Does My Attorney Have the Authority to Accept a Settlement?

Posted in Georgia Court of Appeals on July 25, 2022

The Georgia Court of Appeals recently said an insurance company’s settlement agreement was enforceable where the attorney had apparent authority to enter into the agreement, and the attorney’s letter unconditionally accepted the insurer’s offer.

A plaintiff was injured in a car accident and hired an attorney to assist with his personal injury claim. His lawyer negotiated a settlement with the other driver’s insurer and sent a letter documenting the plaintiff’s acceptance of the insurer’s offer.

A few days later, the plaintiff fired his counsel, and he later hired another attorney, who tried to negotiate for a higher settlement amount. The insurer filed suit and moved to enforce the settlement agreement, which the plaintiff claimed had been entered into without his consent. The trial court denied the motion, concluding that the parties hadn’t formed an enforceable settlement agreement.

Background

In March 2019, the plaintiff was injured when his vehicle was side-swiped by a tractor-trailer. The tractor-trailer driver was employed by a commercial motor carrier that was insured by Progressive. The plaintiff retained a lawyer, who began negotiating with Progressive to settle the case.

On January 22, 2020, the plaintiff’s lawyer emailed Progressive and attached a hold harmless letter. She directed Progressive to send the check and settlement documents to her law firm. The letter stated that it confirmed that the plaintiff accepted Progressive’s offer of $17,500.00 as full and final settlement of the claim. “This settlement is for the bodily injury claim ONLY,” the letter advised. “Further our firm agrees to address any statutorily valid liens filed prior to the distribution of the settlement funds.”

Eight days later, the plaintiff’s attorney sent a letter to Progressive stating that her firm no longer represented the plaintiff and gave notice of an attorneys’ lien her firm was placing on any future settlement or verdict in the case. About a month after that, the plaintiff’s new counsel sent Progressive a letter offering to settle the case for $350,000. The counsel representing the trucking company and its driver responded with a letter noting that the plaintiff had already agreed to settle the case for $17,500 and requested instructions for submitting payment and settlement documents.

The plaintiff didn’t respond, and two months later, Progressive sued him, seeking a declaratory judgment stating that the parties had reached a binding settlement agreement. The plaintiff answered, denying that he’d never accepted a settlement offer and asserting that his first attorney engaged in settlement negotiations without his consent. Progressive then moved to enforce the settlement agreement.

After a hearing, the trial court entered an order denying the motion to enforce. The trial court found that the attorney’s January 22, 2020 letter didn’t include any specific terms and wasn’t made available to the plaintiff.

The trial court also found that the attorney “never received a formal offer, in writing, from [Progressive]”; that neither the plaintiff nor his attorney ever “signed any release of liability agreement or other settlement documents”; and that Progressive “never agreed to the terms” in the attorney’s letter or remitted any payment. Based on these findings, the court concluded that the letter wasn’t an enforceable settlement agreement. Progressive appealed.

The Court of Appeals Reverses

Judge Andrew Pinson and the Court of Appeals began by discarding a potential threshold basis for rejecting the settlement agreement: the attorney’s authority to settle the plaintiff’s claims. Although the plaintiff maintained that he didn’t authorize his first attorney to agree to Progressive’s offer, he acknowledged that he couldn’t rely on that basis to avoid the agreement, because the attorney had apparent authority to enter into a settlement agreement.

Under Georgia law, attorneys have the apparent authority to enter into agreements on behalf of their clients, and those agreements are enforceable against the clients by other settling parties. Put another way, unless an opposing party has been made aware of express restrictions on the attorney’s authority to settle, that authority “may be considered plenary by the court and opposing parties,” and the attorney’s assent to an agreement will bind the client. If an attorney “overstep[s] the bounds of his agency” in negotiating on the client’s behalf and reaches an agreement he did not authorize, the client’s remedy for that problem is to seek redress against the attorney.

Because the attorney had apparent authority to settle his claims, the plaintiff didn’t rely on her purported lack of actual authority to attack the settlement agreement. Instead, he argued the letter didn’t create a binding settlement agreement at all.

Judge Pinson explained that settlement agreements are subject to the same requirements of formation and enforceability as other contracts. This means that an agreement to settle a pending dispute is formed only “when the minds of the parties meet at the same time, upon the same subject matter, and in the same sense.” When an offer to settle has been extended, an answer to the offer will amount to an acceptance only if it is “unconditional and identical with the terms of the offer.” He went on to say that when parties have entered into a definite, certain, and unambiguous agreement to settle, it should be enforced,” quoting an earlier decision.

The required offer and unconditional acceptance were present, the Court said. The plaintiff admitted that Progressive offered to settle his claims for $17,500, and the attorney’s letter unconditionally accepted Progressive’s offer to settle those claims for that same amount. That’s enough to create a binding settlement agreement, Judge Pinson said. The letter also included information about the logistics of payment and the handling of liens by the law firm, but this language was purely informational and didn’t impose any additional conditions that would have created a counteroffer rather than an acceptance. Finally, the attorney’s letter satisfied the writing requirement for settlement agreements whose existence or terms are in dispute.

In concluding that the agreement wasn’t enforceable, the trial court cited the following:

  • The absence of a written offer;
  • The absence of a signed release; and
  • The fact that Progressive never formally “agreed to” the terms in the attorney’s letter or paid the settlement amount.

Judge Pinson said that none of these points call the agreement’s enforceability into question. Georgia law does not require that a settlement offer be made in writing. Nor was execution of a release required to create a binding settlement agreement: the parties here clearly contemplated signing documents to carry out the settlement’s terms, but that wasn’t necessary to create a binding agreement in the first place. Similarly, the Court of Appeals said Progressive’s failure to tender payment of the settlement amount bears on Progressive’s performance of the settlement agreement, rather than its existence or validity. And Progressive wasn’t required to “agree to” the terms in the letter—the agreement was formed once Progressive’s offer was accepted, without the need for any further action by Progressive.

For these reasons, the Court of Appeals concluded that the parties entered into an enforceable settlement agreement. As such, the trial court erred by denying Progressive’s motion to enforce the agreement. The judgment was reversed. Progressive Mut. Ins. Co. v. Butler, 2022 Ga. App. LEXIS 320 (Ga. App. June 22, 2022).

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