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Court Enforces Settlement Agreement Without Insurer Included on Release

By on February 5, 2021 in Settlements with 2 Comments

Plaintiff Glentina Kupolati sued the Village of Timber Creek Condominium when she slipped and fell on a sidewalk near her home.  On the day of trial, the parties’ counsel met to settle the matter with counsel orally agreeing that plaintiff would receive $180,000 and, in return, Kupolati would sign a general release, waiving any claims against the defendant Association. In Kupolati v. Village of Timber Creek Association, 2021 N.J. Super. Unpub. LEXIS 7 (App. Div. Jan. 5, 2021), the issue was whether plaintiff must sign a general release which would also cover the defendant Association’s insurer, as well as provide a physician’s certification that her slip and fall injuries would not require any additional treatment or monitoring.

When the case settled, counsel did not put the settlement terms on the record in open court.  Subsequently, defense counsel prepared settlement documents.  The general release that was prepared included the defendant Association’s insurer, in addition to the Association, releasing them from most claims, including Medicare liens.  As part of the settlement process, defense counsel also insisted that plaintiff’s physician certify that the plaintiff’s slip and fall injuries would not require any additional treatment or monitoring.

The plaintiff’s counsel amended this proposed release, striking the provision that generally released the insurer.  However, plaintiff did agree to accept a paragraph which held the insurer harmless against “any and all liens, known or unknown, or claims that may be asserted against the settlement proceeds.”  The plaintiff signed the defense prepared settlement agreement, accepting the $180,000 settlement payment would cover the insurer’s portion of amounts payable to Medicare, then and in the future and that the responsibility to reimburse Medicare for payments was solely the responsibility of the plaintiff.  Further, plaintiff’s counsel stated in a letter that his office would satisfy any Medicare liens before distributing the settlement funds.

However, a dispute remained over the terms of the general release and the requested physician’s certification.

Plaintiff moved to enforce this settlement without the disputed items.  The defendant cross-moved to enforce a settlement with them.

The trial court found that defendant failed to establish that either a general release of a non-party insurer or a physician’s certification regarding future treatment was standard practice.  The court did note that holding an insurer harmless for Medicare claims was standard practice but it pointed out that the plaintiff had already done so.  The court then ordered defendant to pay interest at the post-judgment interest rate of 3½% on the $180,000 settlement amount, which would commence thirty (30) days after plaintiff signed the amended release.

Defendant appealed this ruling to the Appellate Division and presented two arguments in challenging the order to enforce.  First, the defendant argued that the trial court should have held an evidentiary hearing because there was a genuine factual issue regarding the settlement’s terms or, second, the trial court should have, without an evidentiary hearing, enforced defendant’s version of the settlement, which defendant claimed included terms allegedly consistent with standard industry practice.

The Appellate Division noted that, under New Jersey law, that a settlement agreement between parties to a lawsuit is a contract and governed by the general principles of contract law.  Further, because the court system highly values dispute-settlement agreements, the court will “strain to give effect to the terms of the settlement wherever possible.”  The Appellate Division noted that a court will generally enforce a settlement agreement which involves the payment of money by one party in consideration for the dismissal of a lawsuit if the agreement addresses the principal terms required to resolve the dispute. 

The Court noted that if the parties do not agree on one or more essential terms, the agreement would be unenforceable.  A court will enforce an oral agreement that includes essential terms, “even if the writing does not materialize because a party later reneges.” 

The Appellate Division pointed out that the plaintiff bore the initial burden to establish both the agreement to settle and defendant’s breach.  However, the Court stated that the plaintiff had satisfied her burden through her certification of counsel in certifying that he negotiated the settlement agreement and that the parties orally agreed that the defendant would pay $180,000 and the plaintiff would generally release defendant in return.  He also certified that the parties never agreed to generally release the insurer or to provide a physician’s certification.  In fact, the parties did not even discuss the certification in the conference.

At that point, the burden then shifted to the defendant to present evidence to demonstrate a genuine dispute of material fact.  However, defense counsel, in his responding certification did not deny the plaintiff’s version of what occurred at the settlement conference.  In particular, at the conference, the defendant’s counsel did not demand that plaintiff generally release the insurer and provide a physician’s certification.  Thus, the Appellate Division concluded that there was no genuine dispute that the parties agreed to essential and enforceable terms of a settlement agreement but that they did not expressly agree that plaintiff would provide either a general release of the insurer or a physician’s certification.

Further, the Appellate Division noted that it was not persuaded that “even if the parties did not expressly agree to the release and the certification, those elements were essential, including them is standard practice in settling personal injury suits, and they were implied.”  The Appellate Division held that under general contract law, terms may be implied in a contract “because they are necessarily involved in the contractual relationship so that the parties must have intended them and have only failed to specifically express them because of sheer inadvertence or because the term was too obvious to need expression.”  Further, under New Jersey law, a court may supplement an agreement with terms common to an industry.

Here, the defendant failed to present any competent evidence that generally releasing a tortfeasor’s insurance company was a common and customary practice in settling personal injury suits.  Further, the defendant failed to present any evidence that its demand for the physician’s certification was consistent with industry customs.  Without such evidence, there was no industry usage basis to supply such terms and the Appellate Division found that the trial court properly refused to add such terms to the release.

In summary, the Appellate Division found that the trial court did not err in granting plaintiff’s motion to enforce the settlement agreement, as plaintiff’s counsel described that agreement.

The Appellate Division also upheld the award of prejudgment interest.  The Court found that plaintiff was entitled to the payment of $180,000 based upon the settlement agreement reached but that the defendant retained the use of the money in breach of that agreement.  The Court noted that the trial court “reasonably exercised its discretion in utilizing the post-judgment interest rate and in deciding to start running interest thirty (30) days after the plaintiff signed the documents.”

Hence, the trial court’s decision was affirmed to enforce the settlement based upon the plaintiff’s version of the release.

This case points out the need to discuss all non-monetary terms, as well as the form of the release and parties to be released, at the time a case is settled.  If the defendant has a specific form of a release, which includes the insurer as a party to be released, it would be prudent for defense counsel to advise plaintiff’s counsel that the plaintiff would need to sign a specific form of release, before or no later than the time the case is settled. 

Additionally, although not an issue in this decision, if there are other non-monetary provisions that are material, such as a confidentiality provision or as to which party would satisfy any lien, again, those terms need to be negotiated before the settlement is concluded or, as happened in the Kupolati case, a court may decide that those terms were not implied in the standard settlement agreement (or release) and refuse to enforce them.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020 and 2021, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

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There Are 2 Brilliant Comments

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  1. Avatar Moira Kenah says:

    This is a great reminder to everyone invloved in the settlement process.

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