Settlements: Reopening: Rescission

Kruzich v. Old Republic, 2008 MT 205, 344 Mont. 126, 188 P.3d 983 In order to constitute a mistake of fact justifying rescission, a mistake regarding the nature and extent of a claimant’s condition must be with respect to a claimant’s condition as it exists at the time of settlement and not with respect to a condition that develops at some point in the future. In the present case, Petitioner did not have Parkinson’s disease until approximately ten years after he signed the settlement agreement and when the parties entered into the agreement, no one could have foreseen that Petitioner would develop Parkinson’s disease. Therefore, the parties’ failure to anticipate the future condition was not a mistake as to the nature and extent of Petitioner’s condition at the time of settlement and does not justify rescission.

Gamble v. Sears, 2007 MT 131, 337 Mont. 354, 160 P.2d 537 Where it is undisputed that the parties mutually believed the claimant had reached MMI at the time of settlement, and that if the claimant’s odontoid fracture existed at the time of settlement that the claimant had not actually reached MMI, it is consequently undisputed that if the fracture existed at the time of settlement, the parties were mutually mistaken as to a material fact and the settlement agreement must therefore be rescinded.


Handy v. Montana State Fund [10/10/16] 2016 MTWCC 15 Although the claimant was in a dire financial situation, he could have rejected the insurer's settlement offer and proceeded to mediation. Where there was a legitimate dispute over the insurer's liability, the insurer kept the claimant informed, explained how to appeal, was unaware of the claimant's personal hardships, and kept its settlement offer open for two weeks, the settlement was not unconscionable.

Handy v. Montana State Fund [10/10/16] 2016 MTWCC 15 Where the settlement was written in plain language and the claimant understood the parts he read, knew his claim had been denied and that he could appeal, wrote out the reasons he thought the settlement should be rescinded, and answered deposition questions responsively and completely, the claimant had the capacity to understand the Petition for Settlement.  

Handy v. Montana State Fund [10/10/16] 2016 MTWCC 15 Failing to read a Petition for Settlement in its entirety before signing it, and therefore failing to understand that the document fully and finally settles the claim, does not provide grounds to rescind it.

Hartung v. Montana State Fund [03/15/16] 2016 MTWCC 3 While medical evidence demonstrated that the claimant had a learning disability and extremely low cognitive ability, the reports were equivocal as to whether he had a mere mental weakness, or was incapable of understanding the force and effect of his settlement agreement.  Without an expert’s testimony that the claimant was incapable of understanding the settlement agreement, the Court is not persuaded that he was unable to understand it.

Hartung v. Montana State Fund [03/15/16] 2016 MTWCC 3 Mental weakness which falls short of the claimant being incapable of understanding the force and effect of an agreement is insufficient to invalidate a settlement agreement.  Capacity to contract deals with the ability to understand the terms of the document, not a person’s actual understanding.

Pearson v. MIGA [01/09/12] 2012 MTWCC 1 Since Petitioner signed the settlement agreement on his own behalf and was found by the Court to be incompetent at the time of the agreement, the agreement is subject to rescission pursuant to § 28-2-203, MCA, because Petitioner was of “unsound mind.”  Pursuant to § 27-2-202, MCA, an action founded on a written contract must be commenced within eight years, and since Petitioner filed his Petition for Trial a little over three years after the statute of limitations ran, the Petition would have been time-barred but for the five-year extension of the statute of limitations provided for in § 27-2-401(1), MCA, when an individual suffers from serious mental illness.

Gamble v. Sears [01/30/06] 2006 MTWCC 5 The full and final settlement entered into by the parties is a contract. Therefore, contract law governs the agreement. Morrissette v. Zurich American Ins. Co., 2000 MTWCC 2, ¶ 61 (citing Kienas v. Peterson, 191 Mont. 325, 329, 624 P.2d 1, 3 (1980)). In South v. Transportation Ins. Co., 275 Mont. 397, 401, 913 P.2d 233, 235 (1996), the Montana Supreme Court explained that a material mistake of fact concerning a worker’s medical condition may justify rescission of the contract if the mistake is so fundamental as to defeat the object of the parties in making the contract.
Crawford v. Liberty [2/05/02] 2002 MTWCC 7 Settlement agreements are contracts. Kienas v. Peterson, 191 Mont. 325, 328, 624 P.2d 1, 2 (1980). As a general proposition, upon rescission of a contract, each party is required to restore everything of value received from the other. 28-2-1713, MCA.
Crawford v. Liberty [2/05/02] 2002 MTWCC 7 Where a settlement is rescinded for mutual mistake of fact, the claimant is entitled to retain amounts that are due or will be due him irrespective of the settlement agreement. The insurer is entitled to a credit for or repayment of any remaining amount and may recoup its entitlement out of past-due or future benefits due claimant, including temporary total disability benefits.