Case Number: BC488707    Hearing Date: July 21, 2014    Dept: 46

Posted 7-17-2014
For hearing on 7-21-2014 at 8:30 a.m. – Cal. No. 11

Case Number: BC488707
LORI HEMBREE VS ALLSTATE INSURANCE COMPANY
Filing Date: 07/20/2012
Case Type: Ins Coverage (not Complex) (General Jurisdiction)
Status: Pending
Future Hearings

07/21/2014
1. Petition To Disqualify Neutral Umpire
2. Status Conference
3. Trial Setting Conference

TENTATIVE RULING: Petition to Disqualify Lee Jay Berman as Umpire and Appointment of Neutral Umpire is GRANTED. Allstate is ordered to submit a new list of proposed nominees (with CVs) within 10 calendar days of this hearing, so that this court may proceed to appoint a neutral arbitrator pursuant to CCP § 1281.6. Both parties are ordered to provide CVs for its proposed nominees within 10 calendar days of this hearing. In light of this ruling, Trial Setting Conference is continued for 90 days until 10/21/2014 at 8:30 a.m. in Dept. 46

1. Plaintiff’s motion is for an order, per CCP §§1281.6 and 1281.91, disqualifying Lee Jay Berman (hereinafter, “Berman”) as umpire and for the appointment of a neutral umpire to preside over the appraisal of Plaintiff’s insurance claim with her insurer, Allstate. On 12/12/12, the court ordered this matter to appraisal. On/about 3/4/14, the parties’ appraiser selected Berman as the umpire. Following his selection, Berman disclosed an extensive prior and on-going relationship with Allstate and their appraiser and attorney. Berman is the umpire in two on-going appraisals with Allstate and refers to Allstate as a “client;” Berman has been a mediator where Allstate has been a party in “too many cases to count.” Plaintiff’s appraiser requested that Berman disqualify himself but he has refused. Since then, the parties have not been able to proceed with the appraisal due to the disagreement as to Berman’s disqualification and the selection of an alternative umpire. Plaintiff’s list of proposed nominees is as follows: (1) Honorable Eli Chernow (Ret.), Judge of LASC (available through ADR); (2) Ralph Williams, Esq.) (available through ADR specializes in insurance policies and coverage disputes); (3) Bill Beyer (President of G.W. Beyer Co. insurance adjusters); (4) Jim Humber (President of James M. Humber Co. insurance adjusters) and (5) Avner Gat (CFO of Goodroad & Gat, Inc. property loss consultants).

2. CCP § 1281.6 states as follows:

“If the arbitration agreement provides a method of appointing an
arbitrator, that method shall be followed. If the arbitration agreement
does not provide a method for appointing an arbitrator, the parties to
the agreement who seek arbitration and against whom arbitration is
sought may agree on a method of appointing an arbitrator and that
method shall be followed. In the absence of an agreed method, or if
the agreed method fails or for any reason cannot be followed, or
when an arbitrator appointed fails to act and his or her successor has
not been appointed, the court, on petition of a party to the arbitration
agreement, shall appoint the arbitrator.

When a petition is made to the court to appoint a neutral arbitrator,
the court shall nominate five persons from lists of persons supplied
jointly by the parties to the arbitration or obtained from a
governmental agency concerned with arbitration or private
disinterested association concerned with arbitration. The parties to
the agreement who seek arbitration and against whom arbitration is
sought may within five days of receipt of notice of the nominees from
the court jointly select the arbitrator whether or not the arbitrator is
among the nominees. If the parties fail to select an arbitrator within the
five-day period, the court shall appoint the arbitrator from the nominees.”

3. CCP § 1281.91 states, in pertinent part, as follows:

“(b)(1) If the proposed neutral arbitrator complies with Section 1281.9,
the proposed neutral arbitrator shall be disqualified on the basis of the
disclosure statement after any party entitled to receive the disclosure
serves a notice of disqualification within 15 calendar days after service
of the disclosure statement…”

4. Insurance Code § 2071 states, in relevant part, as follows:

“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.”

5. “When an insurer and its insured fail to agree on the amount of loss…, the Insurance Code requires each of them to select a ‘competent and disinterested appraiser,’ who are in turn required to agree on a ‘competent and disinterested umpire’ (or request appointment of one by the court) to form a three-member panel to adjudge the amount of loss. (Ins. Code, § 2071). California courts have concluded this adjudication must be conducted pursuant to the provisions of the California Arbitration Act, Code of Civil Procedure section 1280 et seq. (Arbitration Act). (See, e.g., Lambert v. Carneghi (2008) 158 C.A.4th 1120, 1129).” Mahnke v. Superior Court (2009) 180 C.A.4th 565, 570. In Mahnke, the 2nd District, Division 7 Court of Appeal queried, “[i]f a party objects to the proposed neutral arbitrator, section 1281.91 requires the objecting party to serve a notice of disqualification within 15 days of receipt of the disclosure statement. Do these disclosure and disqualification provisions apply only to the jointly proposed umpire in a loss appraisal proceeding or also to the ‘competent and disinterested’ appraisers unilaterally designated by the parties? If they do not apply, under what circumstances may a party to the appraisal proceeding disqualify an opposing party appraiser for cause?” Id. at 570. It subsequently stated that, “[t]he disclosure requirements in section 1281.9 and the Judicial Council’s Ethics Standards for Neutral Arbitrators do not apply to any arbitrator other than the jointly selected, or court-appointed, proposed neutral arbitrator—or, in the case of a contested appraisal proceeding, the competent and disinterested umpire.” Id. at 577. The foregoing language reflects Mahnke court’s recognition that CCP § 1281.91 applies to an umpire in the appraisal process.

5. The 3rd District Court of Appeal in Azteca Const., Inc. v. ADR Consulting, Inc. (2009) Azteca advised that:

“Section 1281.91, subdivision (b)(1), provides that a proposed arbitrator
who complies with his or her disclosure obligations under section 1281.9,
‘shall be disqualified on the basis of the disclosure statement ‘ if either
party serves a notice of disqualification within 15 days. (Italics added.)
This subdivision confers on both parties the unqualified right to remove
a proposed arbitrator based on any disclosure required by law which
could affect his or her neutrality. (See also Ethics Standards, former std.
10(a)(2) [now std. 12(a)(2) ].) There is no good faith or good cause
requirement for the exercise of this right, nor is there a limit on the
number of proposed neutrals who may be disqualified in this manner.
(Knight et al., Cal. Practice Guide: Alternative Dispute Resolution (The
Rutter Group 2003) ¶ 7:238, p. 7–49 (Knight).) As long as the objection
is based on a required disclosure, a party’s right to remove the
proposed neutral by giving timely notice is absolute.” Id. at 1163.

It further states that “Azteca had no independent burden to demonstrate that a reasonable person would doubt Taylor’s capacity to be impartial. (Compare §§ 1281.91 subd. (d), 170.1, subd. (a)(6)(C); Betz v. Pankow (1993) 16 C.A.4th 919, 926). The Legislature has already determined that any of the matters required to be disclosed by section 1281.9, subdivision (a), necessarily satisfies that standard. (See International Alliance of Theatrical Stage Employees, etc. v. Laughon (2004) 118 C.A.4th 1380, 1386-1387). Azteca’s demand for disqualification of a proposed neutral arbitrator therefore had the same practical effect as a timely peremptory challenge to a superior court judge under section 170.6—disqualification is automatic, the disqualified judge loses jurisdiction over the case and any subsequent orders or judgments made by him or her are void. (Lawrence v. Superior Court (1988) 206 C.A.3d 611, 615-616; Brown v. Swickard (1985) 163 C.A.3d 820, 824).”

6. Here, Berman issued his disclosure statement on 3/13/14. (Declaration of Robert Henry [hereinafter, “Henry”], Exhibit “B”). On 3/24/14, Henry (i.e., P’s appraiser) faxed a letter to D’s appraiser (i.e., Gary Halpin), which stated as follows:

“Dear Gary:

I received Mr. Berman’s disclosure letter and found an ‘Item of Concern:’

In the fifth paragraph, Mr. Berman states that he has—at present—two
cases where he is serving as umpire with Allstate Insurance Company and is in contact with Allstate Insurance Company’s attorney Mr. Thomas Byron.

At this time, I find it would be conflicting to be involved with a third appraisal of which Allstate Insurance Company and Mr. Byron are also involved.

Due to the above concern, I am voiding my endorsement of Lee J. Berman as umpire in the appraisal: Lori Hembree vs. Allstate Insurance Company.

Please contact me as soon as possible so that we can consider a new umpire.” (Id., Exhibit “D”).

7. Inasmuch as Henry’s letter was timely served within the 15 days as required by CCP § 1281.91, Berman’s disqualification was automatic and required.