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Court Looks to Evidence Outside of Settlement Agreement to Determine the Intent of the Parties

Posted in Firm News

Most New Mexico personal injury lawsuits are settled before the case goes to trial. This is due to several reasons, but primarily because a mutually acceptable settlement agreement eliminates the risk on both sides. Thus, a settlement agreement allows for an accident victim to count on receiving a certain amount of compensation for their injuries. And at the same time, the defendant avoids the risk of losing at trial and having the jury return a damages award that is significantly higher than that which the plaintiff would accept prior to trial.

The ability of a New Mexico personal injury attorney to negotiate and execute a favorable settlement agreement is therefore one of the most important skills an attorney can possess. Not all settlement agreements are clear-cut, and some can present issues if the proper language is not used. A recent case illustrates this concept, and highlights why the language in a pre-trial settlement agreement is very important.

The Facts of the Case

The plaintiff was involved in a traffic accident with a delivery driver for a chain fast-food restaurant. After the accident, the plaintiff filed a personal injury lawsuit against the driver, the restaurant, and the restaurant’s insurance company (“the defendants”). The plaintiff did not name the owner of the vehicle or the owner’s car insurance company in the lawsuit.

About two weeks after the case was filed, the plaintiff entered into a settlement agreement with the owner of the vehicle, as well as the owner’s insurance company. That agreement provided that the plaintiff would receive $25,000, and in exchange she would “release, acquit and forever discharge the said payor(s), their agents and employees, and all other persons, firms or corporations who are or might be liable” to the plaintiff.

In a pretrial motion, the defendants filed a motion to dismiss the plaintiff’s case, arguing that the broad language of the settlement agreement that the plaintiff had executed with the owner and her insurance company excused the named defendants from the lawsuit.

The Court’s Analysis

The court began by noting that, as a general rule, the only evidence a court can consider when interpreting a contract is that which is contained in the contract itself. Thus, extrinsic evidence is not admissible to prove the parties’ intent. However, in certain situations, the court explained that extrinsic evidence can be considered when a party presents evidence of mistaken intent. When a plaintiff presents evidence of mistaken intent, a court can read the contract “in light of the surrounding circumstances.”

Here, the court held that the plaintiff presented evidence of mistaken intent by showing that 1.) the case against the named defendants never included the parties that were subject to the settlement agreement; 2.) the release was signed just weeks after this lawsuit was filed, and did not mention the named defendants, and 3.) the plaintiff did not dismiss the case against the named defendants once the settlement agreement was finalized. These factors, the court held, all favored the plaintiff’s position that she did not intend to excuse the named defendants when she executed the settlement agreement.

Ultimately, the court concluded that the plaintiff’s case should proceed toward trial, where a jury will be able to determine whether the plaintiff excused the named defendants by executing the settlement agreement.

Have You Been Injured in a New Mexico Truck Accident?

If you or a loved one has recently been injured in a New Mexico truck accident, you may be entitled to monetary compensation. The dedicated New Mexico personal injury lawyers at the Fine Law Firm have extensive experience representing injury victims in a wide range of claims, including claims against the employers of negligent drivers. To learn more, call 505-889-FINE to schedule a free consultation.

More Blog Posts:

Investigations in Automobile and Trucking Accidents, New Mexico Personal Injury Lawyer Blog, September 6, 2018.

Federal Appellate Court Affirms Summary Judgment in Favor of Defendant under Daubert Standard, New Mexico Personal Injury Lawyer Blog, September 17, 2018.