Los Angeles Uninsured Motorist Attorney, Barry P. Goldberg, fields questions from lawyers and insureds alike regarding Uninsured and Underinsured Motorist arbitrations. One of the more frequent topics concerns whether an arbitrator can “award” an amount above the stated policy limits and how “award” procedure actually works. Technically, an arbitrator is limited in assessing damages to the extent of the available policy limits. (Insurance Code section 11580.2, subdivision (p)(4)) Notwithstanding those limits, an arbitrator can determine that the damages are equal to or may exceed those limits.
There is an exception that is now widely recognized that an arbitrator can award pre-judgment interest—even if the amount of that interest results in a recovery for more than the policy limits. Many well-meaning personal injury attorneys leave out this valuable tool when they have policy limits or potentially policy limits case.
In Pilimai v. Farmers Ins. Exchange Co. (2006) 39 Cal.4th 133, 137, the California Supreme Court held “the ‘maximum liability’ provision of Insurance Code section 11580.2, subdivision (p)(4) does not preclude recovery of costs under Code of Civil Procedure section 998 that, added to the arbitration award, exceed the coverage limits.” The Court reasoned, “it is not clear that Insurance Code section 11580.2(p)(4)’s maximum liability provision applies to costs imposed on an insurance company through its behavior as a litigant, specifically its failure to settle, rather than damages assessed against it as a liability insurer.” (Id. at p. 145; Emphasis added.)
It is my considered advice that a Code of Civil Procedure section 998 Offer to Compromise be served in every Uninsured and Underinsured Motorist case that is going into arbitration! This is especially the case where that award sought either exceeds or potentially exceeds the stated policy limits. There is no downside and good potential upside.
In a recent unpublished decision, the arbitrator determined plaintiffs’ total damages exceeded the policy limits, but awarded the claimants that limit because the insurer’s maximum liability could not exceed that amount. However, the arbitrator also awarded the claimants prejudgment interest from the date of the interim award when the arbitrator made her determination that the insurer was liable for the available policy limits. The insurer argued, among other things, that the arbitrator exceeded her powers.
When the parties moved to confirm the award in the Superior Court, the award was confirmed and upheld on appeal. The Court of Appeal reasoned that neither Insurance Code section 11580.2, subdivision (p)(4), nor any provision in the insurance policy precludes plaintiffs’ recovery of prejudgment interest because, when added to the liability damages award (which does not exceed the policy limit), plaintiffs’ total recovery exceeds the insurer’s maximum liability under the policy.
“[T]he Legislature has expressed a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’ [Citations.] Consequently, courts will ‘“indulge every intendment to give effect to such proceedings.”’” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) We review the trial court’s ruling on the petitions to confirm and to vacate the arbitration award de novo, but give “substantial deference [to] the arbitrator’s determination of his or her contractual authority. [Citations.] All reasonable inferences must be drawn in support of the award.” (Jones v. Humanscale Corp. (2005) 130 Cal.App.4th 401, 408.)
The lesson to be learned is that an insured’s attorney should request all available recovery, including pre-judgment interest in Uninsured and Underinsured Motorist cases. Further, a Code of Civil Procedure section 998 Offer to Compromise be served in every Uninsured and Underinsured Motorist case that is going into arbitration!