Procedural Posture

Petitioners, a property owner and its law firm, sought a writ of mandate, supersedeas, or other relief to overturn an order of respondent Superior Court of San Diego County (California) that compelled them to arbitrate pursuant to Civ. Code, § 2860, subd. (c), what the trial court characterized as a fee dispute between petitioners and real party in interest insurer arising out of a construction defect action against the owner.

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Overview

Pursuant to a contract between the owner and a general contractor that was the insurer’s named insured, the contractor agreed under an express indemnity provision to defend the owner for claims arising from the contractor’s work on the project at issue. The owner timely requested that the contractor defend and indemnify it in the underlying construction defect action, but the contractor failed to do so. The court found that because issues regarding the duty to defend, breach, and bad faith in connection with the owner’s tender had to be decided in the trial court, and because those issues had not been resolved before the trial court granted the insurer’s motion under Civ. Code, § 2860, subd. (c), the trial court erred when it prematurely stayed the case and ordered the parties to arbitrate their “fee dispute.” When, as in the instant case, an insured raised in a bad faith action the duty to defend, breach, and bad faith by an insurer, those issues had to be resolved first in the trial court before any § 2860, subd. (c), arbitration because a determination of one or more of those issues in favor of the insured might eliminate altogether the need for arbitration under § 2860.

Outcome

The court granted the petition.

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