What is a Perringer Settlement?
A Pierringer settlement is when a plaintiff in a civil lawsuit involving multiple defendants agrees to accept a settlement sum from one or more (but not all) defendants. In exchange, the plaintiff agrees to discontinue their claims against those paying defendants. These defendants would no longer participate in the proceeding (as opposed to a Mary Carter Agreement, in which case the defendants would continue to participate in the proceeding).
The plaintiff assumes all of the financial risks in making such an arrangement. If they underestimate the eventual liability share of the settling defendants, they cannot make up any shortfall from the remaining defendants. Conversely, if the plaintiff eventually recovers a windfall from the settlement (settles for more than is found to be the actual share of liability of the non-settling defendants), they are not entitled to keep the surplus. The court will order that the surplus be used to reduce the amount the non-settling defendants have to pay to satisfy the judgment.
By way of example, assume that there is a claim with damages totalling $1,000,000.00. The suit is against a hospital (with its nurses) and the physicians. The physicians and the hospital are separately represented and have cross-claimed against each other. These two parties at the defence table are outwardly presenting a common front but have left open their right to attack one another during cross-examination. At trial, the trier of fact would establish the respective degrees of fault, if any.
If the hospital and nurses reach a settlement with the plaintiff, say for $400,000.00, the claim against them would be dismissed. The trial against the physicians would now proceed but in the absence of the hospital and its nurses. If the trier of fact determined that the physicians were not liable, that would be the end of the matter. If however it was found that any of the doctors were liable, the trier of fact would then have to determine if the hospital (and nurses) were at fault as well and if so, what were the respective degrees of fault? This would determine how the damages will be apportioned between the parties.
- If the physicians are not liable the action is dismissed, the doctors get their costs and the plaintiff keeps the $400,000 from the hospital settlement. The plaintiff is short by $600,000.00;
- If the physicians are liable but the hospital is not, then the plaintiff still keeps the $400,000.00 from the original settlement and in addition, the percentage share of liability from the doctors up to the damage limit of $1,000,000.00 with any surplus reducing the amount the doctors have to pay (i.e. if the physicians were liable for the full $1 million, their share would be reduced by the $400,000 surplus created by the previous settlement);
- If all of the defendants are liable, and the split is fifty-fifty, then the plaintiff would keep the settlement monies and be paid the share of damages awarded against the physicians. As each defendant would be responsible for $500,000.00 that is what the doctors would pay and the hospital would only pay the settlement amount. The plaintiff would then be short $100,000.00;
- If all were found liable but the split was now eighty percent against the hospital, then the doctors would pay $200,000.00 and the hospital would only pay the settlement amount. The plaintiff was now down $400,000.00;
- If all of the defendants were liable but the split was now sixty percent against the physicians, the doctors would pay $600,000.00 and the hospital the $400,000.00. The plaintiff received all of their damages;
- If we assume liability on both sets of defendants but the doctors were found to be eighty percent responsible, then the doctors would pay $800,000.00 and the plaintiff would already have the $400,000.00. The plaintiff is now ahead by $200,000.00. The court would credit this surplus to the physicians such that they would only have to pay $600,000.00. The plaintiff breaks even.
The scenarios above highlight the risks a plaintiff takes when entering into a Pierringer settlement. They do have the comfort of knowing they have received a certain amount of money, but also have to understand and accept that they can never receive more than the total assessed damages. This is so despite taking the risk of receiving less if they are not substantially successful against the non-settling defendants. ONce a settlement is reached, the plaintiffs must then focus their efforts on establishing the liability of the remaining defendants in order to make up the remainder of the damages.
The non-settling defendant(s) are now on their own. Their goal is to implicate the hospital as being the major player in causing the plaintiff’s damages. That will be a somewhat awkward task as the hospital is no longer a party and will be absent from the courtroom unless they or the plaintiffs call the nurses to testify. The plaintiff is unlikely to do so, forcing the non-settling defendants to call them. Calling them in chief to have their evidence before the court means they would normally lose their right of cross-examination.
A Recent Case
This very dilemma was faced by the doctors (non-settling defendants) in a recent Ontario Superior Court of Justice decision on the eve of trial. Those defendants sought the right to cross-examine the hospital’s witnesses. They relied on their cross-claim, the dynamics mentioned above and the principles of natural justice.
The court recognized that partial settlements can create both substantial and procedural difficulties. A variety of solutions have been used by the courts in Ontario but the solution that worked here was to allow the non-settling defendants, and the plaintiff, the right to cross-examine any hospital witness no matter which party called them.
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