October 19, 2017

Drafting Maryland Liability Releases

By:  Robert S. Campbell, Esq.

The drafting of liability releases has always been complicated and recent legal developments in Maryland have made such drafting even more complicated.   Some non-exhaustive things to think about when drafting liability releases include:

  1. JOINT TORT-FEASOR STATUS: Under the Maryland Uniform Contribution Among Joint Tort-Feasors Act, Cts. & Jud. Proc. I § 3-1401 et seq., the concept of a “joint tort-feasor” is derived from the notion that a single injury can result from the joint actions of two or more individuals, who, putting aside defenses, may be jointly and severally liable. Each individual is severally liable for the entire damage, regardless of whether the conduct of one directly caused more or less injury compared to that of another, because they acted together with a common purpose resulting in responsibility for the common injury.  Under the Act, a “release by the injured person of one joint tort-feasor, whether before or after judgment, does not discharge the other tort-feasors unless the release so provides, but it reduces the claim against the other tort-feasors in the amount of the consideration paid for the release or in any amount or proportion by which the release provides that the total claim shall be reduced, if greater than the consideration paid.” A releasing party’s status as a joint tort-feasor (or not) must be considered in preparing any release.
  2. PRO RATA SHARES: The common liability of tort-feasors is divided on a pro rata basis, or equal shares based upon the number of tort-feasors.  The number of joint tort-feasor “shares” on a pro rata basis impacts what must be paid by each tort-feasor.  A settling plaintiff may have an incentive to limit the number of joint tort-feasor shares, while a settling defendant may have an incentive to increase the number to limit amount that could be paid out in contribution.  Thus, whether the settlement with an institutional defendant constitutes a single share or multiple shares based upon the release is an important consideration in the negotiation of the final release language. See Hashmi v. Bennett, 416 Md. 707 (2010) (holding that a hospital and its released employees constituted one joint tort-feasor share based upon the language of the release).
  3. ADMISSION OF TORT-FEASOR STATUS: To qualify as a joint tort-feasor, and thus limit liability, a party must be adjudicated as liable or have admitted liability as a tort-feasor. See Mercy Medical Center v. Julian, 429 Md. 348 (2012).  For a release to effectively limit liability under the Act, there should be an admission of tort-feasor status.  The admission or not of joint tort-feasor status should be considered in any release.
  4. HOW WILL YOU KNOW WHAT OTHERS SETTLED FOR?: Under Tempel v. Murphy, 202 Md. App. 1 (2011), a settlement amount in a joint tort-feasor release entered into by a settling defendant may not be discoverable until after a verdict is entered against the non-settling defendant.  This ruling has been divisive and has public policy grounds on both sides of the argument.  The case may be revisited by the Court of Appeals or the Maryland Rules Committee.
  5. ARE SWIGERT RELEASES STILL AVAILABLE?: Based upon Mercy Medical Center v. Julian, 429 Md. 348 (2012), the utility/existence of Swigert v. Welk, 213 Md. 613 (1957)—which permitted a reduction of damages only if a released party is found to be a tort-feasor—may be in doubt or may be limited under the particular circumstances.   Following Julian, whether Swigert releases are still permitted is open for debate and is an issue that is likely to be reviewed by the Courts or Maryland General Assembly in the future.    If the release is intended as a Swigert release, there may be a need for a provision for indemnification from judgments for contribution.
  6. INDEMNITY FROM LAWYERS: By means of release provisions, some insurers had sought to have counsel for the settling party hold harmless and indemnify the released party and insurers from claims for medical bills and liens.   The Committee on Ethics for the Maryland State Bar Association has opined that: i) a lawyer may not execute a hold harmless/indemnification agreement under the circumstances described; and ii) it is unethical for a lawyer to demand that another lawyer execute such an agreement. See Maryland State Bar Association Ethics Opinion No. 2012-03.

Robert Campbell is a Member of Pessin Katz Law, P.A. (PK Law) and part of the firm’s General Litigation and Insurance Group.  He has an active litigation practice primarily in complex commercial and general litigation matters in Maryland state and federal courts. Mr. Campbell can be reached at (410) 769-6140.