Last week, the Texas Court of Appeals, Houston, held that State Farm’s letter to the claimant’s attorney “accepting” the claimant’s demand and subsequent release agreement executed by the claimant did not constitute an enforceable contract.  In Bouchra Eid v. Maria Pond, No. 01-18-00553-CV, 2019 WL 1941348 (Tex. App.—Houston [1st Dist.], May 2, 2019, mem. op.), Bouchra Eid, her husband Maaz, and son Omar were injured when her vehicle was struck by Maria Pond’s vehicle. Subsequently, the Eid’s brought claims against Pond and entered into settlement negotiations with Pond’s liability insurer, State Farm. More particularly, Bouchra Eid’s attorney sent State Farm a letter stating:

 [W]e hereby request a settlement in the amount of the policy limits . . . . In             exchange for a tender of policy limits, [Bouchra] will provide a complete   release of your insured, with indemnification for all other claims which might be asserted by, through or under [Bouchra].

In response, State Farm sent Eid’s attorney a letter stating that it “concluded the evaluation of your client’s claim resulting from this loss [and] State Farm is willing to settle your client’s claim for $100,000.00.” Three days later, State Farm sent Eid’s attorney a release that required Eid and her husband Maaz (who was also involved in the accident and asserting claims through the same attorney) to release all of their claims in exchange for $100,000.

The next day, Bouchra’s attorney sent State Farm a copy of the release signed by Mrs. Eid only, with Mr. Eid’s signature line removed from the executed release. The correspondence explained that the release excluded Eid’s husband’s signature because the demand was for Mrs. Eid alone. To which State Farm replied that “[t]he spouse also has to sign the release” and attached another copy of the release that had blank-signature lines for both Mrs. Eid and her husband.

Mrs. Eid’s attorney responded by asserting “Our Stowers demand was for Mrs. Eid’s claims alone. You rejected that demand by adding a new term to the agreement, namely that Mr. Eid also sign the release. As you know, this would have required him to give up his own, personal claims, which had not yet been asserted. In doing so, you’ve also rejected my client’s release.” Five days later, Eid filed suit against Pond, alleging negligence and negligence per se. 

Ten days later, State Farm notified Eid’s attorney that it no longer required Eid’s husband’s signature and it accepted the executed release previously forwarded.  State Farm then mailed Eid’s attorney a check for $100,000, but Eid’s attorney returned the check. 

Consequently, Pond filed a breach-of-contract counterclaim, alleging that a settlement agreement had been reached and that Eid breached the terms of that agreement by filing and maintaining the lawsuit. In response, Eid sought a declaratory judgment that no contract was formed. The parties submitted summary-judgment motions and the trial court granted summary judgment in favor of Pond and issued a declaratory judgment that there was a valid and enforceable settlement agreement between the parties under which Mrs. Eid released all her claims and that she breached that agreement by filing and maintaining the lawsuit. 

On appeal, the court held that State Farm and Mrs. Eid did not form a contract and reversed the judgment of the trial court. The court, considering State Farm’s initial letter independent of the subsequently sent release, found that the letter was not an acceptance because (1) it “simply announced State Farm’s ‘willingness to settle for $100,000’” (2) it did not indicate whether $100,000 represented the policy limits, and (3) it did not tender payment. The court further found that the inclusion of Eid’s husband in the release materially altered the terms of the demand and, thus, constituted a counteroffer that acted to reject the demand.  Additionally, the court found that although Eid signed and returned the release, her redaction of her husband as a releasor, like State Farm’s inclusion of her husband as a releasor, was a material change that constituted a counteroffer. Further, State Farm rejected that offer and made a counteroffer when it resent a blank release with signature lines for both Eid and her husband.         

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