Unetco Industries Exchange v. Homestead Ins. Co.

• Decision Date: 30 September 1997
• Docket Number: No. B105818,B105818
• Citation: 67 Cal.Rptr.2d 784,57 Cal.App.4th 1459
• Parties: , 97 Cal. Daily Op. Serv. 7769, 97 Daily Journal D.A.R. 12,466 UNETCO INDUSTRIES EXCHANGE, Plaintiff and Respondent, v. HOMESTEAD INSURANCE COMPANY, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

Page 784

67 Cal.Rptr.2d 784

57 Cal.App.4th 1459, 97 Cal. Daily Op. Serv. 7769,

97 Daily Journal D.A.R. 12,466

UNETCO INDUSTRIES EXCHANGE, Plaintiff and Respondent, v. HOMESTEAD INSURANCE COMPANY, Defendant and Appellant.

No. B105818.

Court of Appeal, Second District, Division 1, California.

Sept. 30, 1997.

As Modified Oct. 1, 1997.

Crosby, Heafey, Roach & May, James C. Martin, Stacey L. Meltzer, Los Angeles, Wright, Robinson, Osthimer & Tatum and Stephen W. Cusick, Melbourne, for Defendant and Appellant.

Fletcher & Adair, John R. Fletcher, Santa Monica, and James R. Coelho, Santa Monica, for Plaintiff and Respondent.

SPENCER, Presiding Justice.

INTRODUCTION

Appellant Homestead Insurance Company moved to compel an appraisal of two properties for the purpose of determining replacement cost value and to stay trial proceedings until completion of the process. The court granted the motion "only as to the amount of loss as stated in the policy and not the amount of loss covered by the insurance." Appellant appeals from the denial of its motion as to replacement cost. We modify the order to include an appraisal of replacement cost and affirm as modified.

STATEMENT OF FACTS

Respondent Unetco Industries (Unetco) owned two adjacent mansions in Beverly Hills. In August 1993, Unetco obtained earthquake and flood insurance on the mansions from appellant Homestead Insurance Company (Homestead). The mansions sustained significant damage in the January 17, 1994 earthquake, during the Homestead policy coverage period.

The policy provided $6 million in coverage. For earthquake damage, there was a deductible of 10 percent "of the total values, as defined in the valuation clause(s)." The valuation clause provides Homestead "shall not be liable for more than the actual cash value of the property at the time any loss or damage occurs...."

The policy contained an appraisal clause, providing in pertinent part: "If the insured and the company fail to agree as to the amount of loss, each shall, on the written demand of either, made within sixty (60) days after receipt of proof of loss by the company, select a competent and disinterested appraiser, and the appraisal shall be made at a An endorsement to the insurance policy provides that the term "replacement cost (without deduction for depreciation)" shall be substituted for the term "actual cash value," wherever the latter term is used in the policy. Homestead's "liability for loss on a replacement cost basis" was limited to the smallest of the following: "A. The amount of the policy applicable to the damaged or destroyed property; [p] B. The replacement cost of the property or any part thereof identical with such property on the same premises and intended for the same occupancy and use; or [p] C. The amount actually and necessarily expended in repairing or replacing said property or any part thereof."

reasonable time and place. The appraisers shall first select a competent and disinterested umpire, and failing for fifteen (15) days to agree upon such umpire, then on the request of the insured or the company, such umpire shall be selected by a judge or a court of record in the state in which such appraisal is pending. The appraisers shall then appraise the loss, stating separately the actual cash value at the time of loss and the amount of loss, and failing to agree shall submit their differences to the umpire. An award in writing of any two shall determine the amount of loss...."

Unetco tendered its loss to Homestead on January 20, 1994 and was instructed by Homestead to solicit bids to repair the earthquake damage. Unetco obtained three bids estimating the cost of repair: $948,000, $1,175,100 and $1,890,334. Unetco also obtained three appraisals of the replacement cost of the properties. These were $4,775,000, $4,861,860 and $4,550,000.

Homestead rejected Unetco's repair cost bids and obtained its own repair cost estimates. On April 11, 1994, Kenco Construction Inc. submitted a repair cost estimate of $977,234.79. On June 9, it revised its estimate to $465,434.79. On November 29, it revised its estimate again, to $1,044,591.07.

In December 1994, Unetco submitted a sworn statement in proof of loss. In the statement, it listed the cash value of the properties at time of loss as $4,775,000 and the amount claimed under the policy as $1,300,000.

Also in December 1994, Unetco's attorney wrote to Homestead's adjusters challenging the appraisal of the replacement cost of the properties by Homestead's appraiser, Craig Chatfelter, as unreasonably high. He had appraised the replacement cost as $9,721,000. The significance of replacement cost was the parties' interpretation of the policy as setting the deductible at 10 percent of the replacement cost of the insured properties. The attorney demanded an appraisal pursuant to the appraisal clause of the policy. He also suggested Homestead's reliance on Chatfelter's appraisal and refusal to pay constituted bad faith under Insurance Code section 790.03, subdivision (h).

Homestead's attorney wrote back in January 1995, noting it appeared the parties "have not been able to agree as to the value of the insured policy for purposes of assessing a deductible under the policy." He stated that Homestead was rejecting Unetco's sworn statement in proof of loss, disagreeing with the figures contained therein. He enclosed a supplemental sworn statement in proof of loss to be submitted, a check in the amount of $57,442.72, representing the undisputed amount owed by Homestead to Unetco, and a partial release and subrogation receipt to be completed. The attorney also invoked the appraisal provision of the insurance policy, nominating as Homestead's appraiser Robert M. Ellis (Ellis) of Construction Technology and Data Corporation. He listed as the issues to be involved in the appraisal the cost to repair the earthquake damage to the properties and the "total replacement cost value of the two properties for purposes of the deductible under the policy." However, as to the latter, he believed it did not "technically fall under the ambit of the appraisal clause, but it is necessary in order to properly resolve the loss." He suggested the parties "enter into an appropriate stipulation in this regard" in order to resolve the matter.

Believing the parties were at an impasse, Unetco filed suit against Homestead in February 1995. Unetco alleged breach of contract, breach of the covenant of good faith In February 1996, Unetco's attorney wrote to Homestead's attorney regarding appraisal. He indicated Unetco's appraiser, Ron Green, had contacted Ellis in an effort to begin the appraisal process. However, the appraisers needed further instruction as to the scope of the appraisal. Unetco's attorney believed "[t]he only task for the appraisers in the appraisal process is to determine the replacement cost value of the subject properties."

and fair dealing, unfair business practices and fraud.

The attorneys met with the appraisers in March 1996 and agreed to reduce to writing the issue to be determined by the appraisers. They had agreed the issue was to be the replacement cost of the properties.

Unetco's attorney wrote to Homestead's attorney in April 1996 regarding Homestead's proposed instructions for the appraisal procedure. He stated that on further examination of the policy, he had concluded that Homestead was not entitled to appraisal of the replacement cost of the properties, but only of the amount of loss.

In early June, the attorneys for the parties spoke, and Homestead's attorney indicated he intended to move for an order compelling appraisal. Unetco's attorney later wrote that this was unnecessary, in that Unetco was interested in completing an appraisal. However, it would reserve its right to challenge Homestead's right to appraisal, in part based upon its position that the policy did not provide a right to appraisal of replacement cost. The attorney also noted Unetco had submitted to Homestead documentation of the amounts expended to repair the properties. Unetco was still waiting to hear whether Homestead would contest these figures.

Homestead's attorney wrote back, indicating that he would be moving for the order to compel appraisal. He also complained that although Unetco had agreed to allow Homestead's appraiser, Ellis, to inspect the properties, Unetco revoked its agreement when it learned the inspection was to be performed by two of Ellis's employees rather than Ellis himself. He did not believe the appraiser should be precluded from relying on the work of his employees in appraising the property. He also questioned why Unetco had paid more for repairs than cost of repairs estimated in November 1994, based upon which Homestead had made payment to Unetco.

CONTENTION

Appellant contends the determination of replacement cost falls squarely within the appraisal provision and the parties' dispute over that issue is subject to appraisal as a matter of law. We agree in part.

DISCUSSION

The issue presented to this court is whether the trial court correctly interpreted the language of the parties' insurance contract. In general, an insurance policy is interpreted in the same manner as any other contract. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545; see, e.g., Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.) An insurance policy should be interpreted so as to give effect to the mutual intention of the parties. (Civ.Code, § 1636; Waller, supra, at p. 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.) This intention should be inferred, if possible, from the language of the policy. (Civ.Code, § 1639; Waller, supra, at p. 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.) In interpreting the language of an insurance policy, the words used should be given their plain, ordinary meaning unless the policy clearly indicates the contrary. (Civ.Code, § 1644; Waller, supra,...