By Ben Solis
Gongwer News Service
Supreme Court Justice Megan Cavanagh said Friday that she would hold that the state’s legal codes abrogate common-law release-discharge rules and mandate that a settlement agreement does not discharge a property or business owner’s vicarious liability unless the terms of a settlement explicitly provide for a discharge.
Cavanagh, writing in dissent to the high court’s Friday order in Malone v. Famers Insurance Exchange (MSC Docket No. 166575), said she would have also alternatively judicially abandon the common-law rule in regard to its requirement of courts to disregard an express statement of a party’s intent to sue an owner and would instead treat cases involving intent to sue rights as a “covenants not to sue” regardless of whether courts would have historically classified those agreements as “releases” from liability.
Cavanagh’s dissent was joined in part by Justice Elizabeth Welch.
The high court on Friday denied the application for leave to appeal in Malone after the bench heard oral arguments in the matter in December 2024.
The case dealt with a vicarious liability question involving a rear-end crash that was settled between the parties involved in the crash – a pizza delivery driver and another motorist – but left room open to sue the company that contracted the delivery driver.
The Livingston Circuit Court granted summary disposition to the pizza franchisee and dismissed the plaintiff’s complaint. The Court of Appeals affirmed the trial court, but the Supreme Court remanded the case for the appellate court to consider whether a separate amendment to state law abrogated vicarious liability in this circumstance.
On remand, the Court of Appeals once again affirmed.
The high court was asked to determine whether the 1995 amendment of MCL 600.2925d(a) abrogated the common-law rule that “a valid release of an agent for tortious conduct operates to bar recovery against the principal on a theory of vicarious liability, even though the release specifically reserves claims against the principal.”
A majority consisting of Chief Justice Elizabeth Clement, Justice Brian Zahra, Justice Richard Bernstein and Justice Kyra Harris Bolden decided to deny the application for leave following oral arguments because the majority was not persuaded to rule on the matter. Justice Kimberly Thomas did not participate in the order because the case was heard before she took office.
Cavanagh dissented, noting her belief the case’s result was “clearly contrary to the Revised Judicature Act, which provides that ‘a release or a covenant not to sue … does not discharge one or more of the other persons from liability for the injury or wrongful death unless its terms so provide.’”
“Moreover, even if MCL 600.2925d(a) does not clearly abrogate the common-law rule, I would judicially abandon the common-law rule and instead hold that where, as in this case, a settlement agreement with an agent explicitly states the parties’ intent to reserve claims against the principal, a principal may remain vicariously liable for the negligence of the agent,” Cavanagh wrote. “In other words, where a ‘release’ effectively becomes a ‘covenant not to sue’ by expressly retaining the right to sue a principal, the historic distinctions used to differentiate between the two types of agreements become so narrow that courts should ultimately treat such agreements as ‘covenants not to sue.’”
Cavanagh said it was her opinion that there was no good public policy rationale for disregarding the parties’ expressly stated intent on the issue.
“To the contrary, the only practical effect of doing so is that the injured plaintiffs who are unaware of this counterintuitive common-law rule are misled about the consequences of settling with an agent on a potential vicarious-liability claim against the principal,” Cavanagh wrote. “Because the court denies leave to appeal, leaving the Court of Appeals decision and common-law rule in place, I respectfully dissent.”
Welch dissenting in part said she agreed with Cavanagh that the terms of the settlement agreement in Malone should be treated as a covenant not to sue rather than a release.
“The plaintiff’s settlement agreement with McRell explicitly stated that ‘the settlement will not affect the plaintiff’s cause of action against the principal.’ This is a clear expression of the parties’ intent to reserve the right to sue the principal,” Welch wrote. “I agree with Justice Cavanagh that no reasonable plaintiff would ‘release’ the agent only to explicitly state that the vicarious liability claim against the principal is unaffected knowing that the court would disregard such a statement.
… As Justice Cavanagh noted, courts are required to disregard express reservations of vicarious liability claims if the court determines that the agreement is a ‘release’ rather than a ‘covenant not to sue.’”
Welch said the distinction between them was incredibly narrow.
“Given that this court has found that there is a path to preserve liability through covenants not to sue, I agree that the common law principle distinguishing between a release and covenant not to sue in these limited situations is now outdated and arbitrary,” Welch wrote. “As such, I too believe that any such ‘release’ that reserves the right to sue a principal via vicarious liability should be treated as a ‘covenant not to sue.’”
Gongwer News Service
Supreme Court Justice Megan Cavanagh said Friday that she would hold that the state’s legal codes abrogate common-law release-discharge rules and mandate that a settlement agreement does not discharge a property or business owner’s vicarious liability unless the terms of a settlement explicitly provide for a discharge.
Cavanagh, writing in dissent to the high court’s Friday order in Malone v. Famers Insurance Exchange (MSC Docket No. 166575), said she would have also alternatively judicially abandon the common-law rule in regard to its requirement of courts to disregard an express statement of a party’s intent to sue an owner and would instead treat cases involving intent to sue rights as a “covenants not to sue” regardless of whether courts would have historically classified those agreements as “releases” from liability.
Cavanagh’s dissent was joined in part by Justice Elizabeth Welch.
The high court on Friday denied the application for leave to appeal in Malone after the bench heard oral arguments in the matter in December 2024.
The case dealt with a vicarious liability question involving a rear-end crash that was settled between the parties involved in the crash – a pizza delivery driver and another motorist – but left room open to sue the company that contracted the delivery driver.
The Livingston Circuit Court granted summary disposition to the pizza franchisee and dismissed the plaintiff’s complaint. The Court of Appeals affirmed the trial court, but the Supreme Court remanded the case for the appellate court to consider whether a separate amendment to state law abrogated vicarious liability in this circumstance.
On remand, the Court of Appeals once again affirmed.
The high court was asked to determine whether the 1995 amendment of MCL 600.2925d(a) abrogated the common-law rule that “a valid release of an agent for tortious conduct operates to bar recovery against the principal on a theory of vicarious liability, even though the release specifically reserves claims against the principal.”
A majority consisting of Chief Justice Elizabeth Clement, Justice Brian Zahra, Justice Richard Bernstein and Justice Kyra Harris Bolden decided to deny the application for leave following oral arguments because the majority was not persuaded to rule on the matter. Justice Kimberly Thomas did not participate in the order because the case was heard before she took office.
Cavanagh dissented, noting her belief the case’s result was “clearly contrary to the Revised Judicature Act, which provides that ‘a release or a covenant not to sue … does not discharge one or more of the other persons from liability for the injury or wrongful death unless its terms so provide.’”
“Moreover, even if MCL 600.2925d(a) does not clearly abrogate the common-law rule, I would judicially abandon the common-law rule and instead hold that where, as in this case, a settlement agreement with an agent explicitly states the parties’ intent to reserve claims against the principal, a principal may remain vicariously liable for the negligence of the agent,” Cavanagh wrote. “In other words, where a ‘release’ effectively becomes a ‘covenant not to sue’ by expressly retaining the right to sue a principal, the historic distinctions used to differentiate between the two types of agreements become so narrow that courts should ultimately treat such agreements as ‘covenants not to sue.’”
Cavanagh said it was her opinion that there was no good public policy rationale for disregarding the parties’ expressly stated intent on the issue.
“To the contrary, the only practical effect of doing so is that the injured plaintiffs who are unaware of this counterintuitive common-law rule are misled about the consequences of settling with an agent on a potential vicarious-liability claim against the principal,” Cavanagh wrote. “Because the court denies leave to appeal, leaving the Court of Appeals decision and common-law rule in place, I respectfully dissent.”
Welch dissenting in part said she agreed with Cavanagh that the terms of the settlement agreement in Malone should be treated as a covenant not to sue rather than a release.
“The plaintiff’s settlement agreement with McRell explicitly stated that ‘the settlement will not affect the plaintiff’s cause of action against the principal.’ This is a clear expression of the parties’ intent to reserve the right to sue the principal,” Welch wrote. “I agree with Justice Cavanagh that no reasonable plaintiff would ‘release’ the agent only to explicitly state that the vicarious liability claim against the principal is unaffected knowing that the court would disregard such a statement.
… As Justice Cavanagh noted, courts are required to disregard express reservations of vicarious liability claims if the court determines that the agreement is a ‘release’ rather than a ‘covenant not to sue.’”
Welch said the distinction between them was incredibly narrow.
“Given that this court has found that there is a path to preserve liability through covenants not to sue, I agree that the common law principle distinguishing between a release and covenant not to sue in these limited situations is now outdated and arbitrary,” Welch wrote. “As such, I too believe that any such ‘release’ that reserves the right to sue a principal via vicarious liability should be treated as a ‘covenant not to sue.’”
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