Life insurance cases. When is there a settlement?
Here is a 2024 opinion from the Western District of Texas, San Antonio Division that is worth reviewing. The opinion is styled, Arch Insurance Company v. Rita Candelario.
The opinion does not deal with life insurance specifically, rather it deals with an insurance situation wherein the insurance company believed an agreement had been reached via a Rule 11 agreement. A proper Texas Rule 11 of Civil Procedure Settlement Agreement is commonly used to memorialize that the respective parties have reached an agreement to settle a case.
A reading if the case might be interesting for the procedural process and the underlying reasons for the lawsuit being filed. However, here we will examine the way of seeing whether or not a Rule 11 agreement has been properly made.
A Federal Court applies Texas’s Rule of Civil Procedure 11 when a settlement agreement is at issue in a diversity case governed by Texas law. That Rule provides that no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record.
Taking the facts alleged in the live complaint as true, Arch’s complaint sufficiently states a plausible claim for breach-of-contract under Texas law only if it satisfies the elements of a breach-of-contract claim: “(1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach.” The Court need not proceed beyond the first element, as there is pleaded no agreement on all material terms such that an enforceable contract is at issue.
The alleged Rule 11 agreement in this case reads as follows:
This [letter] shall memorialize our conversation this evening in which you
confirmed you will [accept] from Arch as it[s] contribution to a full and final
settlement of all claims [p]resented by Mrs. [C]andelario in the Reeves County
personal injury action. . . . If this comports with our agreement, please respond
confirmed.
The next day, at 1:58 p.m., Herrera replied in part, “Ms. Candelario accepts the $300,000.00 settlement offer from Arch.” Arch further alleges that Defendant’s counsel provided a W-9 form and instructions on payment of the settlement amount, further demonstrating the parties’ agreement.
But these emails do not evidence a definite agreement as to all material terms because there are parties and material terms missing. Under Texas law, “a contract is legally binding only if its terms are sufficiently definite to enable a court to understand the parties’ obligations.” By its plain terms, the “agreement” embodied in the emails is an agreement as to an amount of money Arch would pay Candelario as Arch’s “contribution” to a global settlement “of all claims presented by Mrs. Candelario in the Reeves County action. The live complaint reflects that the underlying Reeves County litigation involves claims by Candelario against Anadarko Petroleum Corporation and Western Gas Partners. Arch moreover, is not a party to the underlying Reeves County litigation. Here, the Court cannot understand
the parties’ obligations with respect to a “full and final settlement” to which Arch’s $300,000 is but a “contribution.” How could Candelario have settled with Arch when there is no indication that Candelario settled with Anadarko and Western Gas? It is nonsensical to conclude that Candelario intended to settle all claims, including claims between her and Anadarko and Western Gas, in exchange for only $300,000 from Arch and with no signature or agreement to provide releases from either Anadarko or Western Gas. Did Arch even have authority to settle for Anadarko and Western Gas? It certainly didn’t purport to sign for them.
While it is true that Texas courts can enforce Rule 11 and other agreements with some open or unresolved terms, so long as the parties’ intent to be bound is apparent, doing so is not warranted when an intent to be bound is lacking. “The critical issue for determining enforceability when the parties agree that some terms will remain open is whether the parties intended for their agreement to be a present, binding agreement in the absence of an agreement on the remaining terms or whether they intended their agreement to have no legal significance until agreement on the remaining terms is reached. Without some indication as to the status of Anadarko and Western Gas’s obligations under a “full settlement of all claims,” Candelario’s agreement to a $300,000 price term is not enforceable.