## Facts

- An insurer issued an annually renewable accident and health policy to an insured barber, who kept premiums current.
- The insured developed a hand fungus infection and claimed total disability preventing him from working in his one-person barber shop.
- The insurer disputed the extent of disability and tendered payments marked as “final,” which the insured rejected as inadequate.
- During a meeting before a state insurance department representative, the insurer offered $800 if the insured surrendered the policy, terminating coverage; the insured refused because he wanted to keep renewable coverage.
- Later that day, the insured telephoned the department representative stating he would accept $800 and would “not require renewal”; the representative relayed this to the insurer.
- The insurer sent the insured a letter directing him to surrender the policy, sign a release, and collect $800.
- The insured did not surrender the policy, did not sign a release, did not take the $800, and sued for disability benefits.
- After a nonjury trial, the trial court awarded $2,800; an intermediate appellate court reduced the award to $800 based on an asserted settlement; the insured obtained leave to appeal.

## Issues

1. Whether the parties’ communications formed a binding settlement that displaced or limited the insured’s original claim, as either (a) a substituted contract or (b) an enforceable executory accord.
2. If no binding settlement existed, whether the insured could recover policy disability benefits as found at trial, subject to any conceded adjustment to the benefit period.

## Decision

- The appellate court reversed the modification limiting recovery to $800.
- The court held the negotiations did not create a substituted contract because the purported settlement was conditional and never consummated by required acts (policy surrender and release).
- The court held the negotiations did not create an enforceable executory accord because there was no enforceable agreement clearly obligating future performance that would discharge the existing claim.
- The court reinstated the trial judgment with a reduction from $2,800 to $2,600 based on the insured’s concession regarding when liability commenced.

## Legal Principles

- Whether settlement discussions create a binding compromise depends on the parties’ intent: immediate substitution of a new agreement versus an agreement to accept future performance as satisfaction of an existing claim.
- A substituted contract requires a clear intent that the new agreement immediately replaces and extinguishes the prior claim.
- An executory accord requires an enforceable agreement that performance of the new promise in the future will discharge the existing claim; until performance, the original claim is not discharged.
- Where a proposed settlement is expressly conditioned on surrender of a policy and execution of a release, and those conditions are not met, the original claim remains enforceable.

## Conclusion

The court held that conditional settlement negotiations—without surrender of the policy, execution of a release, or acceptance of payment—did not bar the insured’s disability claim; the insured could recover policy benefits as proven at trial, reduced only by his conceded adjustment to the start of liability.


Goldbard v. Empire State Mut. Life Ins. Co., 171 N.Y.S.2d 194 (N.Y. App. Div. 1st Dep’t 1958)