Can a signed MDI Mediation Agreement prevent a policyholder from later filing under RICO?

Where did I get such a question? Well, after I read Sop’s recent post with a reference to the Order and Opinion in Boyd v State Farm et al issued last week by Judge Senter, the question came to mind. Ordinarily, reading the Opinion would – and should – have answered my question.

However, Judge Senter’s Opinion does not address the Statue of Limitations governing RICO and the Katrina RICO case was filed on June 20,2007 – the same day the Boyd complaint and approximately 200 nearly identical complaints were filed. However, the date on the Mediation Agreement signed by Boyd was July 19, 2006, almost a year earlier.

Judge Senter’s Opinion also does not address the potential confusion possible when the Q&A that MDI issued with the announcement of the Katrina Mediation Program failed to mention the finality of the Agreement.

Mediation is a non-adversarial, non-binding, alternative dispute resolution procedure designed to facilitate the resolution of claims as fairly and quickly as possible. During the mediation conference, a neutral person (the mediator) guides a discussion of several ways to solve a problem. The mediator does not make decisions for the consumer or the insurance company, but simply helps to develop workable solutions by both parties. Mediation is nonbinding, meaning that neither party is legally obligated to accept the outcome.

I understand there is a distinction between neither party legally obligated to accept and the obligation created when the parties accept the outcome and sign the Agreement; however, the Q&A not only does not make the distinction, it fails to mention the legal obligation of a signed Agreement.

Consequently, I wondered if a signed MDI Mediation Agreement can prevent a policyholder from later filing under RICO and just thought I’d toss the question out.

For reference, here’s the conclusion Judge Senter reached in his Opinion and reflected in his Order.

In my view, the reservation of a right to file a new claim based on “additional insured damage that was not known to the parties prior to the mediation” could only refer to additional and unknown property damage covered by the plaintiff’s State Farm policy. This provision of the settlement agreement cannot be reasonably read as a reservation of the right to pursue a tort claim for fraud or bad faith in the adjustment of the plaintiff’s storm damage claim. Such a construction would undermine the very purpose of this type of settlement agreement, i.e. to finally resolve a disputed claim by a compromise payment that puts an end to the parties’ legal differences.

I will grant State Farm’s motion unless the plaintiff establishes, by appropriate and specific affidavit, his discovery of additional damage to the insured property that was unknown to him at the time this settlement agreement was signed. Plaintiff has recently retained new counsel to replace the SKG. (Notice of Appearance Docket Number [125]). I will hold State Farm’s motion in abeyance for a period of fourteen days to allow sufficient time for the plaintiff’s new counsel to confer with the plaintiff and respond to my requirement concerning this affidavit.

Because this is a court of limited jurisdiction, the discovery of additional insured property damage will not sustain subject matter jurisdiction unless the additional damage is sufficient to meet the minimum amount in controversy required for diversity jurisdiction under 28 U.S.C. §1332.

Again, for reference, here is the language in the Mediation Agreement Boyd is challenging.

2. This settlement amount is full, complete and a total final payment by the insurance company to the insured(s) for the Katrina claim brought to the mediation. Both parties release any and all Katrina claims of any kind whatsoever against one another, except that if the insured(s) discovers additional insured damage that was not known to the parties prior to this mediation, the insured(s) may file a supplemental Katrina claim, which shall be treated as a new claim.

Anyone catching?

27 thoughts on “Can a signed MDI Mediation Agreement prevent a policyholder from later filing under RICO?”

  1. “…however, the Q&A not only does not make the distinction, it fails to mention the legal obligation of a signed Agreement.”

    Nowdy, you’re not intimating that a Q&A brochure\flyer, etc, produced by somebody -other- than the parties signing the agreement can modify or void the contract are you?

    Seems like contract law 101 would make that a simple question to answer. In several Katrina cases brought so far nothing has been allowed to be “added” to the contract language of the policies involved other than the accepted policy endorsements. (wind water protocol, agents statements, advertising pamphlet, etc. all not allowed.) In other words, so far, the language of the contract continues to be the only binding construct of these agreements. You don’t seem to be opining this way but would you really want outside “stuff” able to be brought into a contract after the fact? If that were able to stand, that sword could be wielded against a consumer a whole lot more by business than the other way around I fear.

  2. Thanks for replying, Proximo. Couldn’t find 101 contracts as correspondence course on-line (or finish it overnight if there was such) so thought I’d ask and see if some of you who took the class would explain.

    Not intimating anything about the Q&A but asking. MDI was contractor for mediators and companies paid fees so they were party to something.

    What concerns me is how much the policy holders understood about the mediation process. There seems to be great deal of dissatisfaction with the outcome.

    I spent a lot of time researching the MDI site and the AAA and got so frustrated that I hit google and came up with this.

    Mediation works purely facilitatively: the practitioner has no advisory role.

    Instead, a mediator seeks to help parties to develop a shared understanding of the conflict and to work toward building a practical and lasting resolution.

    Charlton and Dewdney (2004, p. 126.) point out that a mediated agreement may be registered with the court to make it legally binding and it is advisable to have a lawyer prepare the form or, at the very least, to obtain independent legal advice about the proposed terms of the agreement.

    Yet while parties enter into mediation intending to preserve their legal rights and remedies, mediation may result in these rights being directly or indirectly affected.

    The term “mediation” also sometimes occurs incorrectly referring to arbitration; a mediator does not impose a solution on the parties, whereas an arbitrator does.

    I wouldn’t want “outside stuff” in contract but also would not want the people on the Coast in a “bait and switch” situation either – and if they came with the understanding mediation was not binding, it would seem that should be considered.

  3. I agree, there should be no bait and switch but I heard a lot of people walked away from the mediations without satisfaction so that tells me there wasn’t a ‘forced’ situation. If they reach an agreement and have it explained that “this is it” and then sign a paper saying “this is it,” then, “that should be it.” I suppose the argument could be raised that there was duress involved in the contract since the insurance company had the money and the people had the need. That would possibly void the contract but in other instances of this sort of contract termination after the fact, the parties have to go back to where they were before the contract was signed (person has to repay all the funds they received as consideration for the release\contract.)

  4. That seem like a fair resolution, proximo. I had some #’s about the mediation program, will see if I can find them and if they indicate how many “declined”.

    Do settlement agreements have to be filed with the court?

  5. If these policyholders were asked to sign binding legal contracts they should have been advised that they should contact legal counsel. But from what I understand they were in a take or leave it situation. That doesn’t sound like mediation. Coercion? Maybe.

  6. Maybe someone who went through the process will tell us more about how it worked.

    think it was take it or leave it but with a three-day window to change your mind. I don’t know if they were advised to contact counsel if they signed the Agreement.

  7. Belle, I do think it is a form of coercion but at the same time, so many chose to seek lawyers and pursue other means of settlement that I dont think anyone would think they “had no other options.” That is one thing the media made painfully clear. Another “benefit” to the Dickie Scruggs full court P.R. press. If someone signed, I dont see how they could ever say “I didnt know I could get an attorney.”

  8. Is it a matter of not knowing how, Proximo, or not knowing they should seek a legal opinion to make certain their interest were protected.

    Commissioner of Insurance George Dale announced today that of the 1,338 mediation conferences scheduled prior to July 14, 2006, in the Mississippi Hurricane Katrina Mediation Program, 1,112 have settled. Dale also announced that the American Arbitration Association (AAA), the program administrator, has moved the program’s mediation conferences into larger facilities on the campus of the University of Southern Mississippi in Hattiesburg and is now scheduling a minimum of 160 mediations a week.

    Of the number of conferences scheduled thus far, 524 cases have settled prior to their scheduled conference and 588 have settled at conference. There have been 226 impasses. A total of 2,677 requests for mediation had been filed by July 14, the program’s success rates stands at 83%.

    This press release from MDI is date July 20, 2006 – the day after Boyd settled.

    How many were settled but not satisfied? How many thought they should have gotten more but just wanted to get on with their lives.

    And the big question, why was this necessary and then in March 07 have 30-35,000 that needed re-evaluation – and another 148 now. All of whom had insurance.

  9. “how many settled but were not satisfied?” and “how many wanted more but just wanted to get on with their lives?”

    Having taken part in over a hundred mediations with court, AAA, private vendors etc., my guess would be the majority of them. Almost by definition a mediation results in both parties accepting less than they would like. In exchange, they get to resolve the case, avoid future legal expenses, disruption due to litigation and avoid further uncertainty.

    As to what the policyholders knew, my experience has without exception been that the mediator explained the parties were not required to accept the settlement terms being offered and were free to decline to resolve the case. The parties are also uniformly told that if they do settle, they are giving up any rights to pursue claims further arising from the incident in quesion. I would be very surprised or even shocked if the basic message wasn’t the same here.

    As to the last question, I think you are combining cases that were mediated, cases that didn’t settle, cases where preliminary payments were made but were later reopened etc.

  10. justme, that is what I suspected but not having been involved with any mediation before I wasn’t sure. SO, the people are advised they dont have to settle, are giving up ability to pursue claim further, and can have an attorney. If they still settle and sign the document I cannot see how anyone (other than a trial attorney looking to exploit the situation,) can say anything other than “that’s that.” RICO included.

  11. The essence of mediation is the voluntariness of the resulting settlement. In mediation, as it is typically defined, you may settle or you may not, but no one has the ability to compel anyone.

    That isn’t to say there aren’t varying negotiating styles that parties can bring to a mediation. Some parties like “take it or leave it”, some like “offer – counteroffer”. What style prevails has a lot to do with the bargaining power of the parties.

    It is also typical of mediation-driven settlements that the parties are not thrilled with the negotiated outcome. There is a lot of folk wisdom surrounding the negotiation process about how good settlements are ones that neither party like. So it wouldn’t surprise me that people coming out of that process aren’t singing songs about it: that is typical of mediated settlements in many different settings.

  12. All very good points. I believe I would have included information explaining that in my publicity rather than set up a situation where the expected outcome bit me in the behind.

  13. I assume a lot of people are less satisfied with mediation now than they were when they settled. Many of the mediation settlements were before the Broussard decision and before the run of more generous legal settlements began in 2007.
    Even though George Dale had issued bulletins and letters telling State Farm and other insurers that they had the burden to prove damage was caused by flooding in order to exclude coverage, I don’t think any of Dale’s mediators enforced that standard. We heard stories that mediators gave policyholders very pessimistic and slanted views about the legal prospects and precedents, more or less endorsing the insurers’ interpretation of ACC and other policy language.
    State Farm did reopen previously settled cases under the deal with MDI after Judge Senter rejected the settlement with Scruggs, but that probably was the only way to reopen a mediation agreement.

  14. I’d like to thank all who left comments. This topic crosses into Victoria Pynchon’s expertise. I do not know if she has addressed this speciific topic though on her blog.

    The explanations of the mediation concept left here are textbook type material. I took some time to bone up so I could reconcile the comments left here against what I know first hand.

    Thanks to Commissioner Chaney who claimed the credit for George Dale and his mediation program this very important topic came up again. Brian just spoke to the lack of ground rule enforcement on part of MID mediators. But that only partially explains the dissatisfaction IMHO.

    On the thread that kickstarted this discussion I posted a quote from the Memphis Flyer article, The windless Hurricane. Here is what a policyholder said in May 2007:

    Hunter

  15. Quote: “We heard stories that mediators gave policyholders very pessimistic and slanted views about the legal prospects and precedents, more or less endorsing the insurers

  16. Excellent information, claimsguy, although I do not believe “each party had the power of no” in every case. Those experiencing depression would feel powerless – and because of that actually be powerless in that situation. I think you can “engineer that skill mismatch out” of the process with an advocate present.

    We’ll be better prepared “next time” but the question that remains is how we deal with people who settled for less than they could or should have obtained and can’t afford to rebuild. The result, as the Sun Herald stated, is having a devastating impact on the economy of the Coast.

  17. If you can say the word “no” aloud, you have the power of no.

    If someone was so mentally or emotionally impaired that they lacked the capacity to enter into a contract, they can seek to have that contract set aside. But I don’t think that was the case here and I don’t think you do, either.

    I think we have a little seller’s remorse by some parties, and that isn’t very unusual, either.

  18. I understand the process well Mr CG. It is the parties that abuse the process not the mediator.

    The reason mediation was a sham is the insurance ocmpany negotiators only had limited authority to set dollar values. In that venue it didn’t matter if wind obliterated the property because you would not be tendered your policy regardless of the facts.

    From a public policy perspective an insurance carrier that chose not to honor their contracts with a now homeless policyholder has a huge advantage. The elderly were particularily vulernable to the hardball tactics.

    George Dale enabled it.

    sop

  19. Quote: “The reason mediation was a sham is the insurance ocmpany (sic) negotiators only had limited authority to set dollar values.”

    What you describe is a fact at every single insurance mediation ever held. Carriers do not send out adjusters with the ability to obligate the carrier to infinite sums of money. While different carriers handle that issue in different ways, they all set some sort of limits on the adjuster’s authority. To do otherwise would be folly.

    But just because the adjuster doesn’t have the authority to pay what you think he (or she) should doesn’t make the process a sham. The mediation process is about give-and-take, not the rubber stamping of the claimant’s demand. If the adjuster becomes convinced that the claim is worth more than the authority he has, he can always go get more. There are phones and Blackberrys and such, and they can always continue negotiations by phone or otherwise on a later date.

    Tell me, are you that much of a pushover when you buy a car? When the salesman says “that’s the best I can do”, do you just cave? Or do you push? This is the same thing. The carrier doesn’t think they owe you any money. You think they do. You are negotiating. If you approach that process with the attitude that any resistance to your position by anyone is outrageous and unwarranted, then you are destined to come away unhappy.

  20. Mr CG allow me to restate what you found unclear. It didn’t matter what the policy limits were and whether the insured had 50 engineering reports that showed wind as the cause of damage. The industry participants had only limited dollar authority.

    Perhaps Steve will stop in and share how much his families insuere offered them on a $750K policy. The engineering report they had (their insurer didnot order one) made no difference either.

    sop

  21. I just saw your comment. You’re shameless Mr CG.

    Actually the story says it. The insurance comapny decided what the claim was worth and had a check cut before mediation ever began. Take it or leave it with no give.

    Doesn’t sound like mediation at all huh?

    sop

  22. “I would be very interested to hear more about the case with 50 engineering reports.”

    It only took 1 engineering report to send our insurance companies mediation duo to retreat to the office. When we presented our IE homeowners engineers report the mediation team from USAA read it and then noted they would have to continue our mediation later. They then noted they were only authorized to pay 99 thousand that day but didn’t need a contract to settle entire matter to distribute the check. The check was already printed and they noted that USAA was good because they came to mediation with money to distrubute. I agreeed. The claim was latter settled for a generous amount without a lawsuit being filed.

  23. One additonal point is that we didn’t feel comfortable with our mediation “judge”. She was a lawyer out of Jackson, Mississippi. She was classified by our adjuster as being VERY pro-insurance. She even stated “Why did you hire that adjuster.” when he left the room to get some additional information. Needless to say we only went to one mediation meeting and handled the rest without the benefit of the insurance companies paid mediator. It was disconcerting when USAA’s adjuster discussed the payment for the mediatior infront of us. It left me feeling less than equal to USAA as they were paying her directly it appeared.

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