No Means No
Posted on Friday, June 20th, 2014 at 1:00 am
A lawyer who once rejected a medical malpractice insurer’s offer of settlement could not later accept the offer, the Massachusetts Appeals Court has ruled in an unpublished opinion. The court in Muise v. Verhave held that the lawyer’s rejection of an offer to settle the case for $1,000,000, particularly in light of subsequent negotiations for different amounts, precluded a later attempt to “accept” the rejected offer.
Muise involved a medical malpractice trial that occurred in April 2012. During the trial, the plaintiff’s lawyer and the defendant’s insurer had multiple settlement discussions, involving both a possible “high-low” agreement–an agreement which capped the maximum recovery, while providing a minimum payment even if there was a defense verdict–and an outright settlement of all claims for an immediate cash payment. These discussions culminated in the execution of a written high-low agreement while the jury was deliberating, providing that the plaintiff would receive a maximum payment of $4.5 million, and a minimum of $500,000.
The following day, with the jury still out, the plaintiff’s lawyer approached the insurance adjuster and told her that he was now going to “accept” the offer of $1,000,000 to settle the case which had been made before the high-low agreement was signed. The adjuster responded that the offer had already been rejected, and was no longer available. After the jury returned a verdict for the doctor, the insurer paid $500,000 in accordance with the high-low agreement, and the plaintiff sued to “enforce” the settlement agreement, seeking an additional $500,000 payment.
The Appeals Court held that the plaintiff was bound by the signed high-low agreement, and that her recovery was therefore limited to the $500,000 already paid. Reviewing the “elementary” law of offer and acceptance, the court noted that a counteroffer–here the plaintiff’s counsel’s statement that it would take “more than a million” to settle the case–was equivalent to a rejection, and that after such a rejection, the plaintiff no longer had any power to accept the original offer.
As a matter of basic contract law, the Appeals Court clearly got it right. But the case stands as an important reminder to lawyers that the act of asking for more than an offer in essence rejects the offer. In many cases, if the new demand is rejected by the insurer, the plaintiff may still be able to settle for the original offer amount–but that depends on the insurer’s continued willingness to settle at that figure, and not to any legal right. The situation in this case was aggravated by the fact that the plaintiff’s counsel had entered into the written high-low agreement after “rejecting” the outright settlement, and thus the insurer had little incentive to revive the rejected offer.