Lambert v. Carneghi

• Decision Date: 11 January 2008
• Docket Number: No. A113388.,A113388.
• Citation: 70 Cal.Rptr.3d 626,158 Cal.App.4th 1120
• Court: California Court of Appeals Court of Appeals
• Parties: Winston LAMBERT et al., Plaintiffs and Appellants, v. Chris CARNEGHI et al., Defendants and Respondents.

70 Cal.Rptr.3d 626

158 Cal.App.4th 1120

Winston LAMBERT et al., Plaintiffs and Appellants, v. Chris CARNEGHI et al., Defendants and Respondents.

No. A113388.

Court of Appeal, First District, Division 4.

January 11, 2008.

Moody & Hill, E. Craig Moody, San Francisco, for Appellants.

Archer Norris, Jon P. Tonsing, W. Eric Blumhardt, Walnut Creek, Allen & Bender, APC, Michael B. Allen, San Mateo, Jonathan D. Bishop; Lewis Brisbois Bisgaard & Smith LLP, Michael K. Johnson, San Francisco, for Defendants and Respondents.

SEPULVEDA, J.

Appellants Winston and Elaine Lambert sued respondents Chris Carneghi and Robert Dailey for negligence over their alleged failure to adequately advance their position in a fire insurance appraisal proceeding pursuant to Insurance Code section 2071 (section 2071). The trial court sustained respondents' demurrers, and appellants appealed from the subsequent judgments. We conclude that an appraisal proceeding pursuant to section 2071 is an arbitration, and that respondent Carneghi was immune from suit over his role as an appraiser., However, we find that the litigation privilege (Civ.Code, § 47, subd. (b)) does not protect respondent Dailey from suit over his role as an expert hired by appellants. We therefore affirm the trial court's order sustaining respondent Carneghi's demurrer, but reverse the trial court's order sustaining Dailey's demurrer.

I.

Factual And Procedural

Background¹

"The appeal in this case is from a judgment of dismissal entered after the sustaining of a general demurrer. Accordingly, in setting forth the relevant facts for purposes of our review, we are guided by the familiar rules applicable in this setting. 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions, or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed. [Citation.]' [Citation.]" (Moore v. Conliffe (1994) 7 Cal.4th 634, 638, 29 Cal. Rptr.2d 152, 871 P.2d 204.) We cannot, and do not, consider the declaration of respondent Dailey that was submitted to the trial court in connection with his demurrer, because the limited role of the demurrer is to test the legal sufficiency of the complaint. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994, 11 Cal.Rptr .3d 45.)

Appellants owned a home in Los Altos Hills that was totally destroyed by an accidental fire in March 1995. The residence was insured by a policy issued by Fire Insurance Exchange (FIE), which determined that the policy fully covered the fire damage. Appellants' policy provided "guaranteed replacement cost coverage," as well as a "`building ordinance or law coverage' endorsement, which provided that FIE would also pay the full replacement cost to replace or repair the Lamberts' residence in conformity with applicable laws, processes and regulations respecting the premises." (Italics omitted.) FIE hired two appraisers, and provided appellants with checks based on the appraisers' reports. Appellants accepted the checks with the understanding that they represented a deposit until a determination of the full replacement cost of their residence.

It took approximately four years for appellants to obtain the necessary permits to replace their home. During this time, appellants incurred "a very substantial amount of rent and other `soft costs' in architectural, legal, surveying, engineering consulting fees, town fees and interest expenses, etc." FIE and appellants were unable to agree on the replacement cost value to rebuild appellants' entire home. Appellants therefore invoked their right to appraisal in accordance with the terms of their insurance policy.

Appellants did not attach a copy of their FIE insurance policy to their complaint; however, the parties agree that FIE was required under California's Insurance Code to include the following provision in its fire policy regarding appraisals:² "In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record in the state in which the property covered is located. Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, `informal' means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall *be paid by the parties equally." (Italics omitted.) (Ins.Code, §§ 2071, 2070.)

Appellants hired attorneys to represent them in the appraisal process. One of the attorneys hired respondent Dailey as an expert "to define, describe and estimate the replacement cost" of appellants' home for the appraisal process. (Original italics.) Appellants also hired respondent Carneghi as their appraiser, "to provide appraisal services in connection with the appraisal at issue, essentially to determine replacement cost and to be their advocate in the appraisal process and to make sure those relevant to the appraisal understood the meaning and application of the term replacement cost and to convince those involved in the appraisal of the correctness of his valuation by supporting it with facts and logic." (Original italics.)

Appellants' attorneys selected a retired judge who had never conducted a replacement cost appraisal as an umpire. According to appellants, the umpire "demonstrated a fundamental misunderstanding" of replacement costs at the beginning of the hearing on the appraisal. According to appellants' complaint, none of the people hired by appellants changed, or even adequately tried to change, the umpire's understanding, even though they had been hired to do so. They likewise failed throughout the appraisal hearing to clarify the meaning of the term "replacement cost." Because the people who appellants hired failed to adequately define the correct standard of replacement cost for the appraisal, appellants were not awarded proper replacement costs. Appellants allege they were damaged by at least $1.8 million.

Appellants sued respondents Carneghi and Dailey in connection with the allegedly flawed appraisal process.³ As amended, their complaint alleged a single cause of action for negligence against respondents. Respondents both demurred to the complaint. The trial court sustained both demurrers without leave to amend, and judgments were entered for respondents.⁴ This timely appeal followed.

II. Discussion

A. Standard of Review.

Our standard of review is well established. "'When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff" (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171, quoting Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)

B. No Error To Sustain Carneghi's Demurrer Without Leave to Amend.

1. Appraisal procedure is an arbitration.

In arguing that the trial court should sustain his demurrer without leave to amend, Carneghi argued below that the appraisal process mandated by the Insurance Code and described in appellant's complaint constituted an arbitration, and that he was entitled to arbitral immunity because his role as an appraiser was analogous to that of an arbitrator. In their opposition, appellants essentially conceded that the appraisal process in this case was a form of arbitration, referring to Carneghi as "a party appraiser, or arbitrator." Appellants argued that because. Carneghi was alleged to have played a role as a party-appointed advocate, he was not subject to arbitral immunity. The trial court stated at the hearing on the demurrer that Carneghi had prevailed, but left open the question whether it would grant appellants leave to amend. The court ultimately sustained the demurrer without leave to amend.

Appellants' opening brief to this court raises a single argument, not raised below, that the appraisal process set forth in section 2071 is not an "arbitration." Having failed to raise this issue below, they have arguably waived it. (People ex rel. Dept. of Transportation v. Superior Court (2003) 105 Cal.App.4th 39, 46, 129 Cal.Rptr.2d 60 [as a general rule, issues not raised in trial court cannot be raised for first time on appeal].)

Even assuming the argument was not waived, it clearly lacks merit. It is well settled that "[a]n agreement to conduct an appraisal contained in a policy of insurance constitutes an `agreement' within the meaning of [Code of Civil Procedure] section 1280, subdivision (a), and therefore is considered to be an arbitration agreement subject to the statutory contractual arbitration...