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Truck Ins. Exchange v. Superior Court12/18/1996
HASTINGS, J.
This writ proceeding presents a question whether confirmation of an arbitration award pursuant to Civil Code section 2860 is inconsistent with a prior reservation of rights issued by an insurance carrier. We conclude that it is not, and grant a peremptory writ of mandate ordering the trial court to set aside the original order granting summary adjudication in favor of real parties in interest.
STATEMENT OF FACTS
On July 24, 1991, real parties in interest, Andrew Cherng, Peggy Cherng, Panda Management Company, Inc., Panda Express, Inc., and Galleria II Panda Express, Inc. (collectively referred to as real parties), were served with a complaint filed in the Los Angeles County Superior Court by Jack Yu and Fung Nien Chow (the Yu action). The complaint alleged that Yu and Chow were business partners with the Cherngs in the various Panda entities.
Petitioner, Truck Insurance Exchange, had issued a number of insurance policies to real parties and they requested that petitioner provide defense and indemnity with regard to the Yu action. Petitioner agreed to provide a defense under a reservation of rights which included the "right to seek reimbursement of any sums spent in defense or settlement of the [Yu action] should it be determined that the Truck policies do not apply to the [Yu action]." In addition, petitioner advised real parties that if they believed a conflict of interest existed by reason of the reservation of rights they could invoke the provisions of Civil Code section 2860 (hereafter section 2860) and request independent counsel.
Real parties requested independent counsel and were afforded a defense by counsel of their choice, resulting in a judgment in their favor entered on March 26, 1993.
On July 14, 1992, petitioner initiated a declaratory relief action against real parties, seeking a declaration that it owed no duty to defend them in connection with the Yu action and that it was entitled to reimbursement for moneys spent in defense of the suit. Real parties cross-complained against petitioner alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief.
A dispute arose over the amount and nature of fees to be paid by petitioner to independent counsel, and petitioner filed a motion to compel arbitration pursuant to section 2860, subdivision (c). Petitioner contended arbitration would conclude all issues in connection with the cross-complaint filed by real parties, which petitioner characterized as basically seeking relief for attorneys fees pursuant to section 2860. Real parties filed opposition to the motion and disagreed with petitioner's characterization of their cross-action. They advised the court they had filed a first amended cross-complaint that expanded their theories beyond attorneys fees to include breach of the covenant of good faith and fair dealing, fraud, and negligent misrepresentation. However, they stated they were "agreeable to arbitration of its 'attorney's fees' dispute with [petitioner] as the scope of Section 2860(c) permits."
At the hearing on the motion, the scope of the arbitration was discussed and counsel for each side urged that the arbitration should be limited to attorneys fees and not include issues of bad faith, coverage, or other legal issues raised by the pleadings in the action. The court ultimately ruled: "I'm going to compel arbitration of the portions of the cross-complaint that fall under Civil Code 2860(c). The allegation re: denial of coverage shall not be included. . . . SHOULD I SAY THE ALLEGATIONS RE: denial of coverage and/or bad faith . . . And/or fraud . . . or neg
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