Filed 2/27/18
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
ARASH KHORSAND et al., B280273
(Los Angeles County
Plaintiffs and Appellants, Super. Ct. No. YC070063)
v.
LIBERTY MUTUAL FIRE
INSURANCE COMPANY et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Stuart Rice, Judge. Affirmed.
* Pursuant to California Rules of Court, rules 8.1100
and 8.1110, this opinion is certified for publication with the
exception of parts B and D through and including H of the
Discussion.
Robert H. Roe; Abir Cohen Treyzon Salo, Boris
Treyzon and Cynthia Goodman for Plaintiffs and
Appellants.
Sedgwick, Susan K. Sullivan and Douglas J. Collodel;
Cozen O’Connor, Maria Louise Cousinesu and Dina R.
Richman for Defendants and Respondents.
_________________________________
Appellants Arash Khorsand and Mahshid Fahandeza
challenge the confirmation of an appraisal award under
homeowners insurance policies issued by respondents
Liberty Mutual Fire Insurance Company and Liberty
Insurance Corporation (collectively, Liberty Mutual).
Appellants contend the appraisers exceeded their authority
regarding the award and that it was the product of fraud. In
the published portion of this decision, we conclude that the
trial court erred under Evidence Code section 703.5 in
admitting part of an appraiser’s declaration that appellants
offered in opposing confirmation of the award. In the
unpublished portion of this decision, we reject appellants’
challenges to the confirmation of the award. We thus affirm
the judgment confirming the award.
2
RELEVANT FACTUAL AND PROCEDURAL
BACKGROUND
In March 2013, appellants’ two-story house in Pacific
Palisades was insured under a homeowners policy issued by
Liberty Mutual. On March 5, 2013, they reported damage
due to water from an upstairs water pipe. After they
submitted a claim (the pipe claim), Liberty Mutual initially
paid $7,996.84. Appellants hired adjuster Robert Barton,
who estimated that the loss totaled $482,490.37. After
Liberty Mutual retained an engineering firm, “Exponent
Failure Analysis” (Exponent), to assess the damage, a
contractor retained by Liberty Mutual estimated the cost of
repairs to be $34,487.82. Based on that estimate, Liberty
Mutual made an additional payment for undisputed loss.
In late February 2014, following a heavy rainstorm,
appellants reported damage to an upper deck and other
areas, and submitted another claim (the deck claim).1 After
1 The pipe claim was submitted under a policy issued by
respondent Liberty Mutual Fire Insurance Company, which
was effective until February 16, 2014. The deck claim was
submitted under a policy issued by respondent Liberty
Insurance Corporation, which was effective after that date.
For ease of reference, the parties refer to the insurers jointly
as “Liberty Mutual.” We also do so.
We further observe that in mid-February 2014, before
the rainstorm, appellants reported a water pipe break under
the house’s foundation, and submitted a claim based on that
incident. Later, appellants filed a lawsuit relating to the
(Fn. is continued on the next page.)
3
Exponent provided an estimate of the loss, Liberty Mutual
made payments to appellants totaling between $59,618.34
and $66,077.2 Appellants’ contractor estimated the total
loss to be approximately $288,000.
When adjuster Barton, acting on behalf of appellants,
requested an appraisal relating to the pipe claim, Liberty
Mutual denied the request, contending that disputes
regarding coverage issues and the scope of the loss made an
appraisal inappropriate.3 Appellants petitioned the trial
court to compel the appraisal, and in November 2014, the
court granted appellants’ petition. In ordering the
appraisal, the court directed the appraisers to value
separately items of loss regarding which Liberty Mutual
claim. Appellants have noticed a separate appeal from the
judgment in that action, and the issues regarding the
underlying claim are not before us.
2 The parties dispute the amount of Liberty Mutual’s
payments. Liberty Mutual asserts that it paid $66,077;
appellants maintain that Liberty Mutual paid a net amount
of $59,618.34, after withholding $3,959.11 for depreciation
and $2,500 as a deductible. The discrepancy is not material
to our determination of the instant appeal.
3 The term “scope of loss” ordinarily refers to the domain
of putatively damaged items relevant to a claim. (See Lee v.
California Capital Ins. Co. (2015) 237 Cal.App.4th 1154,
1160, 1161-1164 (Lee).)
4
disputed coverage or causation.4 Later, in March 2015,
appellants requested that the deck claim be included within
the existing appraisal. Liberty Mutual agreed.
In February 2016, during the appraisal proceedings,
Liberty Mutual filed an ex parte application for an order
limiting the proceedings to the items of loss appellants had
originally submitted in their claims. The trial court denied
the application.5
On April 27, 2016, the appraisal panel issued its
award. The award was signed by the umpire and Liberty
Mutual’s selected appraiser, but not by appellants’ selected
appraiser. The award stated that the total loss was
$132,293.04, and that the total loss to items regarding
which Liberty Mutual disputed causation or coverage was
$96,530.37.
4 As explained below (see Discussion, pt. C., post), the
appraisal panel had three members: an appraiser selected
by appellants, an appraiser selected by Liberty Mutual, and
an “umpire” chosen by the party-selected appraisers.
5 In April 2016, shortly before the appraisal panel issued
its award, appellants filed an ex parte application for a stay
of the appraisal, which was denied. The application
contended, inter alia, that Liberty Mutual’s selected
appraiser was no longer qualified to serve because a firm he
owned had been named as a defendant in an unrelated
lawsuit initiated by appellants’ counsel. Before us,
appellants have not challenged the denial of that
application.
5
When Liberty Mutual filed a petition to confirm the
award, appellants opposed that petition and filed a motion
to correct or vacate the award. Following a hearing, the
trial court denied appellants’ motion and confirmed the
award. On January 10, 2017, the court entered judgment in
favor of Liberty Mutual and against appellants in
accordance with its rulings. This appeal followed.
DISCUSSION
Appellants maintain that the trial court erred in
failing to vacate the award, contending that the appraisal
panel exceeded its authority in issuing the award and that it
was the product of fraud. They argue that the panel erred
in appraising items whose estimated damage Liberty
Mutual had previously not disputed, in disregarding other
items of loss, in placing more than one valuation of damage
on the losses, and in failing to allocate the items of loss
between the two claims. As explained below, we reject these
contentions.
A. Standard of Review
Because appraisal proceedings are a type of
arbitration, judicial review of an appraisal award is
circumscribed.6 (See Lee, supra, 237 Cal.App.4th at
6 To enforce the finality of arbitration, the statutes
governing nonjudicial arbitration awards minimize judicial
intervention. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th
(Fn. is continued on the next page.)
6
p. 1154.) Generally, “[i]t is not the [trial] court’s role to
review the merits of the controversy or to determine
whether the evidence is sufficient to support the appraisal
award. [Citation.] [¶] The exclusive grounds for vacating an
appraisal award are set forth in Code of Civil Procedure
section 1286.2, subdivision (a). [Citation.]” (Ibid.)
Pertinent here are the grounds that “[t]he award was
procured by corruption, fraud, or other undue means,” and
that “[t]he arbitrators exceeded their powers and the award
cannot be corrected without affecting the merits of the
decision upon the controversy submitted” (Code Civ. Proc.,
§ 1286.2, subds. (a)(1), (a)(4)).7
1, 10 (Moncharsh).) Once a petition to confirm an award is
filed, the superior court has only four courses of conduct: to
confirm the award, to correct and confirm it, to vacate it, or
to dismiss the petition. (United Brotherhood of Carpenters
etc., Local 642 v. DeMello (1972) 22 Cal.App.3d 838, 840.)
The trial court is empowered to correct or vacate the award,
or dismiss the petition, upon the grounds set out in the
pertinent statutes; “[o]therwise courts may not interfere
with arbitration awards.” (Santa Clara-San Benito etc. Elec.
Contractors’ Assn. v. Local Union No. 332 (1974) 40
Cal.App.3d 431, 437.)
7 The statute also provides that an award “shall be
vacate[d]” for related grounds, namely, when there was
“corruption in any of the arbitrators” or “[t]he rights of the
party were substantially prejudiced by misconduct of a
neutral arbitrator.” (Code Civ. Proc., § 1286.2, subds. (a)(2),
(a)(3).)
7
The trial court’s ruling on a challenge to an appraisal
award is reviewed “under a de novo standard, drawing every
reasonable inference to support the award. [Citation.] To
the extent the court’s ruling rests on issues of disputed fact,
however, we apply the substantial evidence test.” (Kacha v.
Allstate Ins. Co. (2006) 140 Cal.App.4th 1023, 1031 (Kacha).)
As the record lacks a statement of decision and does not
reflect the rationale for the ruling, we will imply all factual
findings necessary to support it, and examine those findings
for the existence of substantial evidence. (ECC Capital
Corp. v. Manatt, Phelps & Phillips, LLP (2017) 9
Cal.App.5th 885, 900-901.)8
B. Governing Principles
Under Insurance Code section 2071, homeowners
insurance policies providing fire coverage must authorize
appraisal conforming to the standard policy clause set forth
8 We observe that the parties asserted many evidentiary
objections to the respective adversarial showing. Although
the record provided by appellants discloses that the trial
court ruled on the objections, it does not contain a written
order or oral statement describing the rulings, with the
exception of a ruling we discuss below (see pt. D. of the
Discussion, post). Because the record is silent regarding the
other rulings, when appropriate, we will presume they were
rendered in the manner most favorable to the confirmation
of the award. (See Gee v. American Realty & Construction,
Inc. (2002) 99 Cal.App.4th 1412, 1416.)
8
in that statute. (Gerbers v. State Farm General Ins. Co.
(1995) 38 Cal.App.4th 1648, 1651.) The standard clause
provides that the policyholder and the insurer are permitted
to seek appraisal when they “fail to agree as to the actual
cash value or the amount of loss . . . .” (Ins. Code, § 2071,
subd. (a).) Upon a request for appraisal, each party may
nominate a “competent and disinterested” appraiser; the two
appraisers are then authorized to select a “competent and
disinterested umpire” and conduct informal appraisal
proceedings, unless the parties agree to more rigorous
procedures. (Ibid.) The standard policy clause further
states: “The appraisers shall . . . appraise the loss, stating
separately actual cash value and loss to each item; and,
failing to agree, shall submit their differences, only, to the
umpire. An award in writing, so itemized, of any two when
filed with [the insurer] shall determine the amount of actual
cash value and loss.” (Ibid.)
Although the statutorily mandated policy clause
constitutes an agreement for arbitration, appraisal “is a
special form of limited arbitration.” (Kirkwood v. California
State Automobile Assn. Inter-Insurance Bureau (2011) 193
Cal.App.4th 49, 58.) “The function of appraisers is to
determine the amount of damage resulting to various items
submitted for their consideration[,] . . . not . . . to resolve
questions of coverage and interpret provisions of the policy.”
(Hughes v. Potomac Ins. Co. (1962) 199 Cal.App.2d 239, 253,
disapproved on another ground in Sabella v. Wisler (1963)
59 Cal.2d 21, 34.) Rather, appraisers are empowered only to
9
determine a specific question of fact, namely, “the actual
cash value or amount of loss of a given item.” (Kirkwood,
supra, at p. 59.)
In view of that limitation, appraisers may decide only
certain types of disputes. They are authorized to resolve a
dispute regarding the existence or value of loss to an item,
provided the dispute hinges on a feature of the item --
namely, its existence or condition -- directly amenable to
inspection. (Lee, supra, 237 Cal.App.4th at pp. 1169-1175.)
In contrast, they are barred from resolving disputes that
hinge on issues relating to coverage or causation of the
alleged damage (Kacha, supra, 140 Cal.App.4th at pp. 1035-
1038), as well as from resolving factual disputes not
amenable to determination through inspection (Safeco Ins.
Co. v. Sharma (1984) 160 Cal.App.3d 1060, 1064-1065 [in
valuing paintings claimed stolen, appraisers improperly
resolved factual question regarding the paintings’
provenance]).
The limited nature of appraisal also imposes
constraints on appraisal awards. When a specific item is
subject to a dispute regarding coverage or causation, an
award may value the loss to the item, provided that value is
segregated so as to permit an adjustment to the award’s
determination of the total loss upon resolution of the
dispute. (Devonwood Condominium Owners Assn. v.
Farmers Ins. Exchange (2008) 162 Cal.App.4th 1498, 1502-
1507 (Devonwood); see Lee, supra, 237 Cal.App.4th at
pp. 1169-1170.) However, when the loss to a specific item is
10
subject to a factual dispute amenable to resolution through
inspection, the award may not state alternative values for
the loss based on different resolutions of the dispute, as the
appraisers are required to put an end to such disputes. (Lee,
supra, at pp. 1175-1176.) Thus, regarding such an item, the
appraisers may -- if appropriate -- properly assign a value of
$0 to the claimed loss. (Id. at p. 1173.)
The restrictions on appraisal set forth above are
subject to modification. Under Insurance Code section 2071,
subdivision (a), the requirements of the standard provisions
may be waived by an express writing. (Kacha, supra, 140
Cal.App.4th at p. 1033.) Additionally, in an arbitration, a
party may not voluntarily submit an issue to arbitration,
“await the outcome, and if the decision is unfavorable,
challenge the authority of the arbitrator to act.” (University
of San Francisco Faculty Assn. v. University of San
Francisco (1983) 142 Cal.App.3d 942, 954; Felner v.
Meritplan Ins. Co. (1970) 6 Cal.App.3d 540, 544 (Felner);
Hernandez v. State Farm Ins. Co. (1969) 272 Cal.App.2d
255, 256-257.)
C. Admission of Appraiser’s Declaration
At the threshold of our inquiry into the confirmation of
the award, we examine an issue regarding the evidence
properly considered in reviewing that ruling, namely, the
extent to which the court properly admitted a declaration by
appellants’ selected appraiser. After the court granted
appellants’ petition to compel appraisal, appellants selected
11
Andrew Fraraccio as their appraiser and Liberty Mutual
selected Jeff Caulkins as its appraiser; Fraraccio and
Caulkins then chose Robert Mann to act as umpire. In
challenging the award, appellants submitted a declaration
from Fraraccio, who offered an account of the appraisal
proceedings. Liberty Mutual asserted objections to the
declaration under Evidence Code section 703.5, which the
trial court overruled. On appeal, Liberty Mutual challenges
that ruling.
Although Liberty Mutual noticed no cross-appeal from
the judgment, we may consider the extent to which the
declaration was inadmissible under Evidence Code section
703.5. “As a general rule, respondents who fail to file a
cross-appeal cannot claim error in connection with the
opposing party’s appeal. [Citation.] A limited exception to
this rule is provided by [Code of Civil Procedure] section
906, which states in pertinent part: ‘The respondent
. . . may, without appealing from [the] judgment, request the
reviewing court to and it may review any of the foregoing
[described orders or rulings] for the purpose of determining
whether or not the appellant was prejudiced by the error or
errors upon which he relies for reversal or modification of
the judgment from which the appeal is taken.’ [Citation.]
‘“The purpose of the statutory exception is to allow a
respondent to assert a legal theory which may result in
affirmance of the judgment.” [Citation.]’ [Citation.]”
(Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223
12
Cal.App.4th 1105, 1121.) We therefore examine the
admissibility of Fraraccio’s declaration.
1. Governing Principles
Evidence Code section 703.5 states: “No person
presiding at any judicial or quasi-judicial proceeding, and no
arbitrator or mediator, shall be competent to testify, in any
subsequent civil proceeding, as to any statement, conduct,
decision, or ruling, occurring at or in conjunction with the
prior proceeding, except as to a statement or conduct that
could (a) give rise to civil or criminal contempt, (b)
constitute a crime, (c) be the subject of investigation by the
State Bar or Commission on Judicial Performance, or (d)
give rise to disqualification proceedings under paragraph (1)
or (6) of subdivision (a) of Section 170.1 of the Code of Civil
Procedure.” As explained in Cobler v. Stanley, Barber,
Southard, Brown & Associates (1990) 217 Cal.App.3d 518,
528, fn. 5 (Cobler), though enacted in 1979, Evidence Code
section 703.5 did not encompass arbitrators until it was
amended in 1988.
The application of Evidence Code section 703.5 to
declarations from arbitrators was examined in Cobler.
There, a party to an arbitration sought to vacate the award
on the ground that the arbitrator had engaged in corruption
or was biased (Code Civ. Proc., § 1286.2, subd. (a)(1)).
(Cobler, supra, 217 Cal.App.3d at pp. 523-526.) After
admitting a declaration from the arbitrator over an objection
based on Evidence Code section 703.5, the trial court
13
declined to vacate the award. (Cobler, supra, at pp. 525-
526.)
On appeal, the party seeking vacation of the award
challenged the admission of the arbitrator’s declaration.
(Cobler, supra, 217 Cal.App.3d at p. 527.) In rejecting that
contention, the appellate court noted that before the
amendment of Evidence Code section 703.5 to encompass
arbitrators, judicial decisions had confined the admission of
declarations from arbitrators to specific purposes. (Cobler,
supra, at p. 527.) Under those decisions, arbitrator
declarations were admissible when “‘the record d[id] not
disclose issues submitted for decision and the materials
considered by the arbitrators [citation][,]when a dissenting
arbitrator charge[d] improprieties in the arbitration
[citation][,] and whe[n] others charge[d] bias, partiality or
improper conduct [citation],’” but were not admissible to
challenge the merits of the award. (Id. at p. 528.) The
appellate court concluded that the amendment to Evidence
Code section 703.5 imposed even greater restrictions,
limiting the admission of arbitrator declarations to the four
purposes specified in that statute, which the court construed
to encompass “the qualifications of the arbitrator to act; i.e.,
his bias or lack thereof.” (Cobler, supra, at p. 529.) The
court concluded that the declaration was admissible to
determine whether there was corruption or bias (Code Civ.
Proc., § 1286.2, subd. (a)(1)). (Cobler, supra, at p. 529; see
Betz v. Pankow (1993) 16 Cal.App.4th 919, 927 [in view of
Evidence Code section 703.5, “[t]he merits of the
14
controversy, the manner in which evidence was weighed or
the mental processes of the arbitrators in reaching their
decision are not subject to judicial review”].)
2. Analysis
Before the trial court and on appeal, Liberty Mutual
has contended that Evidence Code section 703.5 bars the
admission of declarations from appraisers unless offered for
limited reasons. In challenging the admission of Fraraccio’s
declaration under the statute, Liberty Mutual raised an
objection to the declaration in its entirety, as well as
objections to each individual section of the declaration.
Applying the standards set forth above, we conclude that
only one portion of Fraraccio’s declaration was admissible.
The declaration was submitted to support appellant’s
challenges to the award, which were based primarily on the
ground that the appraisers exceeded their authority (Code
Civ. Proc., § 1286.2, subd. (a)(4).) In support of those
challenges, Fraraccio provided an account of the appraisal
proceedings, including the evidence presented and the
appraisers’ deliberations, and set forth his reasons for
declining to sign the award. For the reasons discussed
above, the portions of the declaration supporting contentions
unrelated to unethical or similarly improper conduct by the
appraisers or Liberty Mutual were inadmissible.
Only in connection with one challenge we discuss
further below (see pt. E. of the Discussion, post) did
appellants assert that the award “was procured by
15
corruption, fraud or other undue means” (Code Civ. Proc.,
§ 1286.2, subd. (a)(1)). Before the trial court, they argued
that Liberty Mutual and its coverage attorney engaged in
“‘fraud’” because they misled appellants and the appraisal
panel regarding an alleged prior agreement regarding the
minimum scope of loss relating to the deck claim. Although
Fraraccio’s declaration contained no description of any such
misconduct, it stated that appellants’ counsel informed the
appraisers regarding that alleged agreement, and that
Fraraccio disagreed with Liberty Mutual’s selected
appraiser Caulkins regarding whether that minimum scope
of loss should be respected. In view of Cobler, only that
portion of the declaration was admissible under Evidence
Code section 703.5.
The trial court concluded that Fraraccio’s declaration
was admissible in its entirety because he was not an
arbitrator within the meaning of the statute, reasoning that
in an appraisal proceeding, “the only person who is serving a
quasi-judicial function is the umpire,” and that “[t]he other
two appraisers are really advocates for either side.” The
court’s ruling thus presents a question of statutory
interpretation -- whether the term “arbitrator,” as used in
the statute, applies to party-selected appraisers. In order to
resolve this question, we seek the legislative intent, looking
first to the plain meaning of that word, with an eye to its
context and other statutes relating to the same subject
matter. (In re Jerry R. (1994) 29 Cal.App.4th 1432, 1437.)
For the reasons discussed below, we conclude the term
16
“arbitrator” encompasses all the members of the appraisal
panel.
We begin by observing that Evidence Code section
703.5, on its face, imposes no limit on the type of arbitrator
subject to it. It begins, “No person presiding at any judicial
or quasi-judicial proceeding, and no arbitrator or mediator,
shall be competent to testify . . . .” Viewed in context, the
phrase “presiding at any judicial or quasi-judicial
proceeding” cannot reasonably be understood to qualify the
term “arbitrator,” as the former attaches directly to “[n]o
person,” and forms part of a distinct clause, separated from
the clause beginning “no arbitrator” by a comma and the
conjunction “and.”
We further conclude that the term “arbitrator” itself
does not convey any such limitation. Because appraisals are
agreement-based arbitration proceedings subject to the
statutory scheme regulating nonjudicial arbitration (Code
Civ. Proc., § 1280 et seq.), we look to that scheme to
establish the meaning of the term “arbitrator.” The sole
statutory regulation within the scheme concerning the
selection of arbitrators is Code of Civil Procedure section
1281.6, which provides that courts must enforce the method
of selecting arbitrators set forth in the agreement. (Atlas
Plastering, Inc. v. Superior Court (1977) 72 Cal.App.3d 63,
70.) Accordingly, when an agreement provides that each
party shall select an arbitrator, and that the two arbitrators
shall select a third arbitrator, that method of selection must
be employed. (Id. at pp. 69-72.) Although the statutory
17
scheme applies the term “[n]eutral arbitrator” to such an
arbitrator-selected arbitrator (Code Civ. Proc., § 1280, subd.
(d)), nothing in the scheme suggests that party-selected
arbitrators are not fully arbitrators, or that only neutral
arbitrators have that status. For that reason, party-selected
appraisers must be regarded as arbitrators within the
meaning of Evidence Code section 703.5.
Pointing to Good v. Kaiser Foundation Hospital (1984)
152 Cal.App.3d 819 (Good) and Mahnke v. Superior Court
(2009) 180 Cal.App.4th 565 (Mahnke), appellants contend
that because party-selected appraisers are not “neutral
arbitrators” and are expected to favor the parties who select
them, they are not subject to Evidence Code section 703.5.
We disagree. Under the statutory scheme governing
arbitration, the term “[n]eutral arbitrator” refers to an
arbitrator not selected by a specific party.9 Had the
Legislature intended to exclude party-selected arbitrators --
including party-selected appraisers -- from the scope of
Evidence Code section 703.5, it could have done so by
expressly providing that “no [neutral] arbitrator . . . shall be
competent to testify . . . ” (See Goebel v. City of Santa
9 Subdivision (d) of Code of Civil Procedure section 1280
defines “[n]eutral arbitrator” to be “an arbitrator who is (1)
selected jointly by the parties or by the arbitrators selected
by the parties or (2) appointed by the court when the parties
or the arbitrators selected by the parties fail to select an
arbitrator who was to be selected jointly by them.”
18
Barbara (2001) 92 Cal.App.4th 549, 559, italics added.)
Although Good and Mahnke note that party-selected
arbitrators and appraisers are not regarded as fully neutral,
those decisions do not suggest that party-selected appraisers
fall outside the scope of Evidence Code section 703.5, as
neither discusses that statute.10
Appellants’ reliance on Jefferson Ins. Co. v. Superior
Court (1970) 3 Cal.3d 398 also is misplaced. There, our
Supreme Court stated that an appraiser’s declaration was
admissible to establish that the appraisal panel had
exceeded its authority by using an improper method of
determining the value of a loss. (Id. at p. 403.) As that
decision predates the amendment of Evidence Code section
703.5 to encompass appraisers, it provides no guidance
10 Good predates the amendment to Evidence Code
section 703.5 relating to arbitrators, and stands for the
proposition that a party-selected arbitrator’s bias does not
support vacation of arbitration award under Code of Civil
Procedure section 1286.2, subdivision (c), because that
provision applies only to prejudicial misconduct by a
“‘neutral arbitrator.’” (Good, supra, 152 Cal.App.3d at
p. 822.) Mahnke concluded that although party-selected
appraisers may be subject to a higher standard of
impartiality than ordinary party-selected arbitrators due to
the requirement that they be “competent and disinterested”
(Ins. Code, § 2071, subd. (a)), they need not comply with
certain disclosure obligations imposed on neutral arbitrators
(Code Civ., Proc., §§ 1281.9, 1281.91). (Manhke, supra, 180
Cal.App.4th at pp. 573-578.)
19
regarding the application of that statute. In sum, we
disregard Fraraccio’s declaration in reviewing the
confirmation of the appraisal award, with the exception of
the portion of that declaration noted above.
D. Liberty Mutual’s Showing in Support of
Confirmation of the Award
In seeking to confirm the award and opposing the
motion to vacate it, Liberty Mutual offered evidence
supporting the following version of the underlying events:
Liberty Mutual adjuster Kenneth Marsili was assigned to
the March 2013 pipe claim and the February 2014 deck
claim based on the rainstorm. In connection with the deck
claim, Liberty Mutual’s engineering firm Exponent told
Marsili that replacing the exterior deck surfaces would cost
approximately $46,667. Although the deck surfaces were
not damaged, Exponent concluded that they needed to be
replaced because they were porous and potentially related to
mold on a nearby bathroom ceiling. Relying on that
conclusion, Marsili provided a mold report to appellants.
Later, in June 2014, Exponent determined that the
structure above the bathroom ceiling was not porous. When
Marsili advised Barton of the correction, Barton replied that
appellants already had demolished the deck surfaces in
reliance on the mold report.
Marsili included the deck surfaces within his estimate
of the loss, and Liberty Mutual paid for their replacement.
Later, when Marsili visited appellants’ house, he discovered
20
that they had demolished a part of the deck surface unrela-
ted to the part discussed in the mold report.
In November 2014, upon granting appellant’s petition
to compel appraisal of the pipe claim, the trial court issued
an order containing directions to the appraisers. The order
barred the appraisers from deciding any issues concerning
“policy coverage, statutory interpretation or cause of loss.”
The order stated: “Liberty Mutual shall provide
[appellants’] counsel with an adjusted copy of the August
2013 scope of loss and repair estimate submitted by . . .
Barton on behalf of [appellants]. The adjustments to the
Barton estimate by Liberty Mutual must show specific line
items Liberty Mutual agrees to pay, and which specific line
items Liberty Mutual is refusing to pay. . . . Any line item(s)
in the Barton estimate that Liberty Mutual contends are not
covered under the terms of its policy must be valued
separately in the appraisal award in such a way that the
disputed line item(s) can be eliminated from a future
judgment if the line item(s) are later determined not to be
covered under the terms of the applicable insurance
contract.”
In a letter to Liberty Mutual dated March 2, 2015,
appellants’ counsel Robert Roe stated: “[Appellants] hereby
demand appraisal of the amount of loss related to the [deck
claim]. We would like to simply add this claim to the
existing appraisal process taking place regarding the [pipe]
claim. Please let me know if Liberty Mutual will agree to
21
include this claim in the current appraisal.” Liberty Mutual
agreed to do so.
Prior to the first meeting of the appraisal panel,
Fraraccio presented an estimate of the deck claim that
included items not previously included in the claim. In
September 18, 2015, Liberty Mutual objected to the umpire
regarding appraisal of the new items.
In late 2015, during the first two appraisal hearings,
the appraisers examined appellants’ residence and received
their evidence. At the end of the second hearing, after
appellants completed the presentation of their evidence, the
parties set a third hearing for January 18, 2016, during
which Liberty Mutual was to present its evidence.
On January 11, 2016, Roe told Liberty Mutual that
appellants had hired a new contractor to provide new loss
estimates, and that they intended to engage in additional
destructive testing at the residence. Liberty Mutual
objected to the new estimates and the proposed destructive
testing, but the umpire permitted the destructive testing,
which occurred on January 13 and 14. At the third
appraisal hearing, appellants presented the results of the
destructive testing and two new repair estimates. In order
to give Liberty Mutual an opportunity to respond, the
parties set a fourth hearing for February 22, 2016.
On February 11, 2016, Liberty Mutual filed an ex
parte application for an order limiting the appraisal to the
items appellants had originally identified in their claims.
Appellants’ opposition to the application stated: “Liberty
22
Mutual misstated the law when it suggests an appraisal
panel is bound by the scope of an insured’s damage estimate.
Recent California case law makes clear that an important
function of an appraisal panel is to independently determine
the existence of damage and then place a value on the cost of
repair or replacement. The panel is not bound by the
representations of either party but is free [to] make its own
independent determination of the scope of loss.” The
opposition further stated that the appraisers were required
to determine the actual cash value of the losses, and that it
was the appraisers’ own estimates “-- not earlier estimates
prepared by the parties -- that defined the scope of an
appraisal award.” The trial court denied Liberty Mutual’s
ex parte application.
At some point during the appraisal proceedings,
Marsili related the incident regarding the mold report to the
appraisers. According to Marsili, following appellants’
destructive testing, he concluded that water from the
rainstorm had neither damaged the exterior deck surfaces
nor intruded into the bathroom. Although Liberty Mutual
never requested the return of the funds paid relating to the
exterior deck surfaces, it maintained that there was no need
to repair or replace those surfaces.
Following the fourth appraisal hearing on February
22, 2016, Liberty Mutual proposed a form for the award that
reflected appellants’ revised scopes of loss and repair
estimates. The proposed form distinguished the two claims,
and under each claim, set forth every item of loss appellants
23
had alleged in connection with the claim. In order to comply
with the order compelling appraisal, the proposed form
identified the items subject to disputes regarding coverage
or causation.
In a letter to Liberty Mutual’s counsel dated April 13,
2016, Roe objected to “an award form in which the panel is
required to divide the damages between the two separate
claims.” Roe stated that the proposed form improperly
required the panel to make determinations regarding
causation. Liberty Mutual agreed to permit the panel to
combine the two claims in a single award without allocating
the items of loss between the two claims.
On April 27, 2016, the appraisal panel issued its
award, which was signed by the umpire and Liberty
Mutual’s selected appraiser. The award stated that because
the appraisers had addressed damages “without
consideration of causation or coverage,” items of loss were
not allocated between the two claims. The award found that
the total loss was $132,293.04, including the loss to items
regarding which Liberty Mutual disputed causation or
coverage. The award further found that loss to the disputed
items totaled $96,530.37. Attached to the award was a
spreadsheet enumerating each item of loss and the
appraised value of the loss. The award further assigned loss
values to items for which Liberty Mutual disputed causation
or coverage.
24
E. Appellants’ Showing
In support of appellants’ challenges to the award,
Khorsand submitted a declaration stating that in June 2014,
in response to the deck claim, Liberty Mutual provided a
loss estimate of $66,077.45, which Khorsand believed to
include the replacement of the entire upper deck, as well as
tiles on the house’s decks and inside the master bedroom.
Khorsand further stated: “In 2015, Liberty [Mutual] offered
to include the . . . deck claim as part of the appraisal of the
2013 . . . claim. I consented to the proposal, believing that
the parties and the appraisal panel would treat the scope of
loss [in Liberty Mutual’s estimate] as an agreed minimum
scope of loss for the . . . deck claim. . . . I believed the panel
would determine an amount of loss for the deck claim
somewhere between the $66,077.45 paid by Liberty [Mutual]
and my contractor’s $288,000 estimate. I later reduced our
estimate for the deck loss to approximately $244,000.00
based upon a January 2016 estimate. . . . I had no idea at
the time . . . Liberty [Mutual] would later argue its earlier
undisputed payment of the deck claim was a ‘mistake’ and
urge the panel to award virtually nothing for the . . . deck
loss. If I had known Liberty [Mutual] would make this
argument, I would not have agreed to submit the . . . deck
claim to appraisal.”
Appellants also submitted a declaration from Roe, who
stated that in June 2015, the parties agreed to submit the
deck claim to the appraisal panel addressing the pipe claim.
Prior to the first appraisal hearing, in a letter to Roe dated
25
June 5, 2015, Liberty Mutual provided an estimate for the
deck claim showing that certain repairs to the deck surfaces
were within the “‘[a]greed scope of necessary repairs based
on covered damages.”’ At the first appraisal hearing, Roe
told the appraisers that Liberty Mutual had agreed to the
replacement of the entire exterior deck, and that Liberty
Mutual’s June 2014 loss estimate “represented an agreed
minimum scope of loss that was not subject to dispute in the
appraisal proceeding.”
As noted above (see pt. C.2. of the Discussion, ante),
Fraraccio’s declaration stated: “When I realized that . . .
Caulkins . . . wanted to reduce the scope of the . . . deck loss
below the minimum level shown in the June . . . 2014
estimate discussed above, I objected and argued that the
panel did not have authority to change the undisputed
portion of the loss to which the parties had previously
agreed more than a year earlier.”11
11 Although appellants’ April 2016 ex parte application
for a stay of the appraisal proceedings raised issues related
to appellants’ challenges to the award (see fn. 5, ante), they
did not refer to it in opposing confirmation of the award. We
therefore do not include it within our summary of their
evidentiary showing.
26
F. No Error in Award Relating to Liberty Mutual’s
June 2014 Loss Estimate for the Deck Claim
Appellants contend the award must be vacated because
it valued the actual losses for items related to the deck claim
to be less than the “undisputed” amounts Liberty Mutual
identified in the June 2014 estimate. They argue that under
Insurance Code section 2071, subdivision (a), the appraisers
lacked authority to examine the actual losses related to the
undisputed amounts because that statute permits appraisal
only when the parties “fail to agree as the actual cash value
or the amount of loss.” For related reasons, they also
maintain that Liberty Mutual’s conduct supports vacation of
the award. They contend that Liberty Mutual’s pre-
appraisal acknowledgment of some undisputed amounts of
damage estopped it from arguing before the appraisers that
the actual losses were less than the previously undisputed
amounts. Additionally, appellants argue that Liberty
Mutual’s position before the appraisers ignored regulations
requiring insurers to accept or deny claims promptly, and
provide explanations of denials (15 Cal. Code Regs., tit. 10,
§ 2695.7, subd. (b)(1)).12 Appellants contend that the award
12 California Code of Regulations, title 10, section 2695.7,
subdivision (b) provides in pertinent part: “(b) Upon
receiving proof of claim, every insurer, . . . shall
immediately, but in no event more than forty (40) calendar
days later, accept or deny the claim, in whole or in part.
The amounts accepted or denied shall be clearly documented
in the claim file unless the claim has been denied in its
(Fn. is continued on the next page.)
27
exceeded the appraisers’ authority and that Liberty
Mutual’s conduct constituted “fraud.” (Code Civ. Proc.,
§ 1286.2, subds. (a)(1), (a)(4).)
Before the trial court, Liberty Mutual maintained that
appellants’ contentions failed under the doctrine of judicial
estoppel. Generally, judicial estoppel is intended to protect
the judicial process, promote fairness in litigation, and
shield parties from improper strategies adopted by
opponents. (Gottlieb. v. Kest (2006) 141 Cal.App.4th 110,
131-132.) The doctrine precludes a party from asserting a
position in an action that is inconsistent with a prior
position that the party advocated with success. (Id. at
pp. 130-131.) “‘The doctrine [most appropriately] applies
when “(1) the same party has taken two positions; (2) the
positions were taken in judicial or quasi-judicial
administrative proceedings; (3) the party was successful in
asserting the first position (i.e., the tribunal adopted the
position or accepted it as true); (4) the two positions are
totally inconsistent; and (5) the first position was not taken
as a result of ignorance, fraud, or mistake.”’” (Id. at p. 131,
quoting Aguilar v. Lerner (2004) 32 Cal.4th 974, 986-987.)
entirety. [¶] (1) Where an insurer denies or rejects a first
party claim, in whole or in part, it shall do so in writing and
shall provide to the claimant a statement listing all bases
for such rejection or denial and the factual and legal bases
for each reason given for such rejection or denial which is
then within the insurer’s knowledge.”
28
Viewed in the light most favorable to the judgment,
the record shows that the trial court, upon granting
appellants’ petition to compel an appraisal, ordered Liberty
Mutual to provide an estimate for the pipe claim complying
with regulations noted above, in order to establish the items
of loss properly before the appraisers. Later, after the deck
claim was included within the appraisal, but before the
appraisal hearings began, Liberty Mutual responded to
another estimate presented by appellants in a manner
complying with insurance regulation noted above. During
the appraisal proceedings, after appellants sought to
increase the scope of the claimed deck losses, and the
umpire permitted new destructive testing over Liberty
Mutual’s objection, Liberty Mutual filed an ex parte
application to limit the appraisal to the previously identified
scopes of loss. Appellants successfully opposed the
application, arguing that under California law, the appraisal
panel was authorized to make independent determinations
regarding the existence and actual value of the losses, that
the panel was “not bound by the representations of either
party” regarding the scope of loss, and that the appraisers’
own estimates “-- not earlier estimates prepared by the
parties -- defined the scope of an appraisal award.” (Italics
added.) After the application was denied, the appraisers --
with the exception of Fraraccio -- found the actual losses to
be less than the amounts Liberty Mutual had not disputed
before the appraisal.
29
The record before us support a finding of judicial
estoppel. Having successfully advocated the view that the
appraisers’ task was to evaluate the scope and value of the
actual loss on the basis of the evidence, regardless of the
existing estimates, appellants could not equitably require
that Liberty Mutual refrain from presenting evidence and
arguments to the appraisers bearing on that task,
notwithstanding its prior estimates. Accordingly, the trial
court could reasonably have concluded that appellants were
estopped from challenging that conduct by Liberty Mutual,
as well as the appraisers’ valuation of the actual loss in light
of the evidence. (See, e.g., Felner, supra, 6 Cal.App.3d at
p. 544 [“A party cannot gamble on a favorable outcome of a
submitted issue and, having lost the gamble, then attack the
validity of his submission to the tribunal which decided the
issue against him”].)
Spray, Gould & Bowers v. Associated International Ins.
Co. (1999) 71 Cal.App.4th 1260, upon which appellants rely,
is distinguishable. There, after the insured filed a claim, the
insurer failed to comply with an insurance regulation
requiring it to alert the insured to the policy’s contract-
based time limit for filing a lawsuit based on an unpaid
claim. (Id. at p. 1263.) When the insured commenced such
a lawsuit after the time limit, the trial court granted
summary judgment in favor of the insurer. (Id. at pp. 1263-
1265.) Reversing, the appellate court concluded there were
triable issues whether the insurer was barred from relying
on the time limit under the doctrine of equitable estoppel,
30
which applies when a party refrains from disclosing
material facts to another who is ignorant of them. 13 (Id. at
pp. 1267-1269.) In contrast, because appellants successfully
advocated for a broad definition of the appraisers’ task, they
cannot reasonably claim to have been ignorant of the
prospect that Liberty Mutual would participate in the
accomplishment of that task, as defined. In sum, appellants
have failed to show that the award was subject to vacation
because it valued the actual loss for certain items as less
than the “undisputed” amounts Liberty Mutual previously
identified.14
13 “‘“Four elements must ordinarily be proved to establish
an equitable estoppel: (1) The party to be estopped must
know the facts; (2) he must intend that his conduct shall be
acted upon, or must so act that the party asserting the
estoppel had the right to believe that it was so intended; (3)
the party asserting the estoppel must be ignorant of the true
state of facts; and, (4) he must rely upon the conduct to his
injury.”’” (Spray, Gould & Bowers v. Associated Internat.
Ins. Co., supra, 71 Cal.App.4th at p. 1268, quoting
DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe &
Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 59.)
14 For the first time on appeal, appellants’ reply brief
contends that Liberty Mutual was required to pay for the
replacement of certain exterior deck surfaces under
California Code of Regulations, title 10, section 2695.9,
subdivision (a), which sets standards for the payment of
consequential losses resulting from the repair or
replacement of covered losses. Appellants argue that they
(Fn. is continued on the next page.)
31
G. No Error In Award Due to Valuation of Losses
Appellants challenge the manner in which the award
assigns values to the losses. They contend the award states
more than one value for the same loss because the award
estimated both the total losses for all the items and the total
losses for the items subject to disputes regarding coverage or
causation. They further contend the award improperly
“mixes various . . . items from both the 2012 [pipe] and [the]
2014 [deck] claims, leaving no way to determine which non-
covered . . . items . . . should be removed from a subsequent
judgment against [Liberty Mutual].” We reject both
contentions.
As explained above (see pt. B. of the Discussion, ante),
when items of claimed loss are subject to coverage or
causation disputes, an award may value the losses to those
items, provided the values are set forth so as to permit
adjustments to the total losses awarded upon resolution of
the disputes. (Devonwood, supra, 162 Cal.App.4th at
pp. 1502-1507.) Here, the trial court, in granting appellants’
petition to compel appraisal of the pipe claim, directed the
appraisers to value items subject to such disputes
“separately . . . in such a way that the disputed line item(s)
are entitled to payment for losses due to their demolition of
the deck in reliance upon Liberty Mutual’s mistaken mold
report. Because they did not raise this contention in their
opening brief, they have forfeited it. (Campos v. Anderson
(1997) 57 Cal.App.4th 784, 794, fn. 3; 9 Witkin, Cal.
Procedure (5th ed. 2008) Appeal, § 701, pp. 769-771.)
32
can be eliminated from a future judgment if the line item(s)
are later determined not to be covered . . . .” Later, after
appellants requested that the deck claim also be submitted
to the same appraisal panel, they objected to Liberty
Mutual’s proposed form for the award, contending that its
division of items between the two claims would require the
panel to make causation determinations. As a result, the
award separately identified loss values for items subject to
coverage or causation disputes, but did not allocate any
items specifically to the pipe or deck claims.
Those features of the award do not support its
vacation. The first feature -- the separate identification of
loss values for items subject to disputes -- merely reflects
compliance with the order compelling appraisal. The second
feature -- the absence of an allocation between the two
claims -- is the consequence of appellants’ own request.
Having expressly sought that feature, appellants may not
rely on it in an effort to vacate the award. (See Moncharsh,
supra, 3 Cal.4th at p. 30 [“[W]e cannot permit a party to sit
on his rights [before the arbitrator], content in the
knowledge that should he suffer an adverse decision, he
could then raise the illegality issue in a motion to vacate the
arbitrator’s award”].) Appellants have thus failed to show
error requiring vacation of the award.
H. No Error in Award Due to Failure to Value Losses
Appellants challenge the award on the ground that the
appraisers improperly failed to value certain items of loss.
33
They contend the appraisers excluded some damage because
they made improper causation determinations, that is,
attributed the damage to causes other than those underlying
the pipe and deck claims.15 They further contend the
appraisers failed to consider other items of damage --
namely, the costs of packing and storing personal property
during repairs, the time needed for repairs, and the fair
rental value of the property during the period the house was
uninhabitable following the March 2013 pipe break -- even
though they received evidence regarding those items.
Appellants’ contentions fail for want of supporting
evidence, as the only evidence they have identified to
support them are inadmissible portions of Fraraccio’s
declaration. Nothing in the award otherwise suggests
potential error. After stating that the appraisers made no
determinations of causation or coverage, the award
separately valued the losses for items as to which there was
a dispute regarding causation or coverage in a manner
permitting adjustment of the total losses upon resolution of
those disputes. The award further stated: “The [p]arties did
not submit evidence regarding, and the [p]anel does not
make any findings regarding contents, storage, habitability
15 Appellants assert that the appraisers viewed the
damage as attributable to the water pipe break in mid-
February 2014, which gave rise to another claim not at issue
here (see fn. 1, ante).
34
of the dwelling, or additional living expenses.” Accordingly,
appellants have demonstrated no improperly omitted items.
DISPOSITION
The judgment confirming the appraisal award is
affirmed. Respondents are awarded their costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION.
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
35