Settlement Between Insureds and Insurance Company Bars Recovery Against Insurance Agent, Texas Court Rules

Often in insurance cases, a plaintiff may bring a lawsuit against both the insurance company and the insurance agent in the same action. Such was the case in Braziel v. Becton Insurance Agency, Inc., No. 07-11-0134-CV,  2011 WL 5061162 (Texas App. – Amarillo October 25, 2011). The insureds suffered a fire loss to their home. The trial court ruled that the contents of the home were covered under the policy, leading the insurance company to settle the case with the insureds. Of course, the insureds were pleasantly surprised with this turn of events, entered into the settlement, and signed a customary release regarding their claims against the insurance company.

Unfortunately, the continued lawsuit was not as successful for the insureds from that point on. The release they signed stated that the insureds,

RELEASE, ACQUIT, and FOREVER DISCHARGE Travelers from any and all Event Claims including those asserted and those that could have been asserted, whether accrued or unaccrued, whether known or unknown, whether now existing or that may arise hereafter.

It further defined "Travelers" as the insurance company and,

all of its past, present, and future underwriters, officers, directors, stockholders, agents, attorneys, insurers, servants.

Cleverly, the insurance agent jumped on this language and argued to the court that he was an agent for Travelers, so the release encompassed claims against him as well. The insurance agent provided several documents which showed the agreement between it and Travelers which used the term "agent" when referring to the insurance agent, further solidifying his argument.

Ultimately, the court held that,

Upon considering the aforementioned undisputed evidence and the specific terminology of the settlement agreement, we conclude, as a matter of law, that [the insureds] released [the agent] when they released Travelers from all claims, demands, causes of action and the like relating to the loss for which they sued.

For the insureds, the spirit of the settlement was not to include the agent, but the court ruled against them. This illustrates an important lesson. Always read what you sign and be sure you fully understand every detail contained within a contract – especially when related to litigation. If you are unsure of anything, it will never hurt to ask for clarification.