Insured’s Release of Insurer Defeats Claim of Third Party
Read the full article at https://www.linkedin.com/pulse/assignment-claim-against-insurer-after-insured-signed-barry and at
https://zalma.com/blog plus more than 4250 posts.
Posted on June 29, 2022 by Barry Zalma
When a CT Scanner was destroyed as a result of two fires at the storage facility claims were presented and suits filed against the warehouse, Blocker Storage. Blocker was insured by Associated Indemnity, a Fireman’s Fund Company and part of the Allianz group of insurers. Associated paid its limit of liability and received a release from the insured for Associated and all of the related companies.
In Diagnostic Leasing, Inc., et al v. Associated Indemnity Corporation, a California Corporation, No. 19-13535, United States Court of Appeals, Eleventh Circuit (June 24, 2022) the Eleventh Circuit affirmed the district court’s grant of summary judgment for Associated Indemnity Corp. on Diagnostic Leasing, Inc.’s bad faith claims.
FACTUAL BACKGROUND
Blocker Transfer &Storage Co. “operated various warehouse storage facilities” that it owned or leased “as part of its business as a moving and storage company.” Diagnostic Leasing was an equipment rental and leasing company. In 1995, Blocker Storage stored Diagnostic Leasing’s computerized tomography (CT) scanner. Associated Indemnity insured Blocker Storage under the trade name “Fireman’s Fund Insurance Company.”
That same year, two fires at Blocker Storage’s warehouses damaged Diagnostic Leasing’s CT scanner. Fireman’s Fund informed Blocker Storage that the coverage limit for Diagnostic Leasing’s insurance claim was $100,000 and that “Fireman’s Fund [] decided to make available to Blocker [Storage]” the full $100,000 to use at Blocker Storage’s discretion. Fireman’s Fund advised Blocker Storage that any settlement in excess of $100,000 would have to be paid by Blocker Storage. Blocker Storage maintained that its liability was limited to $25,000 based on a contractual provision in the bill of lading from when the CT scanner was first moved into storage.
After the second fire, Diagnostic Leasing sent a second demand letter, this time to Fireman’s Fund directly, asserting a higher replacement cost for the CT scanner-$427,515. Fireman’s Fund advised Blocker Storage that it could not respond to Diagnostic Leasing on Blocker Storage’s behalf because of Blocker Storage’s uninsured exposure in excess of $100,000. Blocker Storage “specifically instructed” Fireman’s Fund that “it d[id] not want any of its insurance coverage tendered” to Diagnostic Leasing because “its maximum liability . . . [wa]s $25,000” and “[a] tendering of any amount by the Fireman’s Fund directly to [Diagnostic Leasing] m[ight] prejudice Blocker [Storage] in enforcing its limitation of liability.”
The Two Lawsuits
Eventually Diagnostic Leasing sued Blocker Storage in Florida state court for breach of contract, negligent bailment, and spoliation of evidence. Fireman’s Fund provided counsel to represent Blocker Storage alongside Blocker Storage’s independent counsel.
While litigation against Blocker Storage was pending, Blocker Storage sued Fireman’s Fund seeking a declaratory judgment regarding Blocker Storage’s claims under the insurance policy.
In 2001, Blocker Storage and Fireman’s Fund executed a “Release of All Claims” to resolve the declaratory judgment lawsuit. Blocker Storage and Fireman’s Fund “agree[d] that the limit of liability coverage available, pursuant to the terms and conditions of the [p]olicy, for the [first] fire [wa]s $100,000.” In exchange, Blocker Storage released “Fireman’s Fund, its employees, adjusters, agents[,] and attorneys” from: all liabilities identified in Blocker [Storage]’s complaint including, but not limited to, the matter of number of occurrences, the matter of the limits of insurance available and the alleged breach of contract. This [r]elease includes, but is not limited to, all claims for contractual damages, extra-contractual damages, “bad[]faith” damages, whether statutory or common law, consequential damages, tort damages, attorney fees, expert costs, expenses and interest, arising out of or related to the allegations in Blocker [Storage]’s complaint.
After ten years of litigation the state court granted judgment for Diagnostic Leasing against Blocker Storage after a bench trial, finding that Blocker Storage’s alleged $25,000 liability limitation was unenforceable and that Blocker Storage owed Diagnostic Leasing $451,431.82 plus prejudgment interest ($229,431.82 in lost revenue and $222,000 to replace the CT scanner).
Diagnostic Leasing moved to include Fireman’s Fund and Associated Indemnity as parties to the final judgment, and Fireman’s Fund, Associated Indemnity, and Diagnostic Leasing negotiated an agreed order to include Associated Indemnity as a party to the final judgment and deny Diagnostic Leasing’s motion to include Fireman’s Fund. The state court entered the agreed order, granting the motion with respect to Associated Indemnity, finding Associated Indemnity liable to the extent of its $100,000 coverage limit under the insurance policy, and denying the motion with regard to Fireman’s Fund. The state court entered final judgment against Blocker Storage for $994,638.37; $100,000 of that amount was recoverable from Associated Indemnity per the agreed order.
DISCUSSION
Diagnostic Leasing argued that the district court erred in granting summary judgment for Associated Indemnity on its bad faith claims but the Eleventh Circuit disagreed.
Agency
Because (1) the policy was issued by Associated Indemnity on behalf of Fireman’s Fund; (2) Fireman’s Fund directed Associated Indemnity to defend Blocker Storage and offer Blocker Storage the policy limits to settle Diagnostic Leasing’s insurance claim; and (3) Fireman’s Fund negotiated the 2001 release to release Blocker Storage’s claims arising from the policy; and because Diagnostic Leasing did not rebut the evidence of an agency relationship, the district court did not err in granting summary judgment for Associated Indemnity on the agency issue.
Effect of the 2001 Release
Under Florida law, once the insured releases the insurer from liability, the insured no longer has a cause of action against the insurer and neither does an injured third party.
The 2001 release was not limited to only those claims that existed at the time of the release; it released “all claims for . . . ‘bad[]faith’ damages, . . . arising out of or related to” Blocker Storage’s insurance claims under the policy. Any bad faith claims against Associated Indemnity related to Blocker Storage’s insurance claims under the policy.
Once Blocker Storage released Associated Indemnity from liability “arising out of or related to” Blocker Storage’s insurance claims under the policy, including liability for any bad faith, “no such [bad faith] action [could] be maintained” by Diagnostic Leasing against Associated Indemnity. Associated Indemnity owed no independent duty of good faith to Diagnostic Leasing who was not an insured under its policy.
Because the 2001 release preceded the assignment of Blocker Storage’s claims under the insurance policy and released Associated Indemnity of “all claims . . . for ‘bad[]faith’ damages” arising out of or related to” Blocker Storage’s insurance claims under the policy, the release extinguished Diagnostic Leasing’s claims for bad faith, which existed only by virtue of Blocker Storage’s insurance relationship with Associated Indemnity.
Mutual Mistake
The 2001 release settled the amount of Associated Indemnity’s liability under its insurance policy issued to Blocker Storage and referenced the underlying litigation between Blocker Storage and Diagnostic Leasing where Associated Indemnity was the insurer and funded Blocker Storage’s defense.
IT DOESN’T PAY TO TAKE AN ASSIGNMENT OF A BAD FAITH CASE IF THE CASE WAS RELEASED
Diagnostic Leasing won a judgment against Blocker Storage for almost one million dollars only to give up trying to collect from the responsible defendant by taking an assignment against Blocker Storage’s insurer who had, before the assignment, released the insurer. Greed and hope of getting the full judgment plus punitive damages from an insurer Diagnostic and its lawyers failed to do their due diligence to deal with the release and tried to avoid the release by going after a sister insurer of the named insurer. A waste of time and effort.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
Anti-Public Adjuster Clause Is Effective in New York
Post number 5301
Read the full article at https://www.linkedin.com/pulse/public-adjusters-attempt-represent-insured-subject-zalma-esq-cfe-rubfc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
Insurers May Contractually Prevent an Insured from Hiring a Public Adjuster
In Peter Barbato & North Jersey Public Adjusters Inc. v. Interstate Fire & Casualty Company, et al, No. 25-cv-5312 (JGK), United States District Court, S.D. New York (December 15, 2025) the plaintiffs, Peter Barbato and North Jersey Public Adjusters, Inc. (“NJPA”), filed suit against several insurance companies, including Interstate Fire & Casualty Company, Independent Specialty Insurance Company, and certain Underwriters at Lloyd’s of London.
FACTS
NJPA is a New Jersey-based public adjusting firm licensed in New York. The dispute centers on ...
Anti-Public Adjuster Clause Is Effective in New York
Post number 5301
Read the full article at https://www.linkedin.com/pulse/public-adjusters-attempt-represent-insured-subject-zalma-esq-cfe-rubfc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
Insurers May Contractually Prevent an Insured from Hiring a Public Adjuster
In Peter Barbato & North Jersey Public Adjusters Inc. v. Interstate Fire & Casualty Company, et al, No. 25-cv-5312 (JGK), United States District Court, S.D. New York (December 15, 2025) the plaintiffs, Peter Barbato and North Jersey Public Adjusters, Inc. (“NJPA”), filed suit against several insurance companies, including Interstate Fire & Casualty Company, Independent Specialty Insurance Company, and certain Underwriters at Lloyd’s of London.
FACTS
NJPA is a New Jersey-based public adjusting firm licensed in New York. The dispute centers on ...
Proof of Highly Contaminated Water is Required for Extra Payments
Post number 5300
Read the full article at https://www.linkedin.com/pulse/acting-your-own-lawyer-foolish-barry-zalma-esq-cfe-mbg0c, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
Acting as Your Own Lawyer is Foolish
Evidence of Breach of Contract Survives Dismissal of All Other Charges
In Lee Lifeng Hsu and Jane Yuchen Hsu v. State Farm Fire And Casualty Company, C. A. No. N24C-09-020 CLS, Superior Court of Delaware (February 27, 2026) a claim to State Farm who paid approximately $61,000 after assessments but denied coverage for additional items including ceramic tiles, the kitchen floor ceiling, underlayment plywood, and numerous personal property items resulted in suit by the Hsu’s acting in pro per.
Facts
Lee Lifeng Hsu and Jane Yuchen Hsu (“Plaintiffs”) purchased a homeowners’ insurance policy from State Farm Fire...
Insurance Condition Requires Following the Intent of the Parties
Post number 5307
Principles of Contract Interpretation Compels Reading Contract as Written
Read the full article at https://www.linkedin.com/pulse/portable-storage-containers-buildings-barry-zalma-esq-cfe-fkg1c and at https://zalma.com/blog.
In Eastside Floor Supplies, Ltd. v. SCS Agency, Inc., Hanover Insurance Company, et al., No. 2024-01501, Index No. 609883/19, 2026 NY Slip Op 01488, Supreme Court of New York, Second Department (March 18, 2026)
In May 2019, a fire damaged business personal property belonging to the plaintiffs, which was stored in portable storage containers at their Manhattan premises. At the time of the fire, the plaintiffs were insured under a businessowners insurance policy (BOP) issued by the defendant Hanover Insurance Company which provided general coverage for business personal property, and which included a specific extension for “Business Personal Property Temporarily in Portable Storage Units” (the portable storage ...
ERISA Saves Fraudulent Claims Suit
Post number 5306
Read the full article at https://www.linkedin.com/pulse/failure-provide-well-pled-facts-defeats-most-action-zalma-esq-cfe-b4zuc and at https://zalma.com/blog plus more than 5300 posts.
Allegations of Fraudulent Insurance Billing Must be Pleaded with Specificity
In Genesis Laboratory Management LLC v. United Healthcare Services, Inc. and Oxford Health Plans, Inc., No. 21cv12057 (EP) (JSA), United States District Court, D. New Jersey (March 13, 2026) Genesis Laboratory Management LLC (“Genesis”), a New Jersey-based molecular diagnostic and anatomic pathology laboratory, provided COVID-19 related testing services and submitted claims for reimbursement as an out-of-network provider to United Healthcare Services, Inc. (“United”) and Oxford Health Insurance, Inc. (“Oxford”). Metropolitan Healthcare Billing, LLC (“Metropolitan”), owned by the same individual as Genesis, handled the billing for Genesis.
FACTUAL BACKGROUND
United and Oxford, who administer both ERISA and ...
ERISA Saves Fraudulent Claims Suit
Post number 5306
Read the full article at https://www.linkedin.com/pulse/failure-provide-well-pled-facts-defeats-most-action-zalma-esq-cfe-b4zuc and at https://zalma.com/blog plus more than 5300 posts.
Allegations of Fraudulent Insurance Billing Must be Pleaded with Specificity
In Genesis Laboratory Management LLC v. United Healthcare Services, Inc. and Oxford Health Plans, Inc., No. 21cv12057 (EP) (JSA), United States District Court, D. New Jersey (March 13, 2026) Genesis Laboratory Management LLC (“Genesis”), a New Jersey-based molecular diagnostic and anatomic pathology laboratory, provided COVID-19 related testing services and submitted claims for reimbursement as an out-of-network provider to United Healthcare Services, Inc. (“United”) and Oxford Health Insurance, Inc. (“Oxford”). Metropolitan Healthcare Billing, LLC (“Metropolitan”), owned by the same individual as Genesis, handled the billing for Genesis.
FACTUAL BACKGROUND
United and Oxford, who administer both ERISA and ...
