Reuben Raucher & Blum is pleased to announce that Nicholas J. Alexakis has joined the firm as an Associate.
Stephen Raucher’s article Businesses Suffer When Disaster Strikes, Too is published in the Los Angeles Daily Journal on December 7, 2018.
In light of the terrible fires plaguing California, policyholders should keep in mind some basic principles should they find themselves needing to make a claim, or even if they just want to re-evaluate their property insurance policies. Many of these pointers are unique to California law.
- Fire losses must be reported “without unnecessary delay.”
- Policyholders must provide a sworn proof of loss within 60 days of the loss.
- Policyholders must cooperate with the insurer in its investigation of the claim.
- Such cooperation typically includes an obligation to submit to an examination under oath, which can even be a condition to payment.
- The policyholder has a right to be represented by counsel in connection with such an examination, though at his or her own cost.
- The standard fire insurance policy requires that any lawsuit against the insurer be filed within 12 months of the loss, although that can be extended to 24 months if the loss is related to a declared state of emergency.
- Property insurance policies may call for appraisal in the event of a dispute over loss value. Appraisal is similar to arbitration, but less formal. Appraisal cannot be compelled if the loss is related to a declared state of emergency.
- Depending on the policy language, loss is generally based either on “actual cash value” or “replacement value.”
- Actual cash value is measured by the fair market value of the damaged structure as of the date of loss.
- As its name suggests, replacement cost is the reasonable amount necessary to repair and replace with similar construction. Replacement cost coverage is better (and more expensive) for the policyholder.
- Insurers must comply with the Fair Claims Settlement Practices Regulations, which generally require that a claim be accepted or denied within 40 days. Failure to satisfy the regulations can give rise to a bad faith claim by the policyholder.
When the spotlight is on them during times of well-publicized disasters, most carriers responsibly adjust their policyholders’ claims. However, there are always exceptions, and policyholders should not hesitate to seek legal assistance at any stage of the process in order to protect their rights.
On October 11, 2018, Stephen L. Raucher was one of the panelists who presented a continuing legal education program entitled “Conflict Waivers, Mediation Waivers – Oh My! Avoiding Ethical Traps Triggered By Recent Developments Under California Law.” The program examined and discussed the ramifications of a recent California Supreme Court opinion regarding conflict waivers as well as new legislation affecting mediation waivers.
RRB’s Stephen Raucher’s article Conflict Waiver Enforceability and the Duty of Loyalty is published in the Los Angeles Daily Journal on September 28, 2018.
Reuben Raucher & Blum attorney Stephen L. Raucher is quoted in the August 31, 2018 Los Angeles Daily Journal regarding the California Supreme Court’s ruling in Sheppard Mullin v. J-M Manufacturing. The state high court upheld an appellate court decision that broad attorney conflict waivers that fail to disclose known conflicts of interest are unenforceable.
RRB’s Stephen Raucher’s article State High Court Soon to Decide Conflict Waivers Case is published in the Los Angeles Daily Journal on August 9, 2018.
Insurance Law is published by the State Bar Litigation Section in its California Litigation Review (2017 Edition), co-authored by RRB attorney Stephen L. Raucher, along with Michael Sohigian, who have provided insurance updates together for the fifth consecutive year.
Stephen Raucher joins a panel of amicus attorneys for episode 102 of the Daily Journal’s podcast entitled “Waiving in the Dark?” and weighs in on the potential ramifications of the California Supreme Court’s pending decision regarding advance conflict-of-interest waivers.
On Monday, April 16, 2018, Stephen L. Raucher was one of the panelists presenting a continuing legal education program entitled “Fourth Annual Update on Developments in Insurance.” The program examined the most important new cases from 2017 regarding insurance coverage and bad faith, focusing particularly on liability and property policies.
In Nutrition Distribution, LLC v. Southern SARMs, Inc. (2018) 2018 Cal. App. LEXIS 81, the California Court of Appeal, Second Appellate District, Division 7, was asked to interpret Code of Civil Procedure Section 128.5(f), which governs the procedure applicable to motions for sanctions for bad faith actions or tactics. The court held that under the version of Section 128.5(f) in effect from January 1, 2015 to August 7, 2017, a 21-day safe harbor waiting period applied to such motions for sanctions. This is in contrast to the holding in San Diegans for Open Government v. San Diego (2016) 246 Cal. App.4th 1306, 1317, which held: “[A] party filing a sanctions motion under Section 128.5 does not need comply with the safe harbor waiting period described in Section 128.7, subdivision (c)(1).”
Section 128.5(a) authorizes a trial court to order a party, the party’s attorney, or both to pay reasonable expenses, including attorney fees, incurred as a result of bad faith actions that are frivolous or solely intended to cause unnecessary delay. Former subdivision (f) was in effect from January 1, 2015 to August 7, 2017. It provided: “Any sanctions imposed pursuant to this section shall be imposed consistently with the standards, conditions, and procedures set forth in subdivisions (c), (d), and (h) of Section 128.7.” Section 128.7 governs misconduct in the filing or advocacy of groundless claims in signed pleadings and other papers. Under Section 128.7(c)(1), service of the motion for sanctions initiates a 21-day safe harbor period, patterned after Federal Rule of Civil Procedure 11. During this time, the offending document may be corrected or withdrawn without penalty, and the motion for sanctions cannot be filed. San Diegans for Open Government found that motions for sanctions under Section 128.5 did not need to comply with the safe harbor provision. This had the effect of allowing parties to request sanctions as part of their moving or opposition papers, in a throwback to the process in California prior to adoption of Section 128.7 and its safe harbor provision.
In Nutrition Development, as part of its demurrer, the defendant argued that the plaintiff’s assertion of frivolous claims and bad faith conduct warranted imposition of sanctions pursuant to Sections 128.5 and 128.7. The court sustained the demurrer and dismissed the case but denied the request for sanctions. The court indicated that the defendant could choose to file a separate motion for sanctions. The defendant did so, but the motion was denied pursuant to the safe harbor rule on January 9, 2017. The defendant appealed.
Meanwhile, in August 2017, the Legislature amended Section 128.5 to include subdivision (f)(1)(B), which contains an explicit 21-day safe harbor period. The Nutrition Development court stated that this amendment confirmed the Legislature’s intent to include a safe harbor provision in former subdivision (f) and “abrogate several of the holdings under San Diegans for Open Government.” The court in Nutrition Development explicitly disagreed with the holding in San Diegans for Open Government and found the plain meaning and obvious intent of the Legislature in Section 128.5 prior to the August amendment was to incorporate the Section 128.7 safe harbor provision by cross-reference. Accordingly, the court affirmed the denial of sanctions.
Given the clear intent to incorporate the safe harbor requirement as stated in the new version of Section 128.5(f), the effect of the holding in Nutrition Development will be limited to sanctions orders issued under the prior version of the law without compliance with the safe harbor rule in reliance on San Diegans for Open Government. How many such orders are or will be subject to appeal — and whether the California Supreme Court will be asked to resolve the split of opinion on this now mostly moot issue — remains to be seen.
Author’s Note: In CPF Vaseo Associates, LLC v. Gray, 29 Cal. App. 5th 997 (2018) (filed December 6, 2018), the Fourth Appellate District reversed its decision in San Diegans for Open Government in favor of the holding and reasoning in Nutrition Distribution. Accordingly, there is no longer a conflict between the Fourth and Second Appellate Districts on this issue.
Reuben Raucher & Blum attorneys Timothy D. Reuben, Stephen L. Raucher, and Stephanie I. Blum are named as Southern California “Super Lawyers” for the 2018 edition of Southern California Super Lawyers magazine.
In a decision that falls in line with the majority of other circuits to have considered the question, the Ninth Circuit recently held that the Federal Arbitration Act (FAA) does not grant arbitrators the power to compel the production of documents from third parties prior to a hearing as part of pre-hearing discovery. Vividus v. Express Scripts, 2017 U.S. App. LEXIS 26233, *2 (9th Cir. 2017).
In Vividus, an arbitration panel issued a subpoena to Express Scripts, which was not a party to the arbitration in question. The subpoena directed Express Scripts to produce certain documents before an arbitration hearing. Express Scripts did not respond to the subpoena, and Vividus attempted to enforce it in federal court in Arizona. Based on 9 U.S.C. Section 7, the Arizona federal district court held that the FAA does not give arbitrators the power to compel the production of documents from third parties outside of a hearing, and Vividus appealed.
The Ninth Circuit began by evaluating the plain language of the statute in order to determine whether Section 7 of the FAA allows an arbitrator to order a third party to produce documents as part of pre-hearing discovery. Section 7 is entitled “Witnesses before arbitrators; fees; compelling attendance” and, in relevant part, states:
The arbitrators selected either as prescribed in this title or otherwise, or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case . . . if any person or persons so summoned to testify shall refuse or neglect to obey said summons, upon petition the United States district court for the district in which such arbitrators, or a majority of them, are sitting may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.
(Emphasis added). The court reasoned that, based on the plain language of the statute, the FAA gives arbitrators two powers: (1) the power to compel the attendance of a person as a witness, and (2) the power to compel the person to bring relevant documents. If the person does not comply, however, the district court can compel attendance. The court concluded that Section 7 only permits an arbitrator to order third parties to produce documents at a hearing.
The Third, Second, and Fourth Circuits have similarly interpreted Section 7. The Eighth Circuit, however, reached a different result. The Eighth Circuit held that “implicit in an arbitration panel’s power to subpoena relevant documents for production at a hearing is the power to order the production of relevant documents for review by a party prior to the hearing.” In re Security Life Ins. Co. of America, 228 F.3d 865, 870-71 (8th Cir. 2000). The Eighth Circuit reasoned that this approach facilitates the efficient resolution of disputes by allowing parties to “review and digest” documents before hearings. Id. at 870. The Ninth Circuit disagreed, stating that third parties should not be subjected to pre-hearing document production because they did not agree to the arbitrator’s jurisdiction. Therefore, the court argued that restricting third party disclosures to a hearing would lessen the burden on non-parties, as well as discourage fishing expeditions. This circuit split, however, makes the issue ripe for Supreme Court review.
What about under California state law? California Code of Civil Procedure Section 1282.6 is analogous to 9 U.S.C. Section 7. Section 1282.6 is entitled “Attendance of witnesses and production of evidence; Subpoenas” and, in relevant part, reads:
(a) A subpoena requiring the attendance of witnesses, and a subpoena duces tecum for the production of books, records, documents and other evidence, at an arbitration proceeding or a deposition under Section 1283, and if Section 1283.05 is applicable, for the purposes of discovery, shall be issued as provided in this section…
Unlike Section 7, Section 1282.6 specifically contemplates pre-hearing document production by third parties, at least in certain circumstances. But how are such subpoenas enforced?
The California Supreme Court honed in on a third party’s lack of consent to an arbitration agreement in Berglund v. Arthroscopic & Laser Center of San Diego, L.P. The question in this case was whether arbitration discovery orders to nonparties should be subject to full judicial review under the California Arbitration Act. Berglund v. Arthroscopic & Laser Center of San Diego, L.P., 44 Cal.4th 528, 532 (2008). The court held that while the dispute must first be submitted to the arbitrator for resolution, the nonparty is entitled to full judicial review of the order. The reasoning in this case relied heavily on the fact that third parties never consented to the jurisdiction of the arbitrator, who is free to not follow the law if he or she chooses and is only subjected to judicial review in narrow circumstances. Id. at 538. Thus, unlike federal law, an arbitrator’s subpoena can be judicially enforced under the California Arbitration Act.
Reuben Raucher & Blum is pleased to announce that Hanna I. Giuntini has joined the firm as an Associate.
Reuben Raucher & Blum is pleased to announce that Daniel R. Lahana has joined the firm as an Associate.