Blackwell v. Foremost Ins. Co. CA6

Filed 6/27/16 Blackwell v. Foremost Ins. Co. CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

GORDON BLACKWELL, as Successor in H042263
Interest, etc., (Santa Cruz County
Super. Ct. No. CV-175362)
Plaintiff and Appellant,

v.

FOREMOST INSURANCE COMPANY,

Defendant and Respondent.

Gordon Blackwell, as successor in interest to his deceased father, Nathaniel
Larimore Blackwell,1 appeals from an order dismissing his father’s action against
Foremost Insurance Company (Foremost)2 for breach of contract and breach of the
covenant of good faith and fair dealing. Gordon contends that the trial court erroneously
rejected his assertion that Foremost had waived a policy term requiring appraisal in the
event of dispute over the amount or scope of loss. Gordon further argues that the
appraisal provision itself is invalid and unenforceable. We find no error and therefore
must affirm the order.

1
Plaintiff Nathaniel Larimore Blackwell was referred to throughout the
proceedings as Larry, the name he used in the documents he signed. We will adhere to
that nomenclature and refer to plaintiff as “Larry” to distinguish him from his son,
appellant Gordon Blackwell (Gordon).
2
Foremost was sued as Foremost Property and Casualty Insurance Company. In
its order the court changed the designation of the defendant to its correct name, Foremost
Insurance Company.
 Background
The events underlying this case arose on January 19, 2012, when a wind storm
damaged Larry Blackwell’s mobile home. The mobile home was insured by a “Foremost
Platinum Manufactured Home policy” issued by Foremost and serviced by Tina
Andreatta of Farmers Insurance Group. On February 3, 2012, Gordon sent Andreatta an
e-mail informing her that “my dad got some wind and rain damage at his home in the last
storm.”3
Between the date of the storm and the report to Foremost, Gordon performed
repairs under the name “Dev. Co. Inc.” On February 8, 2012, Mercy Arapas, a property
adjuster with Crawford U.S. Property & Casualty, met with Larry and inspected the
property. She initially recommended that Foremost set its reserves at $25,000. She also
asked Gordon for written estimates from contractors he was planning to use for the
anticipated repairs as well as documentation for the work that had already been
completed. Gordon assured Arapas that he would have the “info” by the end of the
weekend, three days later. In addition to his own bids from Dev. Co. Inc., Gordon
provided a $25,856 estimate for “New Roof and Repair” from Kriege Construction.
On February 28, 2012, Foremost sent Larry a settlement check for $18,098.86,
based on the replacement cost of the home, less the policy deductible and depreciation.
Foremost wrote to Gordon on March 14, 2012, notifying him that the “final scope of
damages” had not yet been determined and explaining the items that were not covered
under Larry’s policy. It also advised Gordon that by writing the letter the company was
not waiving “any of the terms, conditions, or provisions of [the] insurance policy, all of
which are expressly retained and reserved.” Almost every letter sent to Gordon or to the

3
Foremost’s records indicated that Gordon reported the damage to Foremost on
February 6, 2012.

2
Blackwells’ representative between March 14 and October 15, 2012 repeated this
statement of nonwaiver.
Foremost again wrote to Gordon and Larry on March 22, 2012, assuring them that
no coverage decisions had yet been made and requesting a meeting with a contractor
chosen by each side. In a March 28 letter Foremost reminded Gordon and Larry that in
order to complete its investigation and evaluation, it needed not only to verify the cost of
emergency repairs already performed but also to arrive at “an agreed scope and cost of
repairs with a licensed contractor.”
On April 2, 2012, having received a documented list of repairs from Gordon,
Foremost responded to each item, noting those that were allowed, those that required
additional explanation, and those that were not covered, had already been paid, or
required a competitive bid. Foremost assured Gordon and Larry that it would continue to
keep them advised as the investigation progressed. On April 5, Foremost sent a “building
supplemental payment” of $6,174.19 and an “initial” $1,312.55 payment for personal
property.
Beginning April 17, 2012, Foremost addressed its correspondence to Ruben
Estrada at Adjusters Exchange. Estrada provided a May 7 report estimating the total
structural repairs to be $85,715.80. After meeting with Estrada and a representative of
Fuzzy Mobile Home Services, Inc.,4 Foremost asked for clarification of certain claimed
items and receipts for contents claims that exceeded its past payments.
A consultation with “a contractor experienced in mobile home repairs”
(presumably Fuzzy Mobile Home Services, Inc.) led Foremost to revise its estimate to
$18,430.68 on May 21, 2012. Foremost expressed continuing concern over the large

4
Fuzzy Mobile Home Services, Inc. was identified in Larry’s pleadings as a
licensed contractor in the home repair business.

3
disparity between this figure and Estrada’s $85,715.80 estimate, but it acknowledged its
understanding that further documentation would be forthcoming.
In addition to reiterating the statement of nonwaiver in this May 21 letter,
Foremost called Estrada’s attention to paragraph 8 of the “Policy Conditions” in Larry’s
policy, the provision that is at issue in this appeal.5 Paragraph 8 provided as follows:
“Legal Action Against Us. You may not bring legal action against us concerning this
policy unless you have fully complied with all of the policy terms. If you and we have
failed to agree on the amount of the loss, then you may not bring legal action against us
until you have submitted and resolved that dispute through appraisal as described in
Condition 5. Suit must be brought within one year after the loss occurs.” “Condition 5”
described the process for appraisal in the event that the parties could not agree on the
amount of the loss.6
On July 31, 2012, Foremost sent Estrada a revised estimate for repairs amounting
to $31,126.01. After subtracting the deductible and the prior payment, Foremost
calculated its additional payment to be $12,527.15. The next day Foremost advised
Estrada that due to an oversight, it would be including an additional $1,219.65 in the
ensuing payment.
On August 7, 2012, Foremost acknowledged correspondence from Estrada the day
before and expressed regret that they had “not been able to arrive at an agreed cost of

5
Additional references to “paragraph 8” without further attribution are to the
“Policy Conditions” of the insurance policy Foremost issued to Larry Blackwell.
6
Paragraph 5 of the “Policy Conditions” provided, in relevant part: “Appraisals.
If you and we fail to agree on the amount of the loss, then both you and we have the right
to select a competent and disinterested appraiser within 20 days from the day of
disagreement. The appraisers will determine the amount of the loss. If they do not agree,
then the appraisers will choose a competent and disinterested umpire. Then each
appraiser will submit his amount of the loss to an umpire selected by them or by a court
having jurisdiction if the appraisers cannot agree upon an umpire. The agreement of any
two will determine the amount of loss for damage to your property.”

4
repairs to the home.”7 Foremost’s primary complaint was that Estrada believed
Foremost’s estimate (with which a “mobile home contractor” had agreed) was too low,
but Estrada had failed to support his own estimate. Estrada and Foremost had also
disagreed about the method of repairing the subfloor of the home. Foremost concluded,
“We believe that this matter best [sic] be settled through the appraisal process.” It quoted
paragraph 5 of the policy conditions in Larry’s policy and promised to notify Estrada of
the name of its selected appraiser by August 27.
On August 17, 2012, Foremost gave Estrada the name and contact information of
its appraiser and asked Estrada to let Foremost know who his appraiser would be by
August 27, 2012.
On August 29, 2012, Foremost acknowledged a letter of August 16 in which
Estrada had indicated that he wished “to bypass the appraisal process” and instead settle
the claim. Foremost expressed skepticism regarding the likely success of such an
undertaking, noting that Estrada’s estimate for structural repairs was “nearly 600% higher
than an estimate for repairs agreed to with a licensed mobile home contractor.” Foremost
emphasized that the policyholder was certainly eligible to complete those repairs, but the
cost to do so “should not exceed those by licensed contractors who regularly repair such

7
Foremost described the divergence in the parties’ positions as follows: “We
have reviewed previously submitted receipts and invoices, some written by Gordon
Blackwell acting as his own contractor, and have paid what we were able to substantiate.
We have reviewed the estimates you have submitted, but you have not documented how
you arrived at your estimate amounts, which appear to be far in excess of what would be
deemed reasonable. You have stated to us that you prefer not to deal with contractors
and prefer to write your own estimates. . . You have stated that our estimate is
‘unreasonably low,’ but have not offered any information, such as a comparative estimate
from another contractor, instead asking us to rely solely upon your judgement. You have
stated that ‘many costs have been incurred,’ but you have not supplied documentation
supporting such costs, such as receipts or invoices. If you have invoices, receipts or
estimates from contractors, material suppliers, and the like, please forward them for
review.”

5
damage. Our goal is to indemnify for loss.” Foremost also pointed out that as “the
policyholder continues to complete repairs, you should have a good record of his labor
expenses and material expenses to date.” Foremost asked for that record in a way that
could be understood, as well as documentation for “Additional Living Expenses,” for
which Estrada had projected $120,650 for 55 days ($2,193.64 per day). Once it received
that documentation, Foremost added, it would “be happy to review our position, however,
[sic] we will not waive our option to proceed with appraisal to settle this matter.”
On October 15, 2012, Foremost wrote to Estrada one last time. It noted that
Estrada had not responded to its requests since his letter of August 16. Accordingly, it
was closing the claim and could not make any additional payment for any damage.
Foremost did, however, invite Estrada to submit receipts for “Additional Living Expenses
if they were incurred.” In addition, though it was closing the file, the letter added,
“However, if after reviewing this letter and reading the policy language, you believe there
is additional information that would apply to your claim, please provide us with those
facts for consideration. If you submit additional information we will notify you whether
your file will be reopened.” Foremost again quoted paragraph 8 of the policy conditions
in this letter.
The next day Larry Blackwell initiated this action against Foremost, alleging
breach of contract and breach of the covenant of good faith and fair dealing. He also
accused Fuzzy Mobile Home Services, Inc. of negligence in making recommendations
about the scope of necessary repairs and of “aiding and abetting” Foremost in its tortious
misrepresentations. Finally, Larry alleged intentional infliction of emotional distress
against Ken Sovey, the Foremost Field Claims Supervisor who had signed almost all of
the letters to the Blackwells and then to Estrada between March 28 and October 15, 2012.
Fuzzy Mobile Home Services, Inc. later settled with Larry. According to Foremost
(without citation to the record), Ken Sovey was eventually dismissed as “an improper
defendant.”

6
 At some point in the year after the complaint was filed, Larry died. On October
29, 2013, Gordon filed a first amended complaint containing the same allegations but
naming himself as an individual plaintiff and as successor in interest to Larry. Gordon
remained in the case as an individual plaintiff until April 7, 2015, when his individual
claims were dismissed with prejudice at his request.
On December 15, 2014, Foremost submitted multiple motions in limine along with
its trial brief in anticipation of an April 6, 2015 trial.8 Among them was Motion in
Limine No. 7 to preclude both of the claims against Foremost because Larry (through
Estrada) had failed to cooperate in obtaining an appraisal, a condition precedent to a
lawsuit under Larry’s policy. Gordon responded that Foremost “never seriously pursued
the appraisal process,” because to do so “would have done nothing to settle an essential
dispute, the proper investigation of damage and scope of repair.” Consequently,
litigation would have been necessary to determine whether Foremost’s refusal to pay for
“repairs identified as necessary by the insured” amounted to bad faith. Foremost’s
affirmative defense was, in Gordon’s view, a “non-starter.” It was “inappropriate,” he
believed, for Foremost “to wait for the eve of trial and disguise a motion for summary
judgment as a motion in limine.”
Gordon elaborated on this last point in a motion for a ruling on the validity of
paragraph 8 of the policy conditions, the appraisal prerequisite to suit. Gordon asked the
court to rule that Foremost had waived this condition; that it was estopped from asserting
the condition; that appraisal would not have resolved all of the issues in the action; and
that the condition was invalid as a matter of law. Gordon argued that Foremost’s Motion
in Limine No. 7 was the first time it had invoked the appraisal prerequisite; it had not
moved to compel an appraisal, had not asserted the prerequisite as an affirmative defense,

8
The superior court’s register of actions indicates that Foremost also filed a
motion for judgment on the pleadings.

7
and had not raised the point either by a motion for summary judgment or in a prior
motion for judgment on the pleadings. Consequently, Gordon urged the court to refuse to
enforce paragraph 8 and preclude Foremost’s reliance on the condition either as a bar to
the lawsuit or as a defense at trial against the claim of breach.
The trial court heard argument on both motions on March 24, 2015. In an order
filed April 8, 2015, the court ruled that (1) paragraph 8 of the policy conditions was valid,
(2) Foremost adequately pleaded the prerequisite in its answer, (3) Foremost had not
waived that provision, and (4) Foremost was not estopped from asserting it.9
Accordingly, the court dismissed the first amended complaint. This appeal followed.10
Discussion
1. Waiver
On appeal, Gordon renews his contention that Foremost waived its right to assert
paragraph 8, the appraisal prerequisite. In his view, waiver served to preclude not only
an untimely demand for appraisal but also the use of paragraph 8 as a defense to the
lawsuit. According to Gordon, Foremost failed to raise the condition precedent “at any of
the many court appearances or briefs placed before the court, including a
court-supervised mediation.” As a result of Foremost’s “Inaction Over Twenty-Six
Months of Litigation,” it should not have been permitted to assert the prerequisite to suit.
Gordon adds express waiver as well, contending that when the court offered Foremost the
opportunity for a stay of the trial so that Foremost could pursue its appraisal rights,
Foremost declined.

9
Gordon does not continue to assert estoppel on appeal.
10
On appeal, neither party mentions the court’s separate ruling stating, “Judgment
shall be separately entered in favor of Foremost Insurance Company.” No separate
judgment has been filed, but both parties appear to assume that none was intended. We
will construe the April 8, 2015 order as the court’s final expression of its ruling rather
than deeming the appeal premature.

8
 Gordon compares this case to decisions on waiver of the contractual right to
compel arbitration, particularly in employment contexts. Whether Foremost waived the
right to demand appraisal, however, is immaterial to the disposition of this appeal,
because the issue decided by the trial court was “whether the matter should proceed at
all.” Indeed, as Gordon himself emphasizes, at the hearing Foremost declined the court’s
offer to delay its ruling to give Foremost an opportunity to petition to compel the
appraisal. The court went on to rule that the entire lawsuit was foreclosed. On appeal,
our focus is therefore on the court’s determination that paragraph 8, the appraisal
condition, required dismissal of the entire action.
Gordon asserts that Foremost “forefeited [sic] its right to enforce the appraisal
condition” by failing to enforce its right “during more than two years of litigation.”
According to Gordon, Foremost “sat on its hands” while the parties engaged in discovery,
conducted inspections, traded depositions, and engaged in mediation. Thus, Gordon
argues, “Foremost’s conduct was inconsistent with its right to appraise because it did
nothing for more than two years to suggest it wanted to appraise, never mentioned the
appraisal condition in any discovery response or brief to the court, and in fact took full
part in the litigation which, as courts have held, is itself evidence of waiver.” By failing
to move to compel appraisal or enforce the prerequisite by demurrer or summary
judgment—and then by declining the court’s invitation to move to compel appraisal
Foremost “indisputably” waived application of paragraph 8. Gordon further contends
(without citation to authority) that the standard applied by the trial court—clear and
convincing evidence—was incorrect.
Whether the court applied the correct standard is immaterial here. As there are no
disputed issues of fact, the question of waiver becomes one of law. (Saint Agnes Medical
Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196, 1206 (Saint Agnes)
[“ ‘[w]hen . . . facts are undisputed and only one inference may reasonably be drawn, the

9
issue is one of law and the reviewing court is not bound by the trial court’s ruling”].) We
agree with the court’s determination that no waiver occurred.
Waiver is the intentional relinquishment of a known right with knowledge of the
facts. It may be either express or implied. (Waller v. Truck Ins. Exchange, Inc. (1995) 11
Cal.4th 1, 31 (Waller).) “ ‘The burden . . . is on the party claiming a waiver of a right to
prove it by clear and convincing evidence that does not leave the matter to speculation,
and “doubtful cases will be decided against a waiver” [citation].’ ” (Id. at p. 31, quoting
City of Ukiah v. Fones (1966) 64 Cal.2d 104, 107-108.) A key component of the doctrine
of waiver is intent; consequently, the mere failure to call attention in a denial letter to an
exclusion or limitations provision is not enough to bar the insurer from asserting such a
defense. (Waller, supra, at pp. 31-32; see also Prudential-LMI Com. Insurance v.
Superior Court (1990) 51 Cal.3d 674, 689 [“waiver exists whenever an insurer
intentionally relinquishes its right to rely on the limitations provision”]; Velasquez v.
Truck Ins. Exchange (1991) 1 Cal.App.4th 712, 722 (Velasquez) [no waiver of limitations
clause by letter denying claim].) Appraisal terms are considered comparable in
significant respects to arbitration clauses (Louise Gardens of Encino Homeowners’ Assn.,
Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 658 [appraisal agreement in
insurance policy “is considered to be an arbitration agreement subject to the statutory
contractual arbitration law”]; accord, Lambert v. Carneghi (2008) 158 Cal.App.4th 1120,
1129; see also Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1093
(Doan) [“[a]n appraisal provision in an insurance policy constitutes an agreement for
contractual arbitration”].)11 Waiver of such terms is “not to be lightly inferred and the

11
In Doan, supra, 195 Cal.App.4th at p. 1094, this court noted that while appraisal
is a form of arbitration, “ ‘there are significant differences between the powers of an
arbitrator and those of an appraiser.’ [Citation.] Appraisers’ powers are far more
limited.” Appraisers cannot resolve questions of coverage or interpret provisions of the
policy, but only determine the scope and amount of damage.

10
party seeking to establish a waiver bears a heavy burden of proof.” (Saint Agnes, supra,
31 Cal.4th at p. 1195.)
In Stephens & Stephens XII, LLC v. Fireman’s Fund Ins. Co. (2014) 231
Cal.App.4th 1131, 1148-1149 (Stephens XII), where the insured’s building suffered
considerable damage caused by burglars, the insured asserted a waiver of the insurer’s
right to insist on compliance with a policy provision requiring completion of repairs
before it would be obligated to pay replacement costs. The argument was unsuccessful:
no express waiver of the provision was in evidence, and no acts by the insurer suggested
an intention to abandon its rights under the repair provision. Similarly, here “there is no
evidence, much less evidence that is clear and convincing,” that Foremost intentionally
relinquished its right to assert the appraisal condition of paragraph 8. (Stephens XII,
supra, at p. 1148.)
On the contrary, as noted earlier, almost every letter sent over the course of seven
months during the investigation and negotiation period reminded the insured that “[b]y
the writing of this letter, we do not waive any of the terms, conditions, or provisions of
[the] insurance policy, all of which are expressly retained and reserved.” And contrary to
Gordon’s representation that Foremost said nothing about the appraisal condition in its
answer to the complaint, the answer did assert that “plaintiff has not fulfilled its [sic]
obligations under the policy” (26th affirmative defense) and that he “has chosen not to
pursue all remedies under its [sic] policies, to include but not limited to, arbitration” (28th
affirmative defense).12 That Foremost did not specifically and explicitly invoke
paragraph 8 in its correspondence or in its answer is not equivalent to an expression of
intent to waive this provision. (Cf. Velasquez, supra, 1 Cal.App.4th at p. 722 [not raising
limitations provision in denial letter does not establish intent to waive policy provision].)

12
Foremost asserts that it filed a similar answer to the amended complaint, but it
refers us to no evidence of such a pleading in the record provided by the parties.

11
Nor is Foremost’s mere failure to file a demurrer or similar motion sufficient to show
intent to waive the appraisal prerequisite.13
Gordon’s assertion of express waiver goes nowhere. It is based on Foremost’s
decision to forgo a continuance for the purpose of a motion to compel appraisal. But the
decision not to pursue appraisal at this point—the culmination of the hearing on the
parties’ motions—was not equivalent to an abandonment of Foremost’s right to enforce
the condition precedent to the lawsuit.
Gordon unsuccessfully relies on Charles J. Rounds Co. v. Joint Council of
Teamsters No. 42 (1971) 4 Cal.3d 888 (Rounds). In that case, our Supreme Court held
that the issue presented in the employer’s suit against labor unions was covered by the
arbitration clause in their collective bargaining agreement. As relevant here, the high
court further determined that dismissal rather than a stay was appropriate, since the
plaintiff “at no time attempted to pursue its arbitration remedy,” and the defendants
asserted this fact as an affirmative defense and raised the issue three times before the trial
date. (Id. at p. 899.) Rounds does not offer an escape from dismissal here. There it was
the plaintiff’s failure to pursue arbitration that constituted waiver and led to dismissal;
here, in contrast, the plaintiff seeks to eviscerate the defense by asserting waiver.
Moreover, as later explained by the Supreme Court in Saint Agnes, supra, 31 Cal.4th at p.

13
Addressing the claim of waiver by participating in litigation, Foremost reviewed
the causes of delay in the proceedings: “Plaintiff’s counsel requested a trial continuance
due to an ongoing trial, and Defendants stipulated to a trial continuance to November 15,
2014. Defendants then discovered that former defendant Ken Sovey was in a hospital in
Texas with pneumonia and [would] be unable to travel in time for the May 5, 2014 trial
date . . . As plaintiff’s counsel is well aware, Larry Blackwell passed away in the middle
of the litigation. Finally, this Court with the agreement of all parties moved the trial date
to March 30, 2015. To then utilize these facts to claim that Foremost has been litigating
for two and [a] half years is a misrepresentation of the reality of the litigation history and
lacks any merit as evidence of waiver.” The court summarized this history similarly at
the March 2015 hearing.

12
1202, the dismissal in Rounds was warranted because the only disputed issue was one
subject to the arbitration clause. “Viewed in context, Charles J. Rounds provides no
support for denying arbitration of arbitrable claims in an action where, as here, the party
seeking arbitration did not file the lawsuit in which arbitration is sought.” (Ibid.)
Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307 (Platt Pacific) is not helpful to
Gordon either. In that case the Supreme Court held that a contracting party could not
compel arbitration when it had failed to comply with a contract provision that required a
demand for arbitration within a specified time, and where the provision was within its
power to perform. (Id. at pp. 313-314.) It was that specific context—the failure to
demand arbitration within the time allowed by contract—in which intent was discounted
as an essential element of waiver. (Id. at pp. 314-317.) In any event, here it was Larry,
represented by Estrada and Gordon, who failed to comply with a contract provision; it
was his inaction that constituted a violation of the appraisal requirement. Through
Estrada on August 16, 2012, Larry expressly rejected Foremost’s request for cooperation
in the appraisal process, informing the company that it wished to bypass the process and
settle the claim instead. It was that rejection, followed by Larry’s refusal to respond to
additional correspondence, that led Foremost to conclude that further negotiations were
not forthcoming and that closure of the file was warranted. Only one day later Larry filed
suit. Gordon’s repudiation of the appraisal prerequisite should not be converted to a duty
on the part of Foremost to either move to compel appraisal or forfeit the defense. Thus, it
was Larry and Gordon who prevented the issuance of any award by declining to
participate in the appraisal process. Absent grounds for estoppel--a claim Gordon has
expressly abandoned on appeal—and absent evidence that Foremost intended to
relinquish its affirmative defense, none of Foremost’s conduct demonstrated waiver.
In Velasquez, the insured building owners challenged a summary judgment ruling
in which the court found the action barred by the one-year limitation clause of their
policy. In upholding the judgment the Court of Appeal, Second Appellate District,

13
Division Four, noted that the disputed policy provision was a term approved by the
Legislature in Insurance Code section 2071 (section 2071), which sets forth standard
language for a fire insurance policy. In rejecting the insureds’ claim of waiver, the court
remarked that their argument “suggests that their understanding of Farmers’s conduct,
rather than evidence of Farmers’s actual intent, is sufficient to show waiver. This is not
the law.” (Velasquez, supra, 1 Cal.App.4th at p. 722.)
Even if Gordon’s contention is regarded as an assertion of forfeiture rather than
intentional conduct amounting to waiver, we cannot agree that Foremost’s mere
participation in litigation precluded the company’s reliance on the appraisal condition.
In Saint Agnes, supra, 31 Cal.4th at p. 1203, the defendant in a medical center’s action
(PacificCare, a health maintenance organization) had itself initiated a separate lawsuit
which did not involve arbitrable causes of action. That separate lawsuit did not constitute
a waiver of PacifiCare’s right to seek arbitration. Furthermore, plaintiff Saint Agnes
itself, as in the instant case, had “rebuffed PacificCare’s informal request and offer to
arbitrate before the instant petition to compel arbitration was filed [by PacifiCare].”
(Ibid.)
In Saint Agnes the Supreme Court further emphasized that whether the party
opposing arbitration was prejudiced by engaging in litigation “is critical in waiver
determinations.” (Saint Agnes, supra, 31 Cal.4th at p. 1203.) Here, Gordon contends that
the delay in asserting the appraisal condition prejudiced him “in various ways, including
unnecessary expenditures, dissipation of possible appraisal evidence, revelation of his
evidence and expert opinions in the discovery process that would not have been available
to Foremost in appraisal, and the lapsing of the policy’s one-year statute of limitations.”
However, no evidence in the record supports the bare assertion of “various ways” in
which prejudice occurred. The expenditure of court and litigation costs does not suffice
to establish prejudice: “Because merely participating in litigation, by itself, does not
result in a waiver, courts will not find prejudice where the party opposing arbitration

14
shows only that it incurred court costs and legal expenses.” (Ibid.) The bare mention of
the statute of limitations serves no purpose toward an inference of prejudice. Gordon’s
assertion of prejudice therefore fails to support its premise.14
We thus agree with the superior court that Gordon failed to meet his “heavy
burden” to establish either waiver of the appraisal prerequisite to suit in paragraph 8 of
the policy or prejudice from Foremost’s participation in litigation. (Saint Agnes, supra,
31 Cal.4th at p. 1195.) The court did not err in ruling that Foremost had not waived the
appraisal condition and that the condition itself could be applied to preclude Gordon’s
claims.
2. Validity of the Appraisal Prerequisite
Gordon next renews his contention that paragraph 8 of Larry’s policy is invalid.15
He hastens to acknowledge that paragraph 5, which provides for appraisal, is acceptable;
it is only paragraph 8, he insists, that “conflicts with [section] 2071 and is therefore
invalid and unenforceable.”
Gordon does not cite any authority deeming such provisions invalid; he merely
relies on the perceived absence of authority allowing such a condition. Even before
1900, however, courts recognized the validity of such policy terms. In 1890, for
example, the United States Supreme Court upheld an insurance policy provision setting
forth the procedure for appraisal in the event of property damage. The provision stated
that “until such an appraisal shall have been permitted, and such an award obtained, the

14
Roman v. Superior Court (2009) 172 Cal.App.4th 1462 (Roman) does not
instruct otherwise. In that case the appellate court addressed waiver of an arbitration
clause in an employment contract. The employer had petitioned to compel arbitration
only two months after the complaint was filed, and its discovery requests did not seek to
litigate the merits of arbitrable issues. Consequently, neither waiver nor prejudice
occurred by the employer’s mere participation in litigation.
15
Foremost makes no effort to address this argument; instead, it discusses
unconscionability and equitable estoppel, which are not issues on appeal.

15
loss shall not be payable, and no action shall lie against the company.” (Hamilton v.
Liverpool & London & Globe Ins. Co. (1890) 136 U.S. 242, 254-255.) The high court
found such a provision “unquestionably valid.” (Id. at p. 255.) The insurer in Hamilton
had requested appraisal “explicitly and repeatedly,” but the insured “as often
peremptorily refused to do this” unless the insurer acquiesced to conditions outside the
scope of its obligations. (Id. at p. 256.) The Court held that the trial court had correctly
instructed the jury “that the defendant had requested in writing, and the plaintiff had
declined, the appraisal provided for in the policy, and that the plaintiff, therefore, could
not maintain this action. [¶] If the plaintiff had joined in the appointment of appraisers,
and they had acted unlawfully, or had not acted at all, a different question would have
been presented.” (Ibid.)
Our own Supreme Court has long endorsed appraisal prerequisites to suit as well.
In Adams v. South British & National Fire & Marine Ins. Co. (1886) 70 Cal. 198, the
policy at issue provided for appraisal in case of dispute regarding loss or damage. It also
provided that “ ‘no suit or action for the recovery of any claim by virtue of this policy
shall be sustained in any court until after an award shall have been demanded and
obtained, fixing the amount of such claim in the manner above provided.’ ” (Id. at
p. 201.) Relying on an even older decision, the Supreme Court held that the trial court
had improperly refused to instruct the jury that the action could not be maintained
because no arbitration or award had been obtained. (See Old Saucelito Land & Dry-Dock
Co. v. Commercial Union Assur. Co. (1884) 66 Cal. 253, 259 [without resolution of
dispute by arbitration, or the insured’s “fair effort” to obtain such “adjustment,” no cause
of action arose]; but see Case v. Insurance Co. (1889) 82 Cal. 263, 268, 270 (Case)
[without specification of number and mode of selecting appraisers, appraisal provision
was “too vague and indefinite to be allowed any validity,” distinguishing Adams and Old
Saucelito]; see also Winchester v. North British & Mercantile Ins. Co. of London and
Edinburgh (1911) 160 Cal. 1, 7 [citing Case for the point that an appraisal provision is

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not a condition precedent to plaintiff’s right of action, unless insurer has demanded
appraisal]; cf. Platt Pacific, supra, 6 Cal.4th at p. 321 [unexcused failure to comply with
contract term requiring arbitration demand within specified period precludes judicial
enforcement of term].)
The provision at issue here echoes the language of section 2071. That statute sets
forth the “standard form of fire insurance policy for this state.”16 Among its provisions is
a description of the appraisal process in the event of disagreement on the amount of
loss—a term adopted (with clearer language) in Foremost’s paragraph 5—as well as the
following condition on legal action: “ ‘No suit or action on this policy for the recovery of
any claim shall be sustainable in any court of law or equity unless all the requirements of
this policy shall have been complied with, and unless commenced within 12 months next
after inception of the loss.’ ” As noted in Alexander v. Farmers Ins. Co. Inc. (2013) 219
Cal.App.4th 1183, 1187 (Alexander), California Code of Regulations, title 10, section
2695.9, subdivision (e), states: “[o]nce the appraisal provision under an insurance policy
is invoked, the appraisal process shall not include any legal proceeding or procedure not
specified under California Insurance Code Section 2071. Nothing herein is intended to
preclude separate legal proceedings on issues unrelated to the appraisal process.” Clearly
the Legislature and the Insurance Commissioner have sanctioned policy terms requiring
the appraisal process as a prerequisite to the filing of a complaint in court.
Gordon protests, however, that the policy provision requires—“plainly contrary to
[section] 2071”—that an appraisal award have been issued before an action may be
brought. Gordon overstates the appraisal language in paragraph 8; he suggests not only
that the policyholder must initiate the process but also that appraisal is mandatory even if
it is inappropriate, such as when the main dispute relates to causation or coverage.

16
Neither party contends that section 2071 is inapposite in this case, where wind
rather than fire caused the damage to Larry’s home.

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Paragraph 8 demands neither of these circumstances. The appraisal procedure of
paragraph 5 is necessary only if the insurer and insured “have failed to agree on the
amount of the loss.” That is exactly the circumstance anticipated in the “no suit or
action” language of section 2071.
This was not a situation like that of Kirkwood v. California State Automobile Assn.
Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 62, where the action could proceed without
appraisal because the issues between the parties were outside the scope of an appraiser’s
duties. Without violating paragraph 8, for example, Larry could have sued for
declaratory relief as to the meaning of a statutory or contract provision. (Ibid.; cf. Doan,
supra, 195 Cal.App.4th at p. 1094, 1099 [appraisal not exclusive remedy; court has
discretion to stay appraisal pending resolution of legal questions]; accord, Alexander,
supra, 219 Cal.App.4th at pp. 1194-1196.) The policy does not provide otherwise. It
does not purport to create a bar to lawsuits having nothing to do with the extent of the
insured’s loss, such as the meaning of a coverage provision; it is plainly premised on the
inability of the parties to agree on the amount of loss and contemplates appraisal only to
resolve that issue. In any event, Larry’s lawsuit was not directed at interpretation of
coverage terms or statutes, but was specifically focused on Foremost’s failure to pay for
repair of the mobile home and its requirement that Larry work with adjusters, agents, and
contractors. Consequently, even if paragraph 8 precluded lawsuits outside the purview of
an appraiser’s function, no prejudice could be derived from its application in the present
case.
Disposition
The order is affirmed.

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 _________________________________
ELIA, ACTING P.J.

WE CONCUR:

_______________________________
BAMATTRE-MANOUKIAN, J.

_______________________________
MIHARA, J.

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