Woodland Hills car accident lawyer Barry P. Goldberg is known as an expert in Uninsured and Underinsured Motorist law and arbitration. Recently, he was consulted by another personal injury lawyer regarding the outside time to complete an Underinsured Motorist arbitration and whether there are any time requirements for prosecuting an Underinsured Motorist arbitration. Unfortunately, many competent personal injury lawyers get tripped up on the Underinsured Motorist time limits and deadlines.
The statute of limitations for filing Uninsured Motorist claims does not apply to Underinsured Motorist claims. This is because Underinsured Motorist benefits are not payable until bodily injury liability policies have been exhausted by payment of judgments or settlements and proof thereof provided to the insurer. (Ins. Code § 11580.2(p)(3)) “Exhaustion” of third-party policy limits cannot be predicted with any reasonable accuracy. For example, a case could be tried to a jury or could involve a minor. Therefore, imposing a “hard” limitations period for initiating an action makes no sense whatsoever. (This should be contrasted with some other states that do have firm underinsured motorist deadlines. Mr. Goldberg was recently involved with a California accident and an out of state policy where the Underinsured Motorist statute of limitations ran before the action accrued!)
Here is the problem with Underinsured Motorist time limits and deadlines in California—since it is vague and fluid, personal injury attorneys may be casual, to the detriment of their client/insured. There are stumbling blocks in every Underinsured Motorist claim that are actively placed by the insurance companies and their counsel. I have identified the three most common delay traps by the insurers.
Insurance Code Section 11580.2(i) provides in part:
“(1) No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within one year from the date of the accident:
“(A) Suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction.
“(B) Agreement as to the amount due under the policy has been concluded.
“(C) The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested. Notice shall be sent to the insurer or to the agent for process designated by the insurer filed with the department.
“(2) Any arbitration instituted pursuant to this section shall be concluded either:
“(A) Within five years from the institution of the arbitration proceeding.
“(B) [Time limitation if insured has a workers’ compensation claim.]
“(3) The doctrines of estoppel, waiver, impossibility, impracticability, and futility apply to excuse a party’s noncompliance with the statutory timeframe, as determined by the court.
The first delay trap is when counsel is lulled into not making a timely “formal demand” for Underinsured Motorist arbitration. Just because counsel is talking settlement with the insurance adjuster or its counsel does not mean that Underinsured Motorist arbitration has been initiated. After “bodily injury liability policies have been exhausted by payment of judgments or settlements and proof thereof provided to the insurer” a claimant must act “reasonably” prompt. The most common defense in the Underinsured Motorist cases that have been around for a while is “Laches.” An unreasonable delay in demanding arbitration may “waive” or “forfeit” the insured’s right to arbitration and thus bar his or her Uninsured or Underinsured Motorist claim. (See, e.g., Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783.)
This process becomes complicated because the statute of limitations on proceedings to compel arbitration does not expire until 4 years after either party refuses to arbitrate. (Spear v. California State Auto. Ass’n (1992) 2 Cal.4th 1035, 1044.) The insurers are not the ones that refuse to arbitrate—they just make delay arguments. The problem most often is that arbitration has never been effectively and unequivocally demanded by the claimant/insured. The insurers are generally content to negotiate, ask for additional information and avoid the topic of arbitration. This could go on for months and even years.
There is an additional “land mine” that keeps showing up in the Underinsured Motorist delay cases. The insured’s attorney misses the essential step in the demand process by providing a declaration under penalty of perjury regarding the availability of workers compensation. Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App4th 783; not a “formal” demand for arbitration without the accompanying declaration.)
The other more obvious mistake is that the UM statute Ins. Code Section 11580.2(i) provides in part: “(1) No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within one year from the date of the accident: . . .
‘(C) The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested. Notice shall be sent to the insurer or to the agent for process designated by the insurer filed with the department.’”
It is a difficult position to go into court to obtain relief when the facts demonstrate that counsel for the insured never complied with the mandatory requirement of formally instituting arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested and sent to the insurer or to the agent for process designated by the insurer filed with the department.
The next “land mine” is getting bogged down in the arbitrator selection process. The insurance company counsel has been effective in gumming up this process by not agreeing to insureds’ arbitrator suggestions, providing obviously poor choices for arbitrators and going back and forth endlessly. As a corollary, the insurance companies uniformly argue that appointing an arbitrator is unnecessary because they want to try to resolve the claim first, once all the evidence is available and discovery is complete. Insureds’ counsel are often willing accomplices in this insurer maneuver because they do not want to incur costs and, in many cases, the insured may still need additional medical care.
Claimant/insured’s counsel should beware. In the Gonzalez case referenced above, the insured’s 3–year delay in demanding arbitration was considered “unreasonable” and the court held that the insured had “waived” his right to arbitrate and thus barred his claim even though the statute of limitations had not run because the insurer had not refused to arbitrate.
Although arbitration is favored and waiver is not to be lightly inferred, California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the petitioning party has unreasonably delayed in undertaking the procedure to instances in which the petitioning party has previously taken steps inconsistent with an intent to invoke arbitration, as well as to situations of bad faith or willful misconduct. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196.) Waiver is not a mechanical process and no single test delineates what will constitute a waiver of arbitration. (Id. at p. 1195; Fleming Distribution Co. v. Younan (2020) 49 Cal.App.5th 73, 80.)
“When an arbitration agreement does not specify the time within which arbitration must be demanded, a reasonable time is allowed; a party who does not demand arbitration within a reasonable time is deemed to have waived the right to arbitration. [Citations.] ‘[W]hat constitutes a reasonable time is a question of fact, depending on the situation of the parties, the nature of the transaction, and the facts of the particular case. [Citations.]’ [Citation.] Among the facts a court may consider is any prejudice the opposing party suffered because of the delay.” (Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1043.)
Although delay and waiver are measured by the court on a case by case basis, claimant/insured’s counsel should consider 3 years after exhaustion of the underlying 3rd party policy as a hard deadline.
The third and final “land mine” for claimant/insureds is that the arbitration must absolutely, positively be completed within 5 years after arbitration after a formal demand for arbitration. (Santangelo v. Allstate Ins. Co. (1998) 65 Cal.App.4th 804, 811-12 (claimant’s written demand for arbitration was a formal institution of arbitration pursuant to § 11580.2, (i)).)
Again, it is not only common, but the rule, that counsel delays actually setting the arbitration, but engages in informal discussions and discovery for months and eventually years. This is especially true in cases where the insured has ongoing medical issues and procedures. Do not expect insurer counsel to remind you that the arbitration must be conducted within five years.
When the time crunch becomes recognized claimant/insured’s counsel figure that the equitable doctrines will bail them out. Under the statute, the running of the five-year period is tolled upon a finding that it was impossible, impractical, or futile to bring the matter to trial or arbitration. (§ 11580.2 (i)(3) “The doctrines of estoppel, waiver, impossibility, impracticality, and futility apply to excuse a party’s noncompliance with the statutory timeframe, as determined by the court.”
But, do not expect the courts to bail you out as they have almost uniformly denied equitable requests for tolling. In determining whether a claimant has shown impossibility, impracticability, or futility, “courts have focused on the extent to which the conditions interfered with the plaintiff’s ability to ‘mov[e] the case to trial’ during the relevant period. [Citations.]” (Gaines, supra, 62 Cal.4th at 1101.) “A plaintiff has an obligation to monitor the case in the trial court, to keep track of relevant dates, and to determine whether any filing, scheduling, or calendaring errors have occurred. This obligation of diligence increases as the five-year deadline approaches.” (Jordan v. Superstar Sandcars (2010) 182 Cal.App.4th 1416, 1422; see also De Santiago v. D & G Plumbing, Inc. (2007) 155 Cal.App.4th 365, 371 (impracticability exception “makes allowance for circumstances beyond the plaintiff’s control, in which moving the case to trial is impracticable for all practical purposes”.) The reasonable diligence requirements apply to uninsured motorist arbitrations, and the duty is arguably even higher, considering that arbitration is “‘intended to be more expeditious than litigation.’ [Citation.]” (Santangelo, supra, 65 Cal.App.4th at p. 816.)
It is advisable to act very promptly in Underinsured Motorist cases. The statutes were designed to provide prompt and relatively inexpensive resolution of these claims. By delaying even in the slightest, an injured insured defeats the very purpose of the statutes which were designed for his or her benefit. Perhaps more importantly, securing an early arbitration date by “effectively” demanding arbitration at the outset does more to favorably settle claims than any other action. Of course, the side benefit is that you will never have problems with any statutes of limitation or Laches defenses.