Florida’s Mediation Procedure Amendments to Impact Carriers

The Florida Supreme Court recently approved amendments to Rule 1.720 of the Florida Rules of Civil Procedure, relating to mediation procedures. At least one amendment could prove problematic for insurers.

The amendments are effective Jan. 1, 2012. Changes were made to the following sections of the rule:

(b) Appearance at Mediation. Unless otherwise permitted by court order or stipulated by the parties in writing, a party is deemed to appear at a mediation conference if the following persons are physically present:

(1) The party or a party representative having full authority to settle without further consultation; and

(2) The party’s counsel of record, if any: and

(3) A representative of the insurance carrier for any insured party who is not such carrier’s outside counsel and who has full authority to settle in an amount up to the amount of the plaintiff’s last demand or policy limits, whichever is less, without further consultation.

(c) Party Representative Having Full Authority to Settle. A “party representative having full authority to settle” shall mean the final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement on behalf of the party. Nothing herein shall be deemed to require any party or party representative who appears at a mediation conference in compliance with this rule to enter into a settlement agreement.

(e) Certification of Authority. Unless otherwise stipulated by the parties, each party, 10 days prior to appearing at a mediation conference, shall file with the court and serve all parties a written notice identifying the person or persons who will be attending the mediation conference as a party representative or as an insurance carrier representative, and confirming that those persons have the authority required by subdivision (b).

(f) Sanctions for Failure to Appear. If a party fails to appear at a duly noticed mediation conference without good cause, the court, upon motion, shall impose sanctions, including award of mediation fees, attorneys’ fees, and costs, against the party failing to appear. The failure to file a confirmation of authority required under subdivision (e) above, or failure of the persons actually identified in the confirmation to appear at the mediation conference, shall create a rebuttable presumption of a failure to appear.

The Committee on Alternative Dispute Resolution Rules and Policy recommended these changes, according to Michael A. Packer, supervising attorney for insurance coverage and bad faith matters for the law firm of Marshall, Dennehey, Warner, Coleman & Goggin located in Fort Lauderdale, Fla.

“I think that there has probably has been a growing frustration on the part of both plaintiff attorneys, as well as the court, that at times the necessary folks that would be needed to have settlement authority are not appearing at a mediation in person,” Packer said. Either they are appearing by phone, or they are sending independent adjusters that may not have authority to settle the case to the mediations…When a company representative is only appearing by phone, aggressive defense counsels may prevent the mediator or plaintiff counsel from speaking directly with the claims representative.”

According to Packer, that’s not the point of mediation.

“There should be a frank and open discussion. If you don’t have the parties in the room that can actually settle a case, you are wasting a lot of money,” said Packer.

“The new rule does seem intended to go after the not infrequent practice of having an adjuster or representative attend who has only limited authority but who can reach someone else with such final authority by phone,” stated Christopher M. Shulman in an email to fellow members of the National Academy of Distinguished Neutrals (NADN) and Claims Journal.

Besides a likely delay in the scheduling of mediations, out of state carriers could see increased loss adjusting expenses (LAE) as a result of the amendment.

Full Settlement Authority Problematic

The section requiring adjusters to come to mediation with full settlement authority could prove problematic for insurers. The committee notes on the amendment explain subsection(c), “First, the party representative must be the final decision maker with respect to all issues presented by the case in question. Second, the party representative must have the legal capacity to execute a binding agreement on behalf of the settling party.”

While the committee notes suggests “a decision by a party representative not to settle does not, in and of itself, signify an absence of full authority to settle,” Packer sees the potential for a carrier to be exposed to bad faith.

“It’s problematic because it is not just simply full authority to settle. What they did was they added three words ‘in an amount’ up to the amount of the plaintiff’s last demand or policy limits, whichever is less,” Packer explained. “So, I think that based on the way this was written, the insurance company needs to have somebody present. This has to be somebody who either has authority up to whatever the last demand is or has full policy limits authority, without having to reach out to anybody else.”

Packer worries that this added requirement could prove problematic for insurers. “One of my primary concerns about these changes is that an insurance company that doesn’t comply with these requirements, in addition to be sanctioning by the court, could be potentially exposed to some type of, or at least accused of, bad faith actions,” Packer said.