A release is a contract that relieves one or more parties of future liability surrounding certain incidents. Parties often use releases in the context of settlements, to avoid future litigation in connection with the negotiations.
In the past, it has been uncertain how the courts will interpret the general language of standard form releases in the insurance context (i.e. it was not always clear whether broadly-worded releases would be enforceable against unforeseen claims). Recently, the Ontario Court of Appeal ( “Court”) provided some clarity on this subject. The Court held that express language is required to exclude claims that were not contemplated, provided that the language of the release is sufficiently broad.
In Biancaniello v. DMCT LLP,1 a law firm and a client signed a mutual release in the context of a legal battle and settlement over unpaid legal fees. In doing so they agreed to release the law firm from liability regarding “any and all services” provided between 2006 and 2007, and “with respect to any and all claims, counterclaims or defences that were pleaded or could have been pleaded.”2 Years later, an unanticipated claim from the period of the firm’s retainer came to light. The law firm had been negligent in a manner that neither party contemplated at the time. The question was did the release apply to the unforeseen claim?
The decisions of the lower courts demonstrate the struggle that existed before the Court’s decision in Biancaniello. Both the motion judge and the appellate court found that the general wording of the release could not bar the client from bringing a claim that they did not know existed.3 The Court stated that this would require “exceptionally comprehensive language” and found that the standard form was not sufficient.4
However, on the motion for leave, Justice Sachs of the Superior Court commented that the issue was open to “serious debate.”5
The Court ultimately decided that the broad wording of the mutual release encompassed claims that existed albeit unknown to the parties when they signed it. In other words, the knowledge and lack thereof of a period to the specific claim available to it may not matter if the release is sufficiently broad. The Court considered the intention of the parties at the time of signing.6 It found that because the release was given as part of a settlement agreement, its purpose was to “wipe the slate clean” in respect of the dispute (i.e. the services performed by the firm),7 Because the negligence related directly to that dispute, and given the broad language of the release, it could not be said that the parties did not agree to bar this litigation.8 The court found that:
- Additional words excluding unknown claims would be redundant, as the release encompassed “any and all claims”; and
- The fact that the claim was not discovered at the time does not mean that it did not exist.9
Professional liability insurers can take some comfort in the Court’s recent decision on interpreting releases, as long as insureds use clear and express language to exclude unforeseen future litigation. This will be relevant when agreeing to a release in the settlement context.
1 2017 ONCA 386↩
2 Ibid at para 6. ↩
3 Ibid at para 12.↩
4 Ibid at para 15.↩
5 Ibid at para 13.↩
6 Ibid at para 41.↩
7 Ibid at para 42.↩
8 Ibid at para 51.↩
9 Ibid at paras 50 and 52.↩