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INSURANCE NOTES

Party Is Deemed To Have Waived Mediation Confidentiality And Is Bound By Settlement Reached At Mediation

11.21.2006
A doctor gives written consent to her insurer to settle a medical malpractice claim against her for $125,000. Later, at a mediation, the insurer representative offers $125,000 to the plaintiffs to settle the claim, and plaintiffs accept. When the doctor is informed of the plaintiffs' acceptance, she revokes her consent to settle, leaves the mediation, and does not sign a written settlement agreement. The doctor then litigates what happened in the mediation. Is there a binding settlement?

In Simmons v. Ghaderi, 134 Cal.App.4th 410, 49 Cal.Rptr.3d 342 (2006), involving these facts, the Court answered "yes," an oral settlement agreement was reached at the mediation and it was binding.

The plaintiffs in the case were relatives of Kintausha Clemmons who alleged that Defendant Lida Ghaderi, M.D., committed malpractice by taking Clemmons off dialysis, causing her death. Dr. Ghaderi had medical malpractice insurance. By statute, no medical malpractice insurer is permitted to enter into a settlement without the insured's written consent. Cal. Bus. & Prof. Code §801(g). Accordingly, before the mediation, upon her insurer's request, Dr. Ghaderi signed a consent to settle the case for $125,000.

After the mediation, the plaintiffs moved to enforce the settlement under California Code of Civil Procedure §664.5, which permits entry of judgment upon a signed settlement agreement or a settlement stipulated on the record before the court. Plaintiffs submitted evidence of what happened at the mediation, including a declaration of the mediator. The trial court denied the motion because neither Dr. Ghaderi nor the insurer had signed the written settlement agreement.

Plaintiffs then amended their complaint to allege a cause of action for breach of contract (the oral settlement reached at the mediation). Dr. Ghaderi moved for summary adjudication, contending there was no valid contract because she had revoked her consent to settle. The trial court denied the motion on the ground that since plaintiffs had accepted the $125,000 settlement offer before Dr. Ghaderi revoked her consent, a binding settlement agreement could have been created.

At the trial on the breach of contract claim, Dr. Ghaderi asserted for the first time that any evidence of mediation discussions, agreements or communications was barred by the mediation confidentiality provisions of Evidence Code §§ 1115-1128. Those sections state that anything said or written in the course of, or pursuant to, a mediation is inadmissible as evidence. The trial court admitted the evidence regarding the events that occurred at the mediation, over Dr. Ghaderi's objections. The trial court found that an oral settlement agreement was created notwithstanding Dr. Ghaderi's revocation of her consent and entered judgment in favor of plaintiffs for $125,000.

The Court of Appeal affirmed. Writing for the majority, Justice Croskey concluded that a valid oral contract was formed at the mediation when the plaintiffs unconditionally accepted the insurer's offer to settle the case for $125,000. Dr. Ghaderi's attempt to revoke her consent after the fact was deemed "irrelevant and ineffectual."

The Court rejected the assertion that the evidence of mediation communications was barred by mediation confidentiality, stating that Dr. Ghaderi herself argued those same communications and did not dispute the facts. The Court noted that after litigating the legal effect of those communications for 15 months, she asserted mediation confidentiality "when it appeared that the trial court's determination was going against her." It determined that recognizing mediation confidentiality in the case would not help to ensure open communication in mediation, but simply allow a disgruntled litigant to use it as a convenient shield to hide undisputed true facts and to "trifle" with the courts.

 

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