Question

In: Operations Management

Candy Blair was injured when a truck ran into her car. U.S. Insurance Co. was Candy's...

Candy Blair was injured when a truck ran into her car. U.S. Insurance Co. was Candy's insurance company. Candy went to see Dr. Brown, a chiropractor who treated her 28 times over a two month period. Dr. Brown billed U.S. Insurance four times. After paying the first two bills, U.S. Insurance thought that Dr. Brown may be overcharging for his services. U.S. Insurance hired Chiropractic Services, Inc. to evaluate Dr. Brown's billings. Chiropractic Services determined that Dr. Brown's billings were excessive. U.S Insurance then called Dr. Brown and offered a partial payment to settle the account. After the conversation, U.S. Insurance issued and sent a check for $931 payable to Dr. Brown. On the face of the check, U.S. Insurance typed "settlement in full." Dr. Brown cashed the check upon receipt. He then sought payment of an additional $931. U.S. Insurance claims that they don't owe Dr. Brown any more money. Does U.S. Insurance have to pay an additional money to Dr. Brown? Why or why not?

(Please use IRAC)

Solutions

Expert Solution

Issue

Is there any money owe to Dr. Brown by US Insurance as they paid the cheque with a quote of "settlement in full" on the face which is accepted by him. Does US Insurance have to pay any additional amount to Dr. Brown?

Rule

Settling a debt in full means that the agent have negotiated with the other party to pay less than the total owed amount. An account that has been settled in full has been paid for less than the entire balance. The agency may feel relieved after settling a loan debt, since they no longer have to make payments that can’t afford.

Analysis

In telephonic conversation between Dr. Brown and US Insurance agency, the agency agreed to pay partial amount to Dr. Brown. But they put "settlement in full" on the visible area that is face of the cheque. That makes the conversation a negotiations applied by US Insurance with Brown. Even though the conversation they offer the partial payment, Dr. Brown accepted the cheque from them quoting settlement in full. By accepting that Dr. Brown agrees to close the debt of US Insurance with that cheque. Dr. Brown had cashed the cheque on the receipt of it clearly mentioning his acceptance of the cheque with "settlement in full". Since he accepted, the insurance company no longer owe any money to him.

Conclusion

Therefore, US Insurance have not to pay an additional money to Dr. Brown.


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