Understanding the Recent Florida Mediation Trends
An important aspect of trying to settle a dispute is the flexibility (or lack thereof) of the mediation participants. No matter how good the attorneys and mediator are, if the parties are unwilling to compromise, the mediation process will be unsuccessful. Sometimes a good settlement may look different (even vastly different) than the parties anticipated going into the mediation, and having the flexibility to consider alternative, non-traditional outcomes increases the chances of settlement. For instance, instead of reaching a traditional settlement at mediation where the Defendant simply agrees to pay an amount and the Plaintiff agrees to the amount, with the customary exchanges of releases and dismissal of any pending litigation or arbitration, a settlement may involve only partial resolution of the claims, but in a strategic way that allows the paying party to obtain an assignment of the settling party’s claims, or to target a specific defendant(s) and/or its carrier(s) to maximize recovery on indemnity and AI claims. Or, a settlement may be reached even before the mediation through pre-mediation discussions among carriers on the risk to confirm and agree on time on risk, percentage allocations, and their respective contributions towards a Plaintiff’s demand. Even where the case cannot be settled pre-mediation, the carriers can go into mediation with a gameplan on their expected contributions. Additionally, coverage issues may be discussed and agreed upon outside the presence of their respective insureds and defense counsel. Another consideration for a partial settlement may involve obtaining a scope release for a defendant in exchange for payment. These and other alternative settlement strategies are discussed in more detail below.
- AI tenders followed by acceptance and appointment of counsel by the carrier accepting the tender to take over representation of the party demanding the tender—as a means of retaining and controlling costs moving forward.
- The carrier, having accepted the tender, filing a separate declaratory judgment action—not from the perspective of a carrier having accepted the AI tender, but on behalf of and in the name of the party being defended—to seek additional insurers not paying a share of fees and costs to do so under the theory of contractual indemnity. This is an effort to avoid those who refuse or choose to ignore an AI obligation in the hope of “escaping” any obligation from paying fees and costs from, for lack of a better expression, being “rewarded for their bad behavior” in not stepping up to the plate and participating in the payment of fees and costs owed to an AI.
- Adjusters appearing at mediations without counsel, and even holding segregated meetings solely amongst adjusters even when counsel are present, to discuss allocations, percentage splits and apportionments in attempting to “split the pie” to get a case settled. An owner and general contractor (GC) agreeing to an early mediation where the GC pays an agreed upon sum, assigns its claims against the subcontractors to the owner—resulting in the owner now standing in the shoes of the GC—to not only seek direct contractual indemnity rights (along with fees and costs owed under the contractual indemnity provision as distinct from those rights being asserted by the owner as an AI) but also to allow the owner, in the name of the GC or as assignee of the GC’s rights, to file a claim (typically in a separate lawsuit) to recover back the amount paid by the GC to be released in conjunction with assigning its rights to the owner. This may seem like a double recovery, but the counter argument is that it is not and that the owner—now standing in the GC’s position—is demanding back from the subcontractors the amount that the GC had to pay to be released from the case which should have been paid by the subcontractors on the GC’s behalf under the subcontract indemnity provision. For example, a $1.5 million GC payment and assignment of rights against the subcontractors turns into a potential settlement value to the owner of $3 million.
- Under the preceding point, typically the GC would retain pre-assignment rights as to AI reimbursement of fees and costs incurred through the consummation of the assignment and release between the GC and owner.
- Strategic evaluations of AI endorsements with a view to targeting those carriers with the “best” AI exposure, and making a conscious effort not to settle with that party, absent that party agreeing to pay significant dollars toward fees and costs under AI theory of recovery— essentially maximizing AI rights under the theory that the AI obligations to pay fees and costs run as “joint and several” obligations as to all carriers having AI obligations, and that such obligation to pay fees and costs by a carrier owing such a duty to an AI falls outside of underlying policy limits. The idea is to isolate and leave those with the highest AI exposure as the “last party” or “last parties” standing, as a strategic move to maximize reimbursement of fees and costs incurred. Additionally, carriers accepting the AI tender now have a statutory cause of action to recover attorney’s fees and costs from non-participating AI carriers.
- Tender by the performance bond surety to the owner/obligee of a new bonded GC; the initial GC and surety are released in exchange for the tender, thus passing the risk on to the new bonded GC and its surety.
- An owner giving scope releases to the GC, allowing some subcontractors to get out, where the owner or GC cannot obtain a global settlement. This allows the owner to secure settlement funds from the GC/subs with appropriate releases and indemnity obligations by the owner, minimizing the GC’s exposure at trial and reducing potential defense costs. However, the owner must ensure it is getting enough contribution from the settling defendants vis-à-vis the remaining defendants who will point to the “empty chair” settling defendants as the cause of all or most of the owner’s damages.
To learn more about the recent Florida mediation trends, contact Florida construction mediator and lawyer Gary L. Brown at (954) 370-9970 or (954) 448-1133.