Plaintiff policyholder appealed a judgment from the Superior Court of Santa Clara County (California), which sustained defendant insurer’s demurrer and dismissed the policyholder’s class action suit challenging the insurer’s valuation methods for personal property losses.

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Overview

The parties disputed the extent of the insured’s loss in a home fire. The insured argued that the insurer’s depreciation adjustments were excessive. Instead of demanding an appraisal, the insured sought declaratory relief as to contractual and statutory interpretation issues regarding depreciation, along with a stay of the statutory appraisal process. The court held that because the Ins. Code, § 2071, appraisal procedure did not limit recourse to other remedies, the insured could pursue a cause of action for declaratory relief in accordance with Code Civ. Proc., §§ 1060, 1062, addressing issues that an appraiser lacked authority to resolve. Under such circumstances, declaratory relief could be necessary or proper within the meaning of Code Civ. Proc., § 1061. The insured did not have to submit to an appraisal under § 2071 prior to obtaining a judicial determination as to the proper interpretation of Ins. Code, § 2051, and the depreciation regulations thereunder. Because the rules governing arbitration applied to insurance appraisals, the trial court had discretion under Code Civ. Proc., § 1281.2, subd. (c), to stay the appraisal proceeding pending resolution of the legal questions.

Outcome

The court reversed the judgment of dismissal as to all claims except a consumer claim that had been abandoned. The court remanded with directions to the trial court to enter a new order sustaining the demurrer to the abandoned claim only and to exercise its discretion to consider whether and when declaratory relief should be granted.