James Gravens purchased a policy covering his service station (Pappy's Sunoco Service Station) which provided a limit on the contents of $20,000. During the night of July 31, 1993, burglars took merchandise valued at more than the $20,000 limit.

Gravens retained an attorney, but did not discuss with the attorney the amount for which he was willing to settle and did not give the attorney the authority to settle the claim.

The attorney accepted the company's offer of $18,000, and the company sent a draft for that amount to the attorney with a release form. When Cravens was informed of this by the attorney, he rejected the draft and refused to sign the release. Both were sent back to the company. The attorney withdrew from the case.

Gravens retained new counsel and filed this action. The company asserted the affirmative defense of accord and satisfaction, stating that the claim had already been settled by the original attorney for $18,000.

The trial court entered summary judgment in favor of the company.

On appeal, the court said that an attorney must obtain his client's authority or consent to settle a case since it is the client's right to exercise ultimate authority over any settlement. Both the insured and the company understood that there would be no settlement without a release signed by the insured--not his attorney. The company had no enforceable expectation that the claim had in fact been settled until Gravens himself had signed the release--and he had refused to do so. Under such circumstances, Gravens was not bound by his attorney's agreement to settle.

The judgment entered in the trial court in favor of the company was reversed and remanded for trial.

James E. Gravens, d/b/a Pappy's Sunoco Service Station, Appellant v. Auto-Owners Insurance Company, et al--No. 49A02-9511-CV-654--Court of Appeals of Indiana--June 10, 1996--666 North Eastern Reporter 2d 964.