Judge: James L. Crandall, Case: 22-1252476, Date: 2022-10-13 Tentative Ruling

1.    Motion to Compel Appraisal and Stay Proceedings

Defendant Liberty Mutual Insurance Company’s (“Liberty”) petition for an Order compelling plaintiff Anie Akmakjian to submit to the insurance appraisal process prior to litigating this matter, and to stay the present action pending completion of the appraisal is GRANTED.

“An agreement to conduct an appraisal contained in a policy of insurance constitutes an ‘agreement’ within the meaning of section 1280, subdivision (a), and therefore is considered to be an arbitration agreement subject to the statutory contractual arbitration law. [Citation.] Those statutory provisions represent a comprehensive statutory scheme for the arbitration of disputes. As such, the Legislature’s use of the word “shall” in the statutory provisions which we now discuss makes them mandatory, not precatory. [Citation.]” (Louise Gardens of Encino Homeowners' Assn., Inc. v. Truck Ins. Exch., Inc. (2000) 82 Cal. App. 4th 648, 658.)

“The term ‘ “appraisals” ’ was added to the Arbitration Act in 1961 to expressly extend the coverage of the statute to appraisal proceedings.” (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1130.) “[I]n general, ‘app

the rules governing contractual arbitration proceedings.’ ” (Id. at 1131.)

“Code of Civil Procedure section 1281.2 generally provides that where a party to an arbitration agreement petitions the court with allegations of an agreement to arbitrate a controversy and another party refuses to arbitrate, ‘the court shall order [the parties] to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists....’ A party may petition the court to confirm, correct or vacate an appraisal award; the court must confirm unless it corrects and confirms as corrected, vacates the award, or dismisses the proceeding. (Code Civ. Proc., §§ 1285, 1286.) [¶] Once the appraisal provision in an insurance policy is invoked, however, the appraisal process itself is limited. It ‘shall not include any legal proceeding or procedure not specified under California Insurance Code Section 2071. Nothing [in the regulations] is intended to preclude separate legal proceedings on issues unrelated to the appraisal process.’ (Cal.Code Regs., tit. 10, § 2695.9, subd. (e).)” (Kirkwood v. California State Auto. Assn. Inter-Ins. Bureau (2011) 193 Cal. App. 4th 49, 57–58 (Kirkwood).)

“[S]ection 2071 calls for an informal appraisal proceeding, unless the parties mutually agree otherwise, with no depositions, interrogatories, and the like, no formal rules of evidence, and no court reporter.” (Kirkwood, supra, 193 Cal.App.4th at 58.)

“Additionally, section 2071 constrains the role of the appraiser to that of appraising ‘the loss, stating separately actual cash value and loss to each item....’ Appraisers have no power to interpret the insurance contract or the governing statutes. ‘ “The function of appraisers is to determine the amount of damage resulting to various items submitted for their consideration. It is certainly not their function to resolve questions of coverage and interpret provisions of the policy.” ’ [Citations.] Under section 2071, an appraiser has authority to determine only a question of fact, namely the actual cash value or amount of loss of a given item. [Citation.] (Kirkwood, supra, 193 Cal.App.4th at 57–58.)

Here, Liberty has shown that its affiliate, Liberty Insurance Corporation, issued homeowners policy number H37-268-831059-40 1 7 to Plaintiff for the policy period January 15, 2021, to January 15, 2022 (the “Policy”). (Wright Decl., ¶ 3, Exh. 1.)

Section 1, paragraph 6 of the Policy, provides for an appraisal as follows:

6. Appraisal. If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the “residence premises” is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.

Each party will:

a. Pay its own appraiser; and

b. Bear the other expenses of the appraisal and umpire equally.

(Wright Decl. ¶3; Exh. 1.) As to filing an action, the Policy provides as follows:

8. Suit Against Us. No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss. (Wright Decl. ¶3; Exh. 1.)

Accordingly, Liberty has shown that the Policy provided for appraisal to resolve the dispute regarding amount of claimed loss.

The Complaint alleges that on June 16, 2021, a water loss occurred at Plaintiff’s property and Plaintiff made an insurance claim. (Complaint, ¶¶ 12-13.)

Liberty has shown that Liberty Insurance Corporation determined that the dwelling loss had a replacement cost value of $35,776.78 and an actual cash value of $35,102.46. (Wright Decl., ¶ 5.) Plaintiff, however, asserted a replacement cost value of $65,468.72. (Wright Decl., ¶ 5.) Accordingly, here, the dispute between Liberty and Plaintiff is regarding the amount of loss which falls within the scope of an appraisal.

Plaintiff opposes appraisal on the grounds that (1) Liberty has not made a written demand for appraisal; and (2) Liberty has forfeited and/or waived the right to appraisal.

First, Plaintiff argues that Liberty has not made a written demand for appraisal because the suggestion of an appraisal in the December 16, 2021, email from Liberty claim professional William Christopher Wright to Anthony Hamassian, is insufficient to show that an appraisal was demanded as required by the Policy. “[A] respondent may invoke arbitration either in its answer or by a petition to compel.” (Buckhorn v. St. Jude Heritage Med. Grp. (2004) 121 Cal. App. 4th 1401, 1406, fn. 2.) Liberty’s filing of this motion to compel appraisal in lieu of an answer is therefore sufficient to demand an appraisal.

Second, Plaintiff argues that Liberty has forfeited or waived its right to compel arbitration.

“An insurer may lose a contractual right by: (1) waiver, an intentional relinquishment of a known right demonstrated expressly or implicitly; (2) estoppel, conduct by the insurer that reasonably causes an insured to rely to his detriment; or (3) forfeiture, the assessment of a penalty against the insurer for either misconduct or failure to perform an obligation under the contract.” (Chase v. Blue Cross of Cal. (1996) 42 Cal.App.4th 1142, 1151 (Chase).)

“Forfeiture of a contractual right is not favored in the law . . . [while] arbitration is favored in the law. Consequently, . . . as with waiver, the burden of proof is on the party asserting forfeiture and must be demonstrated by clear and convincing evidence.” (Chase, supra, 42 Cal.App.4th at 1157.) “A covenant of good faith and fair dealing is implied in every contract.” (Id. at 1151.) In the context of insurance contracts, the covenant requires the insurer to reasonably “inform an insured of the insured’s rights and obligations under the insurance policy.” (Id. at 1152.) “In order to find a forfeiture by the insurer of the right to arbitration . . . require[s] conduct designed to mislead policyholders.” (Id. at 1157.) “[T]he court’s focus when evaluating an allegation of forfeiture should be on the subjective intent of the insurer.” (Id. at 1157.)

“Consequently, even if the insured is aware of the arbitration right, bad faith tactics designed to mislead the insured merit the sanction of forfeiture. Conversely, even if the insured in fact was unaware of the arbitration right, no forfeiture occurs if the insurer did not engage in behavior designed to mislead the insured. The insurer’s ability to enforce the arbitration provision cannot realistically hinge on its ability to prove the insured had actual knowledge of the provision. [Citations.] However, a determination of bad faith involves consideration of the totality of the circumstances, including whether the insurer has knowledge of facts suggesting the insured is unaware of the arbitration provision. In other words, in the case of forfeiture, the policyholder’s actual ignorance of the provision is relevant to the extent that ignorance is known to the insurer.” (Chase, supra, 42 Cal.App.4th at 1157.)

Plaintiff has not submitted clear and convincing evidence showing that Liberty engaged in conduct to mislead Plaintiff. Liberty apprised Plaintiff of the right to an appraisal in an email sent on December 16, 2021, by Liberty claim professional William Christopher Wright to Plaintiff’s counsel, Anthony Hamassian. (Wright Decl., ¶ 6.)

In the email, Mr. Wright stated, in part, “With respect to the difference in contractor estimates, perhaps Appraisal would be most beneficial in helping to establish a more accurate cost of repair for this claim.” (Wright Decl. ¶6.) Mr. Wright also quoted both the “Appraisal” and “Suit Against Us” provisions in the Policy. (Id.) Plaintiff argues that Mr. Wright’s conduct of suggesting appraisal a week after Liberty provided a copy of a revised estimate with a total replacement cost value of $35,776.78 and later failing to discuss the claim for more than 3 weeks shows that Liberty did not intend to proceed with the appraisal in good faith. (Hamassian Decl., at ¶ 13.)

Liberty’s failure to suggest appraisal until after sending its revised estimate of loss is not inconsistent with its request for appraisal since at that point Liberty reasonably believed that an appraisal would be helpful to establish an accurate cost of repair for the claim.

Accordingly, Plaintiff has not submitted clear and convincing evidence of forfeiture.

As to waiver, Plaintiff argues that Mr. Wright’s failure to respond or follow up on his December 16, 2021, email for three weeks suggests that Defendant never intended to proceed with appraisal.

Mr. Wright’s failure to respond for three weeks does not show that Liberty did not intend to proceed with appraisal, especially given that Mr. Hamassian responded to the appraisal request by asking to “discuss the claim” and not the requested appraisal. (Hamassian Decl., at ¶ 14, Exh. 3.)

Accordingly, Liberty’s failure to respond immediately to the email does not show that it no longer intended to proceed with appraisal. To the extent Plaintiff argues that Liberty waived appraisal by engaging in bad faith tactics during the investigation of Plaintiff’s claim, Plaintiff’s claim for bad faith is premature absent the determination of the value of Plaintiff’s contractual claim.

Accordingly, Plaintiff has not submitted clear and convincing evidence of waiver.

Based on the foregoing, the request to compel an appraisal is GRANTED and the case is stayed pending completion of the appraisal process.

Moving Defendant to give notice.

2.    Case Management Conference

Future hearing dates

No future hearing dates