Vanderpool v. Grange Ins. Ass'n, 52366-5

• Decision Date: 19 May 1988
• Docket Number: No. 52366-5,52366-5
• Citation: 110 Wn.2d 483,756 P.2d 111
• Parties: Jay D. VANDERPOOL and Yvonne Marie Vanderpool, husband and wife, Petitioners, v. GRANGE INSURANCE ASSOCIATION, a domestic insurance corporation; Richard Goodman and "Jane Doe" Goodman, husband and wife, d/b/a Dick's Exhaust; and Gerald Lee Curtis and "Jane Doe" Curtis, husband and wife, Respondents.
• Court: Washington Supreme Court

Page 483

110 Wn.2d 483

756 P.2d 111

Jay D. VANDERPOOL and Yvonne Marie Vanderpool, husband and wife, Petitioners, v. GRANGE INSURANCE ASSOCIATION, a domestic insurance corporation; Richard Goodman and "Jane Doe" Goodman husband and wife, d/b/a Dick's Exhaust; and Gerald Lee Curtis and "Jane Doe" Curtis, husband and wife, Respondents.

No. 52366-5.

Supreme Court of Washington,

En Banc.

May 19, 1988.

Lacy, Kane & Richardson, P.S., Scott M. Kane, E. Wenatchee, for petitioners.

Murray, Dunham & Murray, Wayne Murray, Seattle, for respondents.

PEARSON, Chief Justice.

This case involves an action by an injured party seeking to sue an employee after releasing the vicariously liable employer from liability. We reverse the Court of Appeals and hold that release of an employer from vicarious liability does not, by operation of law, release the primarily liable employee.

On February 9, 1982, defendant Gerald Curtis, an employee of defendant Richard Goodman (Goodman), d/b/a Dick's Exhaust, backed a car into the path of Yvonne Vanderpool's car. It is uncontroverted that at the time of the accident Mr. Curtis, an agent, was acting within the course and scope of his employment with his principal, Goodman. Defendant Grange Insurance Association (Grange) insured Goodman under a garage keeper's legal liability policy. Mr. Curtis was also insured under that policy as Goodman's employee.

Mrs. Vanderpool sustained injuries to her left knee and property damage to her car. She was taken to a hospital emergency room where x-rays were taken and no fractures were diagnosed. Her knee was wrapped with an Ace bandage and she was advised not to walk on it. Mrs. Vanderpool nonetheless returned to work on crutches the following day.

On February 10, 1982, Mrs. Vanderpool conferred with On February 20, 1982, Mrs. Vanderpool informed Mr. Droz that although her knee had improved, she was still on crutches. Other than the day of the accident, she had not seen a doctor. Mrs. Vanderpool later consulted her family physician about pain in her knee; her doctor informed her that the knee injury was probably just a bruise and a strained ligament.

                Rex Droz, an insurance adjuster for Grange, regarding payment of the medical and car repair bills she had incurred.   Mr. Droz met with Mrs. Vanderpool, inspected the damage to her car, and arranged for repairs at the body shop of Mrs. Vanderpool's choice
                

In early March 1982 settlement negotiations commenced. The Vanderpools rejected the initial offers made by Mr. Droz. Soon thereafter, the Vanderpools discussed the situation with an insurance adjuster not associated with Grange. He advised them that $1,000, plus car repairs and medical bills, would be a reasonable and fair sum to ask for in settlement.

On March 12, 1982, Mrs. Vanderpool signed a release and future medical agreement, settling for $2,840.16. This amount included payment of $1,000 for pain and suffering, medical bills thus far incurred, rental car expenses and car repairs. In addition, $2,000 was set aside for future medical expenses incurred over the next 18 months. The only party named in the release was "RICHARD GOODMAN DBA DICK'S EXHAUST".

Prior to signing the release, Mrs. Vanderpool did not have or seek the advice of an attorney. The parties did not discuss release of Mr. Curtis or compensation for future lost wages. Mrs. Vanderpool testified that she believed Mr. Droz treated her fairly and that she never intended to release Mr. Curtis by signing the agreement, and that she believed her condition would improve. Mr. Droz' knowledge of her condition was limited to what the Vanderpools had told him; he never obtained medical records because Mrs. Vanderpool indicated that her injuries were minor.

The drafts issued as consideration for the release contained language stating that endorsement by the payee constituted release of all claims against all parties associated with the accident. The Court of Appeals noted that both Mrs. Vanderpool and Mr. Droz testified that they believed this language was superfluous and did not alter their formal agreement.

After signing the release, Mrs. Vanderpool sought additional medical treatment. The condition of her injured leg had not improved and surgery was recommended. On May 18, 1982, Mr. Vanderpool approached Mr. Droz to see whether Grange would cover his wife's lost wages while she was having diagnostic knee surgery. Because future lost wages were not covered by the release, Grange refused to reopen the settled claim. The Vanderpools sued, seeking rescission of the release and a judgment for personal injuries and property damages.

The trial court did not find any evidence of intentional fraud, wilful false representation or overreaching, but rescinded the release of Goodman on the theory of "negligent misrepresentation by omission". The court held that Mr. Droz had an affirmative duty to inform Mrs. Vanderpool that she could settle the bodily injury and property damage claims separately. The Court of Appeals reversed in an unpublished opinion, holding that Mr. Droz had no affirmative duty under the circumstances to inform the plaintiffs that settlement under one part of the policy could take place while settlement under another section of the policy was held in abeyance. The Court of Appeals also held that the release of Goodman, a vicariously liable solvent principal, also released Mr. Curtis, a primarily liable agent.

Mrs. Vanderpool petitioned for review of one limited issue: whether the release of a principal prior to the filing of a lawsuit where the injured party is unrepresented by counsel also releases the responsible agent who caused the injury. We hold that settlement with a principal does not automatically release the primarily liable agent.

In Glover v. Tacoma Gen. Hosp., 98 Wash.2d 708, 658 P.2d 1230 (1983), we held that settlement with a solvent agent released the vicariously liable principal after the trial court judge determined that the settlement was reasonable. Grange incorrectly contends that Glover is controlling authority in this case. When, as in Glover, a plaintiff settles with a solvent agent from whom he could have received full compensation, the very foundation of the principal's liability is undermined. A principal is only secondarily liable under a respondeat superior theory. The policy reasons underlying vicarious liability (to afford the plaintiff the maximum opportunity to be fully compensated) are inapplicable when a plaintiff has accepted a release from the primarily liable tortfeasor who was financially capable of making him whole. There is no policy reason to allow that plaintiff to then pursue a claim against the defendant who is only secondarily liable. The Glover court is clear that the principal is released by operation of law as a result of a release of the agent only if that agent is solvent. Glover, at 722, 658 P.2d 1230.

Furthermore, the Glover result is necessary because a release between a plaintiff and an agent would foreclose any possibility of the principal receiving contribution from his agent. RCW 4.22.040(3) abolishes the common law right of indemnity between passive and active tortfeasors. However, with regard to the abolition of implied indemnity, the Senate Select Committee on Tort and Product Liability Reform Final Report states, "Under current law where the active/passive analysis can be applied, the entire liability can be shifted from the passive tortfeasor to the active tortfeasor." Senate Journal, 47th Legislature (1981), at 636 (the difference now is that the shifting takes place under a comparative fault analysis). This therefore should allow an innocent secondarily liable principal to seek contribution against the agent wrongdoer. However, if a plaintiff settles with an agent, the present statutes extinguish the nonsettling principal's right to contribution from the primarily liable agent. RCW 4.22.060(2). See also Zamora v. Mobil Oil However, no such policy reasons exist when a principal is released and a plaintiff sues the actual wrongdoer. There is no reason to apply RCW 4.22.040(1) which allows a court to determine that two or more persons may be treated as a single person. Rather, RCW 4.22.060(2) should be applied. RCW 4.22.060(2) states: "A release ... entered into by a claimant and a person liable discharges that person from all liability for contribution, but it does not discharge any other persons liable upon the same claim unless it so provides."

                Corp., 104 Wash.2d 211, 220, 704 P.2d 591 (1985).   Such inequity led this court in Glover to find that settlement with a solvent agent also serves by operation of law to release the principal.   Glover, 98 Wash.2d at 723, 658 P.2d 1230.   It would be inequitable to allow a plaintiff to recover from a principal after destroying the principal's right to reimbursement from the actual wrongdoer
                

Releases are contracts and their construction is governed by the legal principles applicable to contracts and they are subject to judicial interpretation in light of the language used. Stottlemyre v. Reed, 35 Wash.App. 169, 171, 665 P.2d 1383, review denied, 100 Wash.2d 1015 (1983). The pivotal inquiry is whether the parties to the release intended to release both the principal and the agent. If such intent is clear from the language of the release, then both parties are released. However, absent such evidence of intent to release both parties, the statute provides that no other person liable on the same claim is released. RCW 4.22.060(2). The statute is clear that no reservation of rights against another tortfeasor is necessary to retain a cause of action against a nonsettling defendant. This is sound policy because releases frequently are signed by plaintiffs ignorant of the law and without legal advice. W. Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and Keeton on Torts 335 (5th ed. 1984).

There are many situations where a plaintiff might settle with a principal,...