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Third Party Settlement

THIRD PARTY PRACTICE IN THE CONTEXT OF A SUBROGATION CLAIM: Overlooked Dollars Recoverable Under Theories of Indemnity and/or Contribution after a Third-Party Settlement

 

Introduction

Because subrogation involves "stepping into" the shoes of another, when an insurer brings an action against a tortfeasor based upon its subrogation rights, the insurer's rights flow from the insured's rights. The subrogated insurer can be subrogated to and enforce only such rights as the insured has against the party whose wrong caused the loss. In a subrogation suit, a tortfeasor may assert against the insurer any defense that the tortfeasor could have asserted against the insured. See 4 R. Long, The Law of Liability Insurance § 23.03[2], at 23-13 to 23-14 (1998).
Since an insurer’s rights flow from the insured’s rights, it is important not to overlook subrogation actions based on indemnity and/or contribution. The key to successful Third-Party Practice in the subrogation context is understanding who has been damaged. Indemnity and/or contribution actions only arise when a third-party has been damaged. Thus, it is not the insured’s damages you are seeking to recover, but instead, the carrier is seeking to enforce its insured’s indemnity and/or contribution rights from another party who caused or contributed to the Third-Party’s damages. In order to be successful in protecting a carrier’s subrogation rights in these situations, one must understand how the applicable statutes and case law for the jurisdiction at issue control indemnity and/or contribution actions. Although this presentation will focus on South Carolina law, the majority of states follow similar statutes and/or principles when it comes to Third-Party Practice. Nonetheless, each jurisdiction needs to be properly researched in order to be sure that a third-party subrogation claim is properly protected and instituted.
Common Examples and Questions (answers and suggestions under last heading):

1. A, B and C are involved in a three car accident on January 1, 2000. There is no dispute that A & B both contributed to the accident which caused C to suffer property damages and bodily injuries. The carrier for A pays the claim made by C because B refused to contribute to the settlement and A was concerned with the exposure and costs to defend. A makes sure to have the liability of B fully extinguished by the release signed by C on March 23, 2004 in consideration of the $10,000.00 settlement proceeds tendered

What is the best recourse for A’s carrier?

  • can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
  • what amount can A’s carrier expect to receive from B if they institute suit?
  • when must A institute suit in order to beat the SOL?
  • what elements of the claim must be satisfied in order to recover against B?
2. A is the general contractor for the construction of a new home for C. A subcontracts with B to install the synthetic stucco. A few years later C finds water intrusion due to the faulty installation of the synthetic stucco by B. C sues A who pays the claim in full with no contribution from B. A makes sure to have the liability of B fully extinguished by the release signed by C on March 23, 2004 in consideration of the $100,000.00 settlement proceeds tendered.
What is the best recourse for A’s carrier?
  • what amount can A’s carrier expect to receive from B if they institute suit?
  • when must A institute suit in order to beat the SOL for the claim(s) asserted?
  • what elements of the claim(s) must be satisfied in order to recover against B?
3. A operates a trucking company and one of their drivers is permitted to use a weight scale on property owned by B who also leases a radio communication tower to C located on the same property. When A’s driver attempts to turn around on the property owned by B, he comes into contact with a guy wire supporting the radio tower which causes the radio tower to collapse resulting in significant property damages to C. There is no dispute that A’s driver was negligent for failing to keep a proper lookout and that B was negligent for failing to warn A’s driver about the location of the guy wire. A’s carrier settles with C for $400,000.00 but fails to obtain a general release of all persons or otherwise extinguish the liability of B to C. It is found that the $400,000.00 settlement was a compromise and it did not fully satisfy all damages that could have been claimed by C. A’s carrier wants to sue B for indemnity and contribution.  
What is the best recourse for A’s carrier?
  • can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
  • what amount can A’s carrier expect to receive from B if they institute suit?
  • when must A institute suit in order to beat the SOL for the claim(s) asserted?
  • what elements of the claim(s) must be satisfied in order to recover against B?

I. Equitable Indemnification

 

A. Background

"Indemnity is that form of compensation in which a first party is liable to pay a second party for a loss or damage the second party incurs to a third party. A right to indemnity may arise by contract (express or implied) or by operation of law as a matter of equity between the first or second party." 

Town of Winnsboro v. Wiedeman‑Singleton, Inc.

, 303 S.C. 52, 56, 398 S.E.2d 500, 502 (Ct. App. 1990) aff'd, 307 S.C. 128, 414 S.E.2d 118 (1992) (allowing contractor to recover attorneys' fees and costs under equitable indemnification claim against subcontractor because jury absolved contractor from liability). 

There are two types of indemnity‑‑equitable and contractual. Because contractual indemnity is limited to the terms of an express or implied contract, it will not be discussed here. However, common law definitions of equitable indemnification sweep broadly and may provide relief in many circumstances. James T. Irvin, III, “Easing a Client’s Pain After The Game is Over: Contribution, Indemnification and Set Off”, 13 Oct, S.C. Lawyer 28 (2001).

South Carolina has long recognized the principle of equitable indemnification.

See Vermeer Carolina's Inc. v. Wood/Chuck Chipper Corp. , 336 S.C. 53, 518 S.E.2d 301 (Ct. App. 1999); Stuck v. Pioneer Logging Machinery, Inc., 279 S.C. 22, 301 S.E.2d 552 (1983); Addy v. Bolton, 257 S.C. 28, 183 S.E.2d 708 (1971). Traditionally, courts have allowed equitable indemnity in cases of imputed fault or where some special relationship exists between the first and second parties. See Town of Winnsboro, 303 S.C. 57, 398 S.E.2d 503; See also Stuck, 279 S.C. 22, 22, 301 S.E.2d 552, 552 (holding purchaser of defective vehicle was entitled to indemnification from seller where purchaser was sued by a third party for an accident caused by the defective condition).

Ordinarily, if one person is compelled to pay damages because of negligence imputed to him as the result of a tort committed by another, he may maintain an action over for indemnity against the person whose wrong has thus been imputed to him. Atlantic Coast Line R.R. v. Whetstone, 243 S.C. 61, 132 S.E.2d 172 (1963). This is subject to the proviso that no personal negligence of his own has joined in causing the injury. Id. In Stuck v. Pioneer Logging Machinery, Inc., 279 S.C. 22, 301 S.E.2d 552 (1983), our Supreme Court explained:

We note that the modern trend concerning the right to indemnity is to look to principles of equity. According to equitable principles, a right of indemnity exists whenever the relation between the parties is such that either in law or in equity there is an obligation on one party to indemnify the other, as where one person is exposed to liability by the wrongful act of another in which he does not join.

Stuck, 279 S.C. at 24, 301 S.E.2d at 553.

Thus, according to South Carolina law, in order to sustain a claim for equitable indemnity, the existence of some special relationship between the parties must be established as a prerequisite to recovery. Further, in order for a party to recover under a theory of equitable indemnification, three things must be proven: (1) the indemnitor was liable for causing the Plaintiff's damages; (2) the indemnitee was exonerated from any liability for those damages; and (3) the indemnitee suffered damages (i.e. settlement, costs and expenses etc.) as a result of the Plaintiff's claims against it which were eventually proven to be the fault of the indemnitor.
 
 

B. What constitutes a special relationship?

 
In Toomer v. Norfolk Southern Railway Company, 2001 WL 137612 (S.C. Ct. App. 2001), the Court of Appeals for South Carolina held that “[i]n order to sustain a claim for equitable indemnity, the existence of some special relationship between the parties must be established” as a prerequisite to recovery.  See First Gen. Servs. v. Miller, 314 S.C. 439, 443, 445 S.E.2d 446, 448 (1994) ("We hold that the relationship of contractor/subcontractor is a sufficient basis to support a claim of equitable indemnification."); Stuck, 279 S.C. at 22, 301 S.E.2d at 552 (holding purchaser of defective vehicle was entitled to indemnification from seller where purchaser was sued by a third party for an accident caused by the defective condition); Addy, 257 S.C. at 28, 183 S.E.2d at 708 (holding landlord entitled to indemnification from general contractor for damage contractor caused to tenant's property); Griffin v. Van Norman, 302 S.C. 520, 397 S.E.2d 378 (Ct.App.1990) (holding house vendor entitled to indemnification from exterminator for settlement reached with purchaser where vendor had no knowledge that exterminator's wood infestation report issued to seller was false); Vermeer Carolina's, Inc. v. Wood/Chuck Chipper Corp., 336 S.C. 53, 67, 518 S.E.2d 301, 309 (Ct.App.1999) ("Parties that have no legal relation to one another and who owe the same duty of care to the injured party share a common liability and are joint tortfeasors without a right to indemnity between them."). 
 

In Toomer, Personal representatives of estate of passenger, who was fatally injured when vehicle in which he was riding was struck by a train, brought wrongful death and survival action against railroad, Department of Transportation, county, and driver of vehicle, alleging negligence and joint and several liability.  Id.Railroad asserted cross‑claims for contractual and equitable indemnity against driver.  Id. After railroad dropped its cross‑claim for contractual indemnity, the Circuit Court, Orangeburg County, Jackson V. Gregory, J., granted summary judgment for driver on the equitable indemnity cross‑claim. Railroad appealed. The Court of Appeals, Goolsby, J., held that railroad could not recover on cross‑claim for equitable indemnity absent evidence of some special relationship between railroad and driver.  Id.

 

Therefore, S.C. Appellate Courts have recognized the following relationships between parties in litigation as satisfying the special relationship requirement for equitable indemnification: contractor/sub-contractor; purchaser/seller; landlord/general contractor; and house vendor/exterminator. I am not aware of any decision where a S.C. Appellate Court recognized a special relationship between mere drivers of vehicles who are subsequently involved in the same vehicular accident.

 

C. Can an alleged tortfeasor settle with the injured claimant and still seek equitable indemnification?

 
Yes, if they are later found not to be at fault during the indemnity litigation. Under South Carolina law, innocent defendant’s cost of settling a case is recoverable from actual tortfeasor under theory of equitable indemnity under the following circumstances: (1) if the settlement is bona fide, with no fraud or collusion by the parties; (2) if, in the circumstances, the decision to settle is a reasonable means of protecting the innocent party's interest; and (3) if the amount of the settlement is reasonable in light of the third party's estimated damages and the risk and extent of defendant's exposure if the case is tried.

Griffin v. Van Norman, 302 S.C. 520, 523, 397 S.E.2d 378, 380 (Ct. App. 1990) (where the court held vendor, who had no knowledge that exterminator's wood infestation report to purchasers was false, was entitled to recover from exterminator amount paid to purchasers in order to settle their fraudulent representation claim, under theory of equitable indemnification, where settlement was bona fide, reasonably entered into and reasonable in amount). A decision to settle is reasonable when it will eliminate the need for an expensive trial and avoid the possibility of a verdict against the party settling.   Id at 524.

Consequently, payment of a settlement on behalf of the insured to an injured party will not prevent insured’s carrier from continuing to seek equitable indemnification from at-fault party. However, the carrier would first have to establish that it has a right to equitable indemnity (i.e. their insured was not at fault), and then that the settlement entered was reasonable under the circumstances.

 

D. When does the SOL begin to run for a claim of equitable indmenification

The general rule, followed by the majority of jurisdictions addressing the issue, including South Carolina, is that the cause of action for indemnity based upon tort, is distinct from the cause of action for the underlying tort, and the time when the statute of limitations starts to run upon such cause of action is not when the tort is committed, but when the underlying claim, a judgment thereon, or a settlement thereof is paid. See First General Services of Charleston v. Miller, 314 S.C. 439, 445 S.E.2d 446 (1994) (where the court held as to indemnity, the statute of limitations generally runs from the time judgment is entered against the defendant claiming a right to indemnity); See also Maurice T. Brunner, “When Statute of Limitations Commences to Run Against Claim For Contribution or Indemnity Based on Tort”, 57 A.L.R.3d 867, § 4(a-b) (1974) (citing many cases from federal and state court jurisdictions who follow the general rule that indemnity does not accrue until the liability of the indemnitee to the injured person is fixed as by judgment or settlement). In First General Services of Charleston, the South Carolina Court of Appeals held that absent judgment against contractor on owner's claims, contractor's third‑party claim for equitable indemnity against subcontractor was not time barred. 445 S.E.2d at 449.

A minority of jurisdictions have held that the statute may run from the date of the tort, however, I am aware of any binding case law to that effect in South Carolina. See Brunner, 57 A.L.R.3d 867, § 4(c) (citing cases following minority view).

Therefore, a court is likely to hold that an insured’s claim for equitable indemnification against at-fault party accrues when a settlement is paid or a judgment entered, and consequently, insured has three years from the date of a settlement or judgment to pursue the at-fault party.

 

II. Contribution

A. The Uniform Contribution Among Joint Tortfeasors Act

Until 1988, the old common-law rule prohibiting contribution among joint tortfeasors was followed in South Carolina. See Robert H. Brunson, Contribution in South Carolina—venturing into uncharted waters. 41 S.C. L. Rev. 533, 535 (Spring 1990). “In 1939, the national Conference of Commissioners on Uniform State Laws drafted the first Uniform Contribution Among Tortfeasors Act.” Id at 547. The Uniform Contribution Among Tortfeasors Act (hereinafter “UCATA”) was revised in 1955, and by 1988 seventeen states had adopted it, including South Carolina who adopted the 1955 version with few changes. Id; S.C. Code Ann. §§ 15-38-10 to 70 (Law. Co-op. Supp. 1998).
The UCATA provides for contribution when two or more persons become jointly and severally liable in tort for the same injury to person or property, “even though judgment has not been recovered against all or any of them”. Id at 547; S.C. Code Ann. § 15-38-20(A) (Law Co-op. Supp. 1998). South Carolina’s UCATA provides for a limited right of contribution to recover a portion of an out-of-pocket settlement, but the settlement must first extinguish the liability of another tortfeasor. Id at 548; S.C. Code Ann. § 15-38-20(D) (Law Co-op. Supp. 1998).
The South Carolina UCATA provides, in relevant part, that "[a] tortfeasor who enters into a settlement with a claimant is not entitled to recover contribution from another tortfeasor whose liability for the injury or wrongful death is not extinguished by the settlement nor in respect to any amount paid in a settlement which is in excess of what was reasonable." S.C. Code Ann. § 15-38-20(D) (Law Co-op. Supp.1998). Moreover, the South Carolina UCATA provides that a release given to one of two or more persons liable in tort for the same injury “does not discharge any other tortfeasors from liability for the injury . . . unless its terms so provide”. S.C. Code Ann. § 15-38-50 (1) (Law Co-op. Supp. 1998); See also Vaughn v. Anderson, 300 S.C. 55, 58, 386 S.E.2d 297, 299 (Ct.App.1989) (where the court held a settlement or covenant not to sue with one tortfeasor does not discharge any other tortfeasor unless its terms so provide or the plaintiff has received full compensation amounting to a satisfaction); Trustees of Grace Reformed Episcopal Church v. Charleston Insurance Co., 868 F. Supp. 128 (D.S.C. 1994) (where the court held plaintiffs were not barred by their settlement and covenant not to execute with one tort‑feasor from seeking additional recovery with another tort‑feasor).
           
Thus, the following two requirements must be established before a settling tortfeasor may recover contribution from a nonsettling tortfeasor[1][1]: (1) the settlement agreement must extinguish the non settling tortfeasor’s liability; and (2) the settlement amount must be reasonable. See Brunson, 41 S.C. L. Rev. at 600. For purposes of commencing a contribution action where there is no judgment against any tortfeasors, the South Carolina UCATA provides in relevant part, that “[i]f there is no judgment for the injury or wrongful death against the tortfeasor seeking contribution, his right of contribution is barred unless he has either (1) discharged by payment the common liability within the statute of limitations period applicable to claimant's right of action against him and has commenced his action for contribution within one year after payment, or (2) agreed while action is pending against him to discharge the common liability and has within one year after the agreement paid the liability and commenced his action for contribution. S.C. Code Ann. § 15-38-40 (D) (Law. Co-op. Supp. 1998).

B. Analysis of Requirement to Extinguish Liability with Settlement as Pre-requisite to Entitlement for Contribution

Although South Carolina Appellate Courts have addressed the application of South Carolina’s UCATA[2][2], there was no authority in South Carolina, other than the plain language of the Act, until G & P Trucking v. Parks Auto Sales Service & Salvage, 357 S.C. 82, 591 S.E.2d 42 (Ct. App. 2003) which addressed the requirement that a settlement must extinguish the potential liability of the party for whom contribution is being sought in order for relief to be granted[3][3].
Notwithstanding such, there was ample persuasive authority addressing this issue which provided the South Carolina Court of Appeals with great guidance in this area when hearing appellate arguments in the G & P case. See 18 Am. Jur. 2d Contribution § 70, Right To Settling Tortfeasor To Seek Contribution; See also Anne M. Payne, J.D., Annotation, Release of One Joint Tortfeasor as Discharging Liability of Others Under Uniform Contribution Among Tortfeasors Act and Other Statutes Expressly Governing Effect of Release, 6 A.L.R.5th 883 (1992).
“Although it has been held that a joint tortfeasor, who enters into a settlement of the common liability with an injured person, is entitled to recover contribution from another tortfeasor, whose liability to the injured person was extinguished by that settlement, it may be provided by statute that a settling joint tortfeasor may not obtain contribution from another joint tortfeasor whose liability was not extinguished by the settlement”. 18 Am. Jur. 2d Contribution § 70, citing Lubbock Mfg. Co. v. International Harvester Co., 584 SW2d 908 (Tex Civ App 1979) (Where the manufacturer of a defective tractor trailer settled with various persons injured when propane tanks in the tractor trailer exploded, but was the only party named in the release, none of the claims of the injured partys against the distributor of the tractor trailer were extinguished so that the manufacturer had no right of contribution from the distributor); Castillo v Roger Constr. Co. 560 F2d 1146 (3rd Cir. 1977) (holding that, however, a settling joint tortfeasor would not be precluded from pursuing the right to contribution after obtaining a joint tortfeasor release, rather than a general release, for the pro rata share of the total settlement from other joint tortfeasors who subsequently settled with the injured person for a sum including the sum paid by the joint tortfeasor seeking contribution).
The equitable principle which supports contribution is that the party who seeks payment has conferred an advantage or benefit on the party for whom payment is sought. See Reserve Insurance Company v. Village of Big Lake, 230 N.W.2d 47 (Minn. 1975). Although jurisdictions are split as to whether a general release obtained by a party seeking contribution satisfies the extinguishment of liability requirement if the terms of the release discharge “all other persons” without specific designation of tortfeasor for whom contribution is sought[4][4], the courts in the following cases held that failure to extinguish non-settling tortfeasor(s) liability by settlement barrs right to contribution from non-settling tortfeasor.  See Allbright Bros., Contractors, Inc. ex rel. National Surety Corp. v Hull‑Dobbs Co. 209 F2d 103 (6th Cir. 1953) (in contribution suit, acknowledgment of full settlement given to one joint tortfeasor, did not release other joint tortfeasor, and therefore contribution right was denied due to failure to extinguish liability); Industrial Risk Insurers v. Creole Production Services, Inc., 568 F.Supp. 1323 (D.Alaska 1983) (where the court held under Alaska law, firm which provided design of pump stations on Alaska pipeline had no liability in contribution to firm which was in charge of start‑up operations and which settled with pipeline company for loss sustained in pump station explosion where design firm was not named as released party in the settlement, and consequently, summary judgment was granted to design firm on issue of contribution); Lubbock Mfg. Co., 584 SW2d 908 (Tex Civ App 1979) (cited above); Pearson Brothers Co. Inc. v. Allen, 131 Ill. App.3d 699, 476 N.E.2d 73 (1985) (where the court held alleged tort-feasor who had settled with estate of injured party had no right of contribution from alleged tort-feasor who was not specifically named in release instrument and whose liability was not extinguished by settlement, despite contentions by party seeking contribution that statute of limitations ran during contribution litigation); Guerrero v. Sebastian Contracting Corp., 321 Ill.App.3d 32, 746 N.E.2d 846 (2001) (where the court held that the physicians did not specifically name the employer as a released party in their separate settlement with widow so as to extinguish the employer's tort liability and, thus, were not entitled to recover contribution from the employer); St. Mary’s Hospital v. Health Personnel Options Corp., 309 Ill.App.3d 464, 721 N.E.2d 1213 (1999) (where the court held hospital's failure toextinguish the liability of the staff provider or the nurse when settling the medical malpractice suit barred the hospital from seeking contribution or implied indemnity against the provider); Puckett v. Empire Stove Company, 183 Ill.App.3d 181, 539 N.E.2d 420 (1989) (where the court held installer of furnace which allegedly caught fire and injured resident of house, who settled with victim and purportedly assigned to victim his right of contribution from manufacturer of gas valve used in furnace, had nothing to assign, since under Contribution Among Joint Tortfeasors Act any tort‑feasor who settles with claimant pursuant to release or covenant not to sue or not to enforce judgment is not entitled to recover contribution from another tort‑feasor whose liability was not extinguished by settlement); Reserve Insurance Co., 230 N.W.2d 47 (Minn. 1975) (where the court held payment by one alleged tortfeasor subject to liability did not relieve another alleged tortfeasor’s possible liability in whole or part, no benefit was conferred, and therefore, contribution was denied); Kovalesky v. Giant Rug Market, 422 Pa.Super 116, 618 A.2d 1044 (1993) (where the court held Pennsylvania’s UCATA did not allow person injured in slip‑and‑fall accident at swimming pool, to whom pool owners assigned, under terms of settlement agreement, their right to contribution against two alleged joint tort‑feasors, to recover from those tort‑feasors where settlement did not extinguish liability of joint tort‑feasors); Schuman v. Vitale, 144 Pa.Cmwlth. 560, 602 A.2d 390 (1992) (where the court held that where there are two or more joint tort‑feasors and one of them settles with injured person, such settling joint tort‑feasor may not recover contribution from other nonsettling joint tort‑feasors unless settlement by which settling joint tort‑feasor extinguishes liability of nonsettling joint tort‑feasor to injured person, and therefore, settling joint tortfeasor was not entitled to contribution under Pennsylvania’s version of the UCATA).
Consequently, the G & P case has now firmly established that under South Carolina law, that in order to recover contribution from a non-paying joint tortfeasor, extinguishment of the defending joint tortfeasor's liability must have resulted directly from the settlement itself with the third-party. Although the G & P court did not comment on whether a general release would suffice for this purpose, a smart adjuster will make sure to name the non-paying joint tortfeasor as one of the parties being released by the third-party or describe the non-paying joint tortfeasor in such detail that there is no doubt the injured party intended to release them in consideration of the settlement proceeds tendered.            

 

III. Practical Considerations

A. Indemnity or Contribution: what recovery is available if the carrier pays a settlement or satisfies a judgment:

1.            Indemnity – recovery equals the entire amount of settlement plus attorney fees in defending the underlying suit (although some states permit the recovery of attorney fees for the pursuit of the indemnity claim, South Carolina does not unless it is provided for by contract).
2.            Contribution—recovery under the Act equals pro-rata share of the settlement from the non-paying tortfeasor and no attorney fees recoverable. Although some states will allocate the percentage of negligence to determine the pro-rata share, in South Carolina, joint and several liability principles control. Therefore, it is arguable that pro-rata share is determined by the settlement amount divided by the number of joint tortfeasors. Consequently, the percentage of negligence does not matter when determining pro-rata shares[5][5].
B.            Mode of trial:
            1.            Indemnity is equitable, therefore, without a jury.
2.            With contribution, a jury decides liability and a judge then declares each tortfeasor’s share.
 

IV. Application to Hypothetical Situations

1.            A, B and C are involved in a three car accident on January 1, 2000. There is no dispute that A & B both contributed to the accident which caused C to suffer property damages and bodily injuries. The carrier for A pays the claim made by C because B refused to contribute to the settlement and A was concerned with the exposure and costs to defend. A makes sure to have the liability of B fully extinguished by the release signed by C on March 23, 2004 in consideration of the $10,000.00 settlement proceeds tendered.
What is the best recourse for A’s carrier?
--can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
--what amount can A’s carrier expect to receive from B if they institute suit?
--when must A institute suit in order to beat the SOL?
--what elements of the claim must be satisfied in order to recover against B?

 

ANSWER:           

 
--There is no indemnity claim because there is no special relationship—further, there is no right to equitable indemnification because A was a joint tortfeasor. There is a claim for contribution provided that the action is commenced within one year after the common liability was extinguished by the release.
--$5,000.00 if the $10,000.00 settlement is determined to be reasonable under the circumstances prevailing (i.e. exposure, costs to defend etc.).
--On or before March 22, 2004.
--(1) That B was a joint tortfeasor; (2) that B’s liability was extinguished by the release with the third-party; and (3) that the settlement paid was reasonable.
2.            A is the general contractor for the construction of a new home for C. A subcontracts with B to install the synthetic stucco. A few years later C finds water intrusion due to the faulty installation of the synthetic stucco by B. C sues A who pays the claim in full with no contribution from B. A makes sure to have the liability of B fully extinguished by the release signed by C on March 23, 2004 in consideration of the $100,000.00 settlement proceeds tendered.
           
What is the best recourse for A’s carrier?
--can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
--what amount can A’s carrier expect to receive from B if they institute suit?
--when must A institute suit in order to beat the SOL for the claim(s) asserted?
--what elements of the claim(s) must be satisfied in order to recover against B?

 

ANSWER:

 
--both indemnity and contribution should be pled.
--if successful in proving the indemnity action, $100,000.00, plus costs and expenses and attorney fees incurred in defending the underlying claim; otherwise, can recover $50,000.00 if successful in proving the contribution action.
--3 years from the date of settlement for the indemnity action; 1 year from the date of the settlement for the contribution action. Thus, it is best to commence both actions together within one of the settlement.
--Indemnity: (1) special relationship existed due to contractor-subcontractor relationship; (2) B was liable for causing the third-party’s damages; (3) A was exonerated from causing any liability for those damages (i.e. no negligence); and (4) A suffered damages as a result of the Third-Party’s claims against it which were eventually proven to be the fault of the indmenitor.
                
Contribution: (1) That B was a joint tortfeasor; (2) that B’s liability was extinguished by the release with the third-party; and (3) that the settlement paid was reasonable.
           
3.            A operates a trucking company and one of their drivers is permitted to use a weight scale on property owned by B who also leases a radio communication tower to C located on the same property. When A’s driver attempts to turn around on the property owned by B, he comes into contact with a guy wire supporting the radio tower which causes the radio tower to collapse resulting in significant property damages to C. There is no dispute that A’s driver was negligent for failing to keep a proper lookout and that B was negligent for failing to warn A’s driver about the location of the guy wire. A’s carrier settles with C for $400,000.00 but fails to obtain a general release of all persons or otherwise extinguish the liability of B to C. It is found that the $400,000.00 settlement was a compromise and it did not fully satisfy all damages that could have been claimed by C. A’s carrier wants to sue B for indemnity and contribution.  
What is the best recourse for A’s carrier?
--can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
--what amount can A’s carrier expect to receive from B if they institute suit?
--when must A institute suit in order to beat the SOL for the claim(s) asserted?
--what elements of the claim(s) must be satisfied in order to recover against B?

 

ANSWER

(these were the facts presented in the G & P case):
 
--neither is applicable; no indemnity because both are joint tortfeasors; no contribution because A failed to extinguish B’s liability to C in the settlement.
               --had the release been prepared properly, $200,000.00 in a contribution action.
            --within one year of the settlement for contribution action;
-- Contribution: (1) That B was a joint tortfeasor; (2) that B’s liability was extinguished by the release with the third-party; and (3) that the settlement paid was reasonable.


[1][1] Of course, the settling tortfeasor must also prove that the party for whom contribution is sought is jointly and severally liable in tort for the same injury.
[2][2] See Adrade v. Johnson, 345 S.C. 216, 546 S.E.2d 665 (Ct. App. 2001); Vermeer v. Wood/Chuck Chipper Corp., 336 S.C. 53, 518 S.E.2d 301 (Ct. App. 1999); Southeastern Freight Lines v. City of Hartsville, 313 S.C. 466, 443 S.E.2d 395 (1994).
[3][3] When I (Capers Owings, Esq.) was a defense attorney at a prestigious large Charleston law firm, I tried the G & P case to verdict and lost because the judge ruled the UCATA was ambiguous. Fortunately for me, the Court of Appeals overruled the trial judge and gave me a long awaited victory.
[4][4] See 6 A.L.R.5th 883, §§ 3 – 16; Compare Moore v. Missouri P. Railroad, 773 S.W.2d 78 (Ark. 1989) (where the court required a release to expressly designate by name or to otherwise specifically describe or identify any tortfeasor to be discharged, assuring fulfillment of the parties to the release, and applied this principal to hold that a general release of a named person and "all other persons, associations and corporations, whether herein named or . . . not, and who . . . may be jointly or severally liable" to the releasor did not sufficiently designate other joint tortfeasors claiming benefit of the release); with State farm Mut. Auto. Ins. Co. v. Reynolds, 676 F.Supp.106 (W.D. Va. 1987) (where the court held that a general release of one tortfeasor and "all other persons" operated to discharge all other tortfeasors unnamed by the release, under a literal interpretation of the release, but apparently limited its holding to cases in which the parties had failed to present any evidence that their intent was other than general. Examining the four corners of the release, the court found that the language, although boilerplate, was clear and forceful, leaving the document subject to no other reasonable interpretation).
[5][5] The issue of pro-rata share may be visited by SC appellate courts in the future in order to devise a more equitable method to enforce one’s contribution rights. If so, the Appellate Courts will have to face a major obstacle with the principle of joint and several liability which provides for no determination of the percentage of negligence among joint tortfeasors.

 

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