By: Deborah Ikede, Associate Lawyer
When it comes to resolving disputes, the Canadian justice system favors early settlements over long and often contentious trials. However, in multiparty lawsuits, achieving a quick settlement is often challenging.
Pierringer Agreements[1] (or proportionate share settlement agreements) are a specific type of risk management tool aimed at simplifying the resolution process and enabling settlements in multi-party actions. It allows an adverse party in a multi-party lawsuit to settle with the plaintiff, leaving the remaining defendants responsible to compensate the plaintiff for only for the losses they caused. The non-settling defendants will not be required to pay more than their share of damages as it is inherent in Pierringer Agreements that non-settling defendants can only be held jointly and severally liable for their collective share of a plaintiff’s damages.
But what happens when an affluent non-settling co-defendant with little comparative fault remains the sole party with financial means to satisfy a judgement rendered against all non-settling defendants, some of whom are impecunious? Do they risk being exposed to footing more than their fair share of the bill so that the plaintiff is fully compensated for their loss? The court in Cadieux et al. v. Cadieux et al.,[2] was tasked with deciding this very issue and confirmed that a non-settling co-defendant remains jointly and severally liable with the remaining non-settling co-defendants even if those co-defendants are impecunious.
On April 25, 2010, Patrick Cadieux was transporting his young sons to a park. There was uncontested evidence that Mr. Cadieux ran a light. As Mr. Cadieux approached the intersection, his vehicle was struck by a tractor trailer owned and operated by United Petroleum.
The children sustained catastrophic injuries and initiated a lawsuit against Mr. Cadieux and United Petroleum. They sought damages totaling over $17,000,000. They also sued the City of Ottawa for their alleged negligent design of the subject intersection.
United Petroleum’s insurance policy had third-party limits of $5,000,000 while Mr. Cadieux’s motor vehicle insurance policy limits were a lot lower at $2,000,000. The City was self-insured and not subject to any third-party limits.
The plaintiffs eventually reached a settlement with the City by way of a Pierringer Agreement that in effect extinguished their claims against the city and required the plaintiffs to seek leave to amend their Statement of Claim “[s]o that the claims advanced by the Plaintiffs against the Remaining Defendants will only be in respect of any collective joint and several liability of the Remaining Defendants”. United petroleum argued against the approval of the agreement and the proposed amendments to the Statement of Claim, alleging that it would suffer prejudice as Mr. Cadieux’s insurance policy limits were unlikely to be sufficient to cover his proportionate share of the potential judgement.
The Decision
The court confirmed that a Pierringer Agreement is designed to allow a plaintiff to settle with one or more of the defendants, with the consequence that the settling defendants are no longer required to defend the action against them. The plaintiff is then allowed to continue the action against the non-settling defendants but only for their portion of the losses. Therefore, the settling defendants are shielded from any claims by the non-settling defendants for contribution and indemnity.
United Petroleum’s main concern was that it may end up having to pay not only its several share of damages but also a portion of the damages attributable to the remaining co-defendant pursuant to s. 1 of the Negligence Act, which states as follows:
Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.
The court found that this section in the Negligence Act empowers the plaintiff to seek recovery for all damages from any one of multiple persons whose negligence caused the damages.
While United Petroleum argued that the Supreme Court contemplated that possibility that the non-settling defendants may not always be held jointly and severally liable with the other non-settling defendants, the court stated that such an outcome is reserved for circumstances where the non-settling defendants cause very distinct injuries and the damages arising from the distinct injuries are divisible. In this case, the court found that the injuries to the children were neither distinct nor divisible and that it was the collective negligence of the City, Mr. Cadieux, and United Petroleum that contributed to the plaintiffs’ injuries and losses. Thus, pursuant to s. 1 of the Negligence Act, the defendants who caused or contributed to the injuries of the plaintiffs are jointly and severally liable.
With regards to United Petroleum’s alleged prejudice that the Pierringer Agreement (a) increases its risk exposure as it makes it potentially liable for any portion of a judgment that Mr. Cadieux is unable to satisfy, and (b) precludes United Petroleum from being able to seek contribution and indemnity from the City, the court felt that this alleged prejudice was based on the assumption that it is possible for one defendant to recover from another defendant any shortfall resulting from the insolvency of another jointly and severally liable defendant. The court found that there was no authority for such a proposition and such a remedy is not available under the Negligence Act.
The court reiterated that the Negligence Act is clear that where more than one tortfeasor has caused or contributed to the plaintiff’s injury, they are each responsible for compensating the plaintiff in full subject only to the rule that the plaintiff cannot recover more than 100% of their damages. Thus, the plaintiff can recover 100% of their losses from any defendant who caused or contributed to the particular injury regardless of the degree of fault of that defendant, and regardless of whether others, parties, or non-parties, were also at fault.
Returning to the potential prejudice alleged by United Petroleum, the court found that compensating a plaintiff for their loss suffered takes priority over the potential prejudice to a defendant who might bear the financial responsibility for the entire award. Thus, the risk exposure to the defendant who might be liable to pay 100% of the plaintiff’s damages while not 100% at fault is on that defendant, not the plaintiff.
The court determined that when there are multiple wrongdoers, one of whom is insolvent, a wrongdoer who has paid more than its share of the damages is not entitled to seek contribution from another solvent wrongdoer for the insolvent wrongdoer’s share. In essence, if the plaintiff recovers the entirety of their loss from one wrongdoer and another is insolvent, the paying wrongdoer assumes the insolvent wrongdoer’s share. The insolvent wrongdoer’s share is not distributed amongst the other solvent wrongdoers.
The court added that based on the principle of compensation and double recovery, if the plaintiffs “under-recover” from the City, they cannot recoup that shortfall from the non-settling defendants. Conversely, if the plaintiffs “over-recover” from the City, they cannot retain the surplus. Furthermore, if the City is absolved of fault, United Petroleum can offset the settlement amount the plaintiffs received from the City against any damage award.
Ultimately, the court found that the prejudice been alleged by United Petroleum was speculative as the trial had not happened and liability had not been apportioned amongst the defendants. Moreover, the court must weigh the countervailing policy of promoting settlement, which would be undermined if the court refused to approve the Agreement in this case, against any potential prejudice to United Petroleum.
The court left open the proposition that there might be potential remedies available to litigants in United Petroleum’s position. It was stated that such a determination would be better to address at trial after the court has determined liability, fault apportionment, and damages, thereby enabling a comprehensive assessment of the asserted prejudice and any potential remedy that can address such prejudice.
Practical Implications
Recognizing the pivotal role of settlements in justice administration, this decision suggests that courts will be very reluctant to decline the approval of Pierringer Agreements absent just and substantive cause as doing so would discourage parties from engaging in multi-party settlement negotiations. As a result, Pierringer Agreements are useful risk management tools to achieve a partial resolution of an action.
A Pierringer Agreement must be understood within the context that its purpose is not solely to limit the plaintiff’s ability to recover damages only directly attributable to the non-settling defendants but also to ensure that the plaintiff does not recover damages attributable to a settling defendant. It is also important to remember that Pierringer Agreements do not limit the ability of the non-settling defendants to seek contribution from third and fourth parties.
Given this, it behooves defendants with substantial assets and insurance coverage who find themselves in multi-party proceedings with impecunious or underinsured parties to consider using Pierringer Agreements to resolve claims with Plaintiffs and avoid being held financially responsible for the share of a judgment attributable to the impecunious and underinsured co-defendants. Specifically, a party with significant assets who is likely to bear limited fault might seek settlement with the plaintiff to avoid being forced to pay the judgment with limited opportunity to recover the amounts paid from an impecunious co-defendant. If a defendant is willing to acknowledge some liability and, in a position, to compensate the plaintiff for some of its losses, a Pierringer Agreement could serve as a great tool that allows for resolution for a fixed amount and avoid the significant costs and risks associated with complex trials.
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[1] Based on the 1963 Wisconsin case of Pierringer v. Hoger, (1963), 124 N.W.2d 106 (U.S. Wis. S.C.).
[2] Cadieux et al. v. Cadieux et al., 2024 ONSC 1938 (CanLII)