Many cases go to mediation. This is a great opportunity to hammer out a deal in real time. The atmosphere can be uniquely conducive to settlement. But to be successful, it is important to set the stage properly. Among other things, the right players need to be at the table.
Dealing with individual parties can be fairly straightforward. You deal directly with the party, who has authority to bind himself or herself to an agreement. There can, however, be some nuances and limitations here.
For example, in pending litigation, minors or incompetent adults must act through a guardian ad litem. Code Civ. Pro. Section 372(a)(1). Any agreement entered into by the guardian must eventually be approved by the court. Id. Also, whether a case is pending or not, to be enforceable, the person entering the agreement must be competent. Contracts by persons "wholly without understanding or whose insanity has been judicially determined" are void. Those made by persons of "unsound mind" but not wholly without understanding are voidable. Civ. Code Sections 38, 39, 40; see generally Smalley v. Baker, 262 Cal. App. 2d 824, 832 (1968); 1 Witkin, Summary Eleventh Contracts Section 50 (2018).
While an individual can bind himself or herself to a settlement agreement, there are situations where you need other stakeholders involved. For example, an insured cannot bind his or her insurer to a settlement without the insurer's consent. Hamilton v. Maryland Cas. Co., 27 Cal. 4th 718, 726 (2002). If you reach an agreement without the insurer's involvement, don't expect to get paid. You need the insurer on board. In a case involving a partnership, you may need all the partners present, or at least confirm the partner present has full authority to act on behalf of the partnership. In cases involving injured workers who received or are receiving workers' compensation, the plaintiff-worker can settle his or her own case. However, the worker cannot settle the workers' comp reimbursement claim without the employer's or workers' comp carrier's consent. See Labor Code Section 3859(a). While you can potentially "settle around" the workers' comp carrier, some defendants just won't do it. They want complete resolution. In addition, certain lienholders have special rights in the context of personally injury settlements that require their participation (or at least consent). Medicare, for example, arguably has the right to go directly against a party's liability insurer if a settlement is paid without adequately protecting Medicare's interests. See 42 U.S.C. Section 1395y; Humana Medical Plan, Inc. v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016). In Medicare cases, the defendant or insurer may insist on extra assurances.
A corporation acts through its agents. "An agent is one who represents another, called the principal, in dealings with third persons." Civ. Code Section 2295. "An agency is either actual or ostensible." Civ. Code Section 2298. "Actual authority is such as a principal intentionally confers upon the agent, or intentionally, or by want of ordinary care, allows the agent to believe himself to possess." Civ. Code Section 2316. "Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess." Civ. Code Section 2317. "An agent represents his principal for all purposes within the scope of his actual or ostensible authority, and all the rights and liabilities which would accrue to the agent from transactions within such limit, if they had been entered into on his own account, accrue to the principal." Civ. Code Section 2330. Also, writings (including settlement agreements) signed by a corporate officer are generally binding on the corporation even if the officer did not have actual authority to act. Civ. Code Section 313.
When dealing with a corporation, you should confirm you are dealing with a corporate officer (e.g., president, vice president, secretary, etc.). If not, you should verify whoever is present on behalf of the corporation is an agent with full authority. Otherwise, at the end of the day, you may have a useless settlement agreement.
Both individual parties and corporations appear at mediation either with or through their attorneys. Attorneys are a special kind of agent. When dealing with an attorney, there are a couple things to keep in mind.
First, while attorneys can act alone to bind their clients with respect to "procedural matters" (e.g., evidentiary stipulations), an attorney cannot bind the client to settlement without the client's express authority to do so. Blanton v. Womancare, Inc., 38 Cal. 3d 396, 403-05 (1985) (an attorney has no implied or ostensible authority to settle a cause of action or impair the client's substantial rights without the client's authorization). If you deal exclusively with a party's attorney, you do so at your own risk.
Second, while an attorney, with proper authority, can bind his or her client to settlement, for practical reasons, you still need the party to sign off on the settlement. The expedited enforcement procedures of Section 664.6 of the Code of Civil Procedure require the party to personally assent to the settlement. If you want to preserve this option (and you should), you cannot rely exclusively on the attorney to ratify the agreement.
Third, while there are limits to an attorney's ability to act for the client, the client similarly cannot act without the attorney. A settlement is not enforceable without the consent of the party's attorney. Marriage of Wickander, 187 Cal. App. 3d 1364, 1367 (1986). You need the attorney on board. Of course, if there is disagreement between the attorney and the client regarding settlement, the client has the absolute right to terminate the relationship. Fracasse v. Brent, 6 Cal. 3d 784, 790 (1972). But this can create its own problems. In contingency cases, the attorney is likely entitled to at least a portion of any settlement proceeds. Id. This is not something you want to have to deal with at mediation.
To the extent an insurance company is a party to litigation, the company will be treated like any other corporation. The company can act by and through its authorized or apparent agents. But when the insurance company appears as the insurer of a party, there are some special considerations.
Like any agent, an insurance representative can act on behalf of a party for whom he or she is appearing as an agent. But in that situation, you still face the same general concerns you have when dealing generally with an agent (i.e., does the agent have actual authority to bind his or her principal?). More commonly, the insurance representative is not appearing at mediation as an agent for the insured. He or she is there as an agent for the insurer. This is an important distinction.
Where the insurer has the duty and right to defend an insured, retains the right to control the defense, and does in fact provide a defense (i.e., the situation in most insured cases), the insurance company can act alone to settle a case without the insured's authority. Hurvitz v. St Paul Fire and Marine Ins. Co., 109 Cal. App. 4th 918 (2003). In effect, the insurer is the party. You can deal directly with the insurance company. Of course, if the insurer is not providing a defense, or the potential settlement extends beyond the coverage limits (and the carrier will not pay the excess amount), you still need to deal directly with the party. And again, for practical reasons, you really should have the insured party involved anyway. You need the party or the party's attorney to waive mediation confidentiality so that the agreement can be admitted into evidence for enforcement purposes if necessary. You also need the party to personally consent to the agreement to utilize 664.6 enforcement procedures.
You should be aware that under some insuring agreements (e.g., most professional liability policies), the insured retains the right to override the insurer and reject settlement. These policies often have "burning" policy limits, where the coverage is reduced based on the cost of litigating the case. The policy might also include a term limiting the insurer's indemnity obligation to the amount the insurer was willing to pay in settlement absent the insured's objection.
Also, while typically an insurance representative can settle a case without the client's consent, he or she often has limited authority to do so. The representative still needs authority from the insurer. If the person appearing at mediation has limited authority (quite typical), he or she may need to contact someone up the chain of command to obtain approval to settle the case at the numbers proposed. You should try to learn this early on in the mediation process. If the mediation runs long, you want to know you'll be able to reach the ultimate decision maker. Given the time zone differences and the fact that many insurance companies are not based in California, this can be a real problem. Mediation can often be a very small window to get the deal done.
To have a successful mediation, you need the important players at the table. You generally need the parties themselves. You need to know the limitations when dealing with agents or attorneys. And you should ensure that the important stakeholders are present or at least involved. Nothing will stop a mediation in its tracks faster than looking around the table and realizing a necessary player is not present. If you set the stage properly by making sure the right people are present, you will have greatly improved your chances for success.