California Court of Appeals Holds that Defendant Passenger is Intended Beneficiary of Executed Release

In this case, the plaintiff, Mr. Cline, suffered severe injuries when his motorcycle collided with a car driven by a teenager with a provisional license. Mr. Cline and the driver (and his parents) settled for the limit of their insurance policy, $100,000.00. Mr. Cline then executed a release, effectively releasing the driver and his parents, and “any other person, corporation, association, or partnership responsible in any manner or degree,” from further liability for the accident.

file000704919536 (1)Mr. Cline then sued the driver’s grandmother, the sole adult in the car with the teenager at the time of the accident, for negligent supervision. Ms. Homuth, the defendant grandmother, asserted the release as an affirmative defense and moved for summary judgment. The trial court denied the motion, and a trial took place, centering on whether the release was valid and whether Ms. Homuth was an intended third-party beneficiary of the release.   The trial court found the release was to Ms. Hough’s benefit, and she was entitled to enforce it.

On appeal, Mr. Cline argued the extrinsic evidence showed Ms. Homuth is not an intended beneficiary of the release.   The appellate court first turned to the facts of the case. After the accident in which Mr. Cline was severely injured, his attorney made a demand to the insurance company that provided coverage for the teenage driver’s parents. Since Mr. Cline’s medical expenses exceeded the policy limits, the insurance claims representative deemed payment of the policy limit appropriate.

Mr. Cline signed a settlement agreement with the insurance company. Mr. Cline then filed a lawsuit against Ms. Homuth. In rejecting Ms. Homuth’s motion for summary judgment, the court found that there was a triable issue of fact regarding whether the release was intended to benefit Ms. Homuth.

During trial, the evidence included deposition testimony from the insurance claims representative. He made clear that his duty was to the insured, and he did not discuss releasing others or adding Ms. Homuth’s name to the release, despite his knowledge that she was in the car during the accident.

Mr. Cline’s attorney stated that Mr. Cline would not have signed the release if Ms. Homuth had been named. He did not believe that the release, in its boilerplate form, applied to Ms. Homuth. Mr. Cline testified that he intended to sue Ms. Homuth, and he did not intend to release her.

The trial court relied on precedent and made clear that the language in the release expresses a mutual intent to release a class of people, including Ms. Homuth.

On appeal, the court first turned to the law concerning third-party beneficiaries and contract interpretation. A third party need not be named in a contract but can enforce a contract expressly made for his benefit. In terms of a general release, such as the one involved in the present case, courts have differed in interpretations.

The law allows a plaintiff to offer evidence of the circumstances surrounding the negotiation of the release to show that releasing “any other person” does comport with their intent. Was Mr. Cline’s evidence sufficient to show they did not intend to benefit Ms. Homuth, but to exclude her?

Mr. Cline argues the release intended to affect the liability of only those people specifically named. The court rejected this argument and noted the claims adjuster’s testimony that the language of the release is “pretty self explanatory” and intends to cover “the world.” While Mr. Cline claimed he would not have signed the release had he understood it released Ms. Homuth, this subjective intent was never disclosed to anyone. This is insufficient to show that the parties intended Ms. Homuth to be excluded.

The appeals court stated that Mr. Cline did not overcome Ms. Homuth’s evidence that the parties intended the release to benefit her, as a member of the class of “all other persons.” The court affirmed the trial court’s judgment.

At the Sharifi Law Firm, we help car accident victims secure compensation for their quantifiable injuries. Representing injured individuals throughout Southern California, we can be reached at 1-866-422-7222 and offer a free consultation.

More Blog Posts:

California Court of Appeals Upholds Finding that Defendant’s Negligence was not Substantial Factor in Plaintiff’s Injuries, Southern California Injury Lawyer Blog, July 20, 2015

California Appeals Court Reverses Summary Judgment in Favor of Passenger Defendant Due to Special Knowledge of Road and Encouragement to Speed, Southern California Injury Lawyer Blog, July 16, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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