Jeffrey P. Gale, P.A. // Releasing Active Tortfeasors Does Not Release Vicariously Liable Tortfeasors

Active tortfeasors become legally liable for engaging in negligent conduct. Passive tortfeasors become liable for the negligent conduct of active tortfeasors through the legal principle known as vicarious liability. Examples include owners of motor vehicles whose permissive drivers cause crashes and employers for the acts of their employees.

Nowadays, active tortfeasors can be released from cases, even before a lawsuit is brought, without sacrificing the case against the passive tortfeasors. It wasn’t always this way in Florida.

Common law used to reason that settling with the active tortfeasor discharged the liability of the passive tortfeasor. “At common law and before the enactment of statutes to the contrary, a release of one joint tortfeasor released the other,  Louisville & N.R.R. v. Allen, 67 Fla. 257, 65 So. 8 (1914).” Safecare Health Corp. v. Rimer, 620 So. 2d 161, 164 (Fla. 1993)(McDonald, J. dissenting).

In modern times, at least, the Florida Legislature has, for the most part, not been friendly to Plaintiffs. It has crafted statutes making it harder to gain access to the courthouse and to obtain just compensation for serious injuries once inside. An exception to this history concerns statutory changes that paved the way to the present state of the law regarding settlements with active tortfeasors.

The first statutory change was enacted in 1957. It provided that

A release or covenant not to sue as to one tort-feasor for property damage to, personal injury of, or the wrongful death of any person shall not operate to release or discharge the liability of any other tort-feasor who may be liable for the same tort or death.

In Hertz Corp. v Hellens, 140 So. 2d 73 (Fla. 2d DCA 1962), the court interpreted the statute as applying “to all tort-feasors, whether joint or several, including vicarious tortfeasors.”

Subsequent Florida statutes — 46.015, 768.041, and 768.31 — and case law — e.g., Stephen Bodzo Realty, Inc. v. Willits International Corp., 428 So. 2d 225 (Fla. 1983), Florida TomatoPackers, Inc. v. Wilson, 296 So. 2d 536, 538 (Fla. 3d DCA 1974), JFK Medical Center, Inc. v. Price, 647 So. 2d 833 (Fla. 1994), Crosby  v.  Jones, 705 So. 2d 1356, (Fla. 1998) — have brought us to the present state where it is safe to settle with, and dismiss, actively liable tortfeasors. However, while this may be true, caution must still be exercised with the settlement release.

First and foremost, avoid any language that could be construed as releasing other defendants, including vicariously liable tortfeasors. As further protection, add language to the release making it clear that it does not apply to any other defendants including but not limited to vicariously liable defendants.

Advantages of settling with the active tortfeasor include gaining access to funds and, in some instances, getting the active tortfeasor to feel friendlier to the plaintiff’s side.

Another landmine to avoid is a general release of insurance carriers. It is not unusual for the same carrier to insure more than one defendant either on a different policy or on the same policy, or even the plaintiff’s personal UM or PIP policy with coverage responsibility in the case. Giving a general release without clarifying that the release is only in the carrier’s capacity as the liability insurer for the active tortfeasor, might result in the loss of important funding sources.

Also, be careful of indemnification and hold harmless provisions in releases. Passive defendants have the right to recover from active tortfeasors for payments they have made as a result of their vicarious liability. An agreement to indemnify the settling tortfeasor for such a claim would effectively mean that the plaintiff must give the active defendant the money it got from the vicarious defendant. Here’s how that would work: Plaintiff receives X dollars from vicarious Defendant A. Vicarious Defendant A then pursues an indemnity claim against active Defendant B. Active Defendant B then demands from Plaintiff, under the indemnity provision of the release, the money it paid to Defendant A.

Needless to say, this scenario can be problematic, even a deal breaker.

Indemnification and hold harmless provisions can also involve liens held by entities such as Medicare, Medicaid, and health insurance carriers. Typically, such entities are entitled by law or contract to recover from third-party settlements some or all of the benefits they have paid on behalf of the plaintiff. In some instances, they can even go after defendants who have failed to protect their lien rights.

For the most part, since repayment amounts on these liens can be determined or resolved before or in connection with settlement or verdict, these provisions are not problematic.

Finally, avoid the pitfall experienced in Connecticut General Life Ins. Co. v Dyess, 569 So. 2d 1293 (Fla. 5th DCA 1999). A settling plaintiff lost out on first party insurance benefits by failing to include language in the release that the settlement did not cover all of his damages.