Confidentiality agreements in personal injury settlements are often proposed by those who have been sued. Such agreements can be enforced, even if it is a bad idea.
Confidentiality provisions require non-disclosure of the terms of the agreement, or sometimes even to the fact of settlement itself, by the parties. Such provisions can require penalties such as requiring paying back the settlement if the settlement is disclosed. Non-disclosure is often proposed in settlement of products liability, medical malpractice, toxic tort, and other complex cases where corporations or others are alleged to have committed wrongdoing.
Confidentiality Agreements as Release Provision
Personal injury cases are settled with a release. This brings a full final termination of the claim, in exchange for payment of settlement funds. Confidentiality provisions are injected with specific language in the release, setting out the requirement of non-disclosure, and also the penalty provisions.
Confidentiality agreements must be negotiated. In other words if settlement is proposed, and a non-disclosure clause slipped in at the last moment, attorney and client need to step back and insist that the additional requirement of confidentiality be accompanied by additional settlement proceeds.
Issues posed in Confidentiality Agreements
Non-disclosure agreements pose policy problems. If a product is defective, and the manufacturer insists upon confidentiality, others will never know that a claim was settled as to that defective product. While court pleadings, documents filed in the courthouse, are available for public view, settlement agreements most often remain confidential.
While defendants may insist that parties keep a settlement confidential, demanding that the attorney observe absolute non-disclosure raises ethical dilemmas. Prior restraint against advice to current and future clients interferes with the attorney’s duty to fully, fairly, zealously represent the client.
Confidentiality Can Present Options
Confidentially agreements do have their place and should not be entirely rejected without analysis. For example, in a case in which my office was involved, there had been several other similar cases tried and lost by other attorneys. A fairly substantial settlement was proposed, including a non-disclosure agreement. Balancing the risk of a trial and rejection of the claim by the jury, against the certainty of a settlement including the confidentiality agreement, all terms were accepted.
Scope of Confidentiality Agreements
Specific terms making up confidentiality agreements can vary. Often, insurance companies and their attorneys insist upon non-disclosure of the settlement amount and terms of the agreement. Others require more, that the nature and all details of the dispute be included. Liquidation clauses spell out the penalty to be paid upon breach, often the entire amount. So, it is crucial that non-disclosure agreements, where accepted at all, be written clearly and concisely.
What can happen where confidentiality agreements are breached: click here.