Contracts > Contracts Keyed to Knapp > The Meaning Of The Agreement: Principles Of Interpretation And The Parol Evidence Rule
Taylor v. State Farm Mutual Automobile Insurance Co
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Brief Fact Summary.
Plaintiff Taylor was in a three-car accident. Defendant State Farm Mutual Automobile Insurance Co. was Plaintiff’s insurance provider. Plaintiff received a verdict against him in excess of his policy limit and is claiming that Defendant acted in bad faith by not settling the claim within the policy limits.
Synopsis of Rule of Law.
Under the Corbin view, a court first looks at all then evidence to determine the intent of the parties’ and the extent of integration in the written document, then the court applies the parol evidence rule to exclude any extrinsic evidence that varies or contradicts the written document.
This claim arises from a three-car accident involving Plaintiff. Defendant is Plaintiff’s automobile insurance provider. Plaintiff received a judgment against him in excess of his policy limits. Plaintiff claims that Defendant acted in bad faith by not settling the claim within the policy limits. Defendant argues that the claim is barred by a release Plaintiff signed. Plaintiff signed the release rather than pursuing a claim against Defendant under the uninsured motorist provision of the policy.
Was the extrinsic evidence of Plaintiff’s intent regarding the release properly admitted?
Yes. The extrinsic evidence was properly admitted.
When parties have completely expressed their contract in writing, the parol evidence rule bars the admission of extrinsic evidence that contradicts or varies the written contract. However, extrinsic evidence may be allowed for the purpose of interpretation.
Under the restrictive view, extrinsic evidence may be admitted to aid in interpreting a document if the language is unclear, ambiguous, or vague.
The Court adopts the Corbin view, rather than the restrictive view. The Corbin view first looks at all the evidence to determine what evidence is relevant to the parties’ intent and the extent of integration. After the intent of the parties has been determined, the court then applies the parol evidence rule and excludes any evidence that contradicts or varies the meaning of the agreement.
Plaintiff wanted to introduce extrinsic evidence that the release was intended to apply only to the claim under the uninsured motorist provision and not the claim for bad faith. The evidence Plaintiff wants to introduce includes the disparity between the amount Plaintiff received under the release and the amount Plaintiff could potentially recover for the bad faith claim. The Court also notes that the language in the release was very limiting whereas broader language could have indicated an intention to include the bad faith claim in the release.
Concurrence. The concurring opinion is concerned that the majority opinion does not provide enough guidance for subsequent cases dealing with this same issue.
In this case, the Court does not look solely at the “four corners” to determine the extent of integration. Instead the Court applies the Corbin approach and uses extrinsic evidence to determine whether the parties intended the written document to be a complete integration.