No. 87-360
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
ETHEL HANSON,
Plaintiff and Appellant,
-vs-
and S T A T E FARM MUTUAL
MARY O L J A R
AUTOMOBILE INSURANCE COMPANY,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Allen L. McAlear, Fozeman, Montana
For Respondent:
Moore, Rice, O'Connell & Refling; Christopher L.
Manos, Rozeman, Montana
Submit.ted on Briefs: Feh. 11, 1988
Decided: March 25, 1988
Filed: r
Clerk
Mr. Justice 1,. C. Gulbrandson delivered the Opinion of t h e
Court.
Ethel Hanson appeals an Eighteenth Judicial District
Court judgment in favor of Mary Oljar and State Farm Mutual
Automobile Insurance Company. The District Court found that
Ethel Hanson had executed a valid release of all claims
relating to an automobile accident and that she was bound by
the settlement terms. We affirm.
Ethel Hanson (Hanson) and Mary Oljar (Oljar) were
involved in an automobile accident in Bozeman, Montana, on
May 8, 1985. Oljar's vehicle struck Hanson's vehicle while
Hanson was stopped at an intersection. Both parties were
insured by State Farm Mutual Automobil-e Insurance Company
(State Farm). An adjuster for State Farm, Richard Brown
(Brown), investigated the accident and determined that Oljar
was at fault. Brown also obtained a medical report from
Hanson's doctor which listed Hanson's permanent disabilities
from the accident as "undetermined at this time." Brown did
not discuss the medical report with Hanson.
After several negotiations with Hanson, State Farm,
through its adjuster, paid Hanson $4,362.85 for medical
expenses, lost wages, car rental costs, headaches, and
inconvenience. In return for the settlement payments, State
Farm obtained a general liability release from Ethel Hanson
and her husband, Ben Hanson, on July 9, 1985. On July 15,
1985, Hanson sent a thank you note to Brown to express that
she was pleased with Brown's "settlement and prompt service
Unknown to State Farm at the time of settlement, Hanson
had retained a Bozeman attorney on May 31, 1985, to represent
her with regard to two automobile accidents -- the May 1985
accident and an earlier accident in February of 1985. Hanson
did not tell the State Farm adjuster about her attorney nor
did the attorney contact State Farm about the representation.
On July 18, 1985, Hanson visited her doctor and
received a copy of the same medical report sent to Brown.
Hanson took the medical report to her attorney and informed
him that she had received a settlement and had signed a
release. That same day, Hansonls attorney deposited
$1,010.40 in a Bozeman bank payable to State Farm and sent
State Farm a document entitled "Tender of Payment and
Recision of Release." State Farm refused to accept the
tender of payment. On April 14, 1986, Hanson filed this
lawsuit for recision of the release and damages.
The District Court held a non-jury trial on April 17,
1987. Thereafter, the District Court made the following
findings of fact:
1. Richard Brown, an adjuster with
defendant State Farm, investigated
plaintiff's claim of July 19, 1985.
2. Both Mrs. Hanson and Mrs. Oljar were
insured by defendant company. Brown 's
investigation revealed that Mrs. 0 1jar
was at fault in the automobile collision.
3. Mr. Brown was informed of medical
bills, lost income and property damage
incurred by plaintiff.
4. Brown talked with plaintiff about
medical payments and lost income. He
authorized an advance payment of $678.23
on June 13, 1985. Brown paid advances on
wages and medical bills when presented by
plaintiff. No other bills were
presented.
5. Brown and plaintiff talked about four
or five times about the matter.
6. On July 9, 1985, Brown secured from
plaintiff and her husband a release of
all claims for the payment of $4,362.85.
The document was signed at the Hanson
residence. Brown issued drafts for car
repair, car rental and a draft to
plaintiff for $1,010.40.
7. Brown had seen a medical report on
plaintiff's condition prior to obtaining
the release on July 9, 1985.
8. At this meeting, Brown agreed to pay
for plaintiff's car rental expenses and
property damage. There were no
outstanding medical bills.
9. Brown did not show the medical report
to the plaintiff and does not know if he
discussed it with her.
10. The parties discussed plaintiff's
headaches and inconvenience. Brown
offered $700; plaintiff's counteroffer
was $1000. Brown claimed that the
release was "final and complete" except
for additional medical expenses up to
$3000 for 180 days from the date of the
agreement.
11. Brown gave no itemization as to
which policy was being assessed for
plaintiff's damages, but Brown authorized
all payments to be made under the Oljar
policy.
12. Ben Hanson, plaintiff's husband,
testified that on July 9, 1985, he paid
no attention to the conversation between
plaintiff and Mr. Brown. He did hear
"inconvenience" due to problems renting a
car. Mr. Hanson suggested $1000 and
Brown agreed. Mr. Hanson does not
remember any reference to medical
problems. Mr. Hanson did not realize
that the release was "final" and claims
Brown misrepresented that it was not
final.
13. Mr. Hanson claims that he has to do
most of the driving, and his wife is
afraid of another collision.
14. Mr. Hanson admitted that Brown said
other medical bills could be paid under
the release.
15. Plaintiff testified that she had two
accidents in 1985. The accident in
question was the second accident.
16. Plaintiff retained Mr. McAlear for
personal injuries only on May 18, 1985.
17. Mr. McAlear also represented
plaintiff on the first accident and
recovered a settlement for personal
injuries. Plaintiff settled her own
property damage claim.
18. Plaintiff had not seen any report
from Dr. Heetderks, her family physician.
19. Plaintiff denies that the release
was final. For example, she remembers
her husband told Brown that the future
was uncertain about plaintiff's injuries.
20. Plaintif? received the Heetderks
report on July 18, 1985, and immediately
took it to Mr. McAlear.
21. Mr. McAlear thereafter tendered back
the sum of $1010.40 and deposited the
same in an interest-bearing account at
First Security Bank.
22. Plaintiff claims that she suffered
headaches which kept her awake at night.
She has a fear of having another
accident.
23. Plaintiff admits that she told no
one that Mr. McAlear had been retained by
her concerning the Oljar accident.
24. Plaintiff admits to having received
different drafts from Brown.
25. Plaintiff has not seen a physician
for her headaches after signing the
release form.
26. Except for the two 1985 accidents,
plaintiff has had no dealings with the
insurance adjuster.
27. After the release was signed,
plaintiff wrote a "thank you note" to Mr.
Brown.
28. Brown had no communication with
anyone but plaintiff until the Ju1.y
meeting.
29. Plaintiff did not express any
confusion about the form.
From these findings of fact, the District Court made the
following conclusions of law:
1. The release form is clear and
unambiguous. The parties engaged in
negotiations as to the final sum.
Plaintiff is bound by the terms of the
settlement. Defendant's adiuster was not
guilty of any impropriety. Plaintiff
shall take nothinq by her complaint.
2. Defendant is awarded costs.
Hanson raises the following issues on appeal:
(1) Has Montana adopted the modern liberal rule on
construction of releases on a single party personal injury
case?
(2)What factors should a court consider in
determining whether or not a release should be set aside?
From Hanson's briefs, we identify the following issue
on appeal: Can Ethel Hanson's alleged intent that the
release not be a full and final settlement serve to nullify
the release? The District Court's findings of fact are
undisputed on this appeal. We must determine from the record.
of this case whether there is substantial credible evidence
to support the District Court's findings and conclusions. In
re the matter of B.T. (Mont. 1986), 725 P.2d 230, 232, 43
St.Rep. 1728, 1730. The District Court will not be reversed
unless the findings are clearly erroneous and represent an
abuse of discretion. Rule 52(a), M.R.Civ.P.; Walker v.
Larson (Mont. 1986), 727 P.2d 1321, 1322-23, 43 St.Rep. 1765,
1767.
Hanson urges this Court to adopt a "liberal rule of
construction" regarding releases. She derives this "liberal
rule" from strained interpretations of several cases
regarding releases to argue that her intent was not to make a
final settlement. Hanson requests that we examine her intent
to conclude that the release should be rescinded.
It is clear from previous decisions of this Court that
we must apply the law of contracts to determine the validity
of a release such as presented in this case. Westfall v.
Motors Insurance Co. (1962), 140 Mont. 564, 568, 374 ~ . 2 d
96,
98-99. "[A] release ... is subject to recession for the
same reasons as other contracts." Westfall, 374 P.2d at
98-99. Accordingly, a release obtained through fraud, mutual
mistake, or with inadequate consideration may be rescinded
under proper circumstances. Krusemark v. Hansen (Mont.
1981), 627 P.2d 1202, 1205, 38 St.Rep. 594, 598; Westfall,
374 P.2d at 99. No evidence exists in the record of this
case to show that the release was entered into fraudulently,
through mutual mistake, or without adequate consideration.
Hanson declines to argue the available contract theories for
rescinding the release saying only that such theories are
reversions to outdated principles of law that do not apply to
this case.
Hanson's authority regarding the so-called "liberal
rule" of interpreting releases does not support her position.
These cases stand for the general proposition that the intent
of releasor at the time of the release may be considered as a
factor to determine whether a release by an injured party of
one tort-feasor thereby releases all concurrent tort-feasors.
See e.g., Kussler v. Burlington Northern, Inc. (1980), 186
Mont. 82, 88, 606 P.2d 520, 522-23; McCloskey v. Porter
(1973), 161 Mont. 307, 315, 506 P.2d 845, 849. This Court is
not presented with an issue in this case to which the
above-stated rule might apply.
Hanson's intent, unknown to Oljar, Brown, or State
Farm, cannot change the obvious intent of the release in this
case. Richardson v. Safeco Ins. Co. of America (Mont. 1983),
669 P.2d 1073, 1075, 40 St.Rep. 1515, 1517. Although the
record indicates that Hanson may have some problems or
injuries related to the automobile accident for which she
might not have been compensated, her "latent discontent with
the release cannot be grounds for alteration of [an] express"
agreement to settle with State Farm. McCloskey, 506 P.2d at
849-50.
There is substantial credible evidence in the record to
support the District Court's findings and conclusions.
Hanson negotiated with State Farm over the terms of the
settlement and signed an "Agreement and Release" discharging
Oljar and State Farm "from all claims, demands, damages,
actions, causes of action or suits of any kind or nature
whatsoever ... [for] all injuries, known and unknown
... " The District Court correctly concluded that the
terms of the agreement and release were cl-ear and unambiguous
and that Hanson was bound by those terms.
Affirmed.
t
We concu
Justices
Mr. Justice John C. Sheehy, dissenting:
I dissent from the foregoing Opinion, which is a
decidedly minority view of the courts which have passed upon
the question here presented.
Just as important, we should take this opportunity to
stop what is apparently a dastardly practice by State Farm,
that is, procuring from its Montana insureds releases which
purport to be final in form, but which allow for medical
bills incurred for the next six months, not exceeding $3,000
in total, but deny the insureds any further right to recover
either for pain or suffering or permanent harm as shown by
the future bills.
Most pointedly, State Farm acquired this release without
discussion given to its insured to explain the meaning of the
release either to the unknown injuries, or to the application
of the future medical benefits.
Finally, the majority has overlooked or chosen not to
discuss the ramifications of the adjuster here obtaining a
doctor's report concerning the insured from her doctor, and
never disclosing to the insured what that doctor's report
contained prior to obtaining her signature on the release.
When an insurer presents a release to an injured party,
the insurer has a duty, if the release contains a reference
to unknown injuries, to explain particularly the significance
of that clause to the proposed releasee:
Where a release is given with reference only to
known injuries, and it subsequently develops that a
substantial injury then existed which was unknown
to the parties and not taken into consideration,
the release may be avoided on the grounds of a
mutual mistake. This is true even though the
instrument contains a clause, - - subject of
not the
express bargaining, that the release shall apply to
all unknown and unanticipated injuries. Where an
injured person, not knowing that the accident had
caused a certain injury, signed a release tendered
by the insurer of the person causing the injury,
and unknown to the releasor the release contained a
clause which related to unknown injuries and to
conditions which might thereafter develop, the
release was not binding as to the unknown injuries.
If the person who induced the releasor to sign the
release did not know of the clause relating to
unknown injuries, the case presented a mutual
mistake of fact. And if the person who tendered
the release for signing knew of the clause and knew
that the releasor was not aware of the clause, he
had a duty to inform the releasor of the existence
of the clause.
66 Am.Jur.2d 694, 694, 695, Release, 5 20.
In Kussler v. Burlington Northern, Inc. (1980), 186
Mont. 82, 606 P.2d 520 and McCloskey v. Porter (1973), 161
Mont. 307, 506 P.2d 845, we were governed by the intent of
the parties as to the release in reaching our decisions. In
every case where a release is obtained by an insurer which
contains reference to unknown injuries, intent is an issue,
and one about which the court must specifically make a
finding. Although a releasee may, if he intends to do so,
release any rights respecting future injuries, he should not
be bound by any release which signs away those future rights
without any discussion or without the intent of the releasee.
That is the majority view:
As previously noted, there are essentially two
lines of authority which have developed around
similar cases in other jurisdictions. The line
followed in a small minority of jurisdictions is
typified by the Oregon case of Wheeler v. White
Rock Bottling Company, 229 Or. 360, 366 P.2d 527
(1961). In Wheeler, the court adhered to
traditional conceptions regarding contract law, and
held a release binding upon a pregnant woman with
subsequently discovered back injuries. While this
case is not directly in point as the plaintiff in
that case was aware of some back pain which her
physician may have thought pregnancy originated, it
does illuminate the inflexible and dogmatic
approach of some courts. In their considerations
of the validity of general liability waivers, these
jurisdictions appear not to differentiate between
standards applicable to commercial transactions and
those peculiar to personal injuries. See
generally, Annot. S 15, 71 A.L.R.2d 82, 167-69
(1960).
The better reasoned rule adopted by an overwhelming
majority of jurisdictions permits the avoidance of
a release in circumstances where later discovered
injuries were clearly not contemplated by the
parties at the time of release. A reasonably
succinct statement of this line of authority is set
forth by the California Supreme Court in Casey v.
Proctor, 59 Cal.2d 97, 112-113, 28 Cal.Rptr. 307,
378 P. 2d 579 (1963):
"Under the majority rule, however, a release may
not ipso facto be avoided upon the ground of later
discovered injuries. The essence of the rule is
that the wording of the release is not conclusive;
it is a question of fact whether the parties to a
release actually intended to discharge such
liability .. ."
Finch v. Carlton (Wash. 1974), 524 P.2d 898, 900.
We should look to our sister state of Idaho, which in
Ranta v. Rake (Idaho 1967), 421 P.2d 747, pointed out that
the liberal policy of avoiding releases where there are
unknown injuries is guided by the following factors:
(a) the peculiar dignity the law accords the human
person as distinguished from articles of commerce;
(b) the very real possibility of being mistaken
about the long range effects of damage to human
tissue; (c) the inequality of the bargaining
positions of the contracting parties; and, (d) the
amount of consideration received compared to the
risk of the existence of unknown injuries.
In addition to the foregoing factors, the State of
Washington added the haste, or lack thereof, with which the
release was obtained. Finch, 524 P.2d at 901.
Moreover, we should direct our attention to the kind of
release that was taken by State Farm in this case. This was
a case where State Farm represented as an insurer both the
responsible party, Mary Oljar, and the injured party, Ethel
Hanson. Each were operating automobiles which were insured
at the time by State Farm Mutual Automobile Insurance. A
special duty in that situation devolved upon State Farm to be
fair and equitable in its handling of the claims as between
its two insureds. It is not disclosed in the record whether
the car driven by Ethel Hanson in this case provided
coverage, separate from the other coverages, for medical
payments to those persons injured in the operation of the
Hanson automobile. If it did, the form of release taken by
State Farm was even more reprehensible. A copy of the
release taken from Ethel Hanson is shown in the exhibit 1
attached to this Dissent. It will be seen that in addition
to the monies paid by State Farm under the term of the
release, there was in addition a printed schedule of benefits
in which State Farm agreed to pay an amount not to exceed
$3,000 for medical, dental or surgical treatment furnished to
the releasee within six months following the date of the
agreement, as a result of the accident described, excluding
expenses paid by any collateral source. In this case, State
Farm, being in possession of the doctor's report, and Ethel
Hanson, not being in possession of it, tendered the release
by including in it what is essentially a health and accident
insurance form providing for future medical benefits. The
evil in the form is that though the releasee may have
recovered up to $3,000 for future medical expenses, the
release would preclude, and by the holding of the majority
here, does preclude, any further recovery for permanent
injuries, pain and suffering or other elements of damages
that might accrue to the releasee by virtue of the accident.
Absolutely nothing about this feature of the release was
discussed or pointed out by the adjuster to Ethel Hanson. If
procurement of such a release is a practice of State Farm,
and the printed form indicates it is, this Court should
condemn that practice right now.
I would reverse this case under the present state of the
evidence. I would remand it to the District Court for
further proceedings to determine the intent of the releasee
at the time the release was signed, and recognize the release
only to that extent.
, Justice
11
'-1
Mr. Justice William E. Hunt, Sr., concurs in the foregoing
dissent. /
, '
--
*
. n.
,
?)
AGREEMENTAND RELEASE 'c-1 . 41 .
yment of the sum of
accordance with the SCHEDULE OF BENEFITS set forth below, by the Company accepting this Agreement,
1
SCHEDULE OF BENEFITS
(1) To pay all reasonable and necessary expenses 2) To pa S for each day withi
not t o exceed 13,000 incurred for medical, dental 180 days rollowng the date of this ~ ~ r e e m e n q
or surgical treatment, ambulance. hospital, pro- that sa~dbeneficiary is continuously and neces-
fessional nursing services and rosthet~cdev~ces, sarily disabled and confined indoors under the care
furnished to the named benehiary within 180 of a licensed physician other than himself, due to
days following the date d this Agreement, as a the bodily injury incurred because of the accident
result of the accident described herein, provided described herein ayable monthly); provided that
.
that such expenses are qot paid or payable by any
collatera1 source; and . - 9
the total of sai per diem payments shall not
exteed S3,000;
and provided the total amount payable hereunder for this release, plus said expense payments, plus
said per diem payments, shall not exceed the limit of liability for bodily injury to one person provtded (1
by the policy of Insurance applicable to the releasee named herein,
the undersigned hereby relerrpl and ,forper discharges
,the Insurance Company accepting
this Agreement, and any and d other persona, firms or corporations liable or who might be claimed to be liable,
l
'
from any and d claims, &nun&, damages, actions, causes of action or suits of my kind or nature whatsoever.
l
both to p e m),propy,
w .
and particularly on account of d injuries, &own and unknown, sustained by
l .
which have resulted or m y in futwe dovelop as a result of an .accident which ocnured on or about
a e ~ h y , 9 ~ or na& -
ter &, & -
This nluce expressly rerenca d rights of the parties released to pursue their legal remedies, if any, against the
l
undemgned, their &in, Gecutora, writs and asigns.
It fr also agreed and understood that this ~ t t k r n e n tis the compromise of a doubtful and disputed claim, that
tho payment It not to be construed u m admission of liability on the part of tho persons, fm and corporation,
i
hereby releuad, by whom ltabUty is expressly denied. T i Agreement and Release contains the entire agreement
hs
between the parties hereto, and the terms of this instrument are contractual and not a mere recital. It b further
agreed that d l p tu to this instrument have w e f i ~ l l yread the w n k n t s thoreof and the signttures &low are
ui
, .
tho voluntary and free act of oach.
In witness w h e n o f ~ h r v kreunto sc
e
IN PRESENCEOF
Accepted By:
. ~ ~ A FA): E h LTlJAL AVrOMOBILE INSURANCE COMPANY
I /
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SLAT& FARM FUE ArGD CASUALTY COMPANY
STATE FARM COUNTY MUTUAL INSURANCE COMPANY OF TEXAS
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