Judge Thomas D. Long, Case Number: 24STCP03562, Date: 2024-12-12 Tentative Ruling

On November 4, 2024, Petitioners Ricardo Meono and Luz Adriana Meono filed a Petition to Compel Insurance Appraisal against Respondent California Fair Plan Association. (Respondent’s evidentiary objections are overruled.)

Petitioners have an insurance policy with Respondent that covers certain real property. (See Meono Decl. ¶ 3.) On January 10, 2023, the property was damaged. (Meono Decl. ¶ 4.) Respondent denied coverage and does not agree to continue the appraisal. (See Petition at pp. 9-10.) Petitioners contend that “[w]hen an insured who has suffered a loss covered under a property insurance policy disagrees with the evaluation of the loss by its insurer, the parties may have the value of the loss determined by appraisal under Insurance Code §2071.” (Petition at p. 10.) Insurance Code section 2071 is the standard form of fire insurance policy for California. One provision sets forth the process for an appraisal when the insured and insurer “fail to agree as to the actual cash value or the amount of loss.” Petitioners’ policy with Respondent has a similar appraisal provision. (Meono Decl., Ex. 1 at pp. 14-15, ¶ 9.)

“As used in the Code of Civil Procedure, an agreement providing for an appraisal is included within the concept of agreements to arbitrate.” (Appalachian Insurance Co. v. Rivcom Corp. (1982) 130 Cal.App.3d 818, 824; see also Cheng-Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676, 685 [“California case law recognizes that this appraisal provision is an arbitration agreement.”].) An agreement to conduct an appraisal is therefore subject to the statutory contractual arbitration law. (Louise Gardens of Encino Homeowners’ Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 658.)

When seeking to compel arbitration, the movant must allege the existence of an agreement to arbitrate. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.) The burden then shifts to the opponent to prove the falsity of the agreement. (Ibid.) After the Court determines that an agreement to arbitrate exists, it then considers objections to its enforceability. (Ibid.) The Court must grant a petition to compel arbitration unless the movant has waived the right to compel arbitration or if there are grounds to revoke the arbitration agreement. (Ibid.; Code Civ. Proc., § 1281.2.)

Petitioners argue that Respondent is equitably estopped from refusing to participate in the appraisal because it inspected the home in January 2023, inspected again in July 2023 after substantial work had commenced, denied the claim in September 2023, participated in the appraisal process through June 2024, and sought continuances of the hearing date without withdrawing from the appraisal. (Petition at pp. 14-15.)

Respondent participated in the appraisal process and retained an expert for the May 28, 2024 inspection. (See Yoffie Decl. ¶¶ 5-7.) On the day of the inspection, Respondent’s counsel received an email from the expert stating that when he arrived at the property, he discovered that the dwelling had been demolished. (Yoffie Decl. ¶ 9 & Ex. 11.) The hearing was continued due to the appraisal umpire and Petitioners’ appraiser, not at Respondent’s request. (Yoffie Decl. ¶¶ 10-11.) On June 6, 2024, Respondent’s counsel emailed the appraisal umpire to reject the proposed hearing date because the property was demolished and the expert could not determine the veracity of Petitioners’ damages claims or render an expert opinion on the cost of covered repairs. (Yoffie Decl. ¶ 12 & Ex. 13.) On August 12, 2024, Respondent’s counsel advised the appraisal panel that Respondent denied coverage and was withdrawing from the appraisal. (Yoffie Decl. ¶ 14 & Ex. 22.) Respondent’s withdrawal came after a change in circumstances (Petitioners’ demolition of the property), and its prior participation in the appraisal was not intended to mislead Petitioners about its willingness to engage in an appraisal. (See Opposition at pp. 15-16.)

The Court finds that Respondent is not equitably estopped from refusing an appraisal.

The insurance contract provides that “[i]f you and we fail to agree on the amount of loss, either may request an appraisal of the loss.” (Meono Decl., Ex. 1 at pp. 14-15, ¶ 9.) The parties agree that this is considered an arbitration agreement. (Petition at p. 10; Opposition at p. 12, fn. 2.)

Respondent argues that because it denied coverage in its entirety, “there is no disagreement over the ‘amount of loss,’” so the appraisal provision does not apply. (Opposition at p. 2.) According to Respondent, “the January 10, 2023, wind event did not result in a diminution in value of the Property since Petitioners intended to demolish it.” (Id. at p. 14.)

The denial of coverage was due to an investigation that reflected that Petitioners “already planned to demolish and rebuild the Property at the time the loss occurred and were in the process of executing that plan.” (Berlin Decl., Ex. 21 at p. 10.) Therefore, “there has been no diminution in value of the Property as a result of the January 10, 2023 wind event,” and Petitioners “have not suffered a compensable loss, a separate and distinct basis for denial of [their] claim.” (Ibid.; see Opposition at pp. 13-14)

“‘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.] ‘Matters of statutory construction, contract interpretation and policy coverage are not encompassed within the ambit of a section 2071 appraisal.’ [Citation.]” (Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1094.)

This dispute is one over policy coverage. At this time, the issue is whether Petitioners have a covered loss, not the “amount of loss” governed by the policy’s appraisal provision. Therefore, this is not an appropriate matter for compelling an appraisal.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court