New Supreme Court Opinion: AllState Sanctions
On February 19, 2021, the Alabama Supreme Court released a decision in Allstate Property and Casualty Insurance Company v. Doyle Harbin, an appeal from Madison County Circuit Court, Case Number 1190792. The case is the latest opinion (one of very few) issued by our Supreme Court dealing with mediation and should be reviewed by everyone engaged in mediation. The opinion reverses and remands a decision that garnered lots of discussion.
The underlying case involved an uninsured/underinsured motorist claim against Allstate. The trial court ordered the case to mediation. The order required, among other things, that:
“A representative of each party, which may be counsel, having full authority to settle the entire case for the party must attend the mediation conferences. In the event an insurance company is involved in the proceedings, it is strongly suggested that a representative of each insurance company be present at the mediation sessions.”
A mediation session followed which produced no settlement. Before trial, the parties stipulated that the maximum damages which could be recovered were $75,000.00. The jury returned a verdict against Allstate for $690,000.00. Thereafter, the plaintiff moved for sanctions and attorneys’ fees, alleging that AllState had not complied with the court’s order regarding mediation because it did not participate in the mediation in good faith because the only representative at the mediation for AllState was its defense counsel, he did not have any authority to settle the case, and AllState never made a settlement offer or counter offer. The trial court ordered sanctions against AllState totaling $620,141.36.
The Supreme Court reversed finding that the trial court’s order did not require the physical attendance of an AllState adjuster, that defense counsel had and exercised telephone access to the AllState adjuster during the mediation, and that there was no evidence in the record that defense counsel did not have authority to settle the case (noting the provisions of Ala. Code § 34-3-21 regarding an attorney’s authority to bind his client in any action or proceeding by any agreement made in writing or entered on the minutes of the court and that there was evidence that he had settlement authority).
Citing a case from the Eleventh Circuit, the court noted that refusal to settle or make a settlement offer is not evidence of a lack of settlement authority. Citing In re Novak, 932 F.2d 1397, 1406 n.18 (11th Cir. 1991)(“[Full authority to settle] simply means that the individuals at the settlement conference must be authorized by the parties both to explore fully settlement options and to agree at that time to any settlement terms acceptable to the parties.”).
So, what does this mean for mediations going forward?
The parties should pay particular attention to the terms of any specific order regarding their mediation. Bear in mind that a mediation conducted in a pending civil action will also be governed by Alabama’s Civil Court Mediation Rules (even if not ordered to mediation). Further, under Ala. Code § 6-6-25, a mediator, in any mediation, may not be compelled “to testify in regard to statements made, actions taken, or positions stated by a party during the mediation.” So, if you are going to pursue some claim for a party’s failure to participate or negotiate in good faith, consider the evidentiary and burden of proof challenges.