Insurance Settlements: When is Payment Due?

It is a common misconception in Florida that insurance settlement checks are due 20 days after an insured submits an executed release. Florida Statute 627.4265 states: 

627.4265 Payment of settlement.—In any case in which a person and an insurer have agreed in writing to the settlement of a claim, the insurer shall tender payment according to the terms of the agreement no later than 20 days after such settlement is reached. The tender of payment may be conditioned upon execution by such person of a release mutually agreeable to the insurer and the claimant, but if the payment is not tendered within 20 days, or such other date as the agreement may provide, it shall bear interest at a rate of 12 percent per year from the date of the agreement; however, if the tender of payment is conditioned upon the execution of a release, the interest shall not begin to accrue until the executed release is tendered to the insurer.

This statute makes clear that, where a written settlement agreement is reached, payment is due within 20 days. An email, a letter, a mediation agreement, these are all examples of written settlement agreements. By statute, payment must be made within 20 days of the date of the agreement or interest will be owed by the insurer. 

Under no circumstances is that 20 day deadline changed unless it is expressly written into the settlement agreement. The only exception set forth in the statute pertains to when interest begins accruing. Where the tender of payment is conditioned upon the execution of a release and payment is not made in 20 days from the date of the settlement agreement, the interest will begin to accrue when the executed release is tendered to the insurer. 

Unfortunately, many industry professionals believe that interest does not begin to accrue until 20 days after the release is tendered. There is no basis in law for such a position. The statute does not provide for any extension of the 20 day deadline where a release is required; rather, it simply shifts the date when interest will  begin accrue to the date the release is provided- not 20 days thereafter!

Some insurance carriers have attempted to shift the "20 days after settlement deadline" to "20 days after receipt of release" by including language to that effect in the release. For example, consider the following hypothetical: A settlement agreement is reached January 1, 2018 and is confirmed in writing via emails to and from the carrier and the insured that same day. On January 10, 2018 the carrier provides the release and the insured executes and returns it that same day. Under this scenario, the 20 day payment deadline is 20 days from the January 1, 2018 email confirming settlement, irrespective of what the release states or when it was returned to the carrier. This is because consideration must be paid to give any validity to a release.  If payment is not tendered by that 20 day deadline, interest will begin to accrue. If the January 1, 2018 email confirming settlement mentions a release but does not expressly state that the insured must sign  and return that release before payment is tendered, and payment is not made within 20 days, interest begins accruing on January 1, 2018. If the January 1, 2018 email confirming settlement states that the insured must sign a release before payment is tendered, and payment is not made within 20 days, interest begins accruing on whatever date the release is tendered to the carrier. The point is, the 20 day day deadline did not shift due to the release, regardless of when it was returned to the carrier. 

This very issue was the subject of F.I.T Aviation, Inc. v. Gleason, 510 So.2d 1217 (Fla. 5th DCA 1987). In F.I.T Aviation, the appellate court affirmed an award of interest owed on a settlement agreement. As background, the parties in F.I.T Aviation had reached a written settlement agreement. Although the agreement required a release, it did not expressly state that the tender of payment was conditioned upon the execution of the release. In affirming the trial court's award of interest from the date of the agreement, Florida's 5th DCA held the settlement agreement (not the release) created a new contract between the parties, and while it is common practice in the insurance industry for a carrier to require the execution of a release before payment is made, this cannot be implied as a condition of the settlement. The court explained its reasoning, stating that any conditions required by a party must be made part of a settlement agreement, and that an insurance carrier cannot impose conditions after settlement, such as in a release. Moreover, the court's decision makes clear that even if an insured signs a release giving an insurance carrier an extension of time on date of payment, that release is legally invalid for lack of consideration until such time payment is made and the deadline from the original settlement agreement remains in effect. 

In summary, payment is always due 20 days after a written settlement agreement is reached unless otherwise expressly stated in the settlement agreement. The date on when a release is returned to the carrier simply does not change does not this deadline.