We learned of a case where a patient was injured at a hospital. The treating doctor and the hospital were sued. Doctor decided to settle for policy limits – $1M. He believes he got out early and can sit on the sidelines. He reasonably believes his involvement in the case is over. And the hospital may be on the hook for a larger sum.


The hospital sues the doctor – arguing that if a jury orders them to pay, they want the doctor’s group to underwrite some of that payment. In other words, they want to be reimbursed some of the money a jury holds them liable.


What happened here?


Defendants settle because they want closure. Defendants don’t settle to be drawn back into the case.


When a case settles for money, a settlement agreement is signed. This agreement memorializes the case will be dismissed against that defendant in exchange for money – and sometimes other terms.


How can a settlement agreement protect against a third party imposing potential rights against you, the person who just settled? One way is to have the agreement mandate the plaintiff will indemnify you, the settling defendant, against claims brought by the hospital, the other defendant. In other words, a term should be included which notes that if the hospital seeks money back from you (triggered by a judgment against the hospital), the plaintiff will have to repay you some or all of the money. This would allow you to avoid any additional loss. Indeed, that’s why you settled in the first place – for finality.


Such a technique prevents a plaintiff from double dipping as much as possible. That said, it’s unlikely a court would uphold an indemnification agreement above and beyond the amount you settled for. For example, let’s take a case where you settle for $1M, and the hospital loses $10M at trial. The hospital believes you were fully responsible (and liable) for the negligence and the injury. The hospital then sues you for the full $10M. It’s unlikely the indemnification clause would save you more than the $1M you paid out. And, every state likely has its own rules on how each addresses suits and settlements with multiple defendants.


The take-home message. If you decide to settle and there are multiple defendants, make sure you ask your attorney to make sure when you’re done, you’re really done.