Opinion
B228361
01-25-2012
KHOSROW LALEZARIAN et al., Plaintiffs and Appellants, v. STATE FARM GENERAL INSURANCE COMPANY, Defendant and Respondent.
Robert H. Roe for Plaintiffs and Appellants Khosrow Lalezarian and Violet Lalezarian. Robie & Matthai, Michael J. O'Neill, Craig W. Brunet and Natalie A. Kouyoumdjian for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Los Angeles County Super. Ct. No. SC106552
APPEAL from an order of the Superior Court of Los Angeles County, Linda K. Lefkowitz, Judge. Reversed and remanded.
Robert H. Roe for Plaintiffs and Appellants Khosrow Lalezarian and Violet Lalezarian.
Robie & Matthai, Michael J. O'Neill, Craig W. Brunet and Natalie A. Kouyoumdjian for Defendant and Respondent.
Insurance Code section 2071 sets forth the California standard form fire insurance policy, which includes a provision requiring the insurer and the policyholder to participate in an informal appraisal proceeding in the event they disagree about the amount of an insured loss. This mandatory appraisal provision or a similar one is included in each fire insurance policy in California and is part of the homeowners policy issued by State Farm General Insurance Company (State Farm) to Khosrow and Violet Lalezarian covering their home in Beverly Hills.
The appraisal process, a special form of arbitration, is limited: "'The function of appraisers is to determine the amount of damage resulting to various items submitted for their consideration. It is certainly not their function to resolve questions of coverage and interpret provisions of the policy.'" (Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1094.) Given the limited nature of the appraisal process, is the trial court required to order an appraisal when there are disputes not only as to the amount of the insured loss but also as to coverage and the scope of the damage covered by the policy? Yes, although the court retains discretion pursuant to Code of Civil Procedure section 1281.2, subdivision (c), to delay its order to participate in an appraisal proceeding until the determination of the other issues raised by the insured's complaint.
FACTUAL AND PROCEDURAL BACKGROUND
The Lalezarians' home on North Camden Drive in Beverly Hills was damaged in a wind and rain storm on February 21, 2008. At the time the property was insured under a homeowners insurance policy issued by State Farm. The Lalezarians promptly reported the claim. State Farm inspected the property and hired a consulting firm, Tri-Tech Restoration Co., to estimate the cost of repairs. On April 1, 2008 State Farm paid the Lalezarians more than $216,000 in benefits, including approximately $132,000 for the replacement cost of covered repairs based on the consulting firm's estimates and $83,000 for anticipated additional living expenses during the time the Lalezarians expected to be out of their home while the necessary repairs were made.
With its April 1, 2008 payment, however, State Farm notified the Lalezarians there were significant disagreements as to coverage and the scope of the insured loss. Among the issues State Farm identified were the extent of roof damage caused by the storm, rather than ordinary wear and tear due to age; whether any storm damage had been sustained in the living room, office and one of the bathrooms, as claimed by the Lalezarians; whether the entire house needed to be packed up to do the covered repairs; and the need for additional out-of-home living expenses. The Lalezarians hired a contractor to assist with their damage estimates and retained counsel to represent them in connection with the dispute.
Over the following 18 months counsel for the Lalezarians and for State Farm continued to discuss the outstanding issues; further inspections of the Lalezarians' home occurred; and State Farm made approximately $125,000 in supplemental payments. In October 2009 the Lalezarians' attorney demanded an appraisal to determine the actual cash value or amount of loss caused by the February 21, 2008 storm pursuant to Insurance Code section 2071. State Farm's attorney responded, stating appraisal was not appropriate because the Lalezarians had not provided a statement of their position regarding the amount of the covered loss, so there was not yet a "failure to agree"; in addition, counsel wrote, "disputes over the scope of the loss or coverage are not proper subjects of an appraisal."
The Lalezarians and State Farm remained unable to resolve their differences. On January 8, 2010 State Farm sent the Lalezarians' attorney a check for $1,500 to cover an additional repair and advised him it was closing the claim file. On January 25, 2010 the Lalezarian filed an unverified complaint for breach of contract and breach of the implied covenant of good faith and fair dealing and for specific performance of the appraisal provision in the insurance policy. State Farm moved to strike portions of the complaint; that motion was denied. State Farm then answered the complaint on August 24, 2010. In the interim, on July 12, 2010 the Lalezarians moved for an order compelling appraisal of their insurance claim pursuant to Insurance Code section 2071 and the terms of the State Farm insurance policy issued to the Lalezarians.
State Farm opposed the motion, contending an appraisal is inappropriate when issues exist concerning whether some of the damages to be appraised are covered under the policy. After receiving the Lalezarians' reply in support of their motion, the trial court held an initial hearing on August 3, 2010. The court's tentative ruling was to deny the motion to compel an appraisal. The Lalezarians asked the court to consider ordering a more limited appraisal for those items as to which State Farm had already paid benefits, that is, to determine if the Lalezarians had been underpaid with respect to items not subject to a coverage dispute. The court directed the parties to submit supplemental briefing on that question and held a further hearing on September 7, 2010.
After considering the supplemental briefing and hearing further argument, the court denied the motion. The court explained the Lalezarians' initial request for an appraisal was improper because there was a dispute as to the scope of the covered loss and an appraisal panel may not determine questions of coverage or interpret policy provisions. The court further noted there was no authority to support the Lalezarians' more limited request for an order compelling an appraisal of only a part of their claimed loss. Moreover, even these more limited damage questions "will likely involve questions as to the scope of coverage rather than just the amounts of certain items." Finally, the court stated, if permitted, the proposed appraisal "will not expedite this action (as intended by the statute), since it would at most resolve some portion of Plaintiffs' existing claims."
The Lalezarians filed a timely notice of appeal. At the Lalezarians' request the trial court vacated the June 14, 2011 trial date and stayed further proceedings pending final resolution of this appeal "except as otherwise permitted pursuant to CCP § 916 and governing case authority."
An order denying a motion to compel appraisal, like an order denying a motion to compel arbitration, is appealable. (See Code Civ. Proc., §§ 1294, subd. (a) [order denying petition to compel arbitration is appealable], 1280, subd. (a) [agreement for an appraisal included within definition of arbitration agreement]; Louise Gardens of Encino Homeowners' Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 658; Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 56-57.)
DISCUSSION
1. Standard of Review
Our review in this case is de novo whether we view the issue raised by the Lalezarians' appeal as a question of law requiring interpretation of the contractual language in State Farm's homeowners policy and the relevant provisions of the Insurance Code and the Code of Civil Procedure governing appraisals or as one of applying established legal principles to undisputed facts to determine whether the motion to compel an appraisal was properly denied. (See Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1116-1117 [de novo standard of review applies when determining arbitrability depends on "a question of law involving interpretation of statutes and the contract (with no extrinsic evidence)"]; Louise Gardens of Encino Homeowners' Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 657 [same]; JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1235 ["When 'the language of an arbitration provision is not in dispute, the trial court's decision as to arbitrability is subject to de novo review.' [Citation.] Thus, in cases where 'no conflicting extrinsic evidence is introduced to aid the interpretation of an agreement to arbitrate, the Court of Appeal reviews de novo a trial court's ruling on a petition to compel arbitration.'"].)
2. The Appraisal Process; the Limited Role of the Appraisers
Fire insurance policies on California properties are required to use standard language specified by the Legislature. (Ins. Code, § 2070; Mahnke v. Superior Court (2009) 180 Cal.App.4th 565, 572.) Among other policy provisions, in the event the insurer and the insured disagree about the amount of the loss, Insurance Code section 2071 requires the parties to participate in an informal appraisal proceeding. (See generally Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th at p. 1092.) Insurance Code section 10082.3 requires all residential property insurance policies to contain substantially equivalent appraisal provisions. The Lalezarians' homeowners policy (at page 14, Section I - Conditions, paragraph 4) includes the statutorily mandated appraisal provision, specifying, in part, "If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal." The provision describes the procedure for the selection of an appraiser by each party and the appointment of an umpire to resolve disputes if the two party-selected appraisers are unable to agree on the actual cash value and loss to each item submitted.
Insurance Code section 2071 provides in part: "Appraisal [¶] In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record in the state in which the property covered is located. Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, 'informal' means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings. The appraisers shall then 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 this company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally. In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the insured or this company but shall not be compelled."
An appraisal is a special form of limited arbitration: "An agreement to conduct an appraisal included in a standard fire insurance policy constitutes an 'agreement' within the meaning of Code of Civil Procedure section 1280, subdivision (a), and thus is considered to be an arbitration agreement subject to the statutory contractual arbitration law." (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 57; accord, Louise Gardens of Encino Homeowners' Assn., Inc. v. Truck Ins. Exchange, Inc., supra, 82 Cal.App.4th at p. 658; see Mahnke v. Superior Court, supra, 180 Cal.App.4th at p. 573 [notwithstanding the statutory directive to maintain the informality of appraisal proceedings, "in general those proceedings must also conform to the procedural requirements of the Arbitration Act"].)
Although an appraisal is a form of arbitration, the appraisers' powers are far more limited than an arbitrator's. The appraisers' authority is restricted by statute and contract language to determining the actual cash value or amount of loss of the specific items submitted for their consideration. (Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th at p. 1094.) "Matters of statutory construction, contract interpretation and policy coverage are not encompassed within the ambit of a section 2071 appraisal." (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, supra, 193 Cal.App.4th at p. 53; see id. at p. 59 ["[u]nder section 2071, an appraiser has authority to determine only a question of fact, namely the actual cash value or amount of loss of a given item"].)
An agreement to conduct an appraisal, like other types of arbitration agreements, is generally enforceable by court order pursuant to Code of Civil Procedure section 1281.2, subdivision (a), which, subject to certain enumerated exceptions, requires the superior court to order the parties to an arbitration agreement to arbitrate any controversy subject to its terms upon the request (or "petition") of one of the parties to the agreement. (See Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th at pp. 1099-1100; Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, supra, 193 Cal.App.4th at pp. 57-58; see also Mahnke v. Superior Court, supra, 180 Cal.App.4th at p. 573.) However, subdivision (c) of section 1281.2 provides, "If the court determines that there are other issues between the petitioner and the respondent which are not subject to arbitration and which are the subject of a pending action or special proceeding between the petitioner and the respondent and that a determination of such issues may make the arbitration unnecessary, the court may delay its order to arbitrate until the determination of such other issues or until such earlier time as the court specifies." Under this statutory provision and related case law construing and implementing it, trial courts have discretion to sever arbitrable claims from claims not subject to arbitration and to stay either the arbitration or the judicial proceeding pending the outcome of the other. (See Doan, at pp. 1098-1101; RN Solutions, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1521; cf. Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 393.) Insurance-appraisal proceedings, too, may be stayed pursuant to this discretionary authority of the trial court to permit the resolution of other issues. (Doan, at p. 1099; Kirkwood, at p. 62.)
3. The Trial Court Erred in Simply Denying the Lalezarians' Motion To Compel an Appraisal
The Lalezarians and State Farm agreed to submit to the appraisal process any dispute concerning the actual cash value or amount of loss of items covered by the homeowners policy protecting the Lalezarians' North Camden Drive residence. That written agreement is enforceable by court order pursuant to Code of Civil Procedure section 1281.2, subdivision (a). (Appalachian Insurance Co. v. Rivcom Corp. (1982) 130 Cal.App.3d 818, 824 ["California courts have enforced appraisal clauses in fire insurance policies for almost 100 years"]; see Unetco Industries Exchange v. Homestead Ins. Co. (1997) 57 Cal.App.4th 1459, 1462.)
State Farm argues the parties agreed to an appraisal only when there are no disputes as to coverage or the scope of the damage caused by an insured loss. It thus attempts to impose an express precondition to the effectiveness of their agreement that has no basis in the language of the appraisal provision in the parties' insurance contract or in Insurance Code sections 2071 and 10082.3 and that is inconsistent with the strong public policy favoring arbitration. (See, e.g., Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9; Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th at p. 1101 [public policy favoring arbitration applies to appraisal proceedings].) We reject it. (See Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 [interpretation of an insurance policy is a legal question to which the court applies its own independent judgment]; In re Tobacco II Cases (2009) 46 Cal.4th 298, 311 [issues of statutory interpretation are questions of law subject to appellate court's independent or de novo review].)
The existence of additional issues not subject to appraisal or arbitration does not vitiate the Lalezarians' right to an appraisal to resolve their disagreement with State Farm regarding the value of their covered loss. (See Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1132 ["[a]lthough it is true that a party to a fire insurance contract retains jury trial rights as to other issues, the party 'simply has no jury trial right as regards setting of the dollar amount of loss under the policy'"]; Devonwood Condominium Owners Assn. v. Farmers Ins. Exchange (2008) 162 Cal.App.4th 1498, 1507, fn. 4 ["a judgment after confirmation of an appraisal award fixing the cash value of loss does not preclude further litigation on other issues between parties to an insurance policy"]; see also Safeco Ins. Co. v. Sharma (1984) 160 Cal.App.3d 1060, 1066 ["an insurer is free to litigate whether the insured has misrepresented what he lost; but it is beyond the scope of an appraisal"].) Indeed, the regulations promulgated by the California Department of Insurance "explicitly document that the section 2071 appraisal procedure does not limit recourse to other remedies." (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, supra, 193 Cal.App.4th at p. 62.) "Once 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." (Cal. Code Regs., tit. 10, § 2695.9, subd. (e).)
The trial court disregarded this clear statutory mandate because it believed, with the scope of the covered loss unresolved, ordering an appraisal of the Lalezarians' claims would almost inevitably lead the appraisal panel to impermissibly determine issues other than the actual cash value or amount of loss of specific items submitted for its evaluation—an argument advanced by State Farm in its opposition to the Lalezarians' motion and again in its respondent's brief in this court. (See, e.g., Kacha v. Allstate Ins. Co. (2006) 140 Cal.App.4th 1023, 1035-1036, 1038 [reversing judgment confirming an insurance appraisal award and remanding with directions to grant petition to vacate award after finding appraisal panel had made coverage determinations in awarding insured zero for numerous claimed items].) In addition, the court was concerned that submitting the claims to the informal appraisal process would not expedite the action because issues of coverage and the scope of the Lalezarians' loss, as well as their claim for bad faith, would remain to be determined in a judicial proceeding.
The procedural complexities of an immediate appraisal proceeding that troubled the trial court are quite real, but the court nonetheless erred in attempting to avoid them by simply denying the motion to compel an appraisal. Instead, the court should have granted the motion and ordered the parties to participate in an appraisal proceeding but stayed its order pursuant to Code of Civil Procedure section 1281.2, subdivision (c), until questions of coverage and scope of loss were resolved—the approach to a similar problem adopted in Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th 1082.
Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th 1082, filed May 24, 2011, as well as the case upon which it principally relied, Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, supra, 193 Cal.App.4th 49, filed February 28, 2011, were both decided after the trial court issued its ruling in this case.
In Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th 1082 plaintiff The Doan, whose home was protected by a State Farm property insurance policy, suffered losses when his home and its contents were destroyed by a fire. Doan and State Farm disagreed as to the value of the lost personal property, with State Farm's settlement offer reflecting depreciation nearly two and one-half times greater than Doan's depreciation figure. (Id. at pp. 1087-1088.) Acting on behalf of himself and other California policyholders insured under property insurance policies issued by State Farm, Doan filed a putative class action, in part, for breach of contract and breach of the implied covenant of good faith and fair dealing, alleging State Farm's method of calculating depreciation violated the terms of the State Farm policy and Insurance Code section 2051, which sets out the precise method for determining actual cash value of lost or injured items of personal property, including "a fair and reasonable deduction for physical depreciation based upon [the property's] condition at the time of the injury." (Doan, at pp. 1088-1090.)
State Farm demurred to the complaint, arguing among other grounds Doan could not state a cause of action for breach of contract or for breach of the implied covenant because he was first required to submit his valuation dispute to appraisal pursuant to Insurance Code section 2071. The trial court sustained the demurrer, ultimately without leave to amend. (Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th at p. 1090.) The Court of Appeal reversed, holding the appraisal procedure provided by Insurance Code section 2071 is not an exclusive remedy and Doan could pursue his cause of action for declaratory relief on the statutory and contractual interpretation issues he had raised—issues that were beyond the limited authority of the appraisal panel to decide. (Id. at p. 1098.)
Turning to the question which issue should be resolved first—statutory and contractual interpretation or valuation through appraisal—the appellate court held under Code of Civil Procedure section 1281.2, subdivision (c), insurance-appraisal proceedings, like other arbitration proceedings "may be stayed to permit the resolution of other issues." (Doan v. State Farm General Ins. Co., supra, 195 Cal.App.4th at p. 1099.) "[T]he trial court has discretion to stay the appraisal proceeding pending resolution of the legal questions." (Ibid.)The Doan court further explained, "Given the court's discretion to stay the appraisal, section 2071 cannot be interpreted to include an inflexible requirement compelling an insured to submit to an appraisal before seeking a judicial determination of issues that are not within the ambit of the appraisal." (Id. at p. 1104.) The judgment of dismissal was reversed in part, and the trial court directed to exercise its discretion to consider whether and when declaratory relief should be granted. (Id. at p. 1105.)
Similarly, in Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, supra, 193 Cal.App.4th 49, the Court of Appeal affirmed the trial court's denial "without prejudice" of the insurer's motion to compel an appraisal, agreeing that plaintiff Douglas Kirkwood had properly invoked the court's declaratory relief powers to determine whether the insurer was misinterpreting and misapplying Insurance Code section 2051's provisions for determining actual cash value of lost or injured property, a question outside the limited scope of the appraisal process. (Id. at p. 53.) The appellate court explained, "We think the trial court was right in its conclusion that an appraisal was not mandated 'right now' because the declaratory relief cause of action asked the court to make a declaration that [the insurer] was misconstruing section 2051(b). Denying the motion to compel appraisal without prejudice, the [trial] court was clear: 'I don't see how the plaintiff gets out of an appraisal later.' In other words, given the limited role of an appraisal, the court essentially bifurcated the case, determining that it should first issue a declaration on the statutory issue, 'and then have it inform the appraisal when it goes forward.'" (Id. at p. 57; see also id. at p. 62 ["[t]he contractual and statutory interpretation issues presented in the complaint are not encompassed within the appraisal process articulated in section 2071 or the insurance contract, and therefore appraisal was properly deferred in this case"].)
So, too, in the case at bar, the trial court should not have denied the motion to compel an appraisal outright, but should have exercised its discretion pursuant to Code of Civil Procedure section 1281.2, subdivision (c), to order the appraisal, as mandated by statute and the insurance policy issued by State Farm, and then stayed the appraisal proceedings pending resolution of the disputed coverage and scope of loss issues. The trial court's decision on those issues can then "'inform the appraisal when it goes forward.'" (See Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, supra, 193 Cal.App.4th at p. 57.)
State Farm protests this outcome "would be a waste of judicial time and resources," complaining that ordering and staying an appraisal would result in three separate proceedings: "a full-fledged jury trial on the substantial coverage issues raised in this case"; an appraisal to determine the value of the covered losses as determined by the jury; and finally "another full-fledged jury trial, this time on the extra-contractual claims in [the Lalezarians'] complaint." The premise for this argument is fundamentally flawed.
First, the dispute between the parties concerning coverage and scope of loss might well be resolved by the court on summary judgment, particularly to the extent it involves matters of contract interpretation, which are questions of law for the court. (See, e.g., Feldman v. Illinois Union Ins. Co. (2011) 198 Cal.App.4th 1495, 1500 ["'[s]ummary judgment is an appropriate vehicle to determine coverage under an insurance policy when it appears there is no material issue of fact to be tried and the sole issue before the court is one of law'"]; see also State Farm Fire & Casualty Co. v. Eddy (1990) 218 Cal.App.3d 958, 965 ["[e]ven where a factual dispute exists, this will not preclude entry of summary judgment unless that fact is material"].) Second, although, as State Farm notes, an insurer generally cannot be liable in tort for breach of the implied covenant of good faith if no benefits are due under the policy (see Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36; Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235), in this case, where some benefits were paid as the parties negotiated their rights and responsibilities over time and the obligation to pay any additional benefits is disputed, if a jury is required to decide coverage and scope of loss issues, there is no reason the question of State Farm's alleged liability for a bad faith denial of benefits cannot be determined by the same jury, whether the issues are tried together or bifurcated. (See Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1078 & fn. 10 [recognizing trial court's discretion to try at same time or to bifurcate trial of coverage issues and insurer's liability for bad faith denial of benefits].) Finally, even were State Farm's concerns legitimate, the purported inefficiency of using the mandated appraisal proceeding is not a sufficient basis for ignoring the plain language of the Insurance Code or the parties' insurance contract. It is, however, an appropriate ground for the court to exercise its discretion under Code of Civil Procedure section 1281.2, subdivision (c), to control the order of proceedings to reduce to the extent possible any unnecessary expenditure of the court's or the parties' time and resources.
As we explained in Brehm v. 21st Century Ins. Co., supra, 166 Cal.App.4th at page 1236, "the principle that no breach of the covenant of good faith and fair dealing can occur if there is no coverage or potential for coverage under the policy is quite different from the argument that no breach of the implied covenant can occur if there is no breach of an express contractual provision: '[B]reach of a specific provision of the contract is not a necessary prerequisite to a claim for breach of the implied covenant of good faith and fair dealing. . . . [E]ven an insurer that pays the full limits of its policy may be liable for breach of the implied covenant, if improper claims handling causes detriment to the insured.'"
To be sure, if State Farm is found to have breached the implied covenant of good faith and fair dealing by virtue of its failure to timely pay policy benefits to the Lalezarians, any assessment of punitive damages based on that tortious breach will necessarily await the determination of compensatory damages by the appraisal panel because of the requirement for proportionality between compensatory and punitive damages. (See, e.g., Roby v. McKesson Corp. (2009) 47 Cal.4th 686, 718; Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1181-1183.) However, there is nothing particularly unusual or unfair about a separate trial before a different jury to determine the amount of punitive damages to award to a successful tort plaintiff; indeed, that is a typical outcome when the award of punitive damages is reversed on appeal. (See, e.g., Torres v. Automobile Club of So. California (1997) 15 Cal.4th 771, 781-782.)
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DISPOSITION
The order denying the motion to compel an appraisal is reversed and the cause remanded for further proceedings not inconsistent with this opinion. The Lalezarians are to recover their costs on appeal.
PERLUSS, P. J.
We concur:
ZELON, J.
JACKSON, J.