Is A Release Valid

A person in Dallas, Fort Worth, Grand Prairie, Arlington, Bedford, Hurst, Euless, Boyd, or any other place in Texas may wonder about the validity of any release they are presented with. Sometimes they are valid and binding and sometimes they are not.
Some guidance about the validity of release can be found in the case styled, Ranger Insurance Company v. John Ward, et al. This is a 2003, case decided by the Texarkana Court of Appeals.
Here are some facts:
On March 19, 1991, Ranger Insurance Company (Ranger) issued a policy to Thompson Flying Services, Inc. This policy brought Thompson into compliance with financial responsibility laws governing the commercial application of herbicides and pesticides, per Texas Agriculture Code, Section 76.111. On June 26, 1991, operating under this policy, Thompson applied a herbicide by aerial application to the Smith Trust Ranch. The herbicide drifted across the county line onto a large portion of land owned by Ward and others, destroying a cotton crop and preventing Ward and the others from planting the following season. On April 29, 1992, Ward et al sent letters to Thompson and Ranger, notifying them of the results of the investigation by the Texas Department of Agriculture (the Department). On May 5, 1992, Ranger sent Thompson a reservation of rights letter. In May 1992, Ward et al filed suit against Thompson and others.
On January 16, 1996, Thompson and Ranger entered into a release, under which Ranger paid Thompson $100,000.00 in exchange for his retroactively releasing Ranger from its obligations under the policy as of the date of issuance. Neither party notified the Department of the release, as required by the Agriculture Code.
When Ward et al made a demand for settlement that is when they were first informed of the retroactive release that had been entered into.
Ward et al eventually obtained a judgment against Thompson for $2,394,479.51 with prejudgment interest of $1,576,688.00 and post judgment interest at ten percent per annum. Ward et al then brought this action against Ranger claiming the release was invalid and that Ranger now owed the claim.
The court then discussed the Financial Responsibility Law saying:
At the time in question, Section 76.111 of the Agriculture Code required that a commercial aerial applicator of pesticide maintain a policy of liability insurance in a minimum amount or provide a surety bond in that same amount. The statute provided in pertinent part: “except as otherwise provided by this section, the amount of the proof of financial responsibility may not be less than $5,000 nor more than $100,000 for property damage and may be less than $5,000 for bodily injury.” … Central to both the interpretation and application of this statute is the language that expresses the purpose of compulsory insurance in this activity: “protecting persons who may suffer damages as a result of the operations of the applicant.”
The court went on saying:
Ranger argues it complied with the statutory imposed liability by paying Thompson $100,000.00 in consideration for the release of Ranger’s obligation. Contrary to Ranger’s position, the statute was intended to have the insurance protect an injured third party rather than just its insured. The statutory announcement of the intended policy goal is quite clear. Ranger reads the statute to allow it to remain in compliance by simply buying its way out of a policy by paying its insured the policy limits in exchange for a release.
From the unambiguous language in the statute, the release cannot act as a complete bar to recovery as Ranger contends, nor as a condition precedent to a cancellation. Ranger remains liable in spite of its actions. … The retroactive release is contrary to public policy, rendering the release entirely void and keeping fully intact the policy that was in effect at the time of the loss.
This court then cited rulings from other courts to support their position in this case:
“A release, just as any other contract, however, is subject to the public policy of the State”
“We determine the validity of a release by considering all the attendant circumstances at the time of the making.”
This case serves as an example of what most people have heard at one time or another, which is that contracts (releases) are not always valid. The circumstances, the wording, and public policy come into play in determining the validity of these documents.