Beware of Email Agreements!

The American Bar Association published a story warning us all to be careful about settling by email. It recited the case of Philadelphia  Ins. Indemnity Co. v Kendall decided by the Supreme Court of the State of New York Appellate Division, First Judicial Department, Case No. 2020-02752, Appeal No. 13756 involving an automobile accident in which Erika Kendall, driving her employer’s car collided with an automobile owned and operated by Khaliah T. Martin.  Martin’s insurance policy limits were $25,000 and so Kendall filed an underinsured claim against her employer’s insurance carrier- Philadelphia Indemnity Co. (“Philadelphia”) for $400,000.  Kendall and Philadelphia proceeded to arbitration although counsel for both parties continuously negotiated to reach a settlement. (Id. at 2.)

The arbitration hearing was held on August 15, 2019. The arbitrator rendered her decision on September 16, 2019, awarding Kendall $975,000. The arbitrator emailed and faxed the decision on this same day. However, neither counsel received it and continued to negotiate a settlement. (Id. at 3.)

On September 19, 2019, the parties finally agreed to settle for $400,000. Kendall’s counsel emailed Philadelphia’s counsel: “Confirmed- we are settled for 400k.” He added “sincerely” above his pre-typed block signature and contact information. Counsel for the insurer soon responded attaching a general release and commenting that counsel should have Kendall sign it quickly before the decision arrives as he does not want Kendall to renege. Kendall’s counsel responded stating he would try to have her sign asap. (Id. at 3.)

Counsel for Kendall then received the arbitration decision which was before his client signed the release agreement. So, he advised opposing counsel that he would not proceed with the $400,000 settlement but instead requested the insurer pay the $975,000 awarded by the arbitrator. (Id.)

As you might surmise, the insurer filed a motion to enforce the settlement. The Supreme Court (i.e., trial court) denied relief on the bases that the signature of Kendall’s counsel was pre-typed and was not an actual signature as required by the state’s statute, the actual settlement agreement had not been signed, and thus the settlement and release had not been finalized. (Id. at 3-4.)

The Appellate Division reversed concluding that the distinction between pre-typed and actually typed signatures was irrelevant. What was relevant to the court was whether the email was actually sent. “It is not the signoff that indicated whether the parties intended to reach a settlement via email but rather the fact that the email was sent.” (Id. at 6.) The Court noted under New York’s Electronic Signatures and Records Act, an electronic signature will take the place of a “wet” signature. (Id. at 6.). In a footnote, the court also noted the enactment of the federal Electronic Signatures in Global and National Commerce (E-Sign) Act in 2000 and that many states have enacted statutes authorizing email signatures based on the Unform Electronic Transmissions Act, as well. (Id. at 3, n.5)

The court further found that the email did set forth all of the material terms of the settlement: the payment of money. (Id. at 8.) It disagreed with counsel for the insurer that the email acceptance was conditioned on Kendall signing the release. The court viewed the signing of the release as “…essentially a ministerial condition precedent to payment. (Citations omitted.) (Id. at 9.) That is, it was simply further documentation of an already agreed upon deal in the emails. (Id. at 8.)

In conclusion, the court reversed the order of the court below denying the motion to enforce the settlement and instead granted the petition to enforce the settlement. Thus, Kendall received $400,000 for her injuries rather than the $975,000 awarded by the arbitrator.

The moral is readily apparent: be careful what you state in an email as it may constitute a regrettable settlement.

… Just something to think about.

author

Phyllis Pollack

Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as… MORE

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