Appellant insurer challenged a judgment of the Superior Court of Monterey County, California, in favor of respondent city in the city’s action seeking a declaration that the insurer was estopped to assert a contracting provision in light of its own failure to cooperate in the city’s performance of the condition. The respondent was not represented by any employment attorney California during evidentiary hearing. The city sought to recover a burned municipal building’s functional replacement value under an insurance policy issued by the insurer.
Overview
The policy provided that if the city wished to recover the benefits, it had to enter into a contract to repair or replace the building within 180 days after the fire. The court found that the trial court properly found that the insurer engaged in conduct sufficient to sustain an estoppel in that it: (1) failed to communicate with the city at all concerning several crucial issues under the policy; (2) erected phantom doubts about the city’s right to recovery; (3) explicitly refused to respond to reasonable inquiries until such time as the city might have entered into a contract binding itself to pay to repair or replace the building; and (4) caused, actively or through gross negligence, inordinate and inexcusable delays in communication. There was no basis to conclude that a moratorium on new sewer connections presented any impediment to the city’s entry into a contract to construct a functionally equivalent replacement building. The trial court could readily have found that the insurer sought to compel the city to choose between a cash value settlement and the assertion of a claim for replacement value. That conduct barred the insurer’s late assertion of a contracting condition.
Outcome
The court modified the judgment to provide that the 180 day period provided therein would begin to run when the court’s opinion was final as to the court and the time to seek review from the California Supreme Court had expired. As so modified, the court affirmed the judgment.
Procedural Posture
Appellant underwriters sought review of a judgment from the Court of Appeal, Sixth Appellate District (California), which affirmed the trial court’s refusal to compel arbitration of contract and tort claims brought by respondent, an individual claiming benefits under a disability insurance policy.
Overview
The policy’s arbitration clause provided that, notwithstanding any other item, any dispute that arose was to be settled in binding arbitration. The policy also included a service of suit clause whereby the underwriters, in the event of their failure to pay under the policy, agreed to submit to the jurisdiction of a court of competent jurisdiction within the United States. The court gave effect to the parties’ clear language, in accordance with Cal. Civ. Code §§ 1636, 1638, and found no conflict between the service of suit clause and the arbitration clause. The court noted that 9 U.S.C.S. § 2 and Cal. Code Civ. Proc. § 1280 et seq. favored the enforcement of valid agreements to arbitrate. The service of suit clause was not surplusage under Cal. Civ. Code § 1641 or because of duplication of statutory rights under Cal. Code Civ. Proc. § 1293. Because there was no inconsistency, the rule of Cal. Code Civ. Proc. § 1859 that more specific contractual provisions controlled over more general ones did not apply. The cost-shifting rule for arbitration of certain statutory claims, a judicially created exception to Cal. Code Civ. Proc. § 1284.2, did not extend to common law claims generally.
Outcome
The court reversed the judgment of the court of appeal and remanded for further proceedings.
