The Housing Group v. Pma Capital Insurance
193 Cal. App. 4th 1150
| Cal. Ct. App. | 2011Background
- PMA Capital Insurance Company and Caliber One sought arbitration under Civil Code § 2860(c) for Cumis-fee disputes arising from underlying litigation.
- Plaintiffs filed a lawsuit against Caliber One in July 2007 seeking damages related to defense issues in third-party actions (Engleman, Morrison, Mid-Century).
- The operative first amended complaint (May 22, 2008) alleges breach of contract, bad faith, fraud, declaratory relief, and related claims due to Caliber One’s defense handling.
- Caliber One petitioned to compel arbitration of the Cumis-fee dispute, asserting Caliber One paid and sought to pay only routine defense fees aligned with its ordinary-course rates.
- The trial court denied arbitration, concluding Caliber One did not provide a defense in the underlying actions, thereby precluding § 2860(c) arbitration; Caliber One appealed.
- The appellate court affirmed, holding substantial evidence supported the finding that Caliber One had not provided a defense in the underlying litigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is arbitration under § 2860(c) proper where insurer allegedly did not defend the insured underlying actions? | Caliber One argues it defended via reservation letters and payments. | Plaintiffs contend Caliber One failed to defend, so § 2860(c) cannot apply. | No; arbitration denied; substantial evidence supports failure to defend. |
| Do insurer reservation letters and partial defense payments prove defense, enabling arbitration under § 2860(c)? | Letters acknowledged tender; payments made indicate defense. | Reservation letters do not prove actual defense; not binding acceptance of defense. | Not necessarily; defense acceptance is a factual issue for the trial court. |
| Should the Cumis-fee arbitration issue be reviewed de novo or for substantial evidence? | Standard should be de novo under § 2860(c). | Review is for substantial evidence since the ruling rested on whether a defense was provided. | Review for substantial evidence; affirmed denial based on lack of defense. |
| Are disputed payments of defense fees by Caliber One Cumis fees, subject to § 2860(c)? | Fees should be treated as Cumis fees eligible for arbitration if connected to defense. | Payments alone do not establish Cumis-fee eligibility; underlying defense status matters. | Disputed; the court treated the issue as contingent on whether a defense was provided. |
| Does Compulink control the analysis in this case? | Compulink supports mandatory arbitration for fee disputes. | Compulink involved undisputed defense-fee characterization; not controlling here. | Not controlling; this case centers on whether a defense existed. |
Key Cases Cited
- Compulink Management Center, Inc. v. St. Paul Fire & Marine Ins. Co., 169 Cal.App.4th 289 (Cal. App. 4th Dist. 2008) (distinguishes issues when defense-fee characterization is disputed)
- Stalberg v. Western Title Ins. Co., 230 Cal.App.3d 1223 (Cal. App. 3d Dist. 1991) (insurer’s denial of defense affects rights under Cumis rules)
- Atmel Corp. v. St. Paul Fire & Marine, 426 F.Supp.2d 1039 (N.D. Cal. 2005) (federal court interpreting California law on insurer defense duties under Cumis)
- Handy v. First Interstate Bank, 13 Cal.App.4th 917 (Cal. App. 4th Dist. 1993) (arb. standard related to duty to defend and fee disputes under Cumis)
- Intergulf Development LLC v. Superior Court, 183 Cal.App.4th 16 (Cal. App. 4th Dist. 2010) (preliminary issues on duty to defend and timing of Cumis dispute resolution)