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Bar Journal - September 1, 1999

Settling Claims by Check: Huguelet Explained


In 1997 the Supreme Court of New Hampshire, in a short opinion citing little authority, cast doubt on a common method of settling personal injury claims. In the case Huguelet v. Allstate Insurance Company,1 the Supreme Court found that Tammy Huguelet, after having accepted and obtained payment on a check that read "final settlement of any and all claims" had, nonetheless, not exonerated her insurance company.

Curiously, in their opinion the Supreme Court made no reference to the relevant section of the Uniform Commercial Code. The opinion cited only cases from the 1940's or earlier, and used archaic language such as "to buy peace." Despite this, the Court reached a conclusion which is not inconsistent with U.C.C. 3-311 and does not create any new requirement for formal release language.


On July 9, 1990, Tammy Huguelet was injured in an automobile accident. Tammy suffered a black eye and superficial injury to her head. Her insurer, after some discussion, offered Tammy $525, allocating $125 for lost wages and $400 for pain and suffering. Her insurer mailed Tammy a settlement check for the $525, and on its face the check stated "FINAL SETTLEMENT OF ANY AND ALL CLAIMS ARISING FROM BODILY INJURY CAUSED BY ACCIDENT ON 07/09/90." There apparently was no legend in the endorsement section of the check.

Later, on July 20, 1990, the insurer sent a letter to Tammy stating: "[B]ecause you were the passenger and the accident was not your fault, you have a liability claim. The liability claim will compensate you for your days lost from work and the inconvenience of the accident." On July 24, 1990, Tammy cashed the check she had received.

Tammy later began to suffer from a herniated disc, which she claimed resulted from the July 9 accident. Her insurer refused to cover this new development on the grounds that they had a final settlement and release of further liability when Tammy obtained payment on her check. Tammy filed an action against the insurer, alleging that the she had been intentionally misled and induced to settle her personal injury claim for an amount substantially less than her compensable losses. There is no mention in the opinion of any attempt to return the money in conformity with U.C.C. 3-311(c)(2).

The insurer made a motion to dismiss arguing failure to state a cause of action because Tammy had "executed a release exonerating the defendant from liability." The Superior Court granted the motion on the ground that the settlement "was, in fact, agreed to and paid by the defendant and received by the plaintiff to avoid further controversy" and "was not intended as compensation for plaintiff's minor injury to her forehead." On appeal the Supreme Court of New Hampshire vacated and remanded.


Because this was a review of a motion to dismiss, the Supreme Court of New Hampshire weighed any questions of fact in favor of Tammy Huguelet. "We assume the plaintiff's (Tammy's) pleadings to be true and construe all reasonable inferences drawn therefrom most favorably to the plaintiff."2 Even with this presumption, the Court quickly made it clear that they were not giving Tammy a favorable judgement simply because her injuries were worse than she first thought. If Tammy's complaint had just been that there was a mistake as to the extent of her injuries at the time of settlement, this would have been immaterial to the issue of settlement.

What the Court weighed instead was the intent of the parties. "[W]e focus on the intent of the contracting parties at the time of the agreement."3 In a light most favorable to Tammy, the Court found that payment could have been understood as only compensation for injuries and lost wages, and not as having been contracted with reference to future possibilities. Despite the language on the check, both prior communication and, perhaps more significantly, the narrow language of the subsequent letter, could permit an inference that Tammy reasonably understood the payment to be only for damages already discovered. Since the insurer's intent could reasonably be construed as not having been a final settlement, Tammy still had a cause of action and the Superior Court's judgment was vacated.

The Court clearly stated that they were disregarding the language on the check in reaching their conclusion. They analyzed the agreement between the parties based on contract law from two old cases, Rickle v. Wyoming Valley Paper Mills (1944),4 and Poti v. New England Road Machinery Co. (1928).5 In Rickle an injured party was not found to have given a final release when accepting a settlement which he believed to be only for contemporaneous damages, and in Poti there was a mutual mistake made which had the effect of cancellation of the release.

On its face, this analysis appears to go against U.C.C 3-311. At the very least, 3-311 was not discussed. This opinion, however, can be made consistent with both the language and purpose of 3-311.

U.C.C. 3-311

New Hampshire adopted the current version of U.C.C. Article 3 in 1991. One of the changes from the old version was 3-311 which was intended to make the use of negotiable instruments for accord and satisfaction more structured, clear and useful. The old maneuver of cashing proffered checks "under protest" was abolished while various ways of tricking unsuspecting endorsers were eliminated.

Section 3-311, "Accord and Satisfaction by Use of Instrument" reads:

  1. If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.
  2. Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
  3. Subject to subsection (d), a claim is not discharged under subsection (b) if either of the following applies:
    1. The claimant, if an organization proves that (i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place.
    2. The claimant, whether or not an organization, proves that within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (1)(i).

  4. A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.

In order to prevail on a 3-311 accord and satisfaction defense, the moving party must show: (i) a good faith tender of an instrument to the claimant as full satisfaction of the claim; (ii) the amount of the claim was unliquidated or subject to a bona fide dispute; and (iii) the claimant obtained payment of the instrument. The claim is then discharged, subject to subsection (c) exceptions, if the person asserting accord and satisfaction proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim

The sections of 3-311 are read in conjunction with one another, so that all relevant parts must be met in order for there to be accord and satisfaction by the use of an instrument. Subsection (b), which contains the "conspicuous statement" on the instrument provision was obviously met by the insurer. The amount in the check was for a sum certain, and Tammy obtained payment, so parts (ii) and (iii) of subsection (a) were also met.

Part (i) of section (a), "in good faith tendered an instrument to the claimant as full satisfaction of the claim," is crux of the case. This section could be seen as not having been met by the insurer, particularly when all facts and inferences were draw in favor of Tammy.

U.C.C. 3-311(a)(i) actually contains two elements. The first is the "good faith" of the tenderor. The Official Comment gives examples of the lack of good faith as taking unfair advantage or when business debtors routinely print full satisfaction language on their check stocks. Presumably this was not the case in a single transaction with specific negotiation. It is apparently not the basis on which the Court ultimately decided the issue.

The second element of 3-311(a)(i) is "tendered (to the claimant) as full satisfaction of the claim." This implies that the apparent intent of the tenderor is relevant and that there was, at least objectively, a "meeting of the minds," in the exchange of the instrument/check. If the tenderor did not intend, or appear to intend, the check to be in full satisfaction of present and future claims, having such a provision written on the check would not make it so. Other states have also reached this determination. In Holman v. Simborg (1987),6 the Appellate Court of Illinois stated, "[T]hus a transaction will constitute an accord and satisfaction of a claim only where both parties intend it to have that effect," and the Court of Appeals of North Carolina in Futrelle v. Duke University (1997), wrote "[C]learly understanding (that the tenderor) was offering the check as full and final payment of the disputed debt."7

Section 3-311(a)(i) then is nothing more than a subsection describing normal contract law. A negotiable instrument, such as the check the insurer provided Tammy, has to have been the result of a negotiation between the parties, and be an accurate representation of that negotiation. If the check has language inconsistent with the negotiation then 3-311 may not apply. There will be no accord and satisfaction. There is inherently nothing wrong with analyzing 3-311(a)(i) with old contract law. The concepts of intent and negotiation have been established for a long time. A party seeking full settlement should not obscure its intentions with language (such as the Allstate's July 20th letter) which suggests a narrower tender.

The Supreme Court of New Hampshire found that it could be inferred that the check was tendered by the insurer to Tammy only as compensation for her injuries and lost wages, and not to buy peace from future controversy. This is in keeping with the provision of 3-311(a)(i).


The Supreme Court of New Hampshire has addressed 3-311 in the past. In Gannet they made a firm decision that unanticipated injuries did not constitute mutual mistake.8 Section 3-311 has been followed in the past, and Huguelet does not alter this trend.

The holding in Huguelet is in keeping with U.C.C. 3-311, even if the court decided, for reasons unknown, to address the case with pre WWII law. Failure to tender a check for the purpose of buying settlement from future controversy is not conclusively corrected by the language written on the check itself. Of course a jury could ultimately decide that "final settlement of any and all claims" was intended and understood as just what it says, but the crisp machinery of 3-311, designed to produce summary judgment, is disabled at the outset by negotiations and written communications implying something else. Other states have reached this result in applying 3-311, and now New Hampshire has followed suit.



Huguelet v. Allstate Insurance Company ,141 N.H. 777, 693 A.2d 408 (1997).


Id, at 779, 410.




Rickle v. Wyoming Valley Paper Mills, 93 N.H. 191, 38 A.2d 78 (1944),


Poti v. New England Road Machinery Co., 83 N.H. 232, 140 A. 587 (1928).


Holman v. Simborg, 152 Ill. App.3d 453, at 456, 504 N.E.2d 967, at 969, 105 Ill.Dec. 682, at 684 (1987).


Futrelle v. Duke University, 127 N.C.App. 244, *249, 488 S.E.2d 635, **639 (1997). (Emphasis added.)


Gannett v. Merchants Mutual Insurance Company, 131 N.H. 266, 552 A.2d 99 (1988).

The Author

Brad Close, Class of 1999, Franklin Pierce Law Center, Concord, New Hampshire.


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