52 Cal.App.5th 636
Cal. Ct. App.2020Background
- Storm was injured in a collision and made an underinsured motorist claim against her insurer, Standard Fire, triggering arbitration under the policy.
- The policy’s arbitration clause limited arbitration to two issues: (1) whether the insured is legally entitled to recover damages and (2) the amount of damages; it also stated each party shall pay its own arbitration expenses and bear the arbitrator’s fee equally.
- While arbitration was pending, Storm served a Code Civ. Proc. § 998 offer for $195,000; Standard Fire did not accept. The arbitrator later awarded Storm $219,976.08.
- Storm petitioned to confirm the award and sought recovery of arbitration and post‑arbitration costs; the trial court confirmed the award but later struck Storm’s memorandum of costs, concluding the policy allocation of arbitration expenses precluded recovery.
- On appeal the court held the policy language did not bar recovery under § 998 of arbitration costs or under § 1293.2 of post‑arbitration judicial costs, and found the arbitrator lacked authority to award costs in this limited arbitration, distinguishing Heimlich v. Shivji.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy provision that each party "pay the expenses it incurs" bars recovery of arbitration costs under CCP § 998 | Storm: provision only allocates payment in the first instance and does not eliminate statutory § 998 cost‑shifting | Standard Fire: the policy governs and prevents recovery of arbitration costs | Court: policy language does not preclude recovery under § 998; it allocates initial payment but is silent on statutory recoupment |
| Whether Storm was required to request arbitration costs from the arbitrator before seeking them in court (per Heimlich) | Storm: arbitration was limited to entitlement and amount of damages, so arbitrator had no authority to award costs; court may award them | Standard Fire: Heimlich requires requesting costs from arbitrator first when arbitration could encompass costs | Court: Heimlich is distinguishable; here arbitrator’s powers were narrowly limited and Storm was not required to request costs from arbitrator |
| Whether the policy bars recovery of post‑arbitration judicial costs to confirm the award under CCP § 1293.2 | Storm: § 1293.2 mandates awarding costs for judicial proceedings to confirm an award and the policy does not negate that right | Standard Fire: relied on same policy language to oppose costs | Court: policy does not negate § 1293.2; trial court erred to refuse consideration of post‑arbitration costs |
Key Cases Cited
- Heimlich v. Shivji, 7 Cal.5th 350 (2019) (party must request costs from arbitrator first when arbitration agreement broadly submits disputes to arbitration)
- Pilimai v. Farmers Ins. Exchange Co., 39 Cal.4th 133 (2006) (uninsured/underinsured motorist arbitration falls within CCP § 998 cost‑shifting)
- Weinberg v. Safeco Ins. Co. of America, 114 Cal.App.4th 1075 (2004) (reiterating that UM arbitration is limited to liability and amount of damages)
- Austin v. Allstate Ins. Co., 16 Cal.App.4th 1812 (1993) (section 1284.2 sets default rule that parties bear arbitration expenses)
- Moshonov v. Walsh, 22 Cal.4th 771 (2000) (arbitration scope and whether costs are for arbitrator to decide depends on parties’ agreement)
- Corona v. Amherst Partners, 107 Cal.App.4th 701 (2003) (when arbitration submission is broad, entitlement to costs is for arbitrator)
- Ameron Internat. Corp. v. Ins. Co. of State of Pa., 50 Cal.4th 1370 (2010) (contract interpretation principles govern meaning of insurance provisions)
- Fire Ins. Exchange v. Superior Court, 116 Cal.App.4th 446 (2004) (policies must be read as a whole; court may award post‑arbitration costs under statutory scheme)