Berczek v. Erie Insurance Group

Present: Carrico, C.J., Lacy, Hassell, Keenan, Koontz, and
Kinser, JJ., and Compton, Senior Justice

JOHN A. BERCZEK
OPINION BY
v. Record No. 991117 SENIOR JUSTICE A. CHRISTIAN COMPTON
April 21, 2000
ERIE INSURANCE GROUP

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
F. Bruce Bach, Judge

In this motor vehicle insurance case, we consider whether

an insured's release of a tort claim against the tortfeasor also

operates to bar the insured's contract claim against his insurer

for medical expenses arising from the accident in question.

The facts are undisputed. In 1994, appellant John A.

Berczek was injured as the result of negligence in an automobile

accident in Fairfax County. At that time, he was the named

insured under a "Family Auto Insurance Policy" issued by Erie

Insurance Company, a member of appellee Erie Insurance Group.

In a policy endorsement, the insurer agreed to provide "medical

expense benefits as a result of bodily injury caused by

accident" and arising out of the use of the insured motor

vehicle.

In June 1997, the insured settled his negligence claim for

$19,500, and executed a general release in favor of Rodney
Renner and Karen D. Renner (collectively, the tortfeasor). The

only parties to the release were the insured and the tortfeasor.

Subsequently, the insured filed the present action for

damages against the insurer in April 1998. In a motion for

summary judgment, the insurer asserted that the insured "is

alleging that Erie Insurance Group breached a contract of

insurance for medical expense benefits or payments" arising from

the accident in question. The insurer contended that the

insured's claim is "barred or precluded" because of the June

1997 release executed by the insured, and sought dismissal of

the action.

The release provides:

"For the Sole Consideration of Nineteen Thousand Five
Hundred ($19,500.00) Dollars, the receipt and
sufficiency whereof is hereby acknowledged, the
undersigned hereby releases and forever discharges

Rodney Renner and Karen D. Renner

their heirs, executors, administrators, agents and
assigns, and all other persons, firms or corporations
liable or, who might be claimed to be liable, none of
whom admit any liability, from any and all claims,
demands, actions, causes of action or suits of any
kind or nature whatsoever, and particularly on account
of all injuries, known and unknown, both to person and
property, which have resulted or may in the future
develop from an accident which occurred on or about
July 1, 1994 at or near Little River Turnpike.

This release expressly reserves all rights of the
parties released to pursue their legal remedies, if
any, against the undersigned, their heirs, executors,
agents and assigns.

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 Undersigned hereby declares that the terms of this
settlement have been completely read and are fully
understood and voluntarily accepted for the purpose of
making a full and final compromise adjustment and
settlement of any and all claims, disputed or
otherwise, on account of the injuries and damages
above mentioned, and for the express purpose of
precluding forever any further or additional claims
arising out of the aforesaid accident.

Undersigned hereby accepts draft or drafts as final
payment of the consideration set forth above."

Following discovery and argument of counsel, the trial

court granted the motion for summary judgment and dismissed the

action. In a letter opinion, the court noted the parties'

agreement "that the release addresses the same automobile

accident for which all of the medical expenses claimed in the

present case arose." The court further stated that the issue

becomes whether the insured can proceed against the insurer "in

light of the language of the release."

The trial court determined that the language of the release

is "clear and unambiguous." The court referred to the provision

that the insured "releases 'all other persons, firms or

corporations . . . , from any and all claims, demands, actions,

causes of action or suits of any kind or nature

whatsoever. . . .'" The court said that the insurer "is an

'other . . . firm or corporation' under the release and this

cause of action 'resulted or may in the future develop from an

accident which occurred on or about July 1, 1994 at or near

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Little River Turnpike.'" Accordingly, the court ruled that

"[w]hen this language is given its plain meaning, it is clear

that the release precludes Plaintiff from filing suit against

Defendant for medical expenses arising from the July 1, 1994

accident." The insured appeals.

On appeal, the insurer contends the trial court correctly

granted the summary judgment motion. We disagree.

The question whether an injured party's general release of

a negligence claim bars a medical expense claim under these

circumstances is one of first impression in Virginia. Courts of

other jurisdictions are divided on the question. See cases

collected in Francis M. Dougherty, Annotation, No-Fault

Insurance: General Release of Tortfeasor By Accident Victim As

Affecting Automobile Insurer's Obligation For Personal Injury

Protection (PIP) Benefits, 39 A.L.R. 4th 378 (1985).

The law of Virginia is settled upon the interpretation and

construction of releases. Like the terms of any contract, the

scope and meaning of a release agreement ordinarily is governed

by the intention of the parties as expressed in the document

they have executed. Richfood, Inc. v. Jennings, 255 Va. 588,

591, 499 S.E.2d 272, 275 (1998). When the contract is lawful

and the language is free from ambiguity, the agreement furnishes

the law that governs the parties. Id.

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 We agree with the trial court that the release in question

is unambiguous. But the crucial task is to determine the

intention of the parties to the document, that is, whether this

insured and the tortfeasor contemplated the release of an

insurer from a medical expense claim arising from the accident.

Even given the broad, all-inclusive language of the

document in question, we hold as a matter of law that it could

not have been the intention of the parties, the injured insured

and the tortfeasor, to release the insurer from its obligation

to pay medical benefits, for any number of reasons. For

example, the insured was releasing a tort claim based on

negligence while the insurer, which was not a party to the

release, seeks to bar a contract claim. Two distinct types of

insurance claims are involved — the insurer's obligation to

indemnify its insured as the result of any legal liability he

might incur based on fault as opposed to the insurer's

contractual obligation to pay medical expenses regardless of

fault. Plainly, the release agreement deals with tort liability

only. The document "releases and forever discharges" the

tortfeasor and all others that are "liable or, who might be

claimed to be liable," without admitting any "liability."

Clearly, the agreement does not deal with claims based upon

contract, even though a loose use of the term "liable" could

apply to contract responsibility in another context.

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 Moreover, no rights of the insurer were cut off or placed

in jeopardy by the insured's settlement and release of the

tortfeasor because subrogation of medical expense payments is

prohibited in Virginia by Code § 38.2-3405(A).

Furthermore, a medical expense claimant under these

circumstances has no reason or incentive to forego medical

payment benefits by release; such benefits are a source of

compensation separate and apart from a claim for personal injury

damages based on negligence, even though such medical expenses

can be proved during trial of the tort action.

In conclusion, we note the insurer concedes that if this

release has the sweeping effect for which it contends, then the

document bars, for example, a life insurance claim had the

insured died as a result of this accident. We shall not endorse

such an unreasonable concept.

Consequently, we conclude that the trial court erred in

granting the motion for summary judgment. Thus, we will reverse

the judgment below dismissing the action and will remand the

case for further proceedings on the merits of the insured's

claim.

Reversed and remanded.

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