Judge: Peter A. Hernandez, Case: 23PSCV00403, Date: 2023-07-11 Tentative Ruling

Case Number: 23PSCV00403    Hearing Date: July 11, 2023    Dept: K

Defendant/Petitioner Golden Bear Insurance Company’s Petition to Compel Appraisal and Stay Litigation is GRANTED. The court orders the case stayed pursuant to Code of Civil Procedure § 1281.4, pending completion of the appraisal.

Background[1]

This is an insurance bad faith action. Plaintiffs RD Baldwin Park and Tropicana Enterprises, LLC (together, “Plaintiffs”) allege as follows:

Plaintiffs had an insurance policy with Defendant Golden Bear Insurance Company (“Golden Bear”) for the property located at 13467 Dalewood Street, Baldwin Park, CA 91706 (“Property”). During the term of the policy, Plaintiffs’ Property suffered substantial physical damage, including damage to the firewall, the food grade epoxy flooring, the ductwork and exhaust lines, fire sprinkler system and drainage lines, copper wiring, and the security and electrical systems (the “Claim”). As a result of the damage, the Property was no longer operable as a cannabis extraction manufacturing facility. Golden Bear delayed for almost a full year before admitting that there was physical damage covered by the policy, and thereafter delayed three more months before paying out any monies to repair the damages. Golden Bear also paid far below the actual cost to repair the covered damage.

On February 9, 2023, Plaintiffs filed a complaint, asserting causes of action against Golden Bear and Does 1-50 for:

1.                  Breach of Contract

2.                  Breach of Implied Covenant of Good Faith and Fair Dealing

A Case Management Conference is set for July 11, 2023.

Legal Standard

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for rescission of the agreement. (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact . . .” (Code Civ. Proc., § 1281.2, subds. (a)-(c).)

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies. . . ” (Code Civ. Proc., § 1281.4.)

Discussion

Golden Bear moves the court, pursuant to Code of Civil Procedure sections 1281, et seq., for an order compelling appraisal and staying any further proceedings in this case, on the basis that Plaintiffs are bound by the appraisal provision of their insurance contract with it.

Request for Judicial Notice

The court rules on Golden Bear’s Request for Judicial Notice (“RJN”) as follows: Granted (i.e., as to complaint filed February 9, 2023 in this action).

Merits

At the outset, the court notes that “[a]n agreement to conduct an appraisal included in a[n]. . . insurance policy constitutes an ‘agreement’ within the meaning of Code of Civil Procedure section 1280, subdivision (a), and is thus considered to be an arbitration agreement subject to the statutory contractual arbitration law.” (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 57; Helzel v. Superior Court (1981) 123 Cal.App.3d 652, 659-660 [“’[A]greements providing for valuations, appraisals and similar proceedings’ are within the definition of ‘agreements’ subject to the arbitration statute (§ 1280, subd. (a), and it is fundamental to the policies implicit in that statute that such agreements are to be given full force and effect”].)

Here, Golden Bear seeks to compel an appraisal pursuant to a commercial general liability and commercial property policy issued to Plaintiffs, as the Insureds, and to California Extracts, LLC (“CEL”), Policy number GBP 00668-01, policy period November 17, 2020 to November 17, 2021 (“Policy”) for the property located at 13467 Dalewood Street, Baldwin Park, California 91706 (“Insured Property”). Plaintiffs leased the Insured Property and then retained CEL to provide cannabis manufacturing services. (Elias Decl., ¶ 4.) The Policy states, in relevant part, as follows:

            “E. Loss Conditions

            The following conditions apply in addition to the Common Policy Conditions

and the Commercial Property Conditions. . .

2. Appraisal

            If we and you disagree on the value of the property or the amount of loss,

either may make written demand for an appraisal of the loss. In this event, each

party will select a competent and impartial appraiser. The two appraisers will

select an umpire. If they cannot agree, either may request that selection be made

by a judge of a court having jurisdiction. The appraisers will state separately the

value of the property and amount of loss. If they fail to agree, they will submit

their differences to the umpire. A decision agreed to by any two will be binding.

Each party will:

a.                   Pay its chosen appraiser; and

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

If there is an appraisal, we will still retain our right to deny the claim.” (Id., Exh. A.)

Plaintiffs admit that the Policy includes an appraisal provision, but argue that the petition should nevertheless be denied, on the basis that appraisers have no authority to interpret insurance policies or resolve coverage disputes, both of which are at issue in this case.[2] (Opp., 1:3-5, 3:17-19 and 4:11-13). Golden Bear does not contend that appraisers have such authority; rather, it unequivocally states that it is “only seeking appraisal of the dollar amount of the loss.” (Reply, 6:20). Plaintiffs contend that Kirkwood v. Cal. State Auto. Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49 “is instructive here.” (Id., 4:16-17). The court disagrees.

In Kirkwood, plaintiff was insured by defendant under a “open” homeowner’s policy providing that defendant would pay actual cash value or the replacement cost of lost or damaged personal property. Plaintiff contended that his home and personal property were destroyed as the result of an August 21, 2007 fire. Plaintiff submitted a personal property claim to defendant, setting forth a physical depreciation amount based on the actual condition of each item at the time of the loss; in turn, defendant provided plaintiff with a contents inventory summary which showed that a blanket depreciation schedule was applied to certain categories of property without regard to the condition of said property. Plaintiff asserted that, in doing so, defendant improperly interpreted and applied the 2004 amendments to Insurance Code section 2051 which set out how the measure of actual cash value should be determined under an open policy of fire insurance. Plaintiff, both individually and as a putative class representative, sued defendant for declaratory relief, breach of contract, bad faith, and violation of unfair competition law, which all related to his position that defendant’s use of standardized depreciation scheduled to determine depreciation of personal property items violated California law as well as the parties’ insurance contract. The trial court denied defendant’s motion to compel appraisal without prejudice, so that defendant could raise the issue again after the court resolved the issue of interpretation of section 2051. The First District, Division Four Court of Appeal affirmed, stating:

            We think the trial court was right in its conclusion that an appraisal was not

mandated ‘right now’ because the declaratory relief cause of action asked the

court to make a declaration that [defendant] was misconstruing section 2051(b).

Denying the motion to compel appraisal without prejudice, the court was clear:

‘I don’t see how the plaintiff gets out of an appraisal later.’ In other words, given

the limited role of an appraisal, the court essentially bifurcated the case,

determining that it should first issue a declaration on the statutory issue, ‘and

then have it inform the appraisal when it goes forward.’ In short the court ruled

that the agreement to arbitrate did not include the threshold contract and statutory interpretation issues, which were beyond the purview of the appraisers. We

agree.

(Id. at 57).

The instant case, by way of contrast, contains two causes of action, for breach of contract and breach of the implied covenant of good faith and fair dealing. Plaintiffs have not invoked the court’s declaratory relief powers. Plaintiffs also cite to Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082; however, Doan likewise involved a declaratory relief cause of action, this time involving the proper interpretation of Insurance Code section 2071.

Plaintiffs next assert that the petition should be denied due to waiver. Waiver “may happen in a variety of contexts, ranging from situations in which the proponent of arbitration has previously taken steps inconsistent with an intent to invoke arbitration, to instances in which the proponent has unreasonably delayed in undertaking the procedure.” (Guess?, Inc. v Superior Court (2000) 79 Cal.App.4th 553, 557.) “[A] party who resists arbitration on the ground of waiver bears a heavy burden, and any doubts regarding a waiver allegation should be resolved in favor of arbitration.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4^th 1187, 1195.)

Here, there is no evidence that Golden Bear took “steps inconsistent with an intent to invoke” appraisal. Further, Plaintiffs’ contention that Golden Bear waited to request appraisal until after this lawsuit was filed (i.e., on February 9, 2023) and thus “unreasonabl[y] delay[ed]” is contradicted by attorney David Douglas’ representation that Golden Bear agreed to participate in mediation and raised the appraisal process in October 2022. (Douglas Decl., ¶¶ 18 and 20).

The motion is granted. The court orders the case stayed pursuant to Code of Civil Procedure § 1281.4, pending completion of the appraisal.