Joint Tortfeasor Releases: Practical Answers to Practical Questions
Much has been written about joint tortfeasor releases in the past few years following the Pennsylvania Supreme Court’s decision in Charles v. Giant Eagle Markets, 522 A.2d 1 (1987). Quite appropriately, most of the written material has concentrated on explaining the precise holding in the case. This is certainly understandable, for the first step in considering joint tortfeasor releases is to understand how they work. This article, however, will assume one has a basic understanding of the law, and will move on to the next level, namely, a discussion of some practical questions that lawyers must deal with in their every day practice. Specifically, this article will discuss the following common questions:
- When should a plaintiff seek or avoid a joint tortfeasor release?
- If a joint tort settlement is reached, must the settling defendant’s name still appear on the verdict slip?
- To what extent must the settling defendant’s attorney participate in the trial?
- May the jury be informed that a joint tort release has been signed?
- What is a “pro tanto” release and when can a plaintiff extract one from a defendant?
In discussing these questions, this article will assume that one is dealing with a case involving only defendants sued on negligence theories of recovery, for the law is well settled in those situations. Since the law is not so well settled where at least one strict liability defendant is in the case that factual scenario will not be dealt with here. (See PBA Practice Bulletin No. 32, “Comparative Fault: The Dilemma Posed in Negligence/402A Cases,” for discussion of that complex issue.) Furthermore, except for Part VII, this article will assume that one is dealing with a traditional pro rata release in all cases.
II. A Quick Review of Charles v. Giant Eagle
While one may make a credible argument that Giant Eagle was wrongly decided (in that regard, see the dissenting opinion of Justice Zappala), that point is of interest only from an academic standpoint. From a practical standpoint Giant Eagle, right or wrong, is the law in Pennsylvania.
Giant Eagle dealt with the classic joint tort situation in which the plaintiff signs a so-called “pro rata”release wherein he agrees to accept the settling defendant’s (SD) payment in full satisfaction of whatever SD’s “pro rata” share (read “percentage” since the advent of comparative negligence) turns out to be. The impact of such a release on the plaintiff, the settling defendant (SD), and the non-settling defendant (NSD), may be summarized as follows:
- From plaintiff’s standpoint, he accepts the payment from SD, and he can never get any additional money from SD. The only other money plaintiff will receive is an amount equal to NSD’s pro rata share of the verdict.
- From SD’s standpoint, he owes nothing more to the plaintiff, regardless of the outcome of trial, and conversely, SD can never get any money back from the plaintiff. Additionally, by virtue of the pro rata language, SD has protected himself against claims for contribution asserted by NSD since SD’s payment operates as a full satisfaction of his share of the verdict. Likewise, even if SD “overpays” the plaintiff (i.e. he pays more for the release than what his share of the judgment would have been had he gone to verdict), he has no claim for contribution against the NSD.
- From NSD’s standpoint, the joint tort release has no impact at all since he simply remains responsible for whatever share of the verdict that the jury assigns to him, i.e., he pays exactly what the jury wanted him to pay, no more or no less.
Two examples illustrate the application of the above principles.
Example One. In this case, assume that the plaintiff signs a pro rata joint tort release with SD for $40,000.00. The case goes to verdict, and the jury renders a total award of $100,000.00 with negligence assessed 50% to SD and 50% to NSD.
Under the Giant Eagle holding, the plaintiff collects nothing more from SD. From NSD he gets his rightful share of the verdict, $50,000.00. Thus, plaintiff ends up with a total of $90,000.00 in his pocket even though the jury valued his case at $100,000.
Example Two. Same as above, except assume that the jury verdict of $100,000.00 was coupled with a finding that SD was only 25% at fault, and NSD was 75% at fault. In this situation, again, SD owes no more money to the plaintiff, and NSD owes his share of the verdict, $75,000.00. The plaintiff ends up with $115,000.00 ($40,000.000 in settlement from SD prior to trial, and $75,000.00 from NSD). Note that SD gets no money back as a result of “overpaying” i.e. paying $40,000.00 where the jury would have only made SD pay $25,000.00. Likewise, note that NSD gets no reduction in what he has to pay even though his full payment will result in the plaintiff receiving a “windfall” of $15,000.00 beyond the jury verdict of $100,000.00.
Finally, in order to understand the discussion that will follow, one must not lose sight of the common law concept of joint and several liability which applies where there is no settlement. Recall that in the absence of any pre-trial settlement, a plaintiff who goes to verdict against multiple defendants is free to collect his entire verdict from a deep-pocket defendant despite the fact that the jury has only assigned a small percentage of liability to that party. The importance of this concept will be illustrated below.
III. When Should Plaintiff Seek/Avoid a Joint Tortfeasor Release?
The key to answering this question is to focus on the trade-off that exists between the plaintiff and SD whenever a pro rata joint tort release is signed. Since the plaintiff receives money from SD in exchange for full satisfaction of whatever SD’s pro rata (percentage) share of the verdict turns out to be, it is this trade-off that ultimately determines whether the joint tort turns out to be a good or bad deal for plaintiff. It is this trade-off that carries all of the risk to the plaintiff in the joint tort setting. For example, if the settlement amount turns out to be less than SD’s share of the verdict (see Example One above), the plaintiff ends up with less money than if he had entered into no settlement and simply had gone to verdict and “let the chips fall where they may.” On the other hand, if the plaintiff extracts a settlement payment that turns out to be greater than SD’s share of the verdict (see Example Two above), then plaintiff can end up with a bonus of sorts.
At the time that the joint tort release is signed, no one can predict what SD’s share of the verdict will turn out to be. Hence, a plaintiff never knows until after the verdict whether the pre-trial settlement was a good or bad deal. The overriding lesson to be learned by the plaintiff, therefore, is this: In order to be attractive, the settlement amount offered by SD must be equal to or greater than what the plaintiff predicts SD’s ultimate share of the verdict will be. That prediction requires the plaintiff to assess not only the likely apportionment of fault between SD and NSD, but also the total dollar amount that the jury is likely to award.
With that general principle in mind — that analyzing the “trade-off” described above is the key to deciding whether to accept a joint tort — let us consider some situations in which plaintiff might actively seek or avoid entering into a joint tort release.
1. The Ultimate Trap to Avoid — The joint tortfeasor release to be avoided at all costs, the walking malpractice claim, if you will, is presented by the following common situation. The plaintiff is very seriously injured in an accident involving one clearly liable defendant and one marginally liable defendant. Unfortunately, the clearly liable defendant has limited insurance, whereas the marginally liable defendant has the proverbial “deep pockets.” This situation may be illustrated by a dram shop ca
se involving an obviously negligent party (the drunk driver) and a second defendant whose liability is much less clear (the tavern owner).
Shortly after filing suit (or perhaps even prior to filing of suit), the insurance carrier for the drunk driver approaches the plaintiff’s lawyer and offers her policy limits. The insurance adjuster points out to plaintiff’s counsel that the defendant has no personal assets. The initial inclination is perhaps to accept the offer and sign the joint tort release, the thinking being that plaintiff will never be able to obtain any more money from this insurance carrier or the defendant. Upon further reflection, however, it should occur to plaintiff’s counsel that to accept the joint tort in this circumstance could represent a huge blunder. To demonstrate that, let us put some real numbers into this hypothetical.
Assume that the drunk driver has a $15,000.00 policy, and the plaintiff has catastrophic injuries. If the plaintiff agrees to accept the offer of policy limits in exchange for a pro rata release and the jury apportions 90% of the fault to the drunk driver and 10% to the tavern on a total verdict of $1,000,000.00, the plaintiff will receive 10% of the verdict, or $100,000.00, from NSD. Coupled with the settlement payment of $15,000.00, the victim has received only $115,000.00 on a case that the jury valued at $1,000,000.00!
By contrast, consider what would have happened if plaintiff’s counsel had refrained from entering into the joint tort settlement and the identical jury verdict had occurred. In the absence of any joint tort release, the plaintiff would retain the benefit of the common law rule of joint and several liability. As noted in the introduction, that rule would permit the plaintiff to recover the full $1,000,000.00 verdict, if necessary, from the deep pocket defendant, the tavern, even though that party was only 10% responsible for the accident.
Thus, perhaps the most inviolate rule for the plaintiff contemplating a joint tortfeasor release is this: Never, under any circumstances, accept a joint tort merely because the defendant is paying her policy limits and has no personal assets! The plaintiff must still be guided by the question of whether the settlement offer closely approximates SD’s likely share of the verdict. If it doesn’t, you must refuse the joint tort.
2. Taking a Joint Tort From a “Minor” Defendant — The offer of a joint tort release from a marginally culpable defendant often represents the best circumstance for the plaintiff to enter into such a release. While the guiding rule still has to be the trade-off identified above, i.e., plaintiff needs to receive a settlement amount which fairly approximates the projected responsibility of SD, there may be other considerations which make a joint tort attractive from such a defendant. First, it may provide the plaintiff with some “seed” money from which to finance part of the litigation or take care of immediate financial needs. Second, and perhaps more important, it drastically reduces, if not eliminates, the incentive for one defense lawyer to participate in the case. With one less defense lawyer in the case, there is less “paper” for the plaintiff to battle and fewer questions for his witnesses to handle.
3. Taking a Joint Tort From the Primary Defendant — When the primary defendant approaches the plaintiff to inquire about a joint tort, the plaintiff should probably not entertain such an overture unless that defendant is willing to pay full value for the claim. Why? Because the plaintiff should always be prepared for the possibility that a jury will let a minor defendant walk free on a case and place 100% of the responsibility on the party who, in their minds, was “really” at fault. In such a circumstance, therefore, the trade-off formula demands that plaintiff not accept a joint tort unless the primary defendant is willing to pay the full value of the claim if, indeed, he is perhaps going to be saddled with 100% of the verdict.
4. Beware of The Pure Strict Liability Case –While generally there can be some real advantages to taking a joint tortfeasor release from a relatively “minor” defendant, that is not true in a case involving defendants sued solely on a theory of strict liability. The Supreme Court in Walton v. Avco, 610 A.2d 454 (Supreme 1992), held that in a case involving defendants sued exclusively under §402A, there is no percentage apportionment of responsibility among the defendants. Instead, all defendants who are found to be liable will be responsible for an equal share of the verdict, i.e., if there are three culpable defendants, each is responsible for one-third of the verdict, if there are six responsible defendants, each would be responsible for one-sixth of the verdict. (By the way, this method of apportionment, which the author refers to as “per capita” apportionment, used to be employed in all cases prior to the adoption of comparative negligence in Pennsylvania.)
As a result of the Walton ruling, the plaintiff’s attorney must remember that in a case involving two strict liability defendants, each defendant is going to be responsible for one-half of the verdict, assuming both are found to have provided a defective product. Therefore, any money accepted from a strict liability defendant in such a case in exchange for a joint tortfeasor release will be accepted in full satisfaction of whatever one-half of the verdict turns out to be. Thus, even though the plaintiff projects that the defendant seeking the joint tort is only marginally liable, the plaintiff in this situation, unlike the analogous negligence case where percentage appointment will apply, cannot accept “marginal” money from this defendant. Instead he should only consider a joint tort if he is being offered an amount equal to one-half of the projected verdict.
IV. Must SD’s Name Appear on the Verdict Slip?
Once plaintiff has signed a pro-rata joint tort release, SD no longer has a financial stake in the trial, i.e., he is never going to owe any more money to anybody, nor is he in line to get any money back from anybody. Thus, counsel for SD may wonder whether or not his name needs to appear on the verdict slip. Despite no longer having an interest in the outcome of the case, the answer to the question is clearly “Yes.” Why? Because fault cannot be apportioned under the comparative negligence statute without all defendants appearing on the verdict slip.
Remember from the discussion above that in order to determine what NSD owes plaintiff, the jury must assign a certain percentage of fault to NSD. However, in fairness to NSD, his fault cannot be apportioned in a vacuum; rather, the jury must assess it relative to all defendants. The comparative negligence statute requires that the fault “pie” be divided among all culpable parties, and that the relative shares add up to 100%. Obviously, in dividing up 100% of the “pie,” a disproportionate share would fall on NSD’s shoulders if the jury did not also consider the conduct of SD. Thus, NSD and the judge will insist that SD’s name appear on the verdict slip so that his fault can be factored in by the jury. Indeed, NSD’s entire strategy will be to “lay off” as much fault as possible on SD thereby reducing his share of responsibility to the plaintiff. (The only time SD’s name would not go out on the verdict slip would be in the unlikely event that no party introduced any evidence implicating SD. If that should happen, Ball v. Johns-Manville Corporation , 625 A.2d 650 (1993), says that the court may not include SD on the verdict slip for there is simply no evidence in the record from which a share of liability can be assessed.)
As a caveat, it should be noted that, prior to the advent of comparative negligence, it was not necessarily required that the jury make a finding with regard to SD. In the pre-comparative days, apportionment of fault among joint tortfeasors was not so “fine tuned” that specific percentages of responsibility were determined for each culpable defendant. In
stead, a much simpler (and arguably less precise and equitable) method was employed whereby fault was simply divided equally among all culpable defendants. Thus, if four (4) defendants were each found to have been substantial factors in causing the plaintiff’s harm, each defendant was responsible for 1/4 of the damages. If there were eight (8) culpable defendants, each was responsible for 1/8 of the verdict, and so forth.
Thus, what would often happen in the pre-comparative negligence days is that SD would admit in the release that it was at joint tortfeasor (This was often referred to as a “Griffin” release, so named after the case of Griffin v. United States, 500 F.2d 1059 (3rd Cir. 1974), which sanctioned the use of this device), the understanding being that however many of the remaining defendants were found to be liable at trial, SD’s name would be added to the list and responsibility for the verdict would be divided equally among all culpable defendants. In other words, if three (3) NSDs were found to be at fault by the jury, and SD admitted his fault prior to trial, there would be a total of four (4) “at fault” parties, and each of the NSDs would be responsible for 1/4 of the verdict, rather than 1/3.
Under a comparative negligence system, however, it is not enough for SD merely to admit it was a joint tortfeasor, for one needs to have a specific percentage of fault attributed to SD in order to “run the numbers” and make them add up to 100%. Obviously, SD cannot predict prior to trial what percentage of fault the jury might attribute to him. Therefore, SD’s name must go out on the verdict slip in order for the jury to make that ultimate determination.
V. To What Extent Must SD’s Attorney Participate in the Trial?
Although SD’s name must appear on the verdict slip, the real question for SD, and particularly his insurance carrier, is whether counsel needs to sit through the trial, and if so, to what extent must he participate in the trial? Counsel will no doubt point out to the judge that the insurance carrier for SD, having paid to settle the case, does not want to incur additional costs by having an attorney “babysit” a trial in which it has no financial stake. What should the judge do?
As to the initial question — must the attorney at least be present in the courtroom –the answer really depends upon whether or not the judge believes that counsel’s absence might create undue confusion or distraction for the jury. In other words, since we have already determined that it will be necessary for SD’s name to go out on the verdict slip, the judge has to decide whether the jury is going to begin to wonder (and perhaps speculate) why a party’s name is present on the verdict slip yet he is not represented in the courtroom. There is no case law dealing with this subject and, ultimately, it is a matter best left to the discretion of the trial judge.
The related question, of course, is how vigorous a defense must SD put in, i.e., if the judge determines that SD needs to have counsel present in the courtroom, how actively must he participate in the case? It hardly seems likely that a trial judge could force an attorney to participate since an attorney clearly has no legal obligation to ask questions or make opening/closing remarks to the jury.
To the extent that the trial judge is inclined to solicit the views of the plaintiff and NSD on the subject of SD’s participation, what position should they take? Most plaintiffs would probably agree that they prefer that SD either offer only a token defense in the case or not be present in the courtroom at all. Why? Because once SD pays money to plaintiff, it is the plaintiff’s strategy to shift all of the jury’s attention to NSD in order to raise the percentage of fault attributable to NSD and, therefore, increase the amount NSD has to pay to plaintiff. (As to whether the plaintiff can get a formal agreement from SD to remain silent or otherwise assist in the cast against NSD, see the next section.)
On the opposite side, one might ask: Is NSD better off if SD is, or is not, present in the courtroom? Recall that NSD’s strategy will be just the opposite of plaintiff’s, i.e., he will try to shift responsibility to SD. The question then becomes whether it is easier for NSD to implicate SD when he occupies an empty chair, or does the absence of a “live body” make SD seem less real to the jury and, therefore, less likely to be the subject of a liability finding? This is probably a tactical decision that is best made on a case-by-case basis by NSD’s counsel.
VI. May the Jury be Informed that a Joint Tort Release has been Signed?
In many instances, NSD may want to inform the jury that SD has settled his claim with the plaintiff. Oftentimes, NSD may want to do this in order to explain why the plaintiff and/or SD are “pointing the finger” at him or otherwise to attack their credibility. Should the judge permit the existence of the joint tort release to be revealed to the jury?
With a few exceptions, the answer to that question is “No,” by virtue of 42 Pa.C.S.A. §6141(c). That statute provides that the payment of a settlement to an injured party “shall not be admissible in evidence on the trial of any matter.” Thus, in the typical situation, the jury is not informed that one of the defendants has executed a joint tort release with plaintiff. (Please note, however, that it is quite common for SD, once having settled with the plaintiff, to plead the joint tort release or otherwise place it before the court. The purpose of this, of course, is so that the court may appropriately mold the verdict to reflect the fact that SD has fully satisfied his share of the judgment.) The exceptions to that rule arise in circumstances where plaintiff and SD have entered into a formal agreement either (1) to grant SD a financial stake in the outcome of the case against NSD or (2) to shape the trial testimony in such a way to increase NSD’s liability.
1. Continuing Financial Interest
This exception arises from the Supreme Court’s decision in Hatfield v. Continental Imports, Inc., 610 A.2d 446 (1992). That case involved an injury sustained by a woman when the chair in which she was sitting collapsed. After she and her husband filed suit against the retailer and/or distributor of the chair, they eventually settled the claim against those defendants in exchange for a payment of $100,000 plus future payments of $833 per month for the balance of the wife-plaintiff’s life. However, at the insistence of the settling defendants, the release contained provisions whereby plaintiffs agreed to pursue a claim against the foreign manufacturer of the chair, and the plaintiffs further agreed that if such action was successful, the original defendants would be reimbursed in an amount between $25,000 – $50,000. When the case was ready to proceed to trial against the foreign manufacturer, that party sought a ruling in advance from the trial court that it be permitted to inform the jury of the original defendants’ continuing financial interest in the success of plaintiffs’ claim against it. The trial court granted that request, but on appeal the Superior Court, relying on §6141, reversed the trial court.
Allocatur was granted and the Supreme Court ruled that the jury should be informed of this particular settlement arrangement. The court ruled that §6141 was inapplicable because that provision contemplates a traditional settlement involving a full and final release between contracting parties, and the arrangement in the case at bar “can hardly be described as a conclusive resolution or final disposition of the disputed matters between the plaintiffs and the original defendants.” Hatfield, at page 451. As the court explained, the jury needed to be informed of this agreement in order to properly assess the credibility of witnesses called by the original defendant since the agreement changed the normal relationship that would otherwise exist between the plaintiff and these witnesses.< /p>
The inclusion of the reimbursement provisions in the Agreement certainly renders this instrument distinct from the type of agreements referred to in the statute because it changes the nature of the Agreement from a final resolution of matters between the parties to an ongoing relationship, thereby implicitly joining nominal adversaries in an alliance against the remaining defendant. This has the effect of distorting the adversarial process assumed by the trier of fact to exist. Hatfield, at p. 452.
While the ruling in Hatfield appears to be sound and equitable, one could take issue with it by pointing out that the proffered rationale for informing the jury of the Release — that the “settlement” distorts the trial process by causing parties to adopt unconventional alliances — could be invoked in a traditional full and final joint tort release, i.e., in precisely the context to which §6141 admittedly applies.
For example, prior to the Giant Eagle decision, SD always had a financial incentive to deflect as much responsibility as possible toward NSD, because under the old law if the jury ultimately determined that SD “overpaid” on the case (i.e., paid, for example, $40,000 when the jury found that he was only responsible for $10,000 worth of damages), SD had a contribution claim against NSD for the amount of the overpayment. Thus, in the pre-Giant Eagle days, SD always had the chance at trial to get some money back on a contribution claim from NSD, a circumstance thereby arguably distorting the adversarial process assumed by the trier of fact to exist. Nevertheless, there are no reported cases in the pre-Giant Eagle era which permitted the jury to be informed that SD had executed a settlement with plaintiff.
Even today, after the advent of comparative negligence, one can make the argument that the mere signing of a joint tort release alone is enough to “distort the adversarial process,” and, at a minimum, give the plaintiff an incentive to artificially exaggerate and emphasize the culpability of NSD. Consider the case where plaintiff originally sues two defendants and in his pre-trial deposition has offered testimony critical of both of them. He then agrees to a joint tort with the first defendant. Is it not expected that his trial testimony will concentrate primarily, if not wholly, on implicating the other defendant? Certainly it is. Under these circumstances, therefore, should counsel for the second defendant be entitled to reveal the joint tort settlement to the jury as a way to attack, or otherwise explain, the difference between plaintiff’s trial testimony and his deposition testimony? Section 6141, as interpreted by Hatfield, would suggest that the answer is “No” so long as there was a full and final settlement between plaintiff and SD and not some reimbursement agreement.
In short, to the extent that the rationale for permitting the jury to be informed of the settlement agreement in Hatfield was that the execution of the document gave a financial incentive for one of the contracting parties to conveniently shape trial testimony and thereby “distort the adversarial process,” a good argument can be made that even with a traditional release the settling defendant (in the pre-comparative days) and the plaintiff (both before and after comparative negligence) have reasons to adopt unconventional trial strategies. This suggests that Hatfield was either wrongly decided to the extent that it carved out a narrow exception to the §6141(c) prohibition or, to go to the other extreme, any and all joint tort settlements should be revealed to the jury. The latter “solution,” however, opens a proverbial “Pandora’s Box” out of which numerous problems, for all of the litigants and the court, will spring. The more pragmatic course would be to either re-examine Hatfield or confine it within defined limits, however irrational those limits might be.
2. The Agreement to “Shape” Trial Testimony
The other exception to §6141(c) arises where plaintiff and SD agree to “shape” trial testimony in order to implicate NSD. As noted above, once having received money from SD, plaintiff’s trial strategy is to “lay off” all responsibility on NSD. In order to obtain assistance with that strategy, plaintiff may enter into a formal agreement with SD whereby they agree to “gang up” on NSD. If the agreement is indeed a formal one, counsel for NSD can reveal it to the jury under Hammel v. Christian, 610 A.2d 979 (Superior 1992).
Hammel involved a two-car collision in which the mother-plaintiff was a passenger in a vehicle driven by her daughter. The mother filed suit against the other driver who, in turn, joined the daughter as an additional defendant. Prior to trial, the mother settled with the daughter’s carrier, and as part of the settlement it was formally agreed that the mother would offer no testimony at trial which incriminated the daughter. When the case was called to trial and the mother was on the witness stand, counsel for the other driver attempted to cross examine her on the basis of the aforesaid agreement. Her counsel objected, citing §6141(c). The Superior Court, however, ruled that so long as the jury was not informed that a financial settlement had been reached, it was appropriate to attack the mother’s credibility on the ground that she had executed a document promising not to offer testimony adverse to her daughter.
The agreement not to present evidence against her daughter was relevant to attack the credibility of the wife-plaintiff’s version of the accident. A review of the record discloses that the jury was never told that the plaintiffs’ claim against the additional defendant had been settled. Moreover, although the language of the release was shown to the wife-plaintiff, the release was not given to the jury to examine, and it was identified in the testimony merely as “this document which you and your husband signed.” The true nature of the document was not at any time divulged to the jury. The trial court, under these circumstances, did not commit error or abuse its discretion by allowing the witness to be cross-examined about her agreement not to give testimony against the additional defendant. Hammel, at p. 983.
Quite naturally, the case raises the question of whether an agreement by SD to offer no testimony adverse to the plaintiff, or alternatively, to affirmatively implicate NSD, would likewise be admissible in front of a jury. Presumably, under the rationale set forth in Hammel, it would be.
However, there is nothing in Hammel suggesting that plaintiff and SD cannot independently choose to pursue their own strategy so long as they do not formally agree to same. Thus, in Hammel, it seems that if the mother-plaintiff had simply made a unilateral decision that her trial testimony would not implicate the daughter, that would have been all right. (Indeed, one has to wonder why the plaintiff in Hammel felt the need to agree in writing not to implicate the daughter-defendant.) In other words, the mere fact that a financial settlement had been reached, without any affirmative agreement concerning trial strategy, would not be admissible as a basis to attack the credibility of one of the settling parties by virtue of the §6141(c) prohibition.
VII. What is a “Pro Tanto” Release and When Can a Plaintiff Extract One from a Defendant?
First, an explanation is in order. What exactly is a “pro tanto” release? Pro tanto means “dollar for dollar.” Thus, when plaintiff signs a “pro tanto” release with SD, he is agreeing that the verdict against NSD will be reduced “dollar for dollar” by what SD has already paid him. Please note that this release differs from the pro rata release in which plaintiff is agreeing to off-set the verdict by whatever SD’s percentage of the verdict turns out to be. As may be observed by reference to our previous examples, a pro tanto release reduces the risk of the plaintiff and increases the risk to SD.
The primary way in which the pro tanto release reduces risk to the plaintiff is by eliminating any
chance that the plaintiff will end up with less money than the total jury verdict. To illustrate, consider Example Number One above. In that hypothetical, the plaintiff gave SD a pro rata release for $40,000 and got an additional $50,000 at trial from NSD, or a total of $90,000 in his pocket, some $10,000 less than the full verdict of $100,000. If plaintiff had executed a “dollar for dollar” release, however, consider what would have happened. He would have received the same settlement payment of $40,000 from SD. After the verdict was reached, he then would have subtracted “dollar for dollar” that $40,000 from the total verdict of $100,000, and therefore would have collected the balance of the verdict, or $60,000, from NSD. (Plaintiff would be permitted to collect $60,000 from NSD even though his percentage of the verdict was only $50,000 because of the principle of joint and several liability, which principle is eliminated only when the plaintiff signs a pro rata release.)
While the pro tanto release protects the plaintiff against the risk of ending up with less money than the total verdict, it also correspondingly denies him the opportunity to end up with more than the total verdict. Refer back to Example Number Two. In that instance, under the traditional pro rata release, the plaintiff ended up with a total of $115,000 in his pocket, some $15,000 more than the total verdict of $100,000. Had he signed a pro tanto release in that case, however, he would have received from NSD only the “dollar for dollar” difference between the total verdict of $100,000 and SD’s payment of $40,000, or $60,000. His total compensation, therefore, would be $100,000 instead of $115,000 as with the pro rata release.
While the pro tanto release eliminates some risk from the plaintiff’s standpoint, it also eliminates the prospect of getting “bonus” money. Nevertheless, most plaintiff’s counsel would give up the prospect of “bonus” money in exchange for a guarantee that they would not get “burned” by the verdict. Thus, all things considered, a plaintiff would probably always prefer a pro tanto release to a pro rata release.
If, indeed, the plaintiff normally would prefer a pro tanto release, why do we almost never see such releases executed? The answer is simple. Because it increases the risk to SD, insurance carriers almost invariably refuse to give a pro tanto release. Instead, they say that if the plaintiff wants settlement money, he will have to execute a traditional pro rata release. The risk to SD with a pro tanto release is that he remains exposed for a contribution claim by NSD depending on how the verdict comes in, i.e., SD cannot have the peace of mind of being able to tell his claims adjustor (as they can with a pro rata release) that, once having paid the plaintiff, no other money will have to be spent on the file.
Why does the pro tanto release leave SD exposed for a contribution claim by NSD? To understand the answer to that question, one must understand what it is that the pro rata release has — and what the pro tanto release lacks — which grants SD protection against a contribution claim. Under common law principles, as well as § of the Uniform Contribution Among Joint Tortfeasors Act, a settling defendant always remains exposed for a contribution claim unless he fully satisfies his share of the judgment. The traditional pro rata release satisfies this “unless” clause by containing language whereby the plaintiff agrees to accept the settlement money in exchange for whatever SD’s share of the verdict turns out to be. By virtue of that “magic language,” therefore, SD by definition has contractually satisfied whatever his share of the judgment turns out to be as soon as the joint tort release is executed.
By contrast, however, the pro tanto release contains no such language couched in terms of SD’s relative share of the verdict. Instead, it merely provides for a finite set-off in an amount equal to the settlement payment. Consequently, to the extent that settlement payment turns out to be less than SD’s share of the verdict, NSD has to “carry the weight” for SD and pay that amount over and above his percentage share of the verdict. To equalize matters between SD and NSD, the law then permits NSD to assert a contribution claim against SD for the amount of that “excess” which NSD had to pay the plaintiff.
To illustrate these principles in the context of a pro tanto release, consider Example Number Two. The plaintiff receives $40,000 from SD and that amount is set-off “dollar for dollar” against the total verdict of $100,000, thus leaving $60,000 which NSD must pay to the plaintiff. That $60,000 represents $10,000 more than NSD’s “rightful” share of the verdict of $50,000. Although the principles of joint and several liability make NSD pay that extra $10,000 to the plaintiff, the common law then gives NSD the right to sue SD for $10,000 worth of contribution. In theory, therefore, the contribution claim ultimately equalizes things between SD and NSD such that both parties ultimately pay their “rightful” share of the verdict. However, if SD has insufficient insurance limits and no personal assets to satisfy the contribution claim, NSD is “left holding the bag.”
It should be apparent now why an insurance carrier for SD will almost always insist upon the pro rata release — an insurance carrier simply does not want to take the risk of having to pay a contribution claim asserted by NSD. There are, however, a few relatively rare instances where the plaintiff may be able to convince SD to execute a pro tanto release. The first and most likely situation that comes to mind involves an intra-family tort. Consider, for example, a situation in which a young daughter is a passenger in a vehicle driven by her father, and that vehicle collides with a second car. The girl’s injuries are extremely severe. Assume that the father is primarily at fault and has modest limits of $50,000, whereas the marginally liable other driver has very sizeable limits. Assume further that the young girl has some pressing financial needs which need to be satisfied prior to the time that the case will likely be called to trial. Under these circumstances, plaintiff’s counsel may be able to convince SD to pay over his policy limits of $50,000 and sign a pro tanto release. Why? Consider the practicalities in the situation.
The insurance company would be paying its full policy limits. Thus, it has no money out of which a potential contribution claim can be satisfied. Furthermore, the father, assuming that he has no appreciable assets, is also unlikely to have to pay a contribution claim out of his own pocket. Hence, the father may initially be inclined to sign a pro tanto release because he would like to help his daughter, and the risk of a contribution claim is of no practical consequence to his insurance company or him. It is true, however, that NSD could at least get a judgment on record against the father, and as a consequence of that possibility, the insurance carrier should probably advise the father to seek an independent consultation concerning the legal effect of such a judgment. For example, the father would likely be informed that he would suffer the same detriment visited upon any person against whom there is an outstanding judgment, e.g., suspension of driving privileges 75 Pa.C.S.A. §1771 et seq.; lien against real estate; impact on credit rating, etc. At that point, the father would have to weigh whether or not the benefits of the immediate cash to his daughter outweigh the legal detriment posed by an outstanding judgment. In a given case, it may well be that the father is convinced that the balance weighs in the daughter’s favor and, therefore, is willing to execute a pro tanto release. For reference to a case in which a pro tanto release was used in an intra-family tort, see Wirth v. Miller, 580 A.2d 1154 (Superior 1990).
In addition to the intra-family tort, there is one other situation, albeit a less common and likely scenario, in which the plaintiff may be able to extract a
pro tanto release from SD. Consider the same example as above, except that the vehicle in which the young girl is a passenger is driven not by her father but by some non-family member who is killed in the accident. Assume further that the estate of the deceased driver of that vehicle has no significant assets. Is it possible that the plaintiff’s counsel can convince the personal representative of the driver’s estate to sign a pro tanto release? The plaintiff’s counsel will no doubt point out that the detriment that normally flows from having a judgment on the docket is inapplicable here since the driver is deceased. Even without that latter concern, however, the real distinction between this example and the intra-family example is that here the settling defendant generally has no reason to do a favor for the plaintiff and, thus, even if there is little legal detriment caused to the estate by a pro tanto release, the personal representative may simply be unwilling to sign such a release.
Thus, the best hope that the plaintiff has for extracting a pro tanto release is in a situation similar to that described in the intra-family example above. Please remember that even where a family member is the tortfeasor, however, the insurance company is never going to agree to a pro tanto release if the settlement payment that it is offering is less than its policy limits, for in that circumstance there is remaining money out of which it would have to satisfy NSD’s contribution claim.
The answers to the practical questions described in detail in this article may be summarized as follows:
1. When should a plaintiff seek or avoid a joint tort release? — The plaintiff should seek a joint tort release whenever the settling defendant is willing to pay an amount which is at least equal to whatever plaintiff projects SD’s share of the total verdict would likely be. Whenever the amount offered is less than the projected ultimate share of SD, the joint tort should be refused. Furthermore, under no circumstances whatsoever should a plaintiff ever accept a joint tort merely because SD is willing to pay his policy limits and has no personal assets, i.e., plaintiff must still be guided by whether SD’s policy limits offer is a fair “trade-off” for SD’s likely share of the verdict, for in signing the release, plaintiff is giving up the benefit of joint and several liability.
2. Must SD’s name appear on the verdict slip? — The answer is clearly “Yes” because under the comparative negligence statute the jury is required to assign a specific percentage of fault against each defendant, and obviously that cannot be done unless SD’s name is on the verdict slip.
3. To what extent must SD’s attorney participate in the trial? — A judge can probably order that SD’s counsel at least be present for the trial, but the court probably cannot dictate that counsel participate to a certain extent or with a certain level of vigor. (But see the next question concerning formal agreements by plaintiff and SD to limit participation.)
4. May the jury be informed that a joint tort release has been signed? — Generally, the answer to this question is “No” by virtue of 42 Pa.C.S.A. §6141(c). However, if plaintiff and SD enter into a formal agreement that either (a) grants SD a continuing financial stake in the outcome of the case against NSD, or (b) requires one of the parties to artificially “shape” testimony or participation in such a way as to increase NSD’s liability, that portion of the agreement (although not the financial terms of the settlement) may be disclosed to the jury in order to expose the potential bias of that party or its witnesses.
5. When can plaintiff extract a pro tanto release from SD? — While the insurance carrier for SD is almost never going to execute a pro tanto release because it leaves the carrier potentially exposed for a contribution claim by NSD, there are two circumstances where plaintiff may succeed in getting such a release. One such situation involves the intra-family tort, while the other involves the deceased defendant whose estate has no assets. In either of those situations, the former more likely than the latter, if the offer exhausts the policy limits and SD is judgment proof, SD may be willing to expose himself to a contribution claim from NSD.