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Civil Litigation - Settlement - Claim-Over and Indemnity Terms. Haider v. Rizvi
In Haider v. Rizvi (Ont CA, 2023) the Court of Appeal dealt extensively and usefully with the law and circumstances of a typical settlement 'release', including 'claims-over' and indemnity terms.
This case situation arose due to the all-too-common practice of leaving the drafting of the release document to 'later', or - as here:[6] Paragraph 11 of the Minutes of Settlement provided for the parties and the respondent’s wife to enter into a Full and Final Mutual Release, to be held in escrow by the lawyers for the appellant, with a true copy of the release to be delivered to the respondent’s lawyer upon payment of the settlement funds. The form and content of the release were not prescribed. In this case neither party promptly pursued the final drafting of the release, likely feeling assured that all material terms had been negotiated in the written Minutes of Settlement. So when the appellant sued a third party, who in turn sued the respondent (a classic 'claim-over') [para 10], the stage was set for an salutory illustration of 'release law'. I urge anyone facing a several page (so-called) 'standard' release form, to review this entire case to aid in understanding what they are likely reading.
Here, the Court of Appeal addressed a lower court's ordering that a plaintiff execute and serve a settlement release that "contain(ed) a clause, barring claims-over":[1] The appellant appeals the order of the motion judge requiring him to “execute a standard form Full and Final Mutual Release, which releases all claims arising out of the subject matter” of Actions CV-13-480703 and CV-16-547391 in the Superior Court (the “Actions”) “and containing a clause, barring claims-over”. ... 'Claims-over' are a common issue in settlement. They relate to the possibility that (even though the parties may settle all matters strictly between themselves) some of them may continue to litigate against third parties regarding the same fact situation and those third parties may re-involve the settling parties in litigation by third party claims. Settlements often bar parties who may otherwise make a 'claim-over' as an assurance that a settlement is truly 'the last of it', at least legally.
Here's a definition from the internet of a 'claim-over':Claim-Over means a Claim asserted by any entity that is not a Releasor against a Releasee on the basis of contribution, indemnity, or other claim-over on any theory relating to Claims arising out of or related to Covered Conduct (or conduct that would be Covered Conduct if engaged in by a Releasee) asserted by a Releasor. [LawInsider - https://www.lawinsider.com/dictionary/claim-over] Essentially, 'claims-over' contractually bar the identified parties from commencing legal proceedings against third parties which might cause a third party to sue one of the settling parties, again. That is, to re-involve them in litigation that they were trying to put behind them, completely.
A close relative to a 'claim-over' in the settlement context is that of the "indemnity", though an indemnity is broader in terms of liability coverage. While a 'claims-over' bar can (and usually does) prohibit the parties to the settlement from making any claim-over, an indemnity also attempts to cover the situation where any third party initiates litigation without a claim-over by a settling party. In short, an indemnity attempts to protect it's beneficiary from all further liability respecting the factual subject matter of the litigation, even attempting to protect them against independent third party behaviour - at least as far as that's possible.
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