Janopaul + Block Companies, LLC v. Superior Court
200 Cal. App. 4th 1239
| Cal. Ct. App. | 2011Background
- Janopaul seeks to overturn a trial court order forcing arbitration under Civil Code section 2860, subdivision (c) over what St. Paul calls a Cumis fee dispute.
- The underlying El Cortez construction defect action involved Janopaul and Sundt, with Sundt allegedly failing to defend; Janopaul tendered defense to St. Paul in May 2006.
- St. Paul acknowledged receipt but delayed acceptance, requesting extensive information and continuing its investigation for over two years before advising it would defend under a reservation of rights.
- In July 2008, Janopaul announced intent to file a bad-faith claim against St. Paul for delaying defense; St. Paul then agreed to provide Cumis counsel with a defined fee table and defense arrangement.
- St. Paul later reviewed Golub’s bills, alleged improper billing practices, and invoked section 2860(c) to arbitrate the Cumis-fee dispute; petitioners resisted arbitration, petitioning to dismiss.
- The trial court initially granted arbitration, then ordered supplemental briefing; Janopaul filed a bad-faith action, but the court ultimately reaffirmed its arbitration order, prompting this writ.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the dispute is arbitrable under §2860(c). | Janopaul: duty to defend/breach questions must be decided first; arbitration should not proceed while bad-faith issues unresolved. | St. Paul: Cumis fee dispute arises within §2860(c) and must be arbitrated once a defense is tendered and independent counsel engaged. | Writ granted; threshold duty/breach/bad-faith questions must be decided in trial court before §2860(c) arbitration. |
| Whether St. Paul’s two-year delay in accepting the tender breached the contract and forfeited arbitration rights. | Delay constitutes breach of duty to defend, estoppel/forfeiture of arbitration rights. | Delay is not a bar to arbitration; dispute concerns only fees after tender. | Delay may constitute breach/bad faith; issues to determine in trial court before arbitration. |
| Whether post-acceptance and pre-acceptance fees should be arbitrated together or separately. | All Cumis-related fees should be resolved via arbitration under §2860(c). | Some issues may be resolved in court before arbitration. | Arbitration timeline postponed until threshold questions are resolved; not a blanket denial of arbitration. |
Key Cases Cited
- Intergulf Development LLC v. Superior Court, 183 Cal.App.4th 16 (Cal. Ct. App. 2010) (bad-faith/duty-to-defend issues must be decided in court before arbitration)
- Compulink Management Center, Inc. v. St. Paul Fire & Marine Ins. Co., 169 Cal.App.4th 289 (Cal. Ct. App. 2008) ( Cumis-fee disputes generally arbitrate, but not when threshold duty issues prevail)
- Atmel Corp. v. St. Paul Fire & Marine Ins. Co., 426 F.Supp.2d 1039 (N.D. Cal. 2005) (insurer must meet duty to defend and reservation of rights before arbitration)
- Housing Group v. PMA Capital Ins. Co., 193 Cal.App.4th 1150 (Cal. Ct. App. 2011) (unreasonable delay in paying benefits can constitute breach of contract and bad faith)
- Long v. Century Indemnity Co., 163 Cal.App.4th 1460 (Cal. Ct. App. 2008) (§2860(c) arbitrates Cumis-fee disputes, but context matters)