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Munoz v. GEICO General Insurance Co.

United States District Court, N.D. California

December 2, 2019

MARTISHA ANN MUNOZ, et al., Plaintiffs,



         Pending before the Court is GEICO General Insurance Company's (“GEICO”) motion to compel appraisal and dismiss or stay the case, for which briefing is complete. See Dkt. Nos. 30 (“Mot.”), 36 (“Opp.”), and 40 (“Reply”). Because the Court agrees with Plaintiffs that the dispute presented is not subject to the cited appraisal provision, the Court DENIES the motion.

         I. BACKGROUND

         On June 27, 2019, Plaintiffs, on behalf of themselves and all others similarly situated, filed a complaint alleging breach of contract claims against GEICO. Dkt. No. 1 (“Compl.”). Plaintiffs obtained GEICO private passenger automobile physical damage insurance policies, which included comprehensive and collision coverage (the “Policy”). Compl. ¶ 1. Plaintiff Munoz leased a vehicle and was in an accident on February 24, 2017, which rendered her vehicle a total loss. Id. ¶¶ 45-46. Plaintiff Ventrice-Pearson owned a vehicle and was in an accident on November 14, 2018, which rendered her vehicle a total loss. Id. ¶¶ 58-59. GEICO provided letters to both Plaintiffs determining the base values of the vehicles. Id. ¶¶ 47, 58-63.

         Plaintiffs allege that GEICO failed to pay the actual cash value for the total loss claims of Plaintiffs and others in the putative class. The Policy states that GEICO “will pay for collision loss to the owned auto or non-owned auto for the amount of each loss less the applicable deductible.” Id. ¶ 16. Plaintiffs argue that GEICO breached this provision by failing to pay sales tax owed where the total-loss vehicle was leased, and by only paying a prorated amount of the regulatory fees to all total-loss insureds instead of the full amount. Id. ¶¶ 28-40.


         The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., establishes that a written arbitration agreement is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2; see also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (noting federal policy favoring arbitration). “The [FAA] does not, however, define ‘arbitration.'” Wasyl, Inc. v. First Bos. Corp., 813 F.2d 1579, 1582 (9th Cir. 1987). Instead, state law, to the extent it is not inconsistent with the FAA, provides that answer. Id. Under California law, an appraisal agreement in an insurance policy is considered enforceable as an arbitration clause. See Louise Gardens of Encino Homeowners' Ass'n Inc. v. Truck Ins. Exch., Inc., 98 Cal.Rptr.2d 378 (2000) (finding that an agreement in an insurance policy to conduct an appraisal is considered to be an arbitration agreement); see also Wasyl, Inc., 813 F.2d at 1582 (noting that California law defining agreement does not conflict with the federal policy favoring arbitration).

         When a party moves to compel arbitration, the court must determine (1) “whether a valid arbitration agreement exists” and (2) “whether the agreement encompasses the dispute at issue.” Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). The agreement may also delegate gateway issues to an arbitrator, in which case the court's role is limited to determining whether there is clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). In either instance, “before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 530 (2019) (citing 9 U.S.C. § 2).

         When the parties contest whether an agreement was formed, the court applies “general state-law principles of contract interpretation, ” without a presumption in favor of arbitrability. Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742 (9th Cir. 2014) (internal quotation omitted). The party seeking to compel arbitration bears the burden of proving by a preponderance of the evidence that there was an agreement to arbitrate. Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 2017). Conversely, the party opposing arbitration is entitled to the benefit of all reasonable doubts and inferences. Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1141 (9th Cir. 1991). Therefore, a court may find that an agreement to arbitrate exists as a matter of law “[o]nly when there is no genuine issue of fact concerning the formation of the agreement.” Id. (internal quotation omitted); see also Alarcon v. Vital Recovery Servs., Inc., 706 Fed.Appx. 394, 394 (9th Cir. 2017) (same).


         As relevant here, the Policy provides:

If [GEICO] and the insured do not agree on the amount of loss, either may, within 60 days after proof of loss is filed, demand an appraisal of the loss. In that event, we and the insured will each select a competent appraiser. The appraisers will select a competent and disinterested umpire. The appraisers will state separately the actual cash value and the amount of the loss. If they fail to agree, they will submit the dispute to the umpire. An award in writing of any two will determine the amount of loss. We and the insured will each pay his chosen appraiser and will bear equally the other expenses of the appraisal and umpire.
[GEICO] will not waive our rights by any of our acts relating to appraisal.

Dkt. No. 1, Ex. A at 10. The policy defines “loss” as “direct and accidental loss of or damage to” the insured auto and defines “actual cash value” as “the replacement cost of the auto or ...

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