Can an insured who settles with the insurer pursuant to a mediation program later reject the settlement and seek additional coverage? The Fifth Circuit denied such relief to the insured in Wiley v. State Farm Fire and Cas. Co., No. 09-60191 (5th Cir. Oct. 9, 2009).
The insured's home was reduced to a slab by Hurricane Katrina. State Farm rejected his claim based on the water damage exclusion and anti-concurrent cause provision in the policy. The parties, however, entered the Mississippi Department of Insurance Hurricane Katrina Mediation Program, and in 2006 signed a settlement agreement. After being told by State Farm that his entire claim would be denied because his home had been destroyed by storm surge, the insured released all known claims in exchange for $80,235.
In a 2007 letter, State Farm offered an additional $26,798 in exchange for another release after an agreement between State Farm and the Mississippi Department of Insurance was reached. The insured rejected the second offer and brought suit to recover additional sums under his homeowner's policy. The insured claimed he had learned that wind, and not solely storm surge, had caused part of the damage to his home. Nevertheless, the district court granted summary judgment to State Farm.
The Fifth Circuit affirmed. The 2006 Settlement unambiguously represented a "full, complete and total final payment" for all insured damages that were known to the insured at the time of the settlement. The 2007 offer was not an admission by State Farm that the original payment was incorrect, but preserved the status quo established by the 2006 settlement. Further, the 2007 letter and additional payment offer was issued pursuant to negotiations between State Farm and state regulators, and the insured was not a party to the negotiations.
