Peterson v. Farmers Texas County Mutual Insurance Co.

Dallas Court of Appeals, No. 05‐14‐01235‐CV (June 22, 2016) 

Justices Lang (Opinion), Brown, and Whitehill

Peterson was killed when the 2007 GMC Sierra in which he was riding crashed into a tree. Peterson’s airbag did not deploy, and his seatbelt failed to restrain him. Counsel for Peterson’s estate wrote to Farmers, the driver’s insurer, demanding that it preserve the Sierra as evidence. Farmers responded, acknowledging it had possession of the truck and offering the opportunity for inspection. Peterson’s estate sued the driver and Farmers. That case settled. In the settlement agreement, Peterson’s estate released Farmers from “all past, present, or future claims … Releasor now has, or which hereafter may accrue [and] which … may in any way grow out of” the accident. Later, when Peterson’s estate attempted to sue the manufacturer and seller of the truck, Farmers disclosed that the truck had been “parted out” and was no longer available. Peterson then sued Farmers for having allowed the truck to be destroyed, alleging, among other things, breach of contract and “breach of bailment.” Farmers defended on the basis of the broad language of the release, arguing the claims for the truck’s destruction “grew out of” the accident that caused it to be in Farmers’ custody, and the trial court granted its motion for summary judgment.

The Dallas Court of Appeals affirmed. Peterson’s estate argued that the recitals in the settlement—which arguably restricted the settlement and release to personal injury claims that could have been brought in the original lawsuit against the driver—at least created an ambiguity. The Court rejected that argument, finding the broad language of the release unambiguous and observing, “Recitals do not control over operative phrases unless there is an ambiguity” in those operative phrases.

Moral: Think twice, and critically, before including or agreeing to broad “stock” language in a settlement agreement or release.