Lanois v. Employers Fire Ins. Co. CA2/1

Filed 1/9/15 Lanois v. Employers Fire Ins. Co. CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
DANIEL ROLAND LANOIS et al., B251403
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BS135774)
v.
EMPLOYERS FIRE INSURANCE
COMPANY,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County. Rafael
A. Ongkeko, Judge. Affirmed.
Gordon & Rees, Matthew C. Elstein and George Soares; Musick, Peeler & Garrett
and Matthew C. Elstein for Defendant and Appellant.
Jacobs & Jacobs and Stanley K. Jacobs for Plaintiffs and Respondents.
_______________________________
Defendant Employers Fire Insurance Company (hereafter Employers) appeals
from a judgment confirming an arbitration award and denying its petition to vacate the
award. We affirm.
BACKGROUND
This arbitration concerns a coverage dispute between Employers and its insured,
plaintiff Daniel Lanois, arising out of a motorcycle accident. On June 4, 2010, Lanois
was driving a motorcycle through an intersection, with plaintiff Keisha Kalfin riding as
his passenger, when he swerved out of the way to avoid an oncoming sport utility vehicle
(SUV) proceeding into his lane at the start of a left turn. The motorcycle struck a metal
telephone box and Lanois and Kalfin flew off of the motorcycle and landed on the ground
in a parking lot, each sustaining serious injuries. The insurer for the SUV driver paid
Lanois and Kalfin each $25,000, the limits of the $50,000 policy.
Lanois and Kalfin (collectively referred to as “plaintiffs”) demanded payment
from Employers under Lanois’s underinsured motorist coverage, which had a policy limit
of $1 million. After plaintiffs filed a petition to compel arbitration, Employers agreed to
arbitrate the dispute. The parties selected the Hon. Patricia L. Collins, retired, of ADR
Services, Inc. as the arbitrator. Prior to the arbitration, the parties agreed Employers’
maximum liability under Lanois’s underinsured motorist coverage was $950,000—
$50,000 less than the $1 million policy limit—because Lanois and Kalfin already had
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received $50,000, collectively, from the SUV driver’s insurer.
The arbitration hearing was held October 16-19, 2012. The arbitrator issued a
signed “Binding Arbitration Award,” dated November 8, 2012. On page 2, the arbitrator
referred to this award as an “Interim Binding Arbitration Award,” stating “Having
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Insurance Code section 11580.2, subdivision (p)(4), provides: “When bodily
injury is caused by one or more motor vehicles, whether insured, underinsured, or
uninsured, the maximum liability of the insurer providing the underinsured motorist
coverage shall not exceed the insured’s underinsured motorist coverage limits, less the
amount paid to the insured by or for any person or organization that may be held legally
liable for the injury.”
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considered the testimony of the witnesses, the documentary and demonstrative evidence
submitted, the reasonable inferences drawn from the evidence and the arguments of
counsel and governing law, the Arbitrator issues the following Interim Binding
Arbitration Award.” In this interim award, the arbitrator stated plaintiffs’ total damages
exceeded the policy limit of $1,000,000. The arbitrator awarded Lanois $687,000 in
damages, and awarded Kalfin $313,000 in damages, for a total of $1,000,000. As
explained above, Employers’ maximum liability under the policy was $950,000.
On or about November 19, 2012, Employers filed with the arbitrator an
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application for correction of the award under Code of Civil Procedure section 1284.
Employers contended the arbitrator exceed her powers by awarding plaintiffs $50,000
more than they were entitled to under the policy. The arbitrator did not rule on
Employers’ application for correction.
On or about December 5, 2012, plaintiffs filed with the arbitrator a motion for
cost-of-proof sanctions based on what they characterized as Employers’ “unreasonable
denial” of their requests for admissions. The arbitrator denied this opposed motion in the
signed “Final Binding Arbitration Award,” dated January 17, 2013.
In the final award, the arbitrator stated plaintiffs’ total damages exceeded the
policy limit of $950,000. The arbitrator awarded Lanois $662,000 in damages, and
awarded Kalfin $288,000 in damages, for a total of $950,000. The arbitrator also stated
Employers must pay each plaintiff interest on his/her damages award “at the legal rate
accruing from November 8, 2012.” The arbitrator further required Employers to pay
plaintiffs “the sanctions previously imposed on September 19, 2012 in the amount of
$2362.50.”
On January 31, 2013, Employers filed in superior court a petition to vacate the
November 8, 2012 Binding Arbitration Award. Employers argued, among other grounds
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Code of Civil Procedure section 1284 provides, in pertinent part: “The
arbitrators, upon written application of a party to the arbitration, may correct the award
upon any of the grounds set forth in subdivisions (a) and (c) of Section 1286.6 not later
than 30 days after service of a signed copy of the award on the applicant.”
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not reasserted on appeal, that the arbitrator exceeded her authority “by issuing an award
in excess of the stipulated limit, then refusing to correct the award within the time limit
set forth by the Code [of Civil Procedure], then issuing a late correction of the award in
the form of a ‘Final Binding Arbitration Award’ in which she arbitrarily reduced
[plaintiff]s’ future general damages [by $50,000], then awarding interest from the date of
the original Binding Arbitration Award.”
On February 4, 2013, plaintiffs filed in superior court a petition to confirm the
January 17, 2013 Final Binding Arbitration Award.
On June 4, 2013, the trial court held oral argument on the petitions and denied
Employers’ petition to vacate the interim arbitration award and granted plaintiffs’ petition
to confirm the final arbitration award. On or about June 18, 2013, Employers filed an ex
parte application seeking clarification or reconsideration of the order confirming the final
arbitration award. Employers argued, in pertinent part, plaintiffs were not entitled to
interest on their damages because (1) “an award of interest above and beyond $950,000
exceeds the arbitrator’s authority by awarding in excess of the policy limits,” and (2)
“interest only begins to accrue when judgment is entered.” After a hearing on June 18,
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2013, the court denied the opposed ex parte application.
On July 9, 2013, the trial court entered judgment confirming the final arbitration
award, awarding Lanois “the sum of $662,000 together with interest at the legal rate
accruing from November 8, 2012 and costs to be determined by the court,” and awarding
Kalfin “the sum of $288,000 together with interest at the legal rate accruing from
November 8, 2012 and costs to be determined by the court.”
DISCUSSION
Employers contend the arbitrator did not have the power to correct or modify the
November 8, 2012 Binding Arbitration Award to add prejudgment interest, and the
January 17, 2013 Final Binding Arbitration Award was untimely. Employers also
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The record on appeal does not include a reporter’s transcript from any of the
hearings held in the trial court or any of the proceedings held before the arbitrator.
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contend the arbitrator did not have the power to award prejudgment interest on top of the
maximum liability of $950,000, because the award could not exceed the policy limit.
Based on these contentions, Employers asserts the trial court should have vacated the
arbitration award under Code of Civil Procedure section 1286.2, subdivision (a)(4),
because the arbitrator “exceeded [her] powers and the award cannot be corrected without
affecting the merits of the decision upon the controversy submitted.” For the reasons set
forth below, we reject Employers’ contentions.
“[T]he Legislature has expressed a ‘strong public policy in favor of arbitration as a
speedy and relatively inexpensive means of dispute resolution.’ [Citations.]
Consequently, courts will ‘“indulge every intendment to give effect to such
proceedings.”’” (Moncharsh v. Heily & Blase (1992) 3 Cal. 4th 1, 9.) We review the trial
court’s ruling on the petitions to confirm and to vacate the arbitration award de novo, but
give “substantial deference [to] the arbitrator’s determination of his or her contractual
authority. [Citations.] All reasonable inferences must be drawn in support of the award.”
(Jones v. Humanscale Corp. (2005) 130 Cal. App. 4th 401, 408.)
Citing Code of Civil Procedure section 1284 (which is quoted in footnote 2
above), Employers asserts the arbitrator only had 30 days from service of the November
8, 2012 Binding Arbitration Award to correct it. Not so. This statutory provision applies
to final arbitration awards, not interim awards like the November 8, 2012 award.
Although the arbitrator expressly referred to the November 8, 2012 award as an
“Interim Binding Arbitration Award” on page 2 of the award, Employers asserts the
November 8, 2012 award was not an interim award because the arbitrator also stated,
“This Award is intended to resolve all issues presented for resolution in this dispute
whether or not expressly addressed herein,” at the conclusion of the award on page 20.
The record makes clear, however, the arbitrator had other matters to resolve before
rendering her final award.
There is evidence in the record establishing that, on the first day of the arbitration
and the last day of the arbitration, plaintiffs’ counsel informed the arbitrator plaintiffs
intended to file a motion for cost-of-proof sanctions against Employers if plaintiffs
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prevailed against Employers on liability. Accordingly, plaintiffs’ counsel requested the
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arbitrator issue an interim award if plaintiffs prevailed. Plaintiffs did prevail and the
arbitrator issued an interim award on November 8, 2012. In accordance with their prior
notice to the arbitrator and Employers, plaintiffs filed a motion for cost-of-proof
sanctions on or about December 5, 2012. There is nothing in the record indicating
Employers objected to the arbitrator deciding plaintiffs’ motion on the ground the
arbitrator already had issued a final arbitration award and no longer had power to decide
additional issues. Instead, Employers opposed the motion on the merits, the arbitrator
denied the motion, and incorporated her ruling on the motion in her January 17, 2013
Final Binding Arbitration Award.
In the final award, the arbitrator reduced plaintiffs’ damages by $25,000 each so as
not to exceed Employers’ maximum liability of $950,000, as stipulated by the parties.
The arbitrator also stated plaintiffs were awarded prejudgment interest from November 8,
2012. Employers has cited no authority indicating the arbitrator was without power to
make these modifications to her interim award and issue a final award, which was the
award subject to confirmation, correction or vacation under Code of Civil Procedure
section 1285.
Turning to Employers’ challenge to the award of prejudgment interest, Employers
argues plaintiffs’ damages plus prejudgment interest could not exceed the policy limit of
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$950,000. Employers’ cites no authority supporting this argument.
As discussed above, under Insurance Code section 11580.2, subdivision (p)(4),
Employers’ “maximum liability” to plaintiffs could not exceed the limits of Lanois’s
underinsured motorist coverage less the amount paid to plaintiffs by the SUV driver’s
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These facts regarding notice of the motion for cost-of-proof sanctions are set
forth in the declaration of plaintiffs’ counsel in support of plaintiffs’ opposition to
Employers’ petition to vacate the arbitration award.
5
On appeal, Employers does not argue the arbitrator lacked the power to award
prejudgment interest under Civil Code section 3287 to the extent the damages award plus
prejudgment interest did not exceed $950,000.
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insurer, or $950,000. Prior to the arbitration, the parties agreed the maximum liability the
arbitrator could award in favor of plaintiffs and against Employers was $950,000. In the
final award, the arbitrator awarded Lanois $662,000 in damages, and awarded Kalfin
$288,000 in damages, for a total of $950,000. The damages do not exceed Employers’
maximum liability under the policy.
In Pilimai v. Farmers Ins. Exchange Co. (2006) 39 Cal. 4th 133, 137, the
California Supreme Court held “the ‘maximum liability’ provision of Insurance Code
section 11580.2, subdivision (p)(4) does not preclude recovery of costs under Code of
Civil Procedure section 998 that, added to the arbitration award, exceed the coverage
limits.” The Court reasoned, “it is not clear that Insurance Code section 11580.2(p)(4)’s
maximum liability provision applies to costs imposed on an insurance company through
its behavior as a litigant, specifically its failure to settle, rather than damages assessed
against it as a liability insurer.” (Id. at p. 145.)
Here, in her final award, the arbitrator determined plaintiffs’ total damages
exceeded the policy limit of $950,000, but awarded plaintiffs $950,000 because
Employers’ maximum liability could not exceed that amount. The arbitrator also
awarded plaintiffs prejudgment interest from November 8, 2012, the date of the interim
award when the arbitrator made its determination Employers was liable to plaintiffs for
the available policy limits. Neither Insurance Code section 11580.2, subdivision (p)(4),
nor any provision in the insurance policy precludes plaintiffs’ recovery of prejudgment
interest because, when added to the liability damages award (which does not exceed the
policy limit), plaintiffs’ total recovery exceeds Employers’ maximum liability under the
policy.
The trial court did not err in denying Employers’ petition to vacate the arbitration
award and granting plaintiffs’ petition to confirm the January 17, 2013 Final Binding
Arbitration Award.
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DISPOSITION
The judgment is affirmed. Respondents are entitled to recover costs on appeal.
NOT TO BE PUBLISHED.
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
JOHNSON, J.
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