Disputes Over Cumis Fees Must Be Arbitrated Regardless of Bad Faith Claims

Posted on December 19, 2008 by Kimberly Amick

 

In Compulink Managements Center, Inc. v. St. Paul Fire and Marine Ins. Co., et al California’s Second District ruled that, regardless of Compulink’s claims for bad-faith, the parties’ dispute over the reasonableness of independent counsel’s fees must be arbitrated pursuant to Cal. Civil Code Section 2860.

Not a very glamorous subject, I know, but an important decision for many litigators wanting to get paid by their client’s insurers. 

Civil Code Section 2860 mandates arbitration of any dispute over the reasonableness of independent counsel’s attorney’s fees that must be paid by an insurer. Here, the court clarifies whether, when a coverage action is brought alleging numerous and various claims against the carrier, only one of which happens to be a dispute over the reasonable of independent counsel’s fees, the arbitration of the fee issue is still required. Their answer was “yes”.

The trial court had denied St. Paul’s petition to compel arbitration, stating that Compulink’s bad faith claims took the action beyond the purview of Section 2860. The Second District disagreed, finding that the plain language of the statute required arbitration of any fee dispute and did not provide for an exception in cases where bad-faith allegations were made by the insured.

The opinion is pretty straightforward. What the opinion fails to address, however, are the practical implications of such a ruling. For instance, what about where the insured claims that not only is he owed fees paid to independent counsel, which haven’t been paid by the insurer at all, but that the insurer is also liable for bad-faith.

Can you try such a case without bifurcating the duty to defend and the bad-faith claims? Can the arbitrator determine the reasonableness of the fees before the court determines whether the insurer had a duty to defend in the first place? Why would you want him/her to? And to throw another kink into the process, the court made clear that the mandatory arbitration of Section 2860 applies only to attorney’s fees, not all defense fees and costs (e.g. expert fees).

The legislature intended the mandatory arbitration provision of Civil Code 2860 to prevent the state’s judicial system from bearing the cost of fights over the reasonable of attorneys’ fees -- An understandable and prudent motive. Yet, as in many things, the practical implications may achieve quite the opposite effect.

 

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Order On A Special Motion to Strike Is Immediately Appealable

Posted on February 29, 2008 by Kimberly Amick
Yesterday, the Second District issued an unfortunate reminder that CCP §§ 425.16, subd. (i), and 904.1, subd. (a)(13) make an order either granting or denying a Special Motion to Strike (Anti-SLAPP) immediately appealable.  Waiting until entry of final judgment after the grant of a Special Motion to Strike that disposes of all of the issues in a case could mean waiving your right to appeal the decision at all.  Russell v. Foglio (February 28, 2008) 73 Cal.Rptr.3d 87.

Plaintiff was successful on its Special Motion to Strike.  Defendant mistakenly waited until the entry of final judgment in the case to appeal the court's order.  The Second District found that it was too late and that the court no longer had jurisdiction to hear the appeal on that issue. 

Interestingly, Justice Rubin's concurrence includes a request to the Legislature that amendment may be needed to protect the unwary.  He argues that a more workable solution may be to have a denial of a Special Motion to Strike to be immediately appealable, but not necessarily the granting of such an order.
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Second District Issues Strong Reminder Regarding Burden of Proof on Summary Judgment Motions

Posted on December 11, 2007 by Kimberly Amick
In two separate decisions yesterday, the Second District issued a strong reminder of the difference between raising a triable issue of fact and proving elements of a cause of action on summary judgment.

In Nielsen v. Beck (Los Angeles County Super. Ct. No. BC339322) the found that there remained a triable issue of fact as to whether an attorney continued to represent his client beyond a substitution of attorneys.  The trial court ruled that continued conversation between counsel and his former client did not establish a triable issue of fact sufficient to defeat defendants’ claim that the cause of action was barred by the statute of limitations.  The court disagreed, finding triable issues of fact as to the scope of the attorney’s continuing relationship with his client and regarding the actual date of termination of that relationship.  

In Raven v. Gamette (Los Angeles County Super. Ct. No. BC337558), a tenant sued her landowner for negligent failure to secure the rental premises in light of previous criminal activity.  The landlord brought a motion for summary judgment arguing that his tenant could not prove a causal link between her injuries and his failure to take safety precautions.  The trial court agreed, ruling that plaintiff had “failed to submit admissible evidence establishing a causal link between her injuries . . . and . . . decedent’s alleged breach of duty [and t]hus, plaintiff failed to establish the element of causation in her cause of action for negligence.”  

The Second District overturned the decision admonishing, “In order to defeat defendant’s summary judgment motion, plaintiff only needed to raise a triable issue of material fact as to the issue of causation; she did not need to establish that element of her negligence cause of action.” (Emphasis added).
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