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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