A contractor's welding starts a fire in a store. Before the insurer pays, the store owner signs a paper releasing the contractor from all liability. The likely result is that:
Explanation
Property policies require the insured to do nothing after a loss that impairs the insurer's right of recovery, because the insurer expects to step into the insured's place and pursue whoever caused the fire. Signing away the claim against the welding contractor destroys that right, and the insurer may cut or refuse payment to the extent it was prejudiced. An insured cannot settle privately with the wrongdoer and still collect the whole loss, which would be a double recovery.
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