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Legal tip: If an auto accident settlement isn’t in writing, it doesn’t exist

March 29, 2016 by Steven M. Gursten

What too many lawyers and clients learn the hard way: Michigan Court Rule 2.507(G) instructs lawyers that ‘binding’ settlement agreements must ‘be in writing’

auto accident settlement in writing, image

If it’s not in writing, it doesn’t exist.

Ah, the legal wisdom that can be found in fortune cookies.  Lawyers who represent auto accident victims would do well to heed this ancient Chinese proverb (at least, I think it’s an ancient Chinese proverb).

The modern day equivalent of this long-standing, common-sense adage, however, is enshrined in a court rule requiring that “[a]greements [must] be in writing.” Specifically, Michigan Court Rule (MCR) 2.507(G) provides:

“Agreements to be in Writing. An agreement or consent between the parties or their attorneys respecting the proceedings in an action is not binding unless it was made in open court, or unless evidence of the agreement is in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney.”

The court rule doesn’t specify what’s meant by “in writing,” but Michigan Court of Appeals case law has recognized that a “binding settlement agreement” could be created “[t]hrough a series of e-mail messages exchanged between [a] plaintiff’s attorney and [a] defendant’s attorney …” (See Kloian v. Domino’s Pizza L.L.C., 273 Mich. App. 449, 450-452 (2006))

Significantly, the rule provides an alternative way of ensuring the validity – and enforceability – an agreement other than reducing it to writing. For instance, MCR 2.507(G) provides that an “agreement … is … binding” if:

“[I]t was made in open court …”

I learned first-hand about this court rule about 15 years ago. I only needed to learn it once. I had a client who agreed to a settlement at a facilitation with an adjuster who had flown in from Texas for USAA. The facilitation ran longer than expected, the adjuster and the attorney were trying to catch a flight, and no agreement was signed. My client then changed his mind, and when the defendant brought a motion before Judge Colombo in Wayne County Circuit Court to enforce the settlement, the judge denied the motion.

As an attorney who has devoted my 20 year legal career to helping people who have been injured in Michigan car accidents, I know first-hand the important protection this court rule provides to auto accident victims – and the lawyers who represent them.

Auto accident lawsuits can get quite heated and sometimes, in the heat of battle, adjusters and  lawyers agree to settle cases on terms they later wish they hadn’t. While in the example above, it was my client that changed his mind, this court rule should be viewed as an important protection for auto accident victims (and the lawyers who represent them), as in most cases it will be the defense that tries to change and add terms after the settlement. Too often, new terms such as confidentiality are demanded, or overly broad indemnification language that was never bargained or negotiated. Again, this court rule  protects the auto accident victim – and his or her attorney – who is dealing in good faith to try to obtain a settlement for  No Fault auto insurance benefits and/or pain and suffering compensation.

The court, MCR 2.507(G), stops insurance company “buyer’s remorse.”  To lock-in a settlement, a lawyer  will need to do one of the following to ensure the validity and enforceability of an auto accident injury settlement:

  • Make sure the “agreement is in writing” pursuant to MCR 2.507(G); or,
  • Make the agreement on the record, before a judge, “in open court.”

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