Business & Insurance Litigation Newsletter for Indiana

Settlement Set-offs No Longer Allowed in Indiana

Under Indiana law, a defendant is no longer entitled to a credit for amounts paid to plaintiff by other parties. This dramatic departure from traditional rules of compensation announced in R.L. McCoy Inc. v. Jack, 772 N.E.2d 987 (Ind. 2002), will significantly increase the likelihood of multi-defendant actions going to trial and will undoubtedly result in plaintiffs being overcompensated for their injuries.

Traditionally, Indiana had followed the "one satisfaction" rule that when the actions of multiple defendants cause a single injury to a plaintiff, any defendant against whom the judgment is rendered at trial is entitled to a credit against the assessed damages in the amount of any funds paid to plaintiff by settling joint tortfeasors. Riehle v. Moore, 601 N.E.2d 365 (Ind. Ct. App. 1992). This credit was allowed in order to prevent a plaintiff from recovering twice for the same injury and, therefore, Indiana trial courts have traditionally been empowered to reduce jury verdicts by amounts received in settlement to insure that a plaintiff will not receive more than a full recovery. Id.

However, passage of Indiana's non-party statute complicated the "one satisfaction" principle. See Mendenhall v. Skinner, 728 N.E.2d 140 (Ind. 2000). In R.L. McCoy, the Indiana Supreme Court squarely addressed the issue of whether to allow set-offs in comparative fault cases and abolished the "one satisfaction" rule in Indiana by holding that defendants are no longer entitled to set-offs from amounts paid by settling defendants. Thus, now when one defendant settles, the remaining defendants' only recourse is to identify the settling defendant as a non-party and carry the burden of allocating fault to the non-party.

This decision will greatly benefit plaintiffs in cases involving multiple defendants and will significantly increase the likelihood of such cases going to trial. For example, in asbestos and construction cases where several companies are typically named, in the past the accumulation of numerous nuisance value settlements from companies with no real exposure often made it economically unfeasible for plaintiffs to go to trial against the target defendants, as the large set-off credit created by nuisance settlements would severely diminish, or event eliminate, any award of damages won after a long and expensive trial. However, the R.L. McCoy decision now allows plaintiffs in such cases to "have their cake and eat it too," by allowing them to keep both large amounts accumulated through nuisance value settlements and the full amount of any damages awarded by a jury.