CONFIDENTIAL, COURT PRIVILEGED DOCUMENT

Calendar: 2

Date: 3/21/25

Case No: 24NNCP00539 Trial Date:  None

Case Name: Souren Basmadjian v. Nationwide Mutual Insurance Company

PETITION TO CONFIRM APPRAISAL AWARD

Moving Party: Petitioner Souren Basmadjian

Responding Party: Respondent Nationwide Mutual Insurance Company

RELIEF REQUESTED: Confirm Appraisal Award issued on October 26, 2023 and enter judgment in conformance with the award 

SUMMARY OF FACTS:

Petitioner Souren Basmadjian (“Petitioner”) filed a petition to confirm an appraisal award on September 11, 2024 but did not file proof of service. The Court set an OSC re: failure to file proof of service for March 21, 2025 to be held concurrently with the hearing on the instant petition. On January 22, 2025, Petitioner re-filed the petition and filed proof of personal service on January 27, 2025. 

This petition arises out of an insurance claim Petitioner submitted to Respondent Nationwide Mutual Insurance Company (“Respondent”) pursuant to Petitioner’s Homeowner Policy (“the Policy”) due to water damage at Petitioner’s property. A disagreement arose over Respondent’s coverage of the damage and the parties elected to participate in an appraisal process, pursuant to the terms of the Policy and as mandated by California Insurance Code Section 2071. Pursuant to the Policy, each party selected their own appraiser and mutually agreed to resolve the appraisal without selecting an umpire. (Zivari Decl., ¶5.) After reviewing estimates and information from an appraisal conference, on October 26, 2023, the appraisers issued an Appraisal Award in favor of Petitioner.

On February 3, 2025, Respondent filed its opposition. On March 3, 2025, Respondent filed a notice of errata correcting its opposition. 

As of March 14, 2025, no reply has been filed. 

ANALYSIS:

An arbitration award is not directly enforceable until it is confirmed by a court and judgment is entered.  (Code Civ. Proc. § 1287.6; Jones v. Kvistad (1971) 19 Cal.App.3d 836, 840.) A party may seek a court judgment confirming an arbitration award by filing and serving a petition at least 10 days, but no more than four years after the award is served.  (Code Civ. Proc. §§ 1288, 1288.4.)    

California Insurance Code Section 2071 subdivision (a) states, in relevant part, as follows: 

The following is adopted as the standard form of fire insurance policy for this state:

Appraisal

In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record in the state in which the property covered is located. Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, “informal” means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally. In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the insured or this company but shall not be compelled.

“A confirmed award of appraisers and umpire is treated as a confirmed arbitration award, which has the ‘same force and effect as ... a judgment in a civil action.’” (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1132, citing Klubnikin v. California Fair Plan Assn. (Ct. App. 1978) 84 Cal.App.3d 393, 398.) Appraisal proceedings are a form of informal arbitration and generally are subject to the rules governing arbitration.  (See Code Civ. Proc. § 1280(a); Louise Gardens of Encino Homeowners' Assn, Inc. v. Truck Ins. Exch., Inc. (2000) 82 Cal.App.4th 648, 658; Appalachian Insurance Co. v. Rivcom Corp. (1982) 130 Cal. App. 3d 818, 824; Lambert, supra, 158 Cal.App.4th at 1129; Devonwood Condominium Owners Ass'n v. Farmers Ins. Exch. (2008) 162 Cal.App.4th 1498, 1505.)  However, while the agreement providing for arbitration often gives the arbitrator broad powers, appraisers generally have more limited powers.  (E.g., Kirkwood v. California State Auto. Assn Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 58-59 [finding that, unlike arbitrators, appraisers have no power to interpret insurance policy or governing statutes]; Doan v. State Farm Gen. Ins. Co. (2011) 195 Cal.App.4th 1082, 1096 [appraisers' jurisdiction limited to amount of damages (precluded from determining proper method for calculation].)

Procedural Requirements

Timeliness of the Petition 

“A petition to confirm an award shall be served and filed not later than four years after the date of service of a signed copy of the award on the petitioner.” (Code Civ. Proc. § 1288.)  

 

Here, the Appraisal Award was issued and served on the parties October 26, 2023. (Zivari Decl., ¶ 6, Exh. C.) The Petition to confirm the award was filed January 22, 2025, and served on January 23, 2025, which is less than four years after October 26, 2023. 

Thus, the Petition is timely.   

Service of the Petition and Notice of Hearing 

Code of Civil Procedure section 1290.4 subdivision (a) requires the Petition and Notice of Hearing to be served on Respondent “in the manner provided in the arbitration agreement for the service of such petition and notice” or “[i]f the arbitration agreement does not provide the manner in which such service shall be made . . . [s]ervice within this State shall be made in the manner provided by law for the service of summons in an action.” (Code Civ. Proc. § 1290.4(a), (b).)    

“A summons may be served on a corporation by delivering a copy of the summons and the complaint by any of the following methods...To the person designated as agent for service of process..." (Code Civ. Proc. § 416.10.)

The appraisal clause in the Policy states as follows: 

F. 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 and impartial 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: 

1. Pay its own appraiser; and

2. Bear the other expenses of the appraisal and umpire equally, except that any fees for expert witnesses or attorneys will be paid by the party who hires them.

Neither the umpire nor the appraisers will have a financial interest that is conditioned on the outcome of the specific matter for which they are called to serve. This is not a provision providing for or requiring arbitration. The appraisers and umpire are only authorized to determine the "actual cash value", replacement cost, or cost to repair the property that is the subject of the claim. They are not authorized to determine coverage, exclusions, conditions, forfeiture provisions, conditions precedent, or any other contractual issues that may exist between you and us. The appraisal award cannot be used by either you or us in any proceeding concerning coverage, exclusions, forfeiture provisions, conditions precedent, or other contractual issues. However, once contractual liability is admitted or determined, the appraisal award is binding upon you and us. This appraisal process and authority granted to the appraisers and the umpire can only be expanded or modified by written mutual consent signed by you and us.

(Zivari Decl., Exh. A.)

 Here, the appraisal clause in the Policy does not provide a manner for service of the Petition. The original Petition filed September 11, 2024 did not have a proof of service of summons attached or filed separately. The Petition was refiled on January 22, 2025, and proof of personal service was filed on January 27, 2025. The proof of service states that the Petition and notice was served on Respondent, a corporation, on January 23, 2025 by personally serving Respondent’s agent for service of process. This method is a proper manner of service on a corporation. 

Thus, service of the Petition and notice was proper. 

Appointment of an Umpire

Petitioner’s counsel declares that the parties mutually agreed to resolve the appraisal without selecting an umpire. (Zivari Decl., ¶5.) Respondent argues that the award was neither valid nor final because the appraisers failed to select an umpire as required by Insurance Code section 2071 and the Policy. 

Respondent contends that no changes or variations to section 2071’s standard form are allowed, citing Gebers v. State Farm General Ins. Co. (1995) 38 Cal.App.4th 1648, 1651 and Wildman v. Government Employees’ Ins. Co. (1957) 48 Cal.2d 31, 39. In discussing Insurance Code section 2071, the Gebers court found that “[c]hanges or variations to the standard form may not reduce the insurer's obligations.” (Gebers v. State Farm Gen. Ins. Co. (1995) 38 Cal.App.4th 1648, 1651.) The Wildman court, while discussing a mandate that section 415 of the Vehicle Code be made part of every insurance policy, stated, “[t]he substantive law of this state cannot be enlarged, circumvented, defeated, or modified by any provision which the insurer may have elected to place in its contract in derogation of or in conflict therewith.” (Wildman v. Gov't Emp. Ins. Co. (1957) 48 Cal. 2d 31, 39.)

Here, Insurance Code section 2071 is clear that an umpire must be selected by the appraisers or by a judge. Petitioner provides no legal authority to the contrary. The Policy contains similar language to section 2071 providing for the selection of an umpire by the appraisers, or by the court if the appraisers cannot agree on an umpire themselves. 

Accordingly, the award is not valid or final until the appointment of an umpire. 

Service of the Appraisal Award 

Code of Civil Procedure section 1283.6 requires that “[t]he neutral arbitrator shall serve a signed copy of the award on each party to the arbitration personally or by registered or certified mail or as provided in the agreement.” (Code Civ. Proc. § 1283.6.)   

For purposes of the Uniform Arbitration Act and appraisal procedure under Insurance Code section 2071, the “neutral arbitrator” is akin to the “umpire.” (Code Civ. Proc. §1280(g) (“‘Neutral arbitrator’ means an arbitrator who is (1) selected jointly by the parties or by the arbitrators selected by the parties, or (2) appointed by the court when the parties or the arbitrators selected by the parties fail to select an arbitrator who was to be selected jointly by the parties.”); see also Mahnke v. Superior Ct. (2009) 180 Cal.App.4th 565, 577 (“The statutory scheme now imposes a disclosure obligation exclusively on the “proposed neutral arbitrator” who, like the “umpire” contemplated in Insurance Code section 2071, is either selected jointly by the parties and their respective party arbitrators or appointed by the court upon the failure of the parties to agree.”)

Here, the Policy does not provide for a manner of service of the award. Respondent’s counsel declares that Robert Jackson, the appraiser appointed by Respondent, emailed a copy of the award to the parties. (Mauldin Decl., ¶ 8, Exh. C.) The Court finds that service of the appraisal award was not proper as it was not served by an umpire, and it was emailed to the parties rather than personally served or mailed. 

Thus, service of the appraisal award was improper. 

Confirmation of the Award on the Merits

On the merits, the court must confirm the award as made, unless it corrects or vacates the award, or dismisses the proceeding.  (Code Civ. Proc. § 1286; Valsan Partners Limited Partnership v. Calcor Space Facility, Inc. (1994) 25 Cal.App.4th 809, 818.) Code of Civil Procedure section 1285.4 states that a petition under this chapter shall: 

a. Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement. 

b. Set forth the names of the arbitrators. 

c. Set forth or have attached a copy of the award and the written opinion of the arbitrators, if any. 

(Code Civ. Proc. § 1285.4.)  

Here, first, Petitioner properly attaches to the Petition as Exhibit A the Policy between the parties, which includes an appraisal provision.  (Zivari Decl., Exh. A.)  

Second, the Petition does not state the name of the umpire, the equivalent to an arbitrator, because none was selected. The appraisal award attached to the Petition is signed by appraiser Charles Younes and Bob Jackson, but this alone is insufficient. (Zivari Decl., Exh. C.) Thus, the Petition fails to set forth the name of an umpire.    

Third, the Petition attaches as Exhibit C a copy of the award. 

Overall, procedurally, the award is not valid or final without the appointment of an umpire. Further, an umpire did not serve a signed copy of the award on the parties personally or by registered or certified mail. Notwithstanding the procedural issues, on the merits, the Petition does not meet the requirements of Code of Civil Procedure section 1285.4 for failure to set forth the name of an umpire.

RULING:

DENIED. 

GIVEN THE CORONAVIRUS CRISIS, AND TO ADHERE TO HEALTH GUIDANCE THAT DICTATES SAFETY MEASURES, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES

 

Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance.  Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear.  With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines.  In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask.  The Department D Judge and court staff will continue to wear face masks.  If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.