Ontario Court of Appeal: Pierringer Agreements do not release third and fourth party tortfeasors, unless a contrary intention appears

Earlier this year, the Ontario Court of Appeal tackled the complex arrangement often seen when there are multiple tortfeasors: the Pierringer Agreement. Typically, a Pierringer Agreement may be used when a plaintiff is prepared to settle some of its claims, but not all. As such, this type of arrangement affords the plaintiff some certainty by allowing it to settle some of its claims in exchange for the release of those defendants from the action. As a result, the non-settling defendants continue in the legal proceeding against the plaintiff, who are then only responsible for the several share of damages (i.e., the damages each defendant alone caused).

Background

In 2009, two individuals (the "Maios") bought a new home in Vaughan, Ontario. Soon after moving into the new home, a faucet on the main floor detached and caused a flood in the house, resulting in over $3,000,000 in water damage.

The Maios brought a claim under their homeowner's insurance policy. The insurer brought a subrogated action, on the Maios' behalf, against the City of Vaughan, a subcontractor, and a plumber, who were all involved in the installation of the faucet. The defendants in the action all crossclaimed against each other, and issued third-party claims. In turn, the third parties issued fourth-party claims.

In 2017, the Maios settled their action against the City of Vaughan. Accordingly, a Pierringer Agreement was entered into on behalf of these two parties. Notably, the Pierringer Agreement stated the following:

"It is understood and agreed that, should the Plaintiffs so choose, the Plaintiffs may continue to pursue their claims against the Remaining Defendants, but that such claim will only be pursued solely with respect to the several liability of the Remaining Defendants."^[i]

Subsequently to the entering of the Pierringer Agreement, the Maios agreed to release another defendant, Kapp Contracting Inc., the subcontractor. The only remaining defendant was Mer Mechanical Inc., the plumbing company.

At the direction of the pre-trial judge, a motion was submitted to determine the effect of the Pierringer Agreement. The motion judge held that the Pierringer Agreement did not preclude Mer Mechanical Inc. from pursuing its third-party claims. In other words, the Pierringer Agreement did not limit Mer Mechanical Inc.'s ability to seek contribution for any damages it may be required to pay to the Maios.

Court of Appeal decision

The Court of Appeal upheld the motion judge's findings and dismissed the appeal.

The Court reasoned that the Pierringer Agreement prevents the respondents on appeal, the Maios, from recovering damages from the remaining defendant, Mer Mechanical Inc., for damages attributable to the City of Vaughan or Kapp Contracting Inc., as the Pierringer Agreement fully released these two defendants from the action.

With this understanding set out, the Court further explained that since Mer Mechanical Inc. was still part of the action, as the remaining defendant, the Pierringer Agreement plays no role in limiting its ability to pursue contribution from third and fourth parties not released in the Pierringer Agreement. The Pierringer Agreement limits a plaintiff's ability to recover damages, it does not limit a defendant from seeking contribution for damages for which it may be held liable to the plaintiff.^[ii]

In referencing Endean v St Joseph's General Hospital,^[iii] the Court reiterated that "the general rule [is] that plaintiffs are entitled to recover one hundred percent of their damages from any tortfeasor who is found liable for damages, even if other tortfeasors are also responsible for the same damages. A tortfeasor can then avoid paying all damages by making crossclaims or third-party claims. The court explained that the effect of a Pierringer Agreement must be understood in the context of these principles."^[iv]

With these principles set out in context, the Court held that Mer Mechanical Inc. was thus not barred by the Pierringer Agreement from seeking contribution for any damages it may be found liable to the respondent on appeal, the Maios.

Key takeaways

A Pierringer Agreement is a useful tool for a plaintiff to predictably recover damages from tortfeasors in actions involving multiple defendants. A Pierringer Agreement must be understood within the context that its purpose is not to limit the plaintiff's ability to recover damages only directly attributable to remaining defendants. Rather, its purpose is to ensure the plaintiff does not recover damages attributable to a defendant already released from the Pierringer Agreement.

This decision makes the distinction clear that a Pierringer Agreement does not limit the ability of remaining defendants from seeking contribution from third and fourth parties, unless the Pierringer Agreement contains contrary wording.