Bennett v. Shinoda Floral, Inc.

Dolliver, J.

(dissenting) — I believe there is no principled basis for drawing a distinction between these cases and Finch v. Carlton, 84 Wn.2d 140, 524 P.2d 898 (1974). The *398language of Finch, the cases it cited and others decided since then, and the policies underlying Finch cannot support creating a dichotomy between releasors who believe they have no injuries and releasors who believe their injuries to be minor when in fact the injuries are permanently and totally disabling. I must dissent.

The majority concedes the language of Finch is ambiguous and does not clearly support its conclusion excluding relief for the injured parties here. See footnote 3. I find the language of Finch to support instead the opposite conclusion: the court intended to allow the invalidation of certain releases in circumstances where the plaintiff is already aware of some injury. Most specifically, the Finch court stated the evaluation of a release should include consideration of "the likelihood of inadequate knowledge concerning future consequences of present injury to the human body and brain ..." (Italics mine.) Finch, at 146 (quoting Finch v. Carlton, 10 Wn. App. 32, 39, 516 P.2d 212 (1973) (McInturff, J., dissenting)). What other meaning could this have than an intention to allow relief in circumstances such as those presented here? Additionally, the Finch court recognized the policy favoring private settlement of disputes and the desire to "promote the finality of out-of-court settlements", but concluded the policy "strongly favor[ing] the just compensation of accident victims" took precedence in these cases. Finch, at 145.

Further, other states which have adopted the fairly and knowingly test used in Finch have applied it to known injuries. See, e.g., Denton v. Utley, 350 Mich. 332, 86 N.W.2d 537 (1957); Casey v. Proctor, 59 Cal. 2d 97, 378 P.2d 579, 28 Cal. Rptr. 307 (1963); Ranta v. Rake, 91 Idaho 376, 421 P.2d 747 (1966); Mangini v. McClurg, 24 N.Y.2d 556, 249 N.E.2d 386, 301 N.Y.S.2d 508 (1969); see also Annot., Avoidance of Release of Personal Injury Claims on Grounds of Fraud or Mistake as to the Extent or Nature of Injuries, 71 A.L.R.2d 82 (1960). The majority's position denying further recovery where a plaintiff is aware of some injury prior to signing a release would have resulted in *399denial of relief in the following circumstances where other courts have had the wisdom to allow the release to be avoided.

A 14-year-old girl, hit on the head by a machine falling off a truck, signed a release through her parents believing herself to be fully recovered from symptoms diagnosed as hematoma. Almost 4 years after the injury, she suffered the first of a continuing series of post-traumatic epileptic seizures resulting from the original brain injury. Gleason v. Guzman, 623 P.2d 378 (Colo. 1981). See also Krezinski v. Hay, 77 Wis. 2d 569, 253 N.W.2d 522 (1977) (grand mal epileptic seizures began some time after release signed).

A woman with "very minor" injuries, including superficial abrasions, a bruise, and "muscular skeletal pain" signed a release, then suffered a heart attack over a year after the accident. The treating physician stated the attack "most likely was caused by the auto accident." Newborn v. Hood, 86 Ill. App. 3d 784, 785, 408 N.E.2d 474, 13 A.L.R.4th 681 (1980).

During a collision between a train and an auto, a woman "fell to the pavement and . . . skinned both knees . . ." Three weeks after signing a release her knees began to swell. She discovered she had bone splinters and cartilage damage in her knees, requiring surgery and resulting in permanent injury. Jones v. Union Pac. R.R., 504 P.2d 370, 371 (Colo. Ct. App. 1972).

A plaintiff whose only known injuries at the time of signing a release were fractured ribs and bruises was later discovered to have a ruptured spleen, requiring surgery. Scotton v. Landers, 190 Colo. 27, 543 P.2d 64 (1975).

A passenger in an automobile accident was originally diagnosed to have one or two cracked or bruised ribs. He later discovered through surgery that two vertebrae had been broken, which had resulted in permanent injury. Witt v. Watkins, 579 P.2d 1065 (Alaska 1978).

A plaintiff suffered a broken arm, and learned after signing the release the bones had not united, resulting in permanent disability. McCarthy v. Eddings, 109 Colo. 526, 127 *400P.2d 883 (1942).

In several cases factually similar to Bennett, the plaintiffs originally received diagnoses of minor pulled or strained muscles, only to determine later, after signing releases, the injury involved an intravertebral herniated disc requiring surgery and resulting in permanent disability. See, e.g., Ranta v. Rake, supra; Dorman v. Kansas City Terminal Ry., 231 Kan. 128, 642 P.2d 976 (1982) (railway worker fell 10 feet at work, aware of only laceration on forehead and pain in left thigh, but later diagnosed ruptured intervertebral disc); Campbell v. Stagg, 596 P.2d 1037 (Utah 1979) (injury diagnosed as bruises and cervical strain later determined to be herniated cervical disc with compression of nerve roots); Reynolds v. Merrill, 23 Utah 2d 155, 460 P.2d 323 (1969) (herniated disc not discovered until over 2 months after the release was signed; originally diagnosed as bursitis).

In each of these cases, the plaintiff signed the release knowing of some injury, but later discovered serious additional injuries, for which the plaintiff had not been compensated, resulting from the accident. The injustice of the inadequate compensation given was just as great as in Finch. The majority, however, creates a distinction allowing recovery in Finch but in none of these other circumstances.

The majority's position creates a distinction insupportable by policy and analytically unsound. A distinction between known and unknown injuries rewards haste and ignorance by allowing recovery for plaintiffs who sign before any information about injuries is available but not for plaintiffs who wait to obtain some, though ultimately inadequate, information about possible injuries.

The difference between known and unknown injuries is vague and fails to provide the clear distinction the majority seems to indicate. As the court stated in Gleason v. Guzman, 623 P.2d 378, 384 (Colo. 1981):

[T]he distinction between unknown injuries and unknown consequences of known injuries is a useful analytic standard but it does not yield a litmus-type resolu*401tion to these problems. The words [of distinction] are of doubtful application to a considerable number of marginal cases.

(Citations omitted.) See also Denton v. Utley, 350 Mich. 332, 340, 86 N.W.2d 537 (1957) (distinction is "peculiarly baffling and, I suspect, not completely understood even by those employing it"); Witt v. Watkins, supra at 1069 ("artificial distinction"); Annot., Modern Status of Rules as to Avoidance of Release of Personal Injury Claim on Ground of Mistake as to Nature and Extent of Injuries, 13 A.L.R.4th 686, 691 (1982) (distinction is "sufficiently vague to permit a wide area of dispute").

Rather than adopt this distinction, other courts have simply recognized that

[t]he modern trend is to set aside releases of personal injury claims in situations where the facts, when finally known, present an unconscionable result because of the equitable principle of doing justice under the circumstances of each case.

Scherer v. Ravenswood Hosp. Med. Ctr., 70 Ill. App. 3d 939, 942, 388 N.E.2d 1268 (1979).

I believe the effect of Finch was to create an exception from the application of our mutual mistake doctrine, and create a new test for determining the validity of personal injury releases, regardless of whether the plaintiff believed no injuries or only minor injuries had occurred. Other courts have recognized theses cases involving personal injuries as sui generis, requiring the application of a different standard in order to achieve a just result. As one court stated:

Some courts have recognized that cases of this type are' to some degree sui generis and substantially abandon any attempt to fit these situations within the classic limitations of the law of fraud or mistake and have held that the release may be set aside upon a showing of an inequitable result unless it is established that it was "fairly and knowingly made."...
The courts following this policy of avoiding releases where improvidently made are guided by the following *402factors: (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.

(Citations omitted.) Ranta v. Rake, 91 Idaho 376, 380, 421 P.2d 747 (1966). See also Herndon v. Wright, 257 S.C. 98, 103, 184 S.E.2d 444 (1971).

The complexities of the human body do not always fit neatly into the needs of an insurance company to close a case file expeditiously, and an injured person should not be left uncompensated merely because the responses of the body to the trauma failed to conform to an insurer's time schedule. The law in this area should take into account the reality that the ultimate consequences of an injury may take a long period to discover, regardless of the efforts of the plaintiff or the quality of medical services. I do not find any policy to support the majority's view that the risk of discovery of additional disability from the injury must fall upon the injured person, rather than upon an insurer whose obligation it is to compensate fully that person for injuries suffered. The result of the majority's position is to give the insurer the windfall of avoiding liability for a risk it has been paid to assume. See Casey v. Proctor, 59 Cal. 2d 97, 111, 378 P.2d 579, 28 Cal. Rptr. 307 (1963).

The majority also implies the invalidating of these releases would spell disaster for the entire settlement process, bringing the validity of every release into question. See majority opinion, at 395. This "floodgates" argument has been attacked by other courts:

We do not fear, as did the court in Reinhardt v. Wilbur, 30 N.J. Super. 502, 105 A.2d 415 (1954), that this decision will open the floodgates to recurrent challenges in the courts of releases honestly secured. Our decision does no more than provide just relief in those relatively few cases where it would be inequitable to hold the release a *403bar to later action or renewed negotiation because the injuries sustained prove more serious than could reasonably have been foreseen by any of the parties at the time the release was executed. This leaves free that much larger area and more frequent situation where out-of-court settlement is satisfactorily and equitably achieved.

Ranta v. Rake, supra at 382. The court in Denton v. Utley, supra, also spoke to this issue:

The arguments against relief. . . are not new. Nor is it new that they are framed in terms of the most fearful consequences to the then-existing social order. . . .
. . . Where once the courts were admonished, with respect to the law of trusts, to roil not the conscience lest any gentleman in England be presumed out of his entire estate, to disturb not the letter of the conveyance, lest all security transactions be jeopardized, now we are warned to leave untouched the letter of the release, lest no claim ever be settled, and litigations mount. The argument in terrorem fails here, as it has always failed, and for precisely the same reason: We exist solely to do justice and it shall be done.

Denton v. Utley, supra at 341-42.

The "fairly and knowingly" test is not a recent one, nor is its application to known injuries recent. The test was used as early as 1939 (Farrington v. Harlem Sav. Bank, 280 N.Y. 1, 19 N.E.2d 657 (1939)) and has been consistently used for decades to apply to known as well as unknown injuries. Keefe, Validity of Releases Executed Under Mistake of Fact, 14 Fordham L. Rev. 135 (1945). The "floodgates" argument of the majority ignores both the need to achieve individualized justice in these cases and the long history of use of the "fairly and knowingly" test by other jurisdictions.

I believe the policy considerations discussed in Finch and elsewhere favor the application of the "fairly and knowingly" standard to these two cases. The fairness element would involve consideration of the circumstances leading to the signing of the release. In addition to the ordinary inquiry into elements of fraud, misrepresentation, or overreaching, a court should consider the various advantages *404the insurer has in the settlement process. Insurers have more experience in predicting the course of injuries and greater awareness of the risk of continuing disability. An insurer can also subtly or directly take advantage of the difficult financial and emotional circumstances of the injured party to persuade agreement to a release.

The knowledge element would involve consideration of the actual knowledge of the releasor. A release signed without knowledge of the seriousness of the injury, based upon a reasonable belief only minor or temporary injuries were sustained, cannot be said to be "knowingly" made within the requirement of Finch. See generally Denton v. Utley, supra at 343-44.

The Hoggatt opinion below (Hoggatt v. Jorgensen, 43 Wn. App. 782, 719 P.2d 602 (1986)) did not even mention the Finch case or the "fairly and knowingly made" test it established for reviewing the validity of personal injury releases. Instead it relies, as does the majority here, upon the harsh contract doctrine of mutual mistake. I would reverse the Hoggatt decision and remand for application of the proper standard at a summary judgment under Finch: does a genuine issue of fact exist regarding whether the release was fairly and knowingly made. The burden should be upon the releasor to establish by clear and convincing evidence the reasons for setting aside the release. Witt v. Watkins, 579 P.2d 1065, 1070 (Alaska 1978); Ranta v. Rake, supra at 380. Only if the court determined the plaintiff specifically contemplated and bargained for the assumption of risk of future injuries, including the risk of permanent injury, then the release might be found to be fairly and knowingly made. I believe the Bennett opinion (Bennett v. Shinoda Floral, Inc., 43 Wn. App. 504, 717 P.2d 1379 (1986)) applied the Finch standard properly and would affirm.

Reconsideration denied September 4, 1987.