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April 21, 2000

Record No. 991117





F. Bruce Bach, Judge

Present: Carrico, C.J., Lacy, Hassell, Keenan,
Koontz, and Kinser, JJ., and Compton, Senior Justice


In this motor vehicle insurance case, we
consider whether an insured’s release of a tort claim against the
tortfeasor also operates to bar the insured’s contract claim
against his insurer for medical expenses arising from the
accident in question.

The facts are undisputed. In 1994, appellant
John A. Berczek was injured as the result of negligence in an
automobile accident in Fairfax County. At that time, he was the
named insured under a "Family Auto Insurance Policy"
issued by Erie Insurance Company, a member of appellee Erie
Insurance Group. In a policy endorsement, the insurer agreed to
provide "medical expense benefits as a result of bodily
injury caused by accident" and arising out of the use of the
insured motor vehicle.

In June 1997, the insured settled his
negligence claim for $19,500, and executed a general release in
favor of Rodney Renner and Karen D. Renner (collectively, the
tortfeasor). The only parties to the release were the insured and
the tortfeasor.

Subsequently, the insured filed the present
action for damages against the insurer in April 1998. In a motion
for summary judgment, the insurer asserted that the insured
"is alleging that Erie Insurance Group breached a contract
of insurance for medical expense benefits or payments"
arising from the accident in question. The insurer contended that
the insured’s claim is "barred or precluded" because of
the June 1997 release executed by the insured, and sought
dismissal of the action.

The release provides:

"For the Sole Consideration of Nineteen
Thousand Five Hundred ($19,500.00) Dollars, the receipt and
sufficiency whereof is hereby acknowledged, the undersigned
hereby releases and forever discharges

Rodney Renner and Karen D. Renner

their heirs, executors, administrators, agents
and assigns, and all other persons, firms or corporations liable
or, who might be claimed to be liable, none of whom admit any
liability, from any and all claims, demands, actions, causes of
action or suits of any kind or nature whatsoever, and
particularly on account of all injuries, known and unknown, both
to person and property, which have resulted or may in the future
develop from an accident which occurred on or about July 1, 1994
at or near Little River Turnpike.

This release expressly reserves all rights of
the parties released to pursue their legal remedies, if any,
against the undersigned, their heirs, executors, agents and

Undersigned hereby declares that the terms of
this settlement have been completely read and are fully
understood and voluntarily accepted for the purpose of making a
full and final compromise adjustment and settlement of any and
all claims, disputed or otherwise, on account of the injuries and
damages above mentioned, and for the express purpose of
precluding forever any further or additional claims arising out
of the aforesaid accident.

Undersigned hereby accepts draft or drafts as
final payment of the consideration set forth above."

Following discovery and argument of counsel,
the trial court granted the motion for summary judgment and
dismissed the action. In a letter opinion, the court noted the
parties’ agreement "that the release addresses the same
automobile accident for which all of the medical expenses claimed
in the present case arose." The court further stated that
the issue becomes whether the insured can proceed against the
insurer "in light of the language of the release."

The trial court determined that the language of
the release is "clear and unambiguous." The court
referred to the provision that the insured "releases ‘all
other persons, firms or corporations . . . , from any
and all claims, demands, actions, causes of action or suits of
any kind or nature whatsoever. . . .’" The
court said that the insurer "is an ‘other . . .
firm or corporation’ under the release and this cause of action
‘resulted or may in the future develop from an accident which
occurred on or about July 1, 1994 at or near Little River
Turnpike.’" Accordingly, the court ruled that "[w]hen
this language is given its plain meaning, it is clear that the
release precludes Plaintiff from filing suit against Defendant
for medical expenses arising from the July 1, 1994
accident." The insured appeals.

On appeal, the insurer contends the trial court
correctly granted the summary judgment motion. We disagree.

The question whether an injured party’s general
release of a negligence claim bars a medical expense claim under
these circumstances is one of first impression in Virginia.
Courts of other jurisdictions are divided on the question. See
cases collected in Francis M. Dougherty, Annotation, No-Fault
Insurance: General Release of Tortfeasor By Accident Victim As
Affecting Automobile Insurer’s Obligation For Personal Injury
Protection (PIP) Benefits
, 39 A.L.R. 4th 378 (1985).

The law of Virginia is settled upon the
interpretation and construction of releases. Like the terms of
any contract, the scope and meaning of a release agreement
ordinarily is governed by the intention of the parties as
expressed in the document they have executed. Richfood, Inc.
v. Jennings
, 255 Va. 588, 591, 499 S.E.2d 272, 275 (1998).
When the contract is lawful and the language is free from
ambiguity, the agreement furnishes the law that governs the
parties. Id.

We agree with the trial court that the release
in question is unambiguous. But the crucial task is to determine
the intention of the parties to the document, that is, whether
this insured and the tortfeasor contemplated the release of an
insurer from a medical expense claim arising from the accident.

Even given the broad, all-inclusive language of
the document in question, we hold as a matter of law that it
could not have been the intention of the parties, the injured
insured and the tortfeasor, to release the insurer from its
obligation to pay medical benefits, for any number of reasons.
For example, the insured was releasing a tort claim based on
negligence while the insurer, which was not a party to the
release, seeks to bar a contract claim. Two distinct types of
insurance claims are involved — the insurer’s obligation to
indemnify its insured as the result of any legal liability he
might incur based on fault as opposed to the insurer’s
contractual obligation to pay medical expenses regardless of
fault. Plainly, the release agreement deals with tort liability
only. The document "releases and forever discharges"
the tortfeasor and all others that are "liable or, who might
be claimed to be liable," without admitting any
"liability." Clearly, the agreement does not deal with
claims based upon contract, even though a loose use of the term
"liable" could apply to contract responsibility in
another context.

Moreover, no rights of the insurer were cut off
or placed in jeopardy by the insured’s settlement and release of
the tortfeasor because subrogation of medical expense payments is
prohibited in Virginia by Code ? 38.2-3405(A).

Furthermore, a medical expense claimant under
these circumstances has no reason or incentive to forego medical
payment benefits by release; such benefits are a source of
compensation separate and apart from a claim for personal injury
damages based on negligence, even though such medical expenses
can be proved during trial of the tort action.

In conclusion, we note the insurer concedes
that if this release has the sweeping effect for which it
contends, then the document bars, for example, a life insurance
claim had the insured died as a result of this accident. We shall
not endorse such an unreasonable concept.

Consequently, we conclude that the trial court
erred in granting the motion for summary judgment. Thus, we will
reverse the judgment below dismissing the action and will remand
the case for further proceedings on the merits of the insured’s

Reversed and remanded.