The release you are asked to sign, and what it gives up

A release is a contract, and the check is what you are paid for signing it. Minnesota law limits how far one may reach, refuses to let one defeat certain repayment rights, and requires a judge's approval before one binds a child.

A release is a contract. The check is consideration for it, which means the money is not payment for the injury — it is payment for the promise never to ask again. Minnesota does not leave the terms of that promise entirely to the party drafting it, and it does not let the promise reach some things at all.

What Minnesota says a release may not do

Minn. Stat. § 72A.201, subd. 7 is two clauses long and both matter:

The following acts by an insurer, adjuster, or self-insured or self-insurance administrator constitute unfair settlement practices:

(1) requesting or requiring an insured or a claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment;

(2) issuing a check or draft in payment of a claim that contains any language or provision that implies or states that acceptance of the check or draft constitutes a final settlement or release of any or all future obligations arising out of the loss.

Clause (2) is aimed at a specific and once-common device: language printed above the endorsement line converting the act of depositing a draft into an act of settlement. Clause (1) is aimed at breadth — a release presented for a property damage payment that also releases the bodily injury claim goes beyond the subject matter that gave rise to the payment.

Things a release does not clear

A perfected hospital lien. Section 514.71:

No release of such causes of action, or any of them, or of any judgment thereon shall be valid or effectual as against such lien unless such lienholder shall join therein, or execute a release of such lien, and the claimant, or assignee of such lien, may enforce such lien by action against the person, firm, or corporation liable for such damages, and against any person who received payment for such damages … If the claimant shall prevail in such action, the court may allow reasonable attorneys' fees and disbursements. Such action shall be commenced within two years after the filing of such lien.

The phrase “and against any person who received payment for such damages” is the operative one. The lienholder’s remedy is not confined to the insurer that wrote the check.

A workers’ compensation subrogation right. Minn. Stat. § 176.061, subd. 8a:

In every case arising under subdivision 5, a settlement between the third party and the employee is not valid unless prior notice of the intention to settle is given to the employer within a reasonable time. If the employer or insurer pays compensation to the employee under the provisions of this chapter and becomes subrogated to the right of the employee or the employee's dependents or has a right of indemnity, any settlement between the employee or the employee's dependents and the third party is void as against the employer's right of subrogation or indemnity.

Minnesota does permit a narrower settlement that avoids that problem. In Naig v. Bloomington Sanitation, 258 N.W.2d 891 (Minn. 1977), the supreme court held that where an employee settles only those claims not subject to the employer’s subrogation, the employer cannot credit the proceeds against compensation payments — “So long as the employer is notified of negotiations leading to such a settlement so that it can appear or intervene to protect its interest and so long as the employee demonstrates that the settlement concerns only damages not recoverable under worker’s compensation, or allocates the settlement into recoverable and nonrecoverable claims.” The court named the cost in the next sentence: “By pursuing this course, however, the employee waives his statutory right to one-third of the employer’s net recovery from the third-party” under § 176.061, subd. 6.

A Medical Assistance claim. Section 256B.042, subd. 4(c) requires notice to the state agency at three separate stages, the third being “when a claim is concluded by payment, award, judgment, settlement, or otherwise.” The duty runs to every party — the injured person, the plaintiff, the defendants, and persons alleged to be responsible for compensating them — “regardless of whether the party knows the state agency has a potential or actual lien claim.” Notice by one party counts for all; failure by all counts against all. Subdivision 2(c) then extends the agency’s time: if the required notice is not given, the agency has one year from the date it learns of the lack of notice to commence an action, and it may sue “any or all of the parties or entities which have either paid or received the payments.”

Underinsured motorist coverage: notice comes before the release

An injured person who settles with an at-fault driver for that driver’s policy limit, and who also has underinsured motorist coverage, is in a sequence Minnesota has specifically regulated. Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983), holds two things.

First, the release itself is not fatal to the UIM claim. The court reasoned that “It is the public policy of Minnesota that injured persons should not, by virtue of having purchased underinsurance, be placed in a financial position inferior to that which they would have held had the tortfeasor been fully insured,” and held “that settlement and release of an underinsured tortfeasor does not preclude recovery of underinsurance benefits.”

Second, the underinsurer gets notice and a window:

The underinsurer, however, will have this subrogation right against the tortfeasor only if it has paid underinsurance benefits prior to release of the tortfeasor. Thus, the underinsurer is entitled to notice of the tentative settlement and an opportunity to protect those potential rights by paying underinsurance benefits before release.

… We conclude that in the future 30 days from the written notice of the tentative settlement agreement is a more reasonable time period, and so the procedure set out in the district court orders should hereafter be modified.

Within that period the underinsurer may let the grace period expire and permit the settlement and release — in which case it must still process the underinsurance claim but cannot recover those payments through subrogation — or it may substitute its own payment in an amount equal to the tentative settlement, preserving its subrogation rights to the extent of that payment while the insured receives the same money.

Releasing one defendant when there are several

Minnesota’s default allocation rule is several liability. Section 604.02, subd. 1: “When two or more persons are severally liable, contributions to awards shall be in proportion to the percentage of fault attributable to each,” subject to four listed exceptions where joint and several liability survives — a person whose fault is greater than 50 percent, two or more persons acting in a common scheme or plan, a person who commits an intentional tort, and defendants whose liability arises under the enumerated environmental and public health provisions. The section applies to claims arising from events occurring on or after August 1, 2003.

Against that background, Minnesota recognizes the Pierringer release, under which a plaintiff settles with some defendants, releases that share of the claim, and agrees to indemnify the settling defendants against cross-claims. Frey ex rel. Frey v. Snelgrove, 269 N.W.2d 918 (Minn. 1978), adopted the device and set out how a trial proceeds afterward:

We therefore hold that where the plaintiff has entered into a Pierringer-type release, settling his claims with some defendants and agreeing to pay any cross-claims of the nonsettling defendants, the settling defendants usually should be dismissed, but their negligence should nevertheless be submitted to the jury.

The court’s guidance for future cases is worth reading for what it tells a settling plaintiff about disclosure: when a settlement or release is entered into, “the trial court and other parties should be immediately notified, and the terms of the agreement made a part of the record,” and “In almost every case the trial court should submit to the jury the fault of all parties, including the settling defendants, even though they have been dismissed from the lawsuit.” The plaintiff who settles out one defendant does not remove that defendant’s percentage from the verdict form; the plaintiff absorbs it.

Payments that are not a release

Not every check is a settlement. Section 604.01, subd. 2 provides that a settlement with, or any payment made to, an injured person or to others on their behalf with their permission “shall not constitute an admission of liability,” and subdivision 3 says the same for property damage and economic loss. Subdivision 4 makes such payments inadmissible at trial “Except in an action in which settlement and release has been pleaded as a defense.”

Subdivision 5 handles the accounting, and includes a protection people do not expect:

All settlements and payments made under subdivisions 2 and 3 shall be credited against any final settlement or judgment; provided however that in the event that judgment is entered against the person seeking recovery or if a verdict is rendered for an amount less than the total of any such advance payments in favor of the recipient thereof, such person shall not be required to refund any portion of such advance payments voluntarily made.

The order of operations in the rest of that subdivision is the reverse of the statutory deductions discussed elsewhere on this site: the court applies the comparative fault reduction first and then credits the advance payments against the reduced figure.

A child’s claim needs a judge

Section 540.08 permits a parent to maintain an action for the injury of a minor son or daughter, and a general guardian to do so for a ward. It then places two controls on the money and one on the settlement itself. Before a parent receives property as a result of the action, the parent must file a bond the court prescribes and approves; in lieu of the bond, the court may on petition order the property invested in United States securities, or in a savings account, savings certificate, certificate of deposit, or share certificate at a bank, savings association, trust company, or credit union, or in an annuity or other form of structured settlement, subject to the court’s order. Money or assets in an account the court establishes under the section “are not available to the minor child or the child’s parent or guardian until released by the court . . . .”

The last sentence is the one that governs the release:

No settlement or compromise of the action is valid unless it is approved by a judge of the court in which the action is pending.

Getting out of one afterward is hard

That is not a holding that a release can never be set aside. It is a holding about who carries the weight and on what record, and it is a reason the document is worth more attention before signature than after.

What this page is not

It describes what Minnesota law does and does not permit a release to accomplish. It does not read anyone’s release, and the language in these documents varies enough that the general rules above are a starting point for reading one rather than a substitute for doing it.