign a release claim by your property insurance company.

Sometimes a release will be requested before your insurance company will issue any payment on your claim.  This is improper claims handling. A property insurance company is required to issue undisputed payments to you for what it believes it owes for your damages based on its investigation and adjustment and with no strings attached. It should not ask you to sign a release when it issues claim payments it believes it owes.

More often, a release will be requested after you and your insurance company have negotiated over disputed payments, and after there has been a give and take resulting in a mutual agreement as to how much the insurance company will pay so it can close the claim.

All releases are different. Some resolve all claims for all damages resulting from an event or occurrence (a “general” release), and some are limited to specific claims or damages from an event of occurrence (a “specific’ release). Still others try to prevent any future claims of any type, even if unrelated to the event or occurrence reported to the insurance company.

The following is an example of release language which requires the insureds to forfeit any and all potential and/or future claims or damages from a specific property insurance loss:

“The Insureds hereby fully acquit, release, and forever discharge (INSURANCE COMPANY) and its principals, administrators, heirs, executors, managers, successors, assigns, employees, agents, subsidiaries, officers, partners, partnerships, firms, directors, stockholders, attorneys, adjusters, servants, insurers, affiliates, contractors, and representatives of and from any and all actions, causes of action, rights, benefits, proceeds, costs, expenses, claims, fee claims, interest claims, losses, repair costs and expenses, mitigation costs and expenses, remediation costs and expenses, damages, or demands of whatever name or nature, including any and all contractual and extra-contractual claims, claimed in, relating to, or arising out of the subject matter of Claim Number XXXX.”

If an insured signs a release containing this language, and later wants to pursue another claim for previously undiscovered damages, or a “bad faith” claim, against their insurer, the insured could not do so. They will have forfeited their right to pursue any and all other claims.

Before signing a release, always confirm that all of your damages are accounted for in the amount of the proposed settlement (including interest, costs, or attorney’s fees if they are a part of your claim). Confirm that you are not waiving any rights that are unrelated to the underlying claim being paid. Consider whether you have a potential or future claim, including a “bad faith” or extra-contractual claim, that you’re willing to give up. Most importantly, due to the complex language contained in a release and its effect, you should always consider consulting with an experienced property insurance attorney who represents insureds and who can review the proposed release and help you understand the document before you sign it.