Partial Settlements in Multiparty Tort Actions: the Latest Chapter
| Publication year | 1993 |
| Pages | 2529 |
| Citation | Vol. 22 No. 12 Pg. 2529 |
1993, December, Pg. 2529. Partial Settlements in Multiparty Tort Actions: The Latest Chapter
Soon after Colorado enacted its "tort reform" legislation, one author warned that "partial settlements by less than all tortfeasors create special problems."(fn1) This article considers some of these special problems arising from the conflicting terms of Colorado's collateral source and contribution statutes, and the attempts by the Colorado Court of Appeals to reconcile these statutes, most recently by its decision in Gutierrez v. Bussey(fn2) and Smith v. Zufelt.(fn3)
At least two Colorado statutes address the effect of a partial settlement in multiparty tort actions. The goal of these statutes is the same, but they employ different terms and concepts.
The collateral source statute(fn4) adopts a "dollar reduction rule": the plaintiff's verdict is reduced by the dollar amount of his or her settlement. In contrast, the contribution statute(fn5) uses a "percentage reduction rule": the plaintiff's aggregate claim against the nonsettling defendants is reduced by the percentage fault of the settling party. Application of each rule to the same set of facts can produce significantly different results, as illustrated by Example 1.
(Alternative A) Collateral Source Statute(Alternative B) Contribution Statute
Assume that a $30,000 partial settlement is followed by a $100,000 verdict, and the jury allocates fault as follows: plaintiff 0 percent; defendant 85 percent; and settling party 15 percent. The two settlement reduction statutes yield recoveries that differ by $15,000.
Under Gutierrez,(fn6) decided in April 1992, Alternative B would be correct. Under Smith,(fn7) which was decided in September 1992 and is now before the Colorado Supreme Court, Alternative A would be correct. These results are particularly surprising, given that both decisions state that their results follow from the same three principles. The Colorado Court of Appeals suggests in each decision that: (1) the collateral source statute and the contribution statute must be reconciled, if possible, so as to give effect to each; (2) the statutes must be applied to fulfill the legislature's intent to limit a tortfeasor's liability to the percentage of his or her own negligence; and (3) the statutes must be construed to allow plaintiffs to recover the full amount of their damages.(fn8)
Gutierrez and Smith, taken together, establish that the settling party's percentage fault and the amount of his or her settlement determine which of the two settlement reduction statutes controls. More particularly, they establish three basic rules:
Rule 1. If the settling party is not found to be at fault, the collateral source statute and its dollar reduction rule control.
Rule 2. Subject to Rule 3, if the settling party is found to be at fault, the contribution statute and its percentage reduction rule control.
Rule 3. If the amount of the settlement exceeds the settling party's percentage share of the verdict, follow Rule 1 with respect to the excess amount (that is, the collateral source statute controls).
Neither Gutierrez nor Smith deals with the treatment of multiple settlement agreements. It is unclear whether a court, when determining which of the three basic rules applies, should consider separately or collectively the fault and separate settlement payment of each settling party. Another question is whether the basic rules are consistent
with encouraging settlement and simplifying...
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