The Supreme Court recently published Humana v. Blose, which dealt with the limited issue of whether a claimant can waive his right to a statutory action by signing a release of claims.  The Court of Appeals held that the “remedy for a breach of a release and waiver of a statutory right is “an original action or counterclaim for recovery of damages incurred as a result of the breach,” rather than the dismissal of the statutory action.”

Blose was employed by Humana and terminated allegedly as an overall reduction in workforce.  In exchange for 12 weeks severance pay and continuation of benefits, Blose signed a release, agreeing to settle any claim she might have arising out of her termination.  This included any statutory rights she may have resulting from her disability.  Several years later, she filed suit against Humana, alleging among other claims, disability discrimination.  Humana filed for a dismissal or in the alternative a summary judgment based on Blose’s execution of the release.  The claim was dismissed.

The Court of Appeals held that Blose could not waive a statutory right of action, and that the appropriate remedy to Humana was a suit for breach of contract.  (The breach being Blose’s filing of a lawsuit despite her agreement). The Court of Appeals also held that further discovery was warranted on the factual issues surrounding the execution of the release by Blose.  (This part of the order was not appealed).

The Supreme Court noted that releases and compromise agreements were contracts, governed by contract law.  As such, they could be impeached if procured by fraud, bad faith, or false representations.  Relief from such an agreement could also be granted if the agreement was procured under duress.

The SC noted:

Even before American General , we had held, “a release is a discharge of a claim or obligation and surrender of a claimant’s right to prosecute a cause of action .” Thus, a “‘release’ extinguishes a claim or cause of action.” … Thus, a release without duress, fraud, or bad faith, is effective to waive a plaintiff’s right to bring a claim, whether statutory or otherwise.

Therefore, Humana could assert the release as a defense to Blose’s claim, and not simply counterclaim for breach of the release. The SC reversed so much of the Court of Appeals’ opinion that required the trial court to consider the breach of the release as a counterclaim, as opposed to dismissing the case outright.

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The Court of Appeals published Barkman v. Overstreet, an appeal of a malpractice verdict in favor of the treating physician.  While several errors were alleged, the most interesting one involved the mention of insurance by Dr. Overstreet during his testimony.  The Appellant Barkman argued these mentions were in violation of evidence rule 411, which prohibits the mention of liability insurance to prove negligence.

The Court of Appeals noted that Overstreet mentioned insurance in his testimony on two occasions.  The first was in reference to the 23 hour admission of Barkman.  Overstreet noted that “insurance companies” prefer the limited admission to a full blown admission.  When questioned about fabricating facts to support the 23 hour admission, Dr. Overstreet responded in part that this was due to the insurance companies restrictions.

The  Court of Appeals noted that 411’s prohibition against the mention of insurance requires certain precepts before it is implicated.  First, it must be mentioned in the context of liability insurance, and second, it must be used to prove negligence of a party.  The Court of Appeals noted that in reviewing the context in which the statements were made it was clear that Overstreet was referring to health insurance and not liability insurance.  As such, the trial court did not abuse its discretion in overruling counsel’s motion for a mistrial or in refusing to admonish the jury on its use.

Editor’s note: This rule is often misunderstood and misapplied.  Contrary to popular opinion, the rule does not prohibit any mention of insurance at trial.  The rule is limited to liability insurance and only then if it is being admitted as evidence of negligence.  Even then, rule 411 allows the introduction of liability evidence if used for a different purpose such as agency, ownership, control, or bias or prejudice of a witness.  Of course, the mention of “health” insurance could be in violation of the collateral source rule if used to show receipt of payments of damages by a party from other sources.

The Court of Appeals has posted its minutes for April 11th.  Click here for a list of the published and nonpublished cases.  Check back for digests of cases dealing with tort and insurance law.