Reading Tea Leaves: the Future of Negotiations for Tort Claimants Free from Fault

• Publication year: 1991
• Citation: Vol. 15 No. 02

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 15, No. 2WINTER 1992

Reading Tea Leaves: The Future of Negotiations for Tort Claimants Free From Fault

Cornelius J. Peck (fn*)

I. Introduction

In April, 1991, the Washington Supreme Court issued an opinion in what the casual reader might consider to be a case raising only a technical question concerning workers compensation laws. The case, Clark v. Pacificorp,(fn1) concerned the Department of Labor and Industries' right to reimbursement for benefits paid to an injured worker from a recovery made by the injured worker in a suit against a party other than the worker's employer. The court held that the department did not lose that right to reimbursement merely because it was determined, in the suit brought by the worker, that the employer had also been at fault in the accident that caused the injuries.(fn2) The decision precludes what otherwise would have been opportunities for disasterous raids on the Workers Compensation Fund. The statements made in the opinion concerning the process of negotiation of settlements for tort law suits were, however, much broader than necessary for resolution of the technical question presented. They appear to have significance for the negotiation of settlements in all tort suits involving more than one defendant. Their presence in the opinion, like leaves left in a tea cup, provides a basis for predicting the course that the negotiation of claims involving more than one defendant may take in the future.

This Article first reviews what a study of the 1986 Tort Reform Act reveals to be problems created by that Act for negotiators of settlements in tort suits. These problems are greatest for fault-free plaintiffs. Next, a summary of the previous law governing joint and several liability provides an understanding of these problems and the changes negotiators should make in their negotiation stategies. The court's success in avoiding the mandated disaster for the Workers Compensation Fund raises the possibility that the court may also provide fault-free plaintiffs with an easier escape from the perils and pitfalls created by the Act for the negotiation of settlements with multiple defendants. The likelihood, however, is that the court will not provide that escape. It therefore becomes appropriate to analyze carefully the statements made by the court concerning the negotiation process to ascertain their application to other situations. It is also appropriate to suggest how the law governing negotiation of tort cases involving multiple defendants should develop.

II. Joint and Several Liability Before the 1986 Tort Reform Act

For present purposes, an adequate description of the Washington law of joint and several liability is set out in two decisions of the Washington Supreme Court.(fn3) In Seattle-First National Bank v. Shoreline Concrete,(fn4) the court rejected the argument that adoption of the principle of comparative negligence required abandonment of the rule of joint and several liability. In the course of its opinion, the court briefly summarized the law governing joint and several liability.

The court first noted that tortfeasors had long been held liable for all the harm proximately caused by their tortious conduct.(fn5) This principle applied both to joint tortfeasors (those who acted in common or breached a joint duty) and to those whose independent acts concurred to produce an indivisible injury.(fn6) The indivisibility of the harm caused, combined with the goal of providing full compensation to an injured party, allowed the injured party to seek full recovery from any one, or from all tortfeasors.(fn7) Problems of fairness among multiple tortfeasors were considered to be different from problems of fairness to the injured party.(fn8)

Fairness among multiple tortfeasors was provided by the 1981 statute establishing contribution among joint or concurrent tortfeasors.(fn9) The basis for contribution among persons who were jointly and severally liable was the comparative fault of each person.(fn10) The right to contribution could be enforced either in the original action brought against the joint tortfeasors or in a subsequent suit against them by a party who had paid more than its equitable share of the joint obligation.(fn11) Settlements were encouraged by the statute's provision that a settlement relieved a settling tortfeasor from all liability for contribution.(fn12) The claim of the releasing party against other tortfeasors was reduced by the amount paid pursuant to the settlement agreement, unless the amount paid was unreasonable at the time of the agreement.(fn13)

The law provided for a presettlement determination of whether the amount to be paid was reasonable.(fn14) If such a determination was not made and the amount paid was not sufficient, the statutory language established that the releasing party bore the loss of a reduced recovery from the remaining tortfeasors; on the other hand, the statutory language established that the remaining tortfeasors were the beneficiaries if the settling tortfeasor paid more than his equitable share. The Washington Supreme Court's decision in Glover v. Tacoma General Hospital(fn15) provided a list of factors to be considered in determining whether the settlement amount was reasonable.(fn16)

III. The Problems Created by the 1986 Tort Reform Act

In 1986, I was privileged to serve as chair of a committee appointed by the insurance commissioner of the State of Washington to review and evaluate the changes made in Washington's tort system by the 1986 Tort Reform Act. In addition to the commissioner and the chair, the committee consisted of six attorneys and two nonlawyers. Three of the attorneys specialized in representing plaintiffs in tort litigation; the other three specialized in defending against tort actions. As might be expected, the attorneys' opinions diverged in their appraisal of the wisdom of the 1986 Act's substantive changes. The attorneys were, however, in substantial agreement that the Washington State Legislature had created a number of problems by accepting the Act as drafted. Those problems must not have been foreseen. It is nearly impossible to believe that the legislature or its draftpersons intended to create some of the difficulties for practitioners and judges revealed by studying the statutory language.(fn17)

One of the committee's concerns was that a major provision of the 1986 Act would seriously complicate settlements in cases involving multiple defendants and fault-free plaintiffs.(fn18) That provision is now found in Revised Code of Washington (RCW) 4.22.070.(fn19) It provides that in all actions involving fault of more than "one entity," the trier of fact shall determine the percentage of the total fault attributable to every entity that caused a claimant's damages. Judgment shall be entered against each defendant for that defendant's proportional share of a claimant's total damages. Thus, a plaintiff receives no judgment for shares of damages attributable to entities not joined as defendants and receives no compensation for those portions of the losses suffered.

The section further provides that liability shall "be several only and shall not be joint."(fn20) The Act provides an exception for cases in which the trier of fact determines that the claimant was not at fault. The focus of attention in this Article is on that exception.

For cases in which a plaintiff is at fault and the liability of the defendants is "several only," the Act created few negotiation complications. Negotiation of those cases may proceed with little regard for the effect a settlement would have on claims against other potential defendants. The inquiry focuses on determining the defendant's share of the total fault and the amount that the defendant can pay.(fn21)

Cases involving fault-free plaintiffs are much more complicated. The statutory language appears to limit joint and several liability of multiple defendants to cases in which a trier of fact has determined that the claimant was not at fault.(fn22) There is no statutory language providing for that joint and several liability without such a finding.

In addition, the statutory language seems to require that a judgment be entered to establish joint and several liability. This conclusion is supported by the provision establishing rights to contribution between defendants. The provision is limited to those defendants whose liability has been established pursuant to one of the section's specific exceptions to its general rule of several liability.(fn23) This restriction of the right to contribution suggests that only those against whom a judgment for joint and several liability has been entered have such a liability. Persons with such a liability have need for contribution, but for persons whose liabilities are established under the Act, there is no other provision for contribution. Specifically, there is no provision for contribution among persons who have settled before judgment.(fn24) The provision concerning contribution thus supports a conclusion that a fault-free plaintiff can establish the joint and several liability of multiple defendants only by obtaining a judgment against all of them. A settling defendant who plans to seek contribution from joint tortfeasors should insist upon a judgment.

If this is a correct understanding of the changes made by the 1986 Tort...