On August 12, 2006, James Reppy was seriously injured in a head on vehicle collision with the defendant Gary Winters. Attorneys for Reppy sent a letter to defendant's automobile insurance carrier, Farmers Insurance Group, demanding settlement and left the demand open for 90 days. The demand indicated that if it was not accepted, it would be withdrawn. The offered release would have completely immunized Winters from any further claims in exchange for the policy limits.
The reply of the insurer through counsel indicated that the policy limits offer was accepted, but imposed an additional condition that Reppy's counsel and Reppy would indemnify Winters and his insurance company and their attorney from liability for any type of medical lien.
Ultimately, Reppy decided that the counter-request for indemnification was not an acceptance and proceeded to suit.
Winters and Farmers filed a motion to dismiss and to enforce the settlement, and the trial court granted their motion and entered judgment for Winters. On appeal, the Missouri Western District Court of Appeals overturned the decision. Reppy v. Winters, 2011 WL 3444069, August 9, 2011. The Western District noted that to prevail, a moving party trying to enforce a settlement had to prove the essential elements of a contract: offer, acceptance and consideration. The court noted that essential to the creation of a valid settlement is a meeting of minds and mutual accent to the essential terms of the agreement. The elements had to be proved by clear, convincing and satisfactory evidence.
The court went on to say that without a mirror image acceptance, there is not a settlement and any acceptance that includes a new or variant term amounts to a counter-offer or rejection of the original offer. As a result, no settlement was made.
This decision simply reaffirms basic Missouri law that when new additional terms are added to an acceptance, it is not acceptance but a counteroffer. Interestingly, the court mentioned the additional conditions were an attempt to hold Reppy's counsel responsible for Reppy's bills. Unfortunately, the court did not discuss that a request for indemnification by an attorney of a client is improper as being in violation of the rules of professional ethics. Presumably, neither party brought this to the court's attention. However, attorneys facing such requests should be aware that the advisory committee of the Supreme Court of Missouri in Formal Opinion No. 125 indicated that an attorney may not assume further obligation to indemnify the opposing party if the attorney ethically disburses the funds to the client, and the client does not use the funds to pay a debt to a third party, and found the same to be a violation of professional rule of ethics 4-1.8(e) which provides a lawyer shall not provide financial assistance to a client in connection with a pending or contemplated litigation.
Furthermore, it appears that the insurer, who was in control of the litigation, failed to fully understand an attorney's obligations under the law. Pursuant to Rule 4-1.15, a Missouri attorney does have an obligation to insure that legitimate claims of third parties are protected. In addition, various lien laws, both state and federal, may place a burden on the attorney. Nonetheless, the insurer's attempt to add these additional provisions provided it and it's insured no more protection than already existed under current law. Unfortunately for defendant Winters, it appears to have exposed him to a potential excess judgment. If that it is the ultimate result of the case of Reppy v. Winters, then Winters may have a viable bad faith claim and breach of fiduciary duty claim against the insurer for failing to accept an offer which should have been accepted.
