Title: Berczek v. Erie Insurance Group

State: virginia

Issuer: Virginia Supreme Court

Document:

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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