KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY V THE HONORABLE SAMUEL T . WRIGHT, PRESIDING JUDGE, LETCHER CIRCUIT COURT AND MERYL ADAMS AND ROGER FIELDS
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TO BE PUBLISHED
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KENTUCKY FARM BUREAU MUTUAL
INSURANCE COMPANY
V
IL
X,
APPELLANT
ON APPEAL FROM THE COURT OF APPEALS
2002-CA-2014-OA
LETCHER CIRCUIT COURT NO. 01-CI-00364 and 02-CI-00095
THE HONORABLE SAMUEL T. WRIGHT,
PRESIDING JUDGE, LETCHER CIRCUIT
COURT
APPELLEE
AND
MERYL ADAMS AND ROGER FIELDS
REAL PARTIES IN INTEREST
OPINION AND ORDER BY CHIEF JUSTICE LAMBERT
AFFIRMING IN PART AND REVERSING IN PART
Appellant, Kentucky Farm Bureau Mutual Insurance Company ("Farm
Bureau"), appeals to this Court from the Court of Appeals' denial of its petition for writ of
prohibition or mandamus . In the petition, Farm Bureau sought to vacate the Mediation
Order entered by the Letcher Circuit Court on April 15, 2002 requiring written disclosure
of the extent of settlement authority prior to mediation and directing mandatory fines,
costs, and penalties if the claims were settled following the conclusion of the mediation .
This Court hereby grants a limited writ striking the language of the trial court mediation
order mandating sanctions if the case is settled after the conclusion of mediation .
This case arose from a motor vehicle accident where Roger Fields hit
Meryl Adams who in turn hit an oncoming vehicle driven by Timothy Wright . The
accident occurred in the dark morning hours of December 14, 2001, when Adams was
trying to turn left onto a side road from a two-lane U.S . Highway. Fields, who hit Adams
from the rear, said that he could not see the Adams vehicle because neither the
taillights nor the turn signal were working. Fields and Adams were both insured by
Farm Bureau. Wright, the oncoming driver who was struck by Adams, filed a civil action
for damages against both Fields and Adams for the alleged negligence of both parties .'
Adams filed a civil action for damages against Fields and Farm Bureau claiming that
Fields was negligent in causing the accident, and that Farm Bureau violated the Unfair
Claims Settlement Practices Act. 2
In March 2002, the trial court ordered the cases consolidated, and on April
15, 2002, the trial court ordered the consolidated cases to mediation in October 2002 .
The mediation order provided in part, as follows:
The parties and an adjustor of their insurers, if any,
with full authority to settle shall attend a mediation
conference . Full authority is defined as Plaintiff's last
demand or the extent of coverage, whichever is less. The
full authority of any representative of an insurer shall be
documented in writing prior to the commencement of the
mediation . No telephone calls to seek additional authority
are permitted . The mediation shall be held at the
convenience of all parties and the mediator. Only the Court
or the mediator may alter the terms of the time limits herein .
The parties shall use their best efforts to resolve all issues .
If a party fails to appear at a duly noticed mediation
conference without good cause or fails to comply with this
order in any manner, the Court may impose sanctions
including, but not limited to, an award of attorney's fees and
other costs against the party failing to comply .
Farm Bureau states that this case settled prior to the filing of the petition for writ of
prohibition .
2 KRS 304.12-230(6), (7), and (8).
If the case is settled after the conclusion of the mediation
then additional costs, fines and penalties will be imposed for
the disruption of the courts [sic] schedule and resources due
to the parties [sic] failure to give timely or adequate work and
consideration to this aspect of the case.
On April 24, 2002, Adams filed a motion to alter, amend or vacate the
mediation order, and on April 29, 2002, Fields also filed a motion to alter, amend or
vacate the order. The motions were filed on grounds that the trial court was without
authority to order mediation and that the order improperly authorized imposition of
sanctions . When the trial court had not ruled on the motion by September 16, 2002,
Farm Bureau took action by contacting the Circuit Court Clerk and attempting to
schedule a hearing regarding the pending motions to alter, amend or vacate the order.
On September 19, 2002, Farm Bureau filed a motion to vacate the order because a
hearing could not be scheduled prior to the mediation date due to the unavailability of
the trial judge, and on that same date (September 19, 2002), the trial court overruled the
previously filed motions to alter, amend or vacate the mediation order.
On October 1, 2002, Farm Bureau filed the instant petition for writ of
prohibition or mandamus in the Court of Appeals . On December 11, 2002, the Court of
Appeals denied the petition and held that "Petitioner has failed to make the threshold
showing of irreparable harm and lack of an adequate remedy by appeal." It relied on
James v. Shadoan .3
Farm Bureau argues that the trial court is without authority to order
mediation .
It recognizes that CR 16(1)(f) grants the trial judge discretion to direct the
parties to appear for conference to address "[s]uch other matters as may aid in the
disposition of the action ." Yet it contends that the trial court was still without authority
3 Ky ., 58 S .W.3d 884 (2001).
and acted outside its jurisdiction when it ordered the parties to mediation . Moreover,
Farm Bureau contends that this type of order is not within the trial court's inherent
power even though there is no constitutional provision, statute, or Supreme Court rule
expressly prohibiting such an order. Farm Bureau declares that the mediation order is
not consistent with the Model Mediation Rules adopted by the Supreme Court of
Kentucky.
Finally, Farm Bureau argues that the sanctions that will be imposed if it
settles a claim following the mediation are improper leaving it with a "more illusory than
real" remedy by appeal . It posits that providing a written declaration of the authorized
settlement amount for its bad faith claim is a great injustice and nullifies the effect of the
bifurcation of the cases. It declares that the "theoretical right to appeal, in reality, is not
adequate to protect the interests of the defendant [Farm Bureau] under these
circumstances ."
This matter is before this Court pursuant to CR 76.36(7)(a) allowing a
matter of right appeal in original actions filed in the Court of Appeals . Writs of
prohibition and writs of mandamus are extraordinary remedies and are reluctantly
granted . A petitioner must show that the court is acting outside its jurisdiction or acting
erroneously within its jurisdiction, and when the court is acting within its jurisdiction, the
petitioner must show that it has no adequate remedy by appeal and it will suffer an
irreparable injury if relief is not granted .
With respect to the issue of trial court jurisdiction, "it has generally been
recognized that courts (even without express authority given by the constitution, statute,
4 The trial court bifurcated the bad faith claim against Farm Bureau asserted by Adams .
5 Bender v. Eaton, Ky., 343 S.W.2d 799, 800 (1961).
6 _Id. at 800-01 .
4
or rule of a supreme court of a state) have inherent power to prescribe rules to regulate
their proceedings and to facilitate the administration of justice ."' Additionally, "[t]he
control over this inherent judicial power . . . is exclusively within the constitutional realm
of the courts ."$ Moreover, CR 16(1)(f) appears to grant express authority to order
mediation . For these reasons, the trial court was well within its jurisdiction to do what it
deemed reasonably necessary to "aid in the disposition of the action"9 and to order the
parties to mediation.
While a trial court order to mediate does not generally justify the
extraordinary relief of a writ of prohibition, the order under review does require relief of a
limited nature on grounds of irreparable harm and lack of an adequate remedy by
appeal . The order contains a provision that is troubling. It states in part, "if the case is
settled after the conclusion of the mediation then additional costs, fines and penalties
will be imposed for the disruption of the courts . . . ." Although Farm Bureau concedes
that it may have a remedy by appeal, relief under this rule is appropriate due to the risk
a party would have to encounter to ripen the issue for appellate review. Under the trial
court's order, parties who settled after the conclusion of mediation, despite a belief in
their right to do so, would be required to face mandatory fines and penalties, a route
most reasonable parties would avoid. We conclude that the post-mediation settlement
provision imposing additional costs, fines and penalties exceeds trial court discretion
and results in irreparable harm without an adequate remedy by appeal. This conclusion
eliminates the need to address whether the provision runs afoul of the Model Mediation
Rules or the parties' constitutional rights . Accordingly, a limited writ of prohibition will be
' Craft v. Commonwealth , Ky., 343 S.W.2d 150,151 (1961) .
' Smothers v. Lewis , Ky., 672 S.W.2d 62, 64 (1984).
9 CR 16(1)(f) .
granted and the trial court will be prohibited from enforcing the following language in its
mediation order:
If the case is settled after the conclusion of the mediation
then additional costs, fines and penalties will be imposed for
the disruption of the courts [sic] schedule and resources due
to the parties [sic] failure to give timely or adequate work and
consideration to this aspect of the case.
The final issue we must address is that portion of the trial court's
mediation order requiring the appearance of the parties and their adjustor at the
mediation conference "with full authority to settle ." The order provides, "Full authority is
defined as plaintiff's last demand or the extent of coverage, whichever is less." Some
have interpreted this language to require an insurer to pay plaintiffs last demand or the
extent of its coverage, whichever is less. We reject this interpretation. The language
used does not mean that parties must actually settle ; that the insurer must pay plaintiffs
last demand, or its policy limit; or that it abandon its good faith belief in the settlement
value of the case, if any. The order merely requires the appearance of parties with "full
authority to settle" to prevent the pernicious practice of negotiations by "an agent
without authority." If mediation is to accomplish its intended purpose, and if the
mediation conference is to be the main event, there must be participation by persons
possessed of immediate decision-making authority. The process is irreparably harmed
if final settlement authority rests elsewhere.
The order under review contains no language that forces the insurer to
pay or forces the plaintiff to accept any settlement and should not be interpreted as to
require such actions . The order merely requires that the parties participate in a
mediation conference ordered by the court and that those persons involved be cloaked
with "full authority to settle ." This Court has adopted Model Mediation Rules and
henceforth all Mediation Orders should be in conformity with those rules. Requiring
mediation participants to have full authority to settle does not violate our Rules ; rather
allowing mediation to take place without parties possessing full authority to reach an
agreement is the real violation . In accordance with the language of the order under
review, the parties are free to mediate, agree on a settlement, or disagree and proceed
to trial .
For the foregoing reasons, the Court of Appeals' denial of the petition for a
writ of prohibition is affirmed in part and reversed in part, and this cause is remanded to
the trial court for further consistent proceedings .
IT IS SO ORDERED.
All concur.
ENTERED: June 17, 2004.
COUNSEL FOR APPELLANT :
Michael J. Schmitt
PORTER, SCHMITT, JONES & BANKS
327 Main Street, P . O . Box 1767
Paintsville, KY 41240-1767
COUNSEL FOR APPELLEE :
Hon. Samuel T. Wright
Judge, Letcher Circuit Court
205 Courthouse, 156 Main Street
Whitesburg, KY 41858
COUNSEL FOR REAL PARTY IN
INTEREST, MERYL E. ADAMS :
Daniel F. Dotson
178 East Main Street, Suite 1
P . O. Box 943
Whitesburg, KY 41858
COUNSEL FOR REAL PARTY IN
INTEREST, ROGER FIELDS :
Deborah Lewis Bailey
ENGLE & LEWIS
P. O . Drawer 1179
Hazard, KY 41702
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