Insurance Rep Overreaching Could Prevent Release from Being “Fairly and Knowingly” Made

I have devoted a good amount of commentary on cases in which signed releases are challenged based upon claims of fraud and other alleged questionable circumstances. See Challenging Releases and Settlements Based on Fraudulent Inducement is a Challenge; Alleged Inability to Read English Insufficient Ground to Avoid Executed Release; More on Challenging Releases for Alleged Fraud. There is a reoccurring theme in the caselaw in a certain factual scenario for which the courts are particularly willing to afford the releasor an opportunity to be freed from the release: Insurance company overreaching.

A recent case in point is the decision of the Appellate Division, Second Department, in Wei Qiang Huang v Llerena-Salazar, 2023 NY Slip Op 06772 (2d Dep’t Decided Dec. 27, 2023).

Basic Release Doctrine: “Fairly and Knowingly Made”

As the Court of Appeals noted in the leading case of Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269 (2011), there is no question that because a signed release is a contract, it can be challenged on any of the traditional grounds for avoiding an agreement, “‘namely, duress, illegality, fraud, or mutual mistake.’” (quoting Mangini v McClurg, 24 NY2d 556 (1969)).

But the Court in Mangini explained a broader basis to avoid a release even if actual fraud had not been employed, based on the premise that the release must have been “fairly and knowingly made”.

Read the full blog post here.