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December 30, 2014

General Release Signed Prior to Filing Lawsuit Did Not Contemplate All of Plaintiffs Injuries

In Ford v. Phillips, the Plaintiff and Defendant were involved in a motor vehicle accident in June 2012. Shortly after this accident, a claims representative of the Defendants' insurer, Travelers Insurance Company ("Travelers"), met with the Plaintiff and had Plaintiff execute a general release of all claims in exchange for $750. Six months after signing this release, Plaintiff filed a lawsuit seeking damages for the serious injuries allegedly sustained in the accident. Pursuant to CPLR 3211 (a)(5), Defendants moved pre-answer to dismiss the complaint based on the executed release.

The Third Department found that Defendants had been released from any claims by Plaintiff. Plaintiff, in opposing Defendants' motion, did not seek to have the release set aside. Rather, Plaintiff only sought to avoid pre-answer dismissal.

Defendants submitted an opposition affidavit from the claims representative, denying that he represented to Plaintiff that the $750 payment represented anything other than a full settlement of his claims, or that the settlement could be altered after the release was signed. Further, the claims representative stated that Plaintiff only complained of soreness and pain in his arm, his arm was getting better, and Plaintiff did not mention that he had suffered injury to his neck or back.

The Third Department explained that the signing of a clear and unambiguous release is a significant legal act that ordinarily binds the parties, however, a release must be "fairly and knowingly made." Thus, like any other contract, a release may be set aside on the basis of fraud or mutual mistake. Concerning personal injuries, a release may be invalidated if the parties mistakenly believed that an injury did not exist when the release was executed, but will not be set aside for a mistake pertaining to the future course or sequelae of a known injury.

The Third Department concluded that the record before the court did not establish as a matter of law that either party knew of Plaintiff's clavical injury or herniated disks when he signed the release. The Court opined that it was unclear whether there was a mutual mistake as to the true nature of Plaintiff's injuries at the time Plaintiff signed the release, and the injuries the release was to cover. Accordingly, resolution of this issue as a matter of law and dismissal of the complaint would be premature.

The appellate court also found that Defendants' motion to dismiss a complaint based solely upon a release should be denied when the Plaintiff alleges fraud or duress in the release's procurement. Although it was undisputed that Plaintiff read the release prior to signing, the Court stated that "[t]he question of what constitutes reasonable reliance is always nettlesome because it is so fact-intensive."

This decision represents a potentially troublesome ruling for insurers seeking to settle matters prior to a complaint being filed. Specifically, this ruling places a high burden on insurers to investigate and determine the full extent of a plaintiff's injuries prior to executing a general release. Otherwise, a plaintiff will be able to argue that certain injuries were not contemplated by the executed release and thus pre-answer dismissal, based on the signed release, is improper.

If you require further information regarding the content presented in this Legal Alert and its impact on your organization, please contact Thomas B. Cronmiller, Chair of the Torts & Products Liability Defense Practice Area, at (585) 295-4424 or tcronmiller@hblaw.com.

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