## Facts

- An 11-year-old passenger was injured in a snowmobile accident involving a snowmobile manufactured by Polaris.
- The plaintiff sued Polaris (manufacturer), the driver, the owner, and the seller.
- Before trial, the driver/owner settled for $215,000 in a structured arrangement: $25,000 cash plus $190,000 in periodic payments funded by an annuity purchased for $75,000 (the remaining portion of a $100,000 policy limit).
- The seller separately settled for $2,500, and the court approved the settlements.
- The case proceeded to trial against Polaris only; the jury found Polaris liable and awarded $300,000 in damages.
- Postverdict, the parties disputed the proper reduction of the judgment under Cal. Civ. Proc. Code § 877(a) based on the prior settlements.
- The trial court reduced the $300,000 verdict by $217,500 (cash plus the nominal total of future periodic payments).
- The plaintiff appealed the setoff calculation; Polaris cross-appealed the liability finding.

## Issues

1. Under Cal. Civ. Proc. Code § 877(a), when a plaintiff enters a structured settlement providing future periodic payments, is the nonsettling tortfeasor’s judgment reduced by the nominal total of future payments or by the settlement’s actual cost/present value (including the annuity premium)?
2. Whether substantial evidence supported the jury’s finding of liability against Polaris.

## Decision

- Affirmed the liability judgment against Polaris; substantial evidence supported the verdict.
- Reversed the trial court’s setoff calculation under § 877(a).
- Held the proper reduction is based on the consideration actually paid/incurred by the settling defendants, not the gross total of future periodic payments.
- Remanded for recalculation of the judgment reduction consistent with the opinion.

## Legal Principles

- Under Cal. Civ. Proc. Code § 877(a), the reduction of claims against a nonsettling tortfeasor after a good-faith settlement is measured by the greater of (i) the amount stipulated in the release/dismissal/covenant or (ii) the consideration paid.
- For structured settlements funded by an annuity, “consideration paid” refers to the settlement’s actual economic cost at the time of settlement (e.g., cash paid plus the annuity premium), not the nominal sum of all future periodic payments.
- Using nominal future payment totals as the setoff can overcredit the nonsettling defendant and distort § 877(a)’s goals of encouraging settlements while preventing double recovery.

## Conclusion

The court held that § 877(a) requires reducing a nonsettling tortfeasor’s liability by the actual value of what the settling defendants paid to obtain a structured settlement (including annuity cost), not by the aggregate face value of future periodic payments; the liability verdict against the manufacturer was affirmed, and the case was remanded to recalculate the setoff.


Franck v. Polaris E-Z Go Div. of Textron, Inc., 157 Cal. App. 3d 1107, 204 Cal. Rptr. 321 (Ct. App. 1984)