Farmers Ins. Exchange v. Ruiz

Decision Date05 May 1967
Citation250 Cal.App.2d 741,59 Cal.Rptr. 13
CourtCalifornia Court of Appeals Court of Appeals
PartiesFARMERS INSURANCE EXCHANGE, a reciprocal or interinsurance exchange, Plaintiff and Respondent, v. John A. RUIZ, Mauro Ruiz, Jess Ruiz, Vita Castro, Defendants and Appellants. Civ. 29700.

Richard de Bro, Los Angeles, for defendants and appellants.

Kenneth H. Wechsler, Los Angeles, for plaintiff and respondent.

HUFSTEDLER, Associate Justice.

This is an appeal from an order granting respondent's motion for a preliminary injunction enjoining appellants from continuing an arbitration filed by appellant John Ruiz, one of the heirs at law of decedent John Ruiz, to recover damages pursuant to an uninsured motorist's endorsement in a policy issued by respondent.

Farmers Insurance Exchange ('Farmers') issued an automobile liability policy to John A. Ruiz containing the uninsured motorist endorsement required by section 11580.2 of the Insurance Code. John Ruiz, the brother of John A. Ruiz, was pushing a stalled vehicle when he was struck and fatally injured by an automobile driven by an uninsured motorist. Appellant John A. Ruiz filed a demand for arbitration with the American Arbitration Association requesting arbitration under the terms of the policy which Farmers issued to John A. Ruiz.

Farmers filed a complaint for declaratory relief and for an injunction to prevent the arbitrators from continuing with the arbitration proceedings until the court decided the action for declaratory relief. Farmers in its complaint for declaratory relief alleged a controversy between itself and the heirs of the decedent over the question whether the decedent was an insured under the policy which it had written in favor of John A. Ruiz. Farmers took the position that the decedent was not an insured within the meaning of the policy because at the time of his injury and death the decedent was not residing in John A. Ruiz's household and was therefore excluded from the policy provision defining the insured to include 'relatives of the named insured who are residents of the same household.' It is undisputed that the automobile which struck and killed the decedent was owned and operated by an uninsured motorist.

An order to show cause why a preliminary injunction should not be granted was issued. Appellants filed points and authorities in opposition to the motion and affidavits from some of the Ruiz heirs stating that the decedent was a resident of John A. Ruiz's household at the time of the accident and at the time of his death. No evidence in addition to the verified complaint and the affidavits was offered at the hearing of the order to show cause. An order was granted enjoining appellants from continuing the arbitration during the pendency of the proceedings upon the declaratory relief complaint.

The first issue presented on the appeal is: Does jurisdiction to decide the question whether the decedent was an insured under the policy reside solely in the court, or is that question referable to arbitration? We hold that the court had exclusive jurisdiction to decide the preliminary question whether the claimant was an insured within the meaning of the policy. 1

The critical clause in the Ruiz policy states: 'In the event the insured and the Company do not agree that the insured is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle under this Part II or Do not agree as to the amount of payment which may be owing hereunder, then, upon written demand of either, the matter or matters upon which the insured and the Company do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association.' (Emphasis added.) The language of the Ruiz policy, excepting the italicized language, is a substantial repetition of the provisions of subsection (e) of section 11580.2 of the Insurance Code, which provides, in pertinent part: '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.'

An insurance clause which repeats the language of subsection (e) of section 11580.2 without material change requires arbitration solely of the issues relating to the liability of the uninsured motorist to the insured, and it excludes therefrom the determination of the amount of money which the insurance company must pay to its insured and likewise excludes the preliminary question whether there is a valid and subsisting agreement to arbitrate. (Commercial Ins. Co. of Newark, N.J. v. Copeland (1967) 248 Cal.App.2d 561, a 56 Cal.Rptr. 794; cf. Aetna Cas. & Surety Co. v. Superior Court (1965) 233 Cal.App.2d 333, 337, 43 Cal.Rptr. 476; Pacific Indemnity Co. v. Superior Court (1966) 246 Cal.App.2d 63 b 54 Cal.Rptr. 470.)

If the claimant is conceded to be an insured within the meaning of the policy and the controversy between the insured and his insurance company concerns the amount payable from the insurance company to the claimant, the italicized words of the Ruiz clause constitute an agreement to submit that controversy to arbitration. (Fisher v. State Farm Mut. Auto Ins. Co. (1966) 243 Cal.App.2d 749 c 52 Cal.Rptr. 721.) The existence of the italicized phrase, construed in Fisher, however, does not render arbitrable the question whether the claimant is an insured. 2 The Ruiz clause does not purport to add anything in this respect to subsection (e) of section 11580.2 of the Insurance Code. The conclusion follows that the trial court was correct in withdrawing from arbitration the preliminary issue of the claimant's status as an insured.

The appellant complains that the record before the trial court was not adequate to warrant the issuance of a preliminary injunction restraining the pending arbitration because Farmers did not establish by competent evidence that the decedent was not a resident of the Ruiz household at the time of his death. The trial court in issuing a preventive preliminary injunction was not called upon to decide the merits of the insurance company's claim that there was no coverage. (Miller and Lux v. Madera Canal and Irr. Co. (1909) 155 Cal. 59, 62--63, 99 P. 502, 22 L.R.A.,N.S., 391; Bo Kay Chan v. Gerdon Land Co. (1951) 103 Cal.App.2d 724, 727, 728, 230 P.2d 1.) The existence of a justiciable controversy concerning the coverage issue and the exclusive jurisdiction of the court to decide it was ascertainable from the face of the pleadings and the exhibits appended thereto. The purpose of the preliminary injunction was to maintain the status quo until the merits of that controversy could be decided. (Cf. Curl v. Pacific Home (1952) 108 Cal.App.2d 655, 661, 239 P.2d 481; Harvey Machine Co., Inc. v. Alvarez (1946) 76 Cal.App.2d 427, 429--430, 173 P.2d 65.) Once the court decided that jurisdiction to adjudicate the coverage issue vested solely in the court, it properly issued a preliminary injunction to prevent submission of that issue to arbitration. (Cf. Pacific Indemnity Co. v. Superior Court 3, supra, 246 Cal.App.2d 63 d 54 Cal.Rptr. 470; Curl v. Pacific Home, supra, 108 Cal.App.2d at 661, 239 P.2d 481.)

The second question presented on appeal is: Did the court err in granting a general, rather than a limited, preliminary injunction? The real basis of appellant's complaint is not that the court enjoined arbitration of the coverage issue, but that the preliminary injunction restrained arbitration in its entirety, including those issues which were clearly arbitrable. The trial court was fully aware of the competing considerations which must be taken into account in framing a preliminary injunction in this situation. If, after a trial on the merits of the coverage issue, it were determined that there was no coverage, an arbitration of the other issues during the interim would be nugatory. On the other hand, if arbitration of the issues relating to liability of the uninsured motorist to the claimant could be delayed for months or even years simply by the insurance company's filing an action to declare that no coverage existed, the benefits which the Legislature envisioned in enacting the uninsured motorist legislation may be illusory. The court asked counsel whether or not there was some way to shape an injunction to prevent the claimant's being 'whipsawed.' Counsel were unable to supply the court with any authority to issue a limited injunction, and the court concluded that it had no power to do so.

Although we are aware of no authority which states expressly that the court may restrain the arbitration of a single issue which is outside the jurisdiction of the arbitrator, we believe that the court does have that power. There is no remedy at law to prevent an arbitrator from deciding an issue outside his jurisdiction. It is true that after an award has been made, an aggrieved party may move to vacate the award on the ground that the arbitrator exceeded his powers, if he can produce a record showing that the issue was decided by the arbitrator over the moving party's timely objection 4 and if he can further demonstrate that 'the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.' (Code Civ.Proc., § 1286.2, subsection (d).) The possibility of overturning an award in its entirety because the arbitrator wrongfully assumed jurisdiction over a single issue is not an attractive prospect for any of the litigants, and it can hardly be described as an adequate legal remedy to prevent an arbitrator's assertion of jurisdiction over an issue...

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