Damned if You Do,
Damned if You Don’t

Can an Insurer’s Post-Loss Communications
Create a Contract?

June 7, 2022

Insurance Insight_390x160

By: Taylore Karpa Schollard

Seifer v. Government Employees Insurance Company, decided by the First Circuit on May 13, 2022, raises an issue that could cause insurers to rethink how they handle claim investigations and pre-suit settlements. Seifer raises the question of whether an insurer’s communications can bind them to engage in and complete settlement negotiations with a claimant. The First Circuit’s recent answer should put insurers at ease.  But it also serves as a cautionary tale for insurers regarding their claims correspondence.

Plaintiff, Anita Seifer, suffered injuries when she was in a car hit by a vehicle insured by GEICO on April 22, 2015. After the accident, Seifer submitted a claim to GEICO seeking reimbursement for her medical expenses. By 2018, having not received compensation for the injuries alleged, Seifer brought suit against GEICO in the United States District Court for the District of Massachusetts. Seifer generally alleged that her counsel’s pre-suit conversations with GEICO regarding her claim created an implied-in-fact contract that GEICO breached when a settlement agreement was not reached and GEICO did not issue payment by the running of the statute of limitations.1

In rebuttal, GEICO pointed to two letters it sent to Seifer. It argued that these letters demonstrate the indefiniteness of their communications, negating Seifer’s claim that the communications created a contract.

In the first letter (sent within months of the accident), GEICO stated that it was “taking responsibility for th[e] accident,” and asked Seifer to produce copies of bills and treatment notes supporting her incurred expenses if she intended to pursue her reimbursement claim.2 GEICO stated that it had not heard from Seifer in “some time,” and had not yet received documents regarding her damages. GEICO also informed Seifer of the factors they used to evaluate an injury claim and make a settlement offer, of the statute of limitations period for pursuing her claim, and that GEICO would close its file and consider the matter concluded if she did not contact them within the next 15 days.  

The second letter (sent over 2 years following the accident), recalled GEICO’s several attempts to contact Seifer in an effort to resolve the claim.3  GEICO also reminded Seifer that, while she had provided copies of medical bills, she had not produced medical records demonstrating the causal relationship between her medical condition(s) and the accident involving its insured.  GEICO asked that Seifer contact it to discuss resolving the claim and again informed her of the date that the statute of limitations would run.

Seifer submitted no evidence regarding any other communications she or her counsel had with GEICO. There is also no proof that GEICO offered her a specific figure in payment, that any essential terms of a settlement were agreed to, or that the communications progressed beyond the investigation stage.

The critical question before the First Circuit was whether the above communications were sufficient to contractually bind GEICO to settle Seifer’s claim prior to the running of the statute of limitations, as Seifer alleged.

The United States Court for the District of Massachusetts did not provide an answer. Instead, it dismissed the suit in a decision focused solely on whether the tort or contract statute of limitations period applied.

Seifer appealed.  GEICO argued in its briefing that its pre-suit communications with Seifer did not create a contract between the parties such that it could be liable for ultimately not issuing payment on its insured’s behalf.  The First Circuit agreed.4 The Court concluded that Seifer failed to provide evidence of any essential terms and rejected her argument that an implied-in-fact contract was created by GEICO’s “offer to compensate [her] for her injuries” and “ongoing exchange . . . to evaluate the dollar value of the claim” as conclusory and legally insufficient.5 Notably, the Court also found that GEICO’s two letters “belie[d] the conclusion” that a contract existed or that GEICO intended to be bound by any contract to settle.6

This answer from the First Circuit will help guide insurer conduct in communicating with claimants going forward.  

Seifer v. Government Employees Insurance Company, 530 F. Supp. 3d 123, 125 (D. Mass. 2021). Seifer asserted a single count for breach of contract against GEICO after the Massachusetts three-year tort/personal injury statute of limitation ran.
Appellant Appendix, Seifer v. Government Employees Insurance Company, No. 21-1371 (1st Cir. July 12, 2021) at 16-17.
Id. at 18.
Seifer v. Government Employees Insurance Company, No. 21-1371 (1st Cir. May 13, 2022).
Id. at 6-7.
Id. at 7.

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