Doan v. State Farm General Insurance
195 Cal. App. 4th 1082
| Cal. Ct. App. | 2011Background
- Doan and others seek to recover under fire insurance policies alleging breach of contract, breach of the implied covenant, UCL, and CLRA based on depreciation methods used by State Farm.
- Policies require payment of actual cash value and appraisal for disputed loss amounts under Insurance Code §2071; Doan challenges depreciation practices as violating §2051 and its regulations.
- Doan’s fire loss (June 2006) destroyed his home; he submitted a claim using an itemized depreciation calculation, leading to a settlement offer well below his computed actual cash value and without explanation for depreciation increases.
- State Farm did not inspect items or verify Doan’s depreciation; State Farm refused to reopen the claim or adjust depreciation methods; Doan did not demand an appraisal initially, believing appraisers cannot decide §2051 violations.
- Trial court sustained demurrers to the first four causes of action for failure to plead appraisal compliance; later amended complaint added declaratory relief; court again sustained demurrer. The appellate court reverses, holding appraisal is not exclusive and declaratory relief may proceed, with stay of appraisal possible while interpreting non-arbitrable issues.
- Court directs remand for new order overruling demurrer as to the first four causes of action and for consideration of declaratory relief; fifth claim (CLRA) affirmed as abandoned.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is §2071’s appraisal remedy exclusive? | Doan argues declaratory relief independent of appraisal. | State Farm argues appraisal is mandatory before other relief. | No; appraisal is not exclusive; declaratory relief may proceed. |
| May Doan seek declaratory relief to interpret §2051 and depreciation regulations before appraisal? | Doan seeks court interpretation of depreciation under §2051. | State Farm contends appraisal must precede interpretation. | Yes; declaratory relief is available prior to appraisal. |
| Can appraisal be stayed pending resolution of interpretation issues? | Staying appraisal will conserve judicial resources. | Arbitration should proceed unless issues outside appraisal arise. | Yes; court may stay appraisal under CCP §1281.2(c) to resolve nonarbitrable issues. |
| Do the Kirkwood and Community Assisting lines of authority support bifurcation of issues? | Kirkwood supports deferring appraisal for interpretation issues. | Community Assisting supports appraisal for claims, may bar declaratory relief. | Kirkwood controls; declaratory relief permissible and stay of appraisal appropriate. |
| Are the first four causes of action proper without mandatory appraisal? | Claims depend on statutory/contract interpretation, not merely loss amount. | Claims rely on amount of loss, thus appraisal required. | Appraisal not a prerequisite to claims; viable to proceed with declaratory relief. |
Key Cases Cited
- Kirkwood v. California State Automobile Ass'n Inter-Ins. Bureau, 193 Cal.App.4th 49 (2011) (declaratory relief available; stay of appraisal justified to resolve interpretation issues; appraisal limited to loss amount)
- Community Assisting, supra, 92 Cal.App.4th 886 (2001) (appraisal safeguards; cannot circumvent statutory procedure; distinguishes cases with unlawful practice claims)
- In re Claudia E., 163 Cal.App.4th 627 (2008) (declaratory relief proper to resolve disputes; not precluded by appraisal framework)
- Cronus Investments, Inc. v. Concierge Services, 35 Cal.4th 376 (2005) (arb. stay discretion; sequencing of nonarbitrable issues with arbitration)
- McCall v. PacifiCare of Cal., Inc., 25 Cal.4th 412 (2001) (review standards on demurrers; de novo for statutory interpretation)
- Warren v. Kaiser Foundation Health Plan, Inc., 47 Cal.App.3d 678 (1975) (declaratory relief scope and purpose; judicial economy)
- Kefauver v. Jefferson Ins. Co., not provided (not provided) (placeholder ensuring only cited, official reporters included)