Whenever a dispute between two or more parties is settled each side will most likely want some sort of release signed. Why? A release is a contract that ensures that the case is over and done with. After the release is signed (in most cases) a party cannot then file a lawsuit or continue the claim against the releasing party. In every personal injury auto accident case the at fault insurance company will demand a release be signed before or at the same time as compensation for medical bills, pain and suffering, wage loss and other damages are paid.
Every adjuster wants your client to sign one. Ideally, every injured person will speak with an attorney before putting pen to paper. Releases are one of the reasons many are concerned about the small print. No matter when in the cycle of litigation, a well written release can cause problems or make an attorney’s life that much easier. We have put together a brief overview of what to know about releases and what to watch for in the future.
Pierringer Release
A Pierringer Release is best used when a Plaintiff wants to settle with a joint tortfeasor that a jury would find less liable than the remaining tortfeasor(s). Before signing a Pierringer Release it is important to analyze the situation to be sure that you receive adequate compensation in light of that settling tortfeasor’s potential liability.
A Pierringer Release frees the settling joint tortfeasor from liability while allowing the injured party to proceed against any nonsettling defendants for the percentage of damages attributable to their negligence. A Pierringer Release only releases part of the claim and reserves the remainder of the claim against the nonsettling joint tortfeasors. Pierringer v. Hoger, 21 Wis.2d 188, 191-192, 124 N.W.2d 106 (1963).
With Pierringer Releases the plaintiff must assume/satisfy that portion of the liability that the a jury determines to be the responsibility of the settling tortfeasor. Id. at 184-185. Consequently, a Pierrringer Release attributes to the plaintiff whatever liability in indemnity or contribution the settling joint tortfeasor may have to the nonsettling joint tortfeasors. It also bars subsequent contribution or indemnity actions the nonsettling joint tortfeasors might assert against the settling joint tortfeasor. Fleming v. Thresherman’s Mutual Insurance Company, 131 Wis.2d 123, 131, 388 N.W.2d 908 (1986).
A Pierringer release also effects parties not named in the litigation. This release bars all claims for contribution or indemnity that a settling joint tortfeasor may have against a nonsettling joint tortfeasor, whether the nonsettling joint tortfeasor is a party to the pending action or not. Uniguard Insurance Company v. Insurance Company of North America, 184 Wis.2d 78, 84, 516 N.W.2d 762, 765 (Ct. App. 1994)
Application
A Pierringer Release is best used if you reach a settlement with a joint tortfeasor that you feel adequately represents what a jury would ultimately determine to be that tortfeasor’s share of the damages sustained by your client. Analyze the situation long and hard before signing a Pierringer. You must determine what a jury would likely award in damages, and also how a jury would likely apportion liability. There is risk involved because the analysis requires you to guess what a jury would ultimately determine. If you guess too high or too low you may have sold your claim short.
Municipalities and Pierringer Releases
Earlier this year the Supreme Court decided that under sec. 81.17, Stats., a plaintiff injured because of highway defect who settles with a private contractor under a Pierringer Release cannot recover against a municipality for its negligence. Vancleve v. City of Marinette, 250 Wis.2d 121, 639 N.W.2d 792. (2003). Section 81.17 states that if both a municipality and a contractor are found liable, the contractor is primarily responsible for damages. The municipality is only liable if the plaintiff is unable to collect from the contractor.
Considering this decision, it is risky for plaintiffs to enter into Pierringer Releases with private contractors and possibly foolish, because it is questionable whether a plaintiff, having settled with the private contractor, could ever obtain a judgment against the municipality.
Intentional Torts and Pierringer Releases
We cannot think of a reason to ever enter into a Pierringer Release with an intentional tortfeasor. Once a Plaintiff executes a Pierringer Release with an intentional tortfeasor, she effectively releases all liability on the part of the negligent tortfeasor. A negligent tortfeasor is entitled to complete indemnity from the intentional tortfeasor. Fleming, 131 Wis.2d at 123.
In a situation where you determine that a settlement with joint tortfeasors would not be adequate in light of his/her potential liability, a covenant not to sue would be the best alternative for your client.
Covenants Not To Sue
A covenant not to sue is similar, but not really a release. They are actually agreements to discharge the settling joint tortfeasor with a reservation of rights of the full cause of action against the nonsettling joint tortfeasor. Unlike a Pierringer, a covenant not to sue does not require that the plaintiff assume or satisfy the portion of liability that is determined to be the responsibility of the settling joint tortfeasor. Consequently, a covenant not to sue does not effect a nonsettling joint tortfeasor’s right to contribution or indemnity from a settling joint tortfeasor because there is no settlement within the scope of an accord and satisfaction. The plaintiff’s whole cause of action remains against the nonsettling tortfeasor. Imark Industries v. Arthur Young and Company, 148 Wis.2d 605, 622, 436 N.W. 311 (1989).
The Supreme Court reasoned:
A covenant not to sue is … an agreement not to sue on an existing claim. It does not extinguish the cause of action. As between the parties to the agreement, the final result is the same in both cases. The differences is primarily in effect as to third parties, and is based mainly on the fact that in case of a release or discharge, whereas in the other case there is merely an agreement not to prosecute the suit. A covenant not to sue is nothing but a contract, and should be so construed. Loy v. Bunderson, 107 Wis.2d 400, 420, 320 N.W.2d 175 (1982).
Application
For example, use a covenant not to sue when a joint tortfeasor is liable but has little money. The settling joint tortfeasor may be uninsured or may not have enough insurance proceeds to cover what a jury would likely determine to be his/her share of your client’s damages. In this situation, do not provide the settling joint tortfeasor with a Pierringer Release. This is one of those situations where you could sell out a substantial portion of your claim for a minimal amount of money.
This is why a covenant not to sue works better than a Pierringer. The plaintiff is not obligated to satisfy that portion of the liability that is determined to be the responsibility of the settling joint tortfeasor. Consequently, the nonsettling joint tortfeasor still has a claim for contribution against the settling joint tortfeasor, and can be held jointly and severably liable for the entire judgment.
Do Subrogated Parties Need To Sign A Release?
Regarding subrogated parties, the law has not changed since Schulte v. Frazin, 176 Wis.2d 622, 637, 500 N.W.2d 305 (1993). In Schulte the subrogated party was properly not a party to the release because, 1) the injured party settled with the tortfeasor agreeing to indemnify and hold harmless the settling tortfeasor against any claims of subrogation and 2) the injured party requested a determination from the Circuit Court regarding whether the injured party had been made whole. If you are against the wall keep in mind that you do not have to have the subrogated party sign the release. Instead, you can ask the Circuit Court for a “made whole” hearing (i.e. Rimes hearing). Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 316 N.W.2d 348 (1982) The subrogated party’s right to recovery is dependent upon the Circuit Court’s made whole determination. This was adapted from an article written by Attorney Jonathan P. Groth and published in the Wisconsin Association for Justice’s quarterly publication, The Verdict.