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A federal district court in California has ruled that a release signed by the plaintiff to settle his underinsured motorist (“UIM”) benefits claim also barred the bad faith lawsuit he subsequently filed against the insurer.

The Case

In October 2010, Jack Valle was driving a company vehicle during the scope of his employment when he was struck by another driver. At the time, Valley Forge Insurance Company insured Mr. Valle’s employer, and the insurance policy included a provision for underinsured motorist (“UIM”) coverage.

Because Mr. Valle’s damages exceeded the underinsured driver’s coverage, Mr. Valle pursued UIM benefits from Valley Forge under his employer’s insurance policy.

The parties went to arbitration and reached a settlement. Mr. Valle signed a release and Valley Forge paid him “$699,999.00 in settlement of the above entitled case.”

About five months after the parties executed the release, Mr. Johnson filed a lawsuit against Valley Forge for breach of contract and breach of the covenant of good faith and fair dealing, arguing that Valley Forge had wrongfully and unreasonably delayed the processing, investigation, and evaluation of his claims and had refused to timely pay benefits under the UIM policy.

Valley Forge asserted that the parties had already settled these claims in the release, and it moved for summary judgment.

The Release

The release stated that Mr. Valle:

hereby release[s] and discharge[s] [Valley Forge] . . . of and from any and all claims, actions o[r] causes of action known or unknown, which [Mr. Valle] now ha[s] or may hereafter have on account of or arising out of [the] motor vehicle collision with an uninsured motorist which occurred on or about October 5, 2010 . . . resulting in alleged general and special damages, including, but not limited to, personal injuries, medical expenses, future medical expenses, loss of income, loss of earning capacity, property damage, loss of use of property, and pain and suffering.

It is understood and agreed that this is a full and final release applying to all unknown and unanticipated injuries, deaths, losses or damages arising out of said incident or accident, as well as to those now known or disclosed.

The District Court’s Decision

The district court, applying California law, granted Valley Forge’s motion.

In its decision, the district court first found that the release was “clear” and barred Mr. Valle’s suit because his claims arose out of the motor vehicle accident.

The district court then rejected Mr. Valle’s argument that the release applied only to personal injury and attendant liabilities, reasoning that the release of “any and all claims” was not limited by the later enumerated list of what the accident “result[ed] in.”

Moreover, the district court added, the breadth of the release was “made even clearer” in the paragraph that stated that it applied “to all . . . injuries, deaths, losses or damages arising out of said incident or accident.” The district court pointed out that the term “arising out of” included “even far-flung connected events – including those at issue in this case.” Accordingly, the district court concluded, Mr. Valle had not demonstrated that there was a material fact in contention, and the release precluded Mr. Valle’s action.

The case is Valle v. Valley Forge Ins. Co., No. 17-cv-01048 MCE CKD (E.D. Cal. June 29, 2018). Attorneys involved include: For Jack Valle, Plaintiff: Michael Loewen, LEAD ATTORNEY, Law Office Of Michael R. Loewen, Sacramento, CA; Stanley P. Fleshman, Law Office of Stanley P. Fleshman, Sacramento, CA. For Valley Forge Insurance Company, Doing business as CNA Insurance, Defendant: Steven M. Crane, Steven M. Haskell, LEAD ATTORNEYS, Berkes Crane Robinson & Seal LLP, Los Angeles, CA.

Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.