Supreme Court repudiates lower court decision granting third-parties right to enforce boilerplate release language
For the past decade, the so-called "Engler Majority" of the Supreme Court had allowed to stand a 1999 decision of the Court of Appeals that proved a windfall for insurers. The decision, entitled Romska v. Opper, had granted summary disposition to a wrong-doer's insurer because the accident victim had previously signed a Release document that contained "boiler-plate" [standard] language purporting to release "all other parties" who might be responsible for the victim's injuries. Prior to the decision in Romska, such language was routinely included in Releases at the insistence of insurers, however, if an unwary victim signed the release, it could in some cases be amended to limit its operation to the parties' intent.In Estate of Shay v. Aldrich, et al., the Supreme Court finally confronted this issue. In Shay, Allen Park and Melvindale police officers were sued after they allegedly beat Shay. It was alleged that Melvindale officers originally responded to a car alarm at Shay's home, left the home, but then returned with Allen Park officers later the same day and assaulted Shay.
The case went to Case Evaluation, where minimal awards were entered against two of the [Allen Park] officers, but significant awards were entered against the Melvindale officers. The Allen Park officers and Shay consented to the awards involving these officers and a Release was executed that limited the release and dismissal of Shay's claims to the Allen Park officers only, but also contained "boilerplate" language that purported to dismiss claims against "all other persons."
The Melvindale Defendants argued that they were entitled to a dismissal, citing the "all other persons" language in the Release, even though they conceded that it was not the intent of either of the other parties to release them from the lawsuit. Relying on Romska, the Court of Appeals ordered dismissal of the remainder of the case, and Shay's family appealed.
The Supreme Court noted that the Release contained a latent ambiguity, in that it purported to release only the Allen Park officers, but also contained a reference to releasing all other persons. Since there was a latent ambiguity in the document, the Court noted that reference was properly made to the circumstances external to its execution: on that basis, there was no question that the parties' intent was to release only the Allen Park police officers. The attorney for the Allen Park officers had executed an affidavit confirming the circumstantial evidence documenting the agreement to release only the minimal claims of the Allen Park defendants and not the perpetrators against whom substantial awards had been entered. While the Melvindale officers were potential "third-party beneficiaries" with standing to raise the question of the intent of the Release, they were not entitled to enforce its terms in a manner contrary to the intent of the parties to the contract. On that basis, the case was reinstated and the Melvindale officers will have to defend their actions in the continuation of the injury suit.