Kathryn Tornai v. CSAA Insurance Exchange

Petitions or motions to compel arbitration are governed by Code of Civil Procedure section 1281.2, which states: "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) [t]he right to compel arbitration has been waived by the petitioner; or [¶] (b) [g]rounds exist for the recission of the agreement.

"The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense" (Engalla v. Permanente Medical Group. Inc (1997) 15 Ca1.4th 951, 972 [64 Cal. Rptr. 2d 843, 938 P 2d 903] (Engalla).)

"n ruling on a petition to compel, the court must determine whether the parties entered into an enforceable agreement to arbitrate that reaches the dispute in question, construing the agreement to the limited extent necessary to make this determination." (California Correctional Peace Officers Assn. v. State of California (2006) 142 Cal App.4th 198, 204-205 [47 Cal. Rptr 3d 717] (California Correctional Peace Officers).) If such an agreement exists, the court must ordinarily order the parties to arbitration. (Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Ca1.4th 19, 26 158 Cal Rptr. 3d 434. 157 P.3d 10291, citing Code Civ. Proc.. § 1281,2.)

A relevant principle governing the threshold issue of arbitrability is that "'in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims.- (California Teamsters Public, Prof. etc. Union v. County of Solano (1991) 233 Cal.App.3d 800, 803 [284 Cal. Rptr. 6951 (California Teamsters Public), quoting AT&T Technologies v Communications Workers (1986) 475 U.S. 643, 649 [89 L. Ed. 2d 648. 106 S. Ct. 1415]; see California Correctional Peace Officers, supra, 142 Cal.App.4th at p. 205 ["Section 1281.2 [of the Code of Civil Procedure] expressly forbids the court from reaching the merits of the parties' dispute. instructing that 'f the court determines that a written agreement to arbitrate a controversy exists, an order to arbitrate such controversy may not be refused on the ground that the petitioner's contentions lack substantive merit'"].) Another principle is that "where the agreement contains an arbitration clause, a presumption of arbitrability exists, and doubts should be resolved in favor of arbitration." (California Teamsters Public, supra, 233 Cal.App.3d at pp. 803-804; accord, Engalla, supra, 15 Ca1.4th at pp. 971-972; California Correctional Peace Officers, supra. 142 Cal.App.4th at p. 205.)

"There is no uniform standard of review for evaluating an order denying a motion to compel arbitration." (Robertson v Health Net of California, Inc (2005) 132 Cal.App.4th 1419. 1425 [34 Cal. Rptr 3d 5471.) When the court's order is based on a decision of law, we employ a de novo standard of review. In this case, "the court's order denying a motion to compel arbitration is based on the court's finding that petitioner failed to carry its burden of proof." (Fabian v Renovate America. Inc. (2019) 42 Cal.App.5th 1062, 1066 [255 Cal. Rptr 3d 695].) "[T]he question for the reviewing court is whether that finding [was] erroneous as a matter of law." (Ibid; accord, Trinity v. Life Ins. Co of North America (2022) 78 Cal.App.5th 1111, 1121 [293 Cal Rptr. 3d 8991.) Also, while waiver is generally a question of fact, when, as here, the relevant facts are undisputed, the issue of waiver may be reviewed de novo. (Bower v. Inter-Con Security Systems. Inc. (2014) 232 Cal.App 4th 1035. 1043 [181 Cal Rptr. 3d 729], citing Saint Agnes Medical Center v PacifiCare of California (2003) 31 (Cal.4th 1187. 1196 [8 Cal Rptr. 3d 517, 82 P 3d 727].)

Section 11580.2 requires insurers to provide coverage for bodily injury or wrongful death caused by uninsured or underinsured motorists. (§ 11580.2; Bouton v USAA Casualty Ins Co. (2008) 43 Cal. 4th 1190, 1193 [78 Cal. Rptr 3d 519, 186 P. 3d 1] (Bouton).) Subdivision (f) of section 11580.2 requires language in an automobile policy that provides for arbitration of disputes: "The policy or an endorsement added thereto shall provide that the determination as to whether the insured shall be legally entitled to recover damages, and if so entitled, the amount thereof. shall be made by agreement between the insured and the insurer or, in the event of disagreement, by arbitration. . ."

As our Supreme Court explained, "section 11580.2. subdivision (f) requires the parties to arbitrate the narrow issues of whether the insured is entitled to recover damages from the uninsured or underinsured motorist, and if so, the amount of those damages." (Bouton, supra, 43 Cal 4th at p. 1199, citing Freeman v State Farm Mut. Auto. Ins. Co. (1975) 14 Cal 3d 473, 480 [121 Cal. Rptr. 477, 535 P 2d 341].) As such, "an insurer's contractual right to arbitrate the value of a UIM claim does not prevent an insured from filing suit for bad faith. . . (Mclsaac supra, 64 Cal. App 5th at p. 423.) Put slightly differently, "if the insured files a lawsuit for 'bad faith' before resolving the UM/UIM claim, the UM/UIM claim is still subject to arbitration, even if the 'bad faith' action is not subject to arbitration." (Haning et al., Cal. Practice Guide: Personal Injury (The Rutter Group 2023) 7:293.5e, citing McIsaac.)

In this case, in accordance with section 11580.2, subdivision (f), the policy provides, in relevant part "Determination whether an insured person is legally entitled to recover damages or the amount of damages shall be made by agreement between the insured person and us. If no agreement is reached, the decision will be made by arbitration." (Boldface omitted.) Plaintiff did not dispute the validity of this provision.

Nor was there a dispute over the interpretation of the arbitration provision of the policy or section 11580.2, subdivision (f). Both the policy and statutory language quoted above make clear that a disagreement over entitlement to UIM damages, or the amount of damages, must exist between an insurer and insured before arbitration becomes the required means of resolution (,S 11580.2. subd. (f).)

The parties, however. took different positions as to whether a disagreement over the amount of UIM damages owed to plaintiff had arisen.

In its motion, defendant asserted that it "has disputed the amount that Plaintiff claimed under the policy and therefore the dispute falls squarely within the arbitration provision of [t]he Auto Policy."

In her opposition, plaintiff claimed she was "undisputedly owed" $30,451.98, the amount of medical bills and expenses which she had incurred as of August 2022 and for which she presented documentation. According to plaintiff, "arbitration cannot be compelled as to funds that are undisputedly owed." Plaintiff acknowledged, however, that $244,548.02 (the difference between the remaining policy limits of $275,000 and the $30,451.98) was "remaining in dispute "

In its reply, defendant refuted plaintiff's claim that she was "'undisputedly owed- at least $30,451.98, explaining that it had requested from plaintiff, but was not provided. documentation from Medi-Cal, of which plaintiff was a beneficiary. As such, defendant asserted that plaintiff's refusal to provide documentation prevented it from assessing the nature and extent of the damages claims.

The above indicates that the parties plainly failed to reach an agreement as to the amount of damages owed, thereby triggering the requirements of section 11580.2, subdivision (f) and the terms of the policy for arbitration of that issue. This fact was not negated by plaintiff's contention that she was "'undisputedly owed- at least $30.451.98. By "'undisputedly,- plaintiff apparently meant not that the parties in fact failed to reach an agreement over the amount of damages owed. but rather that defendant could not have reasonably disagreed—i.e., its disagreement was in bad faith. However, regardless of what caused their failure to reach an agreement over the $30,451.98, defendant and plaintiff clearly did not reach an agreement as to that amount. As asserted in its reply papers below, defendant was unable to evaluate that amount because plaintiff failed to provide documentation from Medi-Cal. But even assuming the parties did agree that plaintiff was at least owed $30,451.98, she claimed she was also entitled to the remaining, available policy limits in the amount of $244,548.02, which she expressly acknowledged "remain[ed] in dispute."

In sum. because the parties disagreed over the amount of UIM damages owed to plaintiff, defendant was entitled under section 11580.2. subdivision (f) and the terms of the policy to arbitrate the issue of UIM damages. Accordingly, the trial court erred in denying defendant's motion to compel arbitration.