With the Legislative Session having just wrapped up, carriers can rejoice, at least for the time being, that two important bills, bad faith and a ban on lead paint exclusions, did not pass this time around. However, two very interesting amendments did pass, one requiring a defendant to choose before trial whether to take the liability offset of the monetary amount of the settlement or the still unknown liability percentage of the settled defendant to be determined by the jury. The other amendment permits a plaintiff to recover directly against a third party defendant found to be liable to the defendant in certain actions.
The amendment to General Obligations Law § 15-108 provides that, in tort cases where one defendant has settled, that remaining defendants must elect, prior to trial, whether to reduce liability by the amount of the settlement or by the amount of the equitable share of damages delegated to the settler in the verdict. Currently, a non-settling defendant makes that “choice” after the verdict when the percentage of liability is determined, and presumably just elects the greater off-set. Advocates for this change (take a guess) argued that the current format deters settlements because it rewards non-settlors in instances where the settling tortfeasor's payment turns out to exceed what the trier of fact later determines to be the settlor's equitable share of the damages. Further, the non-settlor was able to deduct settlor's equitable share whether or not the settlor actually could have paid such sum. By now requiring the non-settlor to make this choice before trial, and before the percentages of liability are known, there is conceivably an added incentive to settle since they face the risk of making a bad choice. This decision must be made in writing or in open court prior to opening statements, or as soon as practical after a settlement is made known. In the event there are settlements by multiple defendants, the amounts must be aggregated, so that a non-settlor cannot selectively choose the monetary amount against one settling defendant, and percentage of liability against another. Non-settling defendants do not have to agree amongst themselves on which off-set to take however, and each non-settling defendant can make an independent decision. The statute further purports to codify that settling defendants would be immune from not only contribution claims, but also common-law indemnity claims (but not contractual indemnity). The law is slated to take effect on January 1, 2020, and will apply only to actions and proceedings commenced on or after such date.
It will be very interesting to see how this plays out in practice. Currently, if a settlement is deemed confidential by the settling parties, the amount of the settlement is not discoverable by the other parties until there is a post-trial hearing to determine the off-sets. As a defendant now has to now make a pretrial decision on the offset, is that settlement amount now a mandatory disclosure? How can a defendant make an informed decision without knowledge of either the settlement amount or the percentage of liability? I guess the thought is that if you increase the risk, you increase the likelihood of a settlement. You also increase the risk that a plaintiff will obtain more in settlements than a verdict if multiple defendants “overpay” by not knowing the amount of other settlements and have no determination on percentages of liability.
The other amendment permits a plaintiff to recover directly against a third party defendant found to be liable to the defendant in certain actions. Section 1405 to the CPLR will be created to expressly permit a plaintiff to recover and collect an unsatisfied judgment or portion of a judgment directly against a third-party defendant found liable for contribution or indemnification. Direct recovery, however, is not authorized against a third-party defendant in those circumstances in which the third-party claim would have been barred by the “Grave Injury Statute” of Section 11 of the Worker's Compensation Law. The goal apparently, is to protect the ability of a plaintiff-judgement creditor to enforce their rights against a third-party by preserving the ability for the plaintiff-judgement creditor to pursue a judgment or cause of action against a third-party even if such claim or cause of action is extinguished in the bankruptcy of a defendant-judgement debtor. This act is to take effect immediately, and shall apply to all judgments entered by plaintiffs on or after such date.