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McREYNOLDS v. KREBS: BINDING SETTLEMENT AGREEMENT, NOT SO FAST! INSURERS BEWARE!!

Posted by Christina Cribbs

McReynolds v. Krebs, 2012 GA. LEXIS 337 (March 23, 2012) arises out of a motor vehicle accident where Plaintiff Krebs was a passenger in the vehicle struck by Defendant McReynolds. Plaintiff filed suit against McReynolds and General Motors (“GM”), the manufacturer of the car she was riding in at the time of the accident. Prior to trial, Plaintiff settled with GM for an undisclosed amount. At trial, the jury awarded Plaintiff a $1.2 million judgment against Defendant McReynolds.

The Georgia Supreme Court granted certiorari on two issues: 1. Whether the Georgia apportionment statute required the jury to apportion damages among multiple Defendants when the Plaintiff is not at fault; and 2. whether Defendant McReynolds’s insurer made a counteroffer in response to Plaintiff’s demand. (For a thorough discussion of the first issue, See Cribbs, C.R., “McReynolds v. Krebs, One Small Step for this Plaintiff, but One Huge Leap for the Defense Bar (Part One),” Georgia Insurance Defense Blog, April 5, 2012.)

Prior to trial, Plaintiff offered to settle her claim for Defendant’s policy limit of $25,000. Defendant’s insurer responded to the offer by agreeing to settle the case for $25,000, and requested that Plaintiff’s attorney contact the insurer to discuss how a $273,000 hospital lien would be resolved as part of the settlement. Plaintiff’s settlement offer made no mention of liens.

Defendant argued that its response to the offer was an acceptance, because mentioning the hospital lien was just a request for information, not a new condition of settlement. However, the Court determined that Defendant’s question about the hospital lien was aimed at the resolution of the lien, which added a condition that was not in Plaintiff’s original offer.
In addressing whether the parties had come to a binding settlement agreement, the Georgia Supreme Court relied heavily on Frickey v. Jones, 280 Ga. 573 (2006). The Court noted that an offer must be accepted unequivocally and without variance to form an enforceable contract. If a party’s “acceptance” of a settlement offer imposes conditions not included in the offer, there is no acceptance; rather, the party’s response is deemed a counter-offer. The court may consider extrinsic evidence such as correspondence and discussions between the parties when determining whether the parties agreed to a settlement.

The Court made it clear in Frickey that a request made to confirm that no liens exist will not convert an acceptance into a counter-offer, but adding a condition regarding the resolution of liens will. Because McReynolds’ letter proposed resolving the hospital lien as part of the settlement, the Court determined that McReynolds had made a counter-offer. As such, the parties did not reach a binding settlement agreement. The Supreme Court affirmed the denial of Defendant’s motion for summary judgment.

In a lengthy dissent, Justice Melton distinguished Frickey on the grounds that there was correspondence suggesting that the parties were willing to settle the case if the outstanding liens were resolved as part of the settlement. Conversely, in Krebs, Melton opined that Defendant fully accepted Plaintiff’s offer to settle for policy limits and merely requested a phone call to discuss outstanding liens. There was no language that required the hospital lien to be resolved as a condition of the settlement. As such, Defendant’s response to Plaintiff’s settlement offer constituted acceptance. A binding settlement agreement was formed and should have been enforced. However, Melton was the only Justice who expressed this opinion.

If Defendant had prevailed on the motion for summary judgment based on the settlement agreement, the case would have been settled for $25,000. However, because the Court found that there was no binding settlement agreement that prevented trial of the case, the jury’s $1.2 million verdict stood.

Krebs makes it clear that it is extremely important for defense counsel to choose their words carefully when responding to a demand and in any other correspondence regarding the settlement.