The Pierringer Predicament: When can non-settling defendants be left holding the bag?

Pierringer agreements can be a valuable tool to encourage settlement in multi-party litigation. They can contribute to reducing the delays, expense, and stress of litigation; they can also provide some measure of finality for settling defendants. In multi-party litigation, non-settling and settling defendants may disagree on whether the court should approve a Pierringer agreement. The court will generally only decline to approve a Pierringer agreement when it significantly prejudices a non-settling defendant and when that prejudice outweighs the public interest in encouraging settlements.

This was squarely the issue before the Court of Appeal for Ontario in Cadieux v. Cadieux.^[1] The lower court had approved a Pierringer agreement over the objection of the non-settling defendants who then appealed. The appellants argued approval of the agreement significantly prejudiced them because they were left to defend with other non-settling defendants who were potentially insolvent and had insufficient insurance coverage to pay any potential damages. The Court of Appeal disagreed and affirmed the lower court’s approval of the Pierringer agreement.

Background

Patrick Cadieux, the primary defendant, was transporting his two sons, aged 4 and 6, to a park. On the way, he entered an intersection eight seconds after the light turned red. Cadieux and his young sons were struck by a tractor trailer operated by Scott Ray. The two sons allege they sustained catastrophic injuries and sued their father and Ray as well as various other defendants including the City of Ottawa. The plaintiffs alleged that Ottawa was negligent in its design of the subject intersection and sought damages that far exceeded the insurance policy limits of most of the defendants. Only Ottawa, which was considered the “deep pocket” defendant and which was self-insured, had adequate insurance to respond to the claim.

The plaintiffs and Ottawa entered into a Pierringer agreement which required that the plaintiffs amend their claims such that the non-settling defendants would remain jointly and severally liable only to the degree of their collective fault. The objective was to eliminate any crossclaim for contribution and indemnity as against Ottawa. The plaintiffs moved for approval of the agreement, which the court granted at first instance and then upheld on appeal, despite objections. The non-settling appellants argued that the agreement unfairly prejudiced them by precluding Ottawa from sharing in joint liability to pay for the plaintiffs’ alleged damages at trial, including damages that may be in excess of policy limits, because the primary defendant may be unable to pay personally.

Pierringer agreements and cascading settlements encouraged

The Court of Appeal unanimously agreed with and upheld the lower court’s decision to approve the Pierringer agreement on the basis that: (1) the alleged prejudice might never materialize;
(2) declining to approve the agreement would undermine policy objectives of promoting settlements – which is important in complex, multi-party litigation – and outweigh any speculative prejudice; and (3) it is preferrable to address any prejudice the appellants might suffer at trial.

In affirming the lower court’s decision, the Court of Appeal set out a common, but often unspoken proposition, namely that in complex, multi-party litigation, the first settlement can often trigger “cascading settlements”. An insolvent or impecunious defendant presents a risk to all defendants from the start of litigation. “Someone has to go [settle] first” and in this case Ottawa did. Avoiding joint liability with an insolvent or impecunious defendant is an incentive to settle and should not give rise to prejudice (or, alternatively, foreclose the ability to settle favourably). The court rejected the appellants’ arguments that the agreement prejudiced them by precluding their ability to seek “equitable restitution” for unsatisfied portions of the insolvent defendant’s liability because such a claim (for equitable restitution) was unavailable with our without the agreement in question.

Ongoing Ontario civil rules reform may alter Pierringer agreement deductions

Ontario courts encourage settlements and will often approve Pierringer agreements as part of supporting that policy goal. Notably, the ongoing Ontario Civil Rules Review supports the use of Pierringer agreements; however, it proposes reverting to the pre-Laudon v. Roberts litigation scheme where the settlement monies paid under a Pierringer agreement are not deducted from the damages awarded at trial.^[2] In other words, under the proposed reform, which has yet to be implemented, whatever the damages happen to be and whatever percentage of liability the court finds against the non-settling defendants is the amount the non-settling defendants must pay to the plaintiff – no matter what amount was agreed to and paid by a settling defendant pursuant to the Pierringer agreement. This would be a significant change.

Amendments to Ontario Rules of Civil Procedure

Other amendments to the Ontario’s Rules of Civil Procedure relating to Pierringer agreements are coming into force imminently, on June 16, 2025. These amendments will introduce a new framework setting out the procedure to disclose partial settlement agreements and the consequences for failure to disclose such agreements as required. The amendments will also create a new Form 49E, Terms of Partial Settlement Agreement, to be used for disclosure.

Key takeaways

This decision has significant implications for “deep-pocket” defendants involved in complex, multi-party litigation with insolvent or potentially insolvent co-defendants. This decision stands for the proposition that the Court of Appeal for Ontario endorses the continued use of Pierringer agreements as beneficial and that “cascading settlements” should be promoted over speculative prejudice. The Ontario Civil Rules Reform Phase 2 report proposes to revert to the pre-Laudon v. Roberts state of the law. Further, the Ontario Rules of Civil Procedure are on the cusp of significant amendments with respect to the disclosure of partial settlements. The Court of Appeal for Ontario did not discuss the potential reforms and imminent amendments in Cadieux. As judicial perspectives evolve, it remains to be seen how these reforms and amendments will shape multi-party litigation.

If you have questions about this decision, reach out to our Litigation and Dispute Resolution Group.

^[1] Cadieux v. Cadieux, 2025 ONCA 405.

^[2] Civil Rules Review Phase 2 Consultation Report at page 105.