Can settlement agreements permit joint payee checks for subrogation claims? Bennion v. Stolrow Explained

In Bennion v. Stolrow, the Utah Court of Appeals addressed whether a settlement agreement’s language permitted issuing settlement checks with joint payees to address subrogation claims. The case provides important guidance for practitioners handling settlements involving healthcare liens and subrogation issues.

Background and Facts

Weston Bennion was injured in a deck collapse at Dale Stolrow’s property in 2015. After two years of litigation, the parties reached a $150,000 settlement. The agreement contained a specific provision stating the settlement was “subject to” subrogation claims and healthcare liens, with Bennion agreeing to indemnify Stolrow and State Farm from such claims. When State Farm prepared to issue payment, it had notice of a $9,103.09 lien from Rawlings Company on behalf of Blue Cross/Blue Shield. State Farm offered to issue two checks: one for $140,896.91 to Bennion and his attorney, and another for $9,103.09 to Bennion, his attorney, and Rawlings as joint payees. Bennion refused this arrangement and filed a motion to enforce the settlement agreement.

Key Legal Issues

The central issue was whether the settlement agreement’s plain language permitted State Farm to include a subrogation claimant as a joint payee on a portion of the settlement payment. Bennion argued the agreement required payment of the full $150,000 directly to him without any third-party payees.

Court’s Analysis and Holding

The Court of Appeals reviewed the contract interpretation question for correctness and found the district court properly interpreted the agreement. The court focused on paragraph 7 of the settlement agreement, which stated the settlement was “subject to” subrogation claims. The court interpreted “subject to” as meaning “affected by” such claims, recognizing that existing subrogation claims could impact the settlement. The court noted that both checks totaling $150,000 listed Bennion as a payee and were delivered to him, meaning he received the full settlement amount despite the joint payee arrangement. The court also emphasized that failing to address the known Rawlings lien could expose Stolrow and State Farm to liability beyond the settlement amount under Utah’s subrogation law.

Practice Implications

This decision highlights the importance of carefully drafting settlement agreements when subrogation claims are anticipated. Practitioners should include specific language addressing how payments will be made when liens exist. The ruling also demonstrates that courts will interpret settlement agreements to protect settling defendants from exposure to claims beyond the settlement amount when they have actual knowledge of subrogation interests.