What assumptions do we make when negotiating a settlement? Do we expect that the opposing party will sign a “standard form” agreement without objection? Considering a recent superior court order, best practice is to set forth all important aspects of settlement before agreeing to a payment amount and sending out a release.
In Dillon v. City of Manchester, Hillsborough Superior Court, Northern District, No. 216-2018-CV-0488, Judge David Anderson granted plaintiff’s motion to enforce settlement of his malicious prosecution claim without allowing the city to include an indemnification clause in the Release. No doubt this was part of a standard Release used by the insurance company, but it had not been part of the negotiations and, as such, was not imposed on the plaintiff.
Plaintiff’s counsel and the adjuster had engaged in several e-mails primarily addressing amounts offered and demanded. The participants referred to a “global settlement” of all claims to date, to “full and final settlement” and to “dismissal of our insured.” The adjuster made a final monetary offer, indicating that a check could be expedited if a signed release were provided promptly. Counsel e-mailed the adjuster to accept the offer and request that he be sent a draft release to review. Upon receipt, counsel objected to the indemnification clause.
The court observed that settlement agreements are governed by contract law, requiring offer, acceptance and a “meeting of the minds.” The court used the prevailing objective standard, based on what the parties said or wrote, not on what they say they intended. Courts outside New Hampshire have generally held that a release in exchange for money is distinct from an agreement to indemnify the payor against other claims. Finding no case law supporting the notion that an indemnification clause is assumed to be part of a General Release, the court agreed with plaintiff that the clause could not be assumed to be part of the agreement. The court further found that the agreement reached through e-mails did not contemplate execution of a formal settlement agreement as opposed to a simple release. The agreement terms had been reached through the e-mails with nothing left to negotiate.
This presents a trap for the unwary. When managing multiple claims, one must agree on all essential terms before confirming that settlement has been reached. Indemnification is a key term, with potential financial obligations for the plaintiff, so it must be part and parcel of the discussions before the final number is reached.
A similar issue arose in Waters v. Hedberg, 126 N.H. 546 (1985). A negligent driver’s employer, the only named defendant on a theory of respondeat superior, settled during trial, obtaining a signed release of only the employer and its liability carrier. Plaintiffs then sued the driver individually. The driver moved to dismiss, arguing among other things that he was protected by the document releasing his employer. The court disagreed, relying on a statute (RSA 507: 7-b) that permits plaintiff to release one tortfeasor and then pursue another. It matters not that there was an employer-employee (or any other) relationship. Ordinarily the release would also encompass “agents, servants, successors and assigns” of the employer, particularly if those other persons were covered under the same insurance policy, so there must have been a good reason not to name them (as opposed to a mere oversight) but this reinforces that excluded terms will not be incorporated by assumption.