The preparation of a proper release of liability can be tricky, especially when less than all of the potentially responsible parties participate. There have been several recent Maryland decisions on the subject. Suppose Mr. Smith sues Brown and Jones for severe injuries in a car accident. Brown decides to settle and pays Smith $1,000,000. The Release says nothing about Brown being liable or at fault for the accident, but includes language that if it is determinedthat Brown is liable, then any judgment that Smith might get against Jones would be reduced by the amount paid or Brown’s “pro rata share" of the judgment.
Suppose that after the settlement, Jones dismisses his claims against Brown and goes to trial against Jones. The jury determines that Jones is liable, awards $1,000,000 in damages, but finds that Brown is NOT liable. Smith has gotten $2,000,000 on his claim. Can he keep it? Yes, because when the jury found Brown NOT liable, Brown’s payment is viewed as an act of a volunteer. He had no legal liability for the accident, so Jones has to pay the full amount. See, Spangler v McQuitty, 424 Md. 527, 36 A.3d 928 (2012)(co-defendant granted summary judgment).
What if the jury determined that Brown was liable? Then, by terms of the release, Jones would have to pay NOTHING, because the release provided that the judgment would be reduced by the amount Brown paid in the settlement.
Okay, what if the jury makes NO determination against Brown? Can Jones now bring suit against Brown asking that he contribute to the judgment and to have him determined at fault, and thus get the benefit of the Release? Or, is Jones out of luck because he should have filed a claim against Brown in the original action? The answer is that he can bring a separate action. Mercy Medical Ctr, v. Julian, (Md. Ct. App., Slip Op. Nov. 28, 2012) http://mdcourts.gov/opinions/coa/2012/118a11.pdf
The final question is what if the amount of the settlement was just $50,000 and the jury’s verdict against Jones was $1,000,000, all of which was for pain and suffering (non-economic damages). The jury also found Brown liable. Would the verdict have to be first reduced by Maryland’s limitation on non-economic damages (let’s say $750,000) before applying the settlement? The difference is significant. If the “cap" is applied first, this is the result: $1,000,000 reduced to $750,000 (the “cap’); Brown’s “pro rata share" is ½; so, one half of the reduced jury verdict is $375,000. Total recovery: $375,000 plus settlement of $50,000 = $425,000. If the pro rata share is applied first this is what happens: $1,000,000 less $500,000 (pro rata share) = $500,000. That amount is not over the cap. Total recovery: $500,000 + $50,000 (settlement) = $550,000. Total difference: $125,000. The answer is the cap applies first in Maryland. Lockshin v. Semsker, 412 Md. 257, 987 A.2d 18 (2010). So, Mr. Smith would only get $425,000.
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