When Should Your Patient Sign the Insurance Company’s Release of Claims?
By Richard H. Adler
May 13, 1992
The Washington Supreme Court in the case of Bennett v. Shinoda Floral, 108 Wn.2d 380 (1987), addressed the issue of whether an injured party who signs a release, settling an automobile accident injury claim is barred from re-opening his/her claim at a later time even if he/she did not know the full extent or consequences of the injuries at the time of settlement.
The underlying facts of Bennett v. Shinoda Floral are worth discussing in detail because they reflect circumstances which doctors and patients frequently encounter. On August 23, 1982, James Bennett was rear ended. He was diagnosed with a “lumbosacral and dorsal sprain.” His treating doctor told him his injury would “heal within a reasonable period of time and he could return to work shortly.” Mr. Bennett had every intention of returning to work and making a full recovery.
The claims adjuster for the at-fault party’s insurance company contacted Mr. Bennett approximately two weeks after the accident. The adjuster stated that the insurer would pay his medical expenses and lost wages as long as Mr. Bennett was unable to work. Approximately two months later, the claims adjuster received a report from the treating doctor,indicating that Mr. Bennett’s prognosis as well as the date he could return to work were still “undetermined.” In early December 1982, the insurer advised Mr. Bennett that they would no longer pay his continuing lost wages. However, the claims representative was interested in making a full and final settlement offer. The insurer offered $5,000.00 in final settlement.
Mr. Bennett thought that the $5,000.00 settlement, plus monies owed to him from his employer for vacation and sick leave time, would be sufficient to meet his needs until he could return to work. He agreed to settle his claim. On the same day the offer was made, Mr. Bennett signed a standard written release commonly used in personal injury cases. The release was for “all claims of every nature and kind whatsoever ¼ that are known and unknown, suspected and unsuspected.”
By spring of 1983, Mr. Bennett’s back condition had worsened. His treating doctor concluded that Mr. Bennett had a “herniated intravertebral disc in his low back, and that this was a different and much more serious condition than the sprain which was originally diagnosed.” Obviously, neither Mr. Bennett nor his doctor knew the full extent of his injuries or the consequences when settlement was made in December 1982.
The Supreme Court analyzed the facts and circumstances of this case and concluded that as a matter of law, once an injured party signs a release, he/she is forever barred from reopening his/her claim, even when the injured party and/or the doctor is unaware of the full extent of the injuries or its consequences at the time the release is signed. The Supreme Court held:
… there are two competing policies which must be considered in deciding the voidability of releases. On one hand, the law favors the just compensation of accident victims. On the other hand, the law favors private settlement of disputes and gives the releases great weight in order to support the finality of such settlements …
… when a person signs a release knowing that he has been injured, he assumes some risk that his condition may worsen … `[I]t is common knowledge that few diagnoses and prognoses concerning injuries to the human body can be reduced to mathematical certainty.’ By signing a release when he knows he is injured, a person is aware that there is a chance that he could be left insufficiently compensated if the prognosis changes. He knowingly takes a gamble in agreeing to a settlement. This risk that circumstances will change is inherent in the settlement process …
The Bennett v. Shinoda Floral case was decided by the Supreme Court close to five years ago. Since that time, there have been no contradictory court decisions; thus, this point of law stands. Nonetheless, health care providers and their patients continue to seek legal counsel on how to set aside a release once the patient’s condition worsens. We offer the following insights for the doctor and therapist when faced with their patient’s question of whether he/she should settle his/her case:
In practical terms, Bennett v. Shinoda Floral encourages and rewards the insurer who is quick to offer a low settlement to an injured party. Conversely, the injured party assumes health care and financial risk by settling before knowing the full extent of their injuries and degenerating physical conditions that may develop later on.
The insurance adjuster may have more experience in predicting the course of injuries and treatment and has greater awareness of the risk of continuing disability than does your patient. However, the law places no obligation on the insurance company to advise the victim of what the future may hold. The insurance adjuster is only obligated to his company to settle claims for as little as possible, as soon as possible.
The Supreme Court decision not only rewards the insurer in cases of hasty settlement, but also allows the insurer to subtly or directly take advantage of the difficult financial and/or emotional circumstances of the injured party in order to persuade agreement to a final release.
When your patient settles his/her claim, any and all remaining PIP or Med Pay benefits under your patient’s automobile insurance coverage plan also terminate. As a result, your patient may not be able to obtain future health care coverage if there is no insurance to cover his/her treatment needs.
Clearly, your patient is in an unequal bargaining position when trying to negotiate a reasonable and fair settlement with an insurance company. Seeking legal counsel is prudent. It is important to remind your patient of the difference between seeking legal advice and hiring an attorney. Initially, your patient may only need to have some questions answered.
YOUR PATIENT’S SETTLEMENT OF CLAIM AND POTENTIAL MALPRACTICE RISK TO DOCTOR
Providing any type of legal advice to a patient, particularly as it relates to whether a patient should “settle” his case, can possibly lead to a future allegation of malpractice by the patient. For example, if your patient settles his claim for a nominal amount and his condition subsequently worsens, your patient will not be allowed to re-open his case. The patient may then say “I relied on my doctor’s advice when he indicated I could settle.” It does not take a great leap of imagination to see how Mr. Bennett could claim that if his doctor had properly diagnosed the low back condition as a disc problem and not as just a low back strain, he would not have settled his case for only $5,000.00. The patient may then bring claims against the doctor for the following:
- Practicing law without a license; and
- Dispensing bad advice, i.e., the doctor should have known and advised the patient that a more serious condition may develop later on.
Whenever you are asked for advice on whether to settle a claim, it is best to respond by stating:
“I can’t advise you concerning settlement because that is a legal matter; but in terms of whether you are ready to be discharged from care, it is my opinion that … “;
“Concerning your question on whether to settle your case, I can only recommend that you consult with an attorney who practices personal injury and insurance law to help you examine the medical-legal aspects of your injury.”
If you or your patients need legal advice or would just like some questions answered, we will be glad to help. Simply give us a call. There is no charge for initial consultations.