Non-Traditional Settlement Agreements in Multi-Defendant Tort Litigation

The developing complexity of multi-party personal injury litigation and the competing interests of multiple insurers as these cases approach trial, have developed creative approaches to achieve settlement of such cases. Some of the approaches discussed below create a duty of disclosure by the “settling” party; some require continued participation in the trial by the “settling” party; and, may therefore compromise the credibility of the “settling” party’s witnesses at trial. This article will explore such “settlement” agreements and their potential ramifications.

I. Loan Receipt Agreements, a/k/a “Mary Carter”

The most often discussed and litigated of these settlement agreements is the “loan receipt agreement,” commonly referred to as a “Mary Carter” agreement, first reported in the case of Booth v. Mary Carter Paint Co., (Fla. Dist. Ct. App. 1967, 202 So.2d

8). A “loan receipt agreement” is an agreement between the plaintiff and one or more defendant in which the settling defendant(s) “loan(s)” a stated amount of money to the plaintiff and is entitled to be repaid the loan from any recovery the plaintiff receives from a non-settling defendant. Banovz v. Rantanen, 271 Ill.App.3d 910, 208 Ill.Dec. 617 (5th Dist. 1995). The essential feature of a “Mary Carter” agreement is the repayment of the loan from monies recovered from the non-settling co-defendants. Banovz, 208 Ill.Dec. at 622. Should there be no further recovery, there is no repayment.