Releases 101

One of my recently concluded matters involved a Claims Adjuster for an insurance company acting as the agent for one of the Defendants named in our Plaintiff’s Claim.  This Defendant filed a claim with their insurer to act on their behalf, rather than the party hiring their own legal representative.  If you have insurance, why not use it, right?

During the settlement negotiations, the Claims Adjuster demanded that any settlement reached would include a term that our client releases the other Defendants named in the action.  Obviously, we said no.  The reason being that the other Defendants were not parties to the settlement and do not get to benefit from the Release.  Additionally, the insurer was not representing the other Defendants, who were not aware of the litigation because they had not been served with the Plaintiff’s Claim.  We advised that the action would be dismissed against all the Defendants, but the Release would only be in favour of the insured’s client.

We arrived at a settlement that our client was happy with, and the insurer provided its standard Release for our client to execute. 

The very next day, the Claims Adjuster attempted to change the terms of the settlement and provided a revised Release which now included a term that our client would indemnify the insured’s client if any third-party claims and/or crossclaims are brought against their client.

The Claims Adjuster was asked why our client would indemnify theirs if a lawsuit was brought by other parties who were unrelated to our client.  Clearly, the Claims Adjuster failed to provide a reasonable answer, because there was no reasonable answer.

To provide an indemnity means our client would cover the costs of the legal fees of the insured’s client if a third-party claim or crossclaim was brought against them. 

The way the term was drafted reads that our client would indemnify the insured’s client for any lawsuit brought against them for an indefinite amount of time.  The insanity!

Our client cannot control the actions of unrelated parties, and our client most certainly cannot be held accountable for those actions.

A Release releases the party settling from all claims whatsoever relating to the issues in the action.  The Release also prevents Releasor’s (in this case, our client’s) agents, heirs, administrators, executors and so on from bringing an action against the settling party.

After having a brief discussion with the insurer’s in-house counsel, that issue was quickly dealt with, and the settlement proceeded as originally agreed to and the matter concluded.

A Release discharges the settling party from all actions relating to the issues being settled on.  It does not provide indemnification on unrelated matters with unrelated parties for an infinite amount of time. 

Always review the Release before signing it, so you know what you’re signing and agreeing to.

Murray Brown, Licensed Paralegal