American Home Assurance Co. v. Benowitz

• Decision Date: 20 September 1991
• Docket Number: Nos. B049723,B051996,s. B049723
• Citation: 285 Cal.Rptr. 626,234 Cal.App.3d 192
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN HOME ASSURANCE COMPANY, Plaintiff and Appellant, v. Lynn BENOWITZ, Defendant and Respondent.

Page 626

285 Cal.Rptr. 626

234 Cal.App.3d 192

AMERICAN HOME ASSURANCE COMPANY, Plaintiff and Appellant, v. Lynn BENOWITZ, Defendant and Respondent.

Nos. B049723, B051996.

Court of Appeal, Second District, Division 4, California.

Sept. 20, 1991.

Henderson & Wohlgemuth, Anthony B. Nixon and Gerald B. Velasco, Ventura, for plaintiff and appellant.

Parsons & Anderson and Steven L. Anderson, Los Angeles, for defendant and respondent.

EPSTEIN, Associate Justice.

The respondent, Lynn Benowitz, thought that her automobile insurer had unreasonably delayed in acting on her demand to arbitrate a dispute under the uninsured motorist provision of her policy. Through her attorney, she selected her own arbitrator and proceeded to obtain an award at a scheduled hearing. We conclude that the insurer committed no breach giving rise to a waiver of its rights under the uninsured motorist provision of the policy, and that, even if it had, Ms. Benowitz' remedy was to compel arbitration. She was not entitled to unilaterally select an arbitrator and procure an award. The trial court erred in denying the insurer's motion to vacate the award, in granting Ms. Benowitz' motion to confirm the award, and in issuing judgment on the confirmed award. These errors require reversal. ¹

FACTUAL AND PROCEDURAL SUMMARY

Lynn Benowitz entered into an automobile insurance agreement with American Home Assurance Company on October 18, 1988. (We will generally refer to her as "insured," and to the issuing company as "insurer.") She was the victim of a hit-and-run accident in Beverly Hills on February 8, 1989, a date within the policy period. Some two weeks later, she notified an agent of the insurer of the accident, and forwarded information about her injuries and damages to her vehicle. On July 17, 1989, after she had completed a course of treatment for her injuries, she sent the insurer a demand to settle under the uninsured motorist provision of her policy, for $25,000. A representative of the insurer acknowledged this demand on August 11, 1989, and informed the insured that 30 days were needed for a response.

Apparently the insurer made a $2,146 offer to settle within that time, since the insured wrote the insurer on September 12, 1989, acknowledging the offer, rejecting it, and requesting a copy of the insurance policy. The insurer responded three days later, on September 15, 1989, that the policy was being assembled and would be sent to the insured.

The insured repeated her request for a copy of the policy in a facsimile communication of September 19, 1989. That same message repeated her earlier rejection of the $2,146 offer, and demanded arbitration of the uninsured motorist claim.

The insurer then sent the policy and increased its offer. In an October 5, 1989 transmission, it enclosed a copy of the policy and reiterated an earlier offer to settle for $14,000, of which $3,854 was offset for medical payments already received by the insured, and $10,146 was new money for her. That communication apparently crossed in the mail with the first letter from Steven L. Anderson, who wrote the insurer as attorney for Ms. Benowitz. This letter, dated October 3, 1989, notified the insurer of his representation of the insured and again rejected the $2,146 offer.

On November 21, 1989, some 47 days after the policy had been sent to Ms. Benowitz, Mr. Anderson sent a letter to the insurer that is central to the litigation. He acknowledged that the insurer had substantially increased its offer, but said that the new amount was still insufficient. He then said that he had "gone ahead and selected a neutral arbitrator," an attorney named Richard Voorhies, and that he had scheduled an arbitration in Mr. Voorhies' office for December 5, 1989. The insurer objected in writing to this procedure, asserting that the arbitrator had not been selected in accordance with the arbitration provision of the policy. This letter, of December 1, 1989, and a second, similar letter of December 4, 1989, also informed Mr. Anderson that the insurer would not appear at the scheduled hearing, lest its appearance and participation be considered a waiver of its objection to the procedure. (See Ray Wilson Co. v. Anaheim Memorial Hospital Assn. (1985) 166 Cal.App.3d 1081, 213 Cal.Rptr. 62; Kemper v. Schardt (1983) 143 Cal.App.3d 557, 560, 192 Cal.Rptr. 46.)

The arbitration hearing was held as scheduled before Mr. Voorhies on December 5, 1989; the insurer was not represented. The following day, December 6, 1989, Mr. Voorhies issued an award in favor of Ms. Benowitz and against the insurer, for $44,789. The insurer received a copy of the award on December 14, 1989, and 15 days later filed a petition in the superior court to vacate the award.

The insured filed an opposition to the petition, in which she asked for the affirmative relief of a confirmation of the award and for judgment. After oral argument and a submission, the court issued its order denying the petition on February 5, 1990. The minute order gives the following explanation: "Petitioner completely ignored responding party's request for a copy of her policy and demand for arbitration. Not until almost 3 months later, when informed a hearing would be held, did petitioner respond by refusing to participate in any arbitration scheduled by responding party. Petitioner's inexcusable delay constitutes a waiver."

After that, the insurer moved the court to reconsider its ruling; the motion was denied. Ms. Benowitz submitted a proposed judgment, confirming the $44,789 award to her, together with interest; judgment was signed and entered as requested, on March 19, 1990. The insurer filed timely appeals from the order denying its petition to vacate and from the judgment. As we have noted, these appeals have been consolidated. Because we conclude that the award was obtained without legal authority and cannot be justified on a doctrine of waiver, we are compelled to reverse the order and judgment, with directions that the petition to vacate be granted.

DISCUSSION

Since 1961, California has required that all automobile bodily injury insurance policies include an uninsured motorist provision, unless the parties agree to delete this coverage by a specific written provision. This comprehensive statute is found in section 11580.2 of the Insurance Code. Subdivision (f) of the statute provides for resolution of disputes concerning entitlement to damages and the amount of damages. It requires that policies provide that such determinations "shall be made by agreement between the insured and the insurer or, in the event of disagreement, by arbitration. The arbitration shall be conducted by a single neutral arbitrator."

The year 1961 saw the enactment of another comprehensive statute, the Arbitration Act (Code Civ.Proc., § 1280 et seq.). ² Supplanting arbitration statutes dating back to 1927, the Arbitration Act was drafted by the California Law Revision Commission to provide a comprehensive, all-inclusive statutory scheme applicable to all written agreements to arbitrate disputes. (Crofoot v. Blair Holdings Corp. (1953) 119 Cal.App.2d 156, 182, 260 P.2d 156, disapproved on other grounds in Posner v. Grunwald-Marx, Inc. (1961) 56 Cal.2d 169, 183, 14 Cal.Rptr. 297, 363 P.2d 313; Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 479, 121 Cal.Rptr. 477, 535 P.2d 341.) It "provides the sole statutory recognition concerning the appointment of arbitrators." (Atlas Plastering, Inc. v. Superior Court (1977) 72 Cal.App.3d 63, 69, 140 Cal.Rptr. 59.)

The Arbitration Act recognizes that arbitration agreements are divided into two broad categories with respect to selection of the arbitrator or arbitrators: those that are self-enforcing, and those that are not. Section 1281.6 states that if the agreement provides a method of appointing an arbitrator, "such method shall be followed." If it does not, the parties may agree upon a method. But failing a contractual provision or later agreement of the parties, the statute provides the method. Any party entitled to arbitrate may petition the superior court to appoint an arbitrator. When that is done (and the court ascertains that the petitioning party is entitled to arbitration), "the court shall nominate five persons from lists of persons supplied jointly by the parties to the arbitration" and, if the parties do not agree on a selection from that list within five days, the court shall select an arbitrator from the list of five. (§ 1281.6) (See Titan Enterprises, Inc. v. Armo Construction, Inc. (1973) 32 Cal.App.3d 828, 830, 108 Cal.Rptr. 456 [self-executing provision is one whose provisions spell out or incorporate method for selecting arbitrator without necessity of resort to judicial process]; Gunderson v. Superior Court (1975) 46 Cal.App.3d 138, 143, 120 Cal.Rptr. 35 [unless provision is self-executing, method of enforcement is by initiation of proceedings under statute]; Brink v. Allegro Builders, Inc. (1962) 58 Cal.2d 577, 580, 25 Cal.Rptr. 556, 375 P.2d 436 ["[t]he statutory procedure to compel arbitration by court order was designed to afford a remedy where the parties have not provided for the contingency that has arisen or where the contractual scheme has failed"].)

The uninsured motorist statute provides for a non-self-executing type of arbitration. As we have seen, it requires a resolution by a "single neutral arbitrator" if the parties do not resolve their dispute. "Neutral arbitrator" is a term of art, defined in section 1280, subdivision (d) of the Arbitration Act. It is an arbitrator selected jointly by the parties or by arbitrators selected by each party, or "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 them." (§ 1280, subd. (d)(2).)

Where a statute such as section 11580.2 of the Insurance Code requires a contract to provide for certain matters, "the statute becomes a part...