California Supreme Court Abolishes Common Law 'Release Rule'

August 24, 2012

On August 23, 2012, the California Supreme Court ruled that the long standing common law “release rule,” shall no longer be followed in California.

The common law “release rule” provides that if a Plaintiff settles with and releases one joint-tortfeasor from liability then the Plaintiff releases from liability all other tortfeasor. The rationale for the rule is that there can only be 1 (one) compensation for a single injury and because joint tortfeasors are equally liable for all damage under joint and several liability, any joint tortfeasor’s payment of the 1 compensation satisfies Plaintiff’s entire claim. In simplistic terms, the rule is commonly referred to as “release of one is a release of all.”

In March 2003, an infant named Adian Leung was born in Vertigo Hills hospital. Shortly after his birth, Adian began to show signs of jaundice. His parents contacted their pediatrician and were informed that jaundice was common in babies and not to worry. The hospital likewise erroneously downplayed the baby’s condition. As a result, Adian did not receive necessary medical treatment and developed “kernicterus” resulting in severe brain damage.

Adian’s parents sued both his pediatrician and the hospital for negligence. The pediatrician settled with Adian for his insurance policy limit of $1 million. The hospital rejected Plaintiff’s offer to settle for $2.1 million, opting to defend itself at trial. The Plaintiffs prevailed and the jury awarded $15 million against both the doctor and the hospital. The hospital, however, was only deemed to be 40% liable.

On appeal, the hospital argued that under the “release rule” Plaintiff’s settlement with the doctor also released the hospital from liability. The court of appeal agreed. On appeal to the Supreme Court, the hospital presented two arguments: (1) because the trial court determined the doctor’s settlement was not made in good faith, the hospital should be released from liability under the common law “release rule”; and/or (2) the hospital should only be responsible for its proportional liability of 40%.

Reversing the Court of Appeal, the Supreme Court held that the common law “release rule” shall no longer be followed in California. The Court reasoned that a ruling in favor of the hospital would recognize a new exception to the established rule of joint and several liability, limit the damage a Plaintiff could recover, and encourage bad faith settlements. Writing for the majority, Justice Kennard held that application of the “release rule” in the case rendered a harsh and unjust result. As such, the hospital is liable and shall pay the entire jury award of $15 million – less the $1 million paid by the doctor. The hospital may now file suit against the doctor to recover some of its overpayment due to the trial court’s determination that the doctor’s settlement was not made in good faith.