United States District Court for the Southern District of New York

March 11, 2022, Decided; March 11, 2022, Filed

20 Civ. 9067 (ER)

Reporter

2022 U.S. Dist. LEXIS 43516 *

WESCO INSURANCE COMPANY, Plaintiff, – against – PRIME PROPERTY & CASUALTY INSURANCE, INC., Defendant.

Core Terms

coverage, abstention, indemnify, district court, declaratory, subject matter jurisdiction, insured, parties, exercise jurisdiction, declaration, endorsement, abstain, driver

Counsel:  [*1] For Wesco Insurance Company, Plaintiff: Kevin E. Wolff, Kinney Lisovicz Reilly & Wolff P.C., New York, NY.

For Prime Property & Casualty Insurance, Inc., Defendant: Bruce Strikowsky, LEAD ATTORNEY, Schnader, Harrison, Segal & Lewis, New York, NY.

Judges: Edgardo Ramos, United States District Judge.

Opinion by: Edgardo Ramos

Opinion

OPINION & ORDER

Ramos, D.J.:

Wesco Insurance Company brought this action against Prime Property & Casualty Insurance, Inc. on October 29, 2020. Doc. 1. Wesco alleges that Prime improperly declined insurance coverage for JCA, which is insured by Prime, related to a car accident between a JCA vehicle and a vehicle insured by Wesco. Prime now moves to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(b)(7). Doc. 14.

The Court held oral argument and requested additional briefing on the issue of abstention. Docs. 19-21. For the reasons set forth below, the Court declines to exercise jurisdiction over this action and declines to rule on the motion to dismiss.

I. BACKGROUND

The following facts, unless otherwise indicated, are based on the allegations in the complaint, which the Court accepts as true for purposes of the instant motion. See, e.g., Koch v. Christie’s Int’l PLC, 699 F.3d 141, 145 (2d Cir. 2012).

Wesco is a Delaware insurance company with its principal place of [*2]  business in New York. Doc. 1 ¶ 1. Prime is an Illinois insurance company with its principal place of business in Utah. Id. ¶ 2.

Prime issued a commercial automobile liability insurance policy to JCA Transport Auto Export LLC for coverage from February 13, 2017 to February 13, 2018. Doc. 1 ¶ 5. The policy contains an MCS-90 endorsement which states that Prime will pay “any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance, or use of motor vehicles” operated in interstate commerce. Id. ¶ 12. The policy provides for payments of up to $1,000,000 on such claims. Id. This endorsement also states that Prime is not relieved “from liability or from the payment of any final judgment, within the limits of liability herein described” by any “condition, provision, stipulation or limitation contained in the policy.” Id. ¶ 13. As also relevant to this matter, the policy contains a provision by which Cesar Aguilar, JCA’s owner, agreed to indemnify Prime from any costs expended or owed as a result of claims involving a vehicle or driver who was not properly scheduled on the policy. Doc. 16-2 at 14.

Wesco issued a commercial automobile [*3]  liability insurance policy to B&B Millwork, Inc. for coverage from June 16, 2017 to June 16, 2018. Doc. 1 ¶ 6.

On September 25, 2017, a JCA vehicle operated with permission by Lamar Booker Jerrel, a JCA employee, struck the rear of a B&B vehicle operated by Tyrone Mejias, a B&B employee, on the Deegan Expressway in the Bronx, New York. Id. ¶ 7. JCA’s vehicle was being operated in interstate commerce. Id. ¶ 8. JCA notified Prime about the accident on December 18, 2017. Id. ¶ 9. Prime advised JCA and Jerrel that it would not defend or indemnify them against claims related to Mejias’ injuries from the accident. Id. Upon information and belief, Prime’s position is based on the “Scheduled Drivers Endorsement” provision of the policy that states that only identified and scheduled drivers are insured. Id. ¶ 11. Jerrel was not a scheduled driver on the accident date. Id.

After finding out that Prime would not defend or indemnify JCA, Mejias notified Wesco that he would pursue an uninsured motorist claim under the Wesco Policy’s “New Jersey Uninsured and Underinsured Motorist Endorsement.” Id. ¶ 10. Wesco then advised Prime in writing that Prime’s denial of coverage for JCA and Jerrel violates [*4]  New York law, including New York Vehicle and Traffic Law § 388. Id. ¶ 14. Wesco also advised Prime that even if they declined to defend or indemnify JCA or Jerrel, Prime would still be obliged to indemnify JCA for liability related to Mejias’ injuries because JCA’s vehicle was operating in interstate commerce at the time of the accident, triggering the MCS-90 endorsement. Id. ¶ 15. Prime has stated that, if that is the case, their obligation is excess to any obligation of Wesco to provide uninsured motorist coverage to Mejias. Id. ¶ 16. Wesco disagrees, stating that there is no priority of coverage issue at play because the policies insure different risks, with the sole obligation to defend and indemnify JCA and Jerrel resting with Prime. Id. ¶ 17.

Prime brought an action against JCA in Utah state court on June 15, 2020 seeking a declaration that the policy did not cover the accident because it involved an unscheduled driver, or in the alternative, that JCA is required to reimburse Prime for the resultant coverage payments. Doc. 16-1.

Mejias brought a personal injury action against JCA and Jerrel in the Bronx County Supreme Court in New York on September 18, 2020. Doc. 16-4. Notwithstanding its earlier position that it would [*5]  not defend JCA or Jerrel, Prime is paying the law firm of Ehrlich Gayner, LLC to serve as counsel for them. Doc. 15 at 11; Doc. 16-4; Doc. 16-5.

Wesco then filed this action on October 29, 2020, seeking a declaration that Prime’s denial of coverage is invalid under the policy and violates New York Vehicle and Traffic Law (NYVTL) § 388, resulting in an obligation to indemnify JCA for up to $1,000,000 for any judgment entered against JCA for Mejias’ injuries. Wesco also seeks a declaration that Prime’s obligation to defend and indemnify JCA is primary, and Wesco’s policy insures a different risk than Prime’s.

II. LEGAL STANDARD

A. 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) requires that an action be dismissed for lack of subject matter jurisdiction when the district court lacks the statutory or constitutional power to adjudicate the case. Fed. R. Civ. P. 12(b)(1). The party asserting subject matter jurisdiction carries the burden of establishing, by a preponderance of the evidence, that jurisdiction exists. Morrison v. Nat’l Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). “On a Rule 12(b)(1) motion challenging the district court’s subject matter jurisdiction, the court may resolve the disputed jurisdictional fact issues by referring to evidence outside of the pleadings . . . .” Zappia Middle East Constr. Co. Ltd. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000). When evaluating a motion to dismiss for lack [*6]  of subject matter jurisdiction, the court accepts all material factual allegations in the complaint as true but does not draw inferences from the complaint favorable to the plainti??. J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004) (citing Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998)).

Where, as here, a party also seeks dismissal on Rule 12(b)(6) grounds, the court must consider the Rule 12(b)(1) motion ??rst, Baldessarre v. Monroe-Woodbury Cent. Sch. Dist., 820 F. Supp. 2d 490, 499 (S.D.N.Y. 2011), a??’d, 496 F. App’x 131 (2d Cir. 2012), because “disposition of a Rule 12(b)(6) motion is a decision on the merits, and therefore, an exercise of jurisdiction.” Chambers v. Wright, No. 05 Civ. 9915 (WHP), 2007 U.S. Dist. LEXIS 92729, 2007 WL 4462181, at *2 (S.D.N.Y. Dec. 19, 2007) (quoting Magee v. Nassau Cnty. Med. Ctr., 27 F. Supp. 2d 154, 158 (E.D.N.Y. 1998)).

III. DISCUSSION

The pending Utah state action warrants dismissal of this case pursuant to the doctrine of abstention. At the request of the Court, the parties submitted supplemental briefing on this issue. Docs. 20, 21.

a. Legal Standard

Federal courts may abstain from exercising jurisdiction over an action for which there is a parallel state court proceeding based on considerations of “wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976) (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 72 S. Ct. 219, 96 L. Ed. 200, 1952 Dec. Comm’r Pat. 407 (1952)). A district court may sua sponte challenge subject matter jurisdiction, including through abstention principles. See F.D.I.C. v. Four Star Holding Co., 178 F.3d 97, 100 n.2 (2d Cir. 1999) (finding that a district court or appellate court could sua sponte address subject matter jurisdiction and applying Colorado River abstention [*7]  principles).

“An analysis of whether a court should abstain under Colorado River begins with a determination of whether the concurrent federal and state proceedings are ‘parallel’ in nature.” Fernandez v. City of New York, 2017 U.S. Dist. LEXIS 105574, 2017 WL 2894144, at *2 (S.D.N.Y. July 7, 2017) (citing Dittmer v. Cty. of Suffolk, 146 F.3d 113, 118 (2d Cir. 1998)). Federal and state proceedings are “parallel” for abstention purposes when “substantially the same parties are contemporaneously litigating substantially the same issue in another forum.” Niagara Mohawk Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84, 100 (2d Cir. 2012). “Perfect symmetry of parties and issues is not required. Rather, parallelism is achieved where there is a substantial likelihood that the state litigation will dispose of all claims presented in the federal case.” Shields v. Murdoch, 891 F. Supp. 2d 567, 2012 WL 4097199, at *5 (S.D.N.Y. 2012) (quoting In re Comverse Tech., Inc., 06 Civ. 1849 (NGG) (RER), 2006 U.S. Dist. LEXIS 80195, 2006 WL 3193709, at *2 (E.D.N.Y. Nov. 2, 2006)) (emphasis in original) (internal quotation marks omitted).

Colorado River abstention is only warranted in “exceptional circumstances.” Colorado River, 424 U.S. at 813. “The mere fact of concurrent state and federal proceedings ‘does not, without more, warrant staying exercise of federal jurisdiction.’” All. of Am. Insurers v. Cuomo, 854 F.2d 591, 602 (2d Cir. 1988) (quoting Colorado River, 424 U.S. at 816). In determining whether abstention is warranted, courts consider six factors:

(1) whether the controversy involves a res over which one of the courts has assumed jurisdiction, (2) whether the federal forum is less inconvenient than the other for the parties, (3) whether staying or dismissing the federal action will avoid piecemeal [*8]  litigation, (4) the order in which the actions were filed, and whether proceedings have advanced more in one forum than in the other, (5) whether federal law provides the rule of decision, and (6) whether the state procedures are adequate to protect the plaintiff’s federal rights.

Woodford v. Cmty. Action Agency of Greene County, Inc., 239 F.3d 517, 522 (2d Cir. 2001) (internal citations omitted). “No one factor is necessarily determinative; a carefully considered judgment taking into account both the obligation to exercise jurisdiction and the combination of factors counselling against that exercise is required.” Royal & Sun All. Ins. Co. of Canada v. Century Int’l Arms, Inc., 466 F.3d 88, 94 (2d Cir. 2006) (quoting Colorado River, 424 U.S. at 818-19). The balance of these factors is “heavily weighted in favor of the exercise of jurisdiction.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983). “Where a Colorado River factor is facially neutral, that ‘is a basis for retaining jurisdiction, not for yielding it.’” Niagara Mohawk Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84, 101 (2d Cir. 2012) (quoting Woodford, 239 F.3d at 522).

The Second Circuit has stated “the primary context in which we have affirmed Colorado River abstention in order to avoid piecemeal adjudication has involved lawsuits that posed a risk of inconsistent outcomes not preventable by principles of res judicata and collateral estoppel. The classic example arises where all of the potentially liable defendants are parties in one lawsuit, but in the other lawsuit, one defendant seeks a declaration of nonliability [*9]  and the other potentially liable defendants are not parties.” Woodford, 239 F.3d at 522 (citing De Cisneros v. Younger, 871 F.2d 305, 308 (2d Cir. 1989); General Reinsurance Corp. v. Ciba-Geigy Corp., 853 F.2d 78, 81 (2d Cir. 1988)); Lumbermens Mutual Casualty Co. v. Connecticut Bank & Trust, 806 F.2d 411, 414 (2d Cir. 1986).

A district court has greater discretion to abstain where the plaintiff seeks declaratory judgment. See Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S. Ct. 2137, 132 L. Ed. 2d 214 (1995) (in declaratory judgment actions, district courts have greater discretion to abstain “than that permitted under the ‘exceptional circumstances’ test of Colorado River“); see also Dittmer v. Cty. of Suffolk, 146 F.3d 113, 118 (2d Cir. 1998) (in declaratory judgment actions, “the district court ha[s] somewhat greater discretion to abstain” than in Colorado River). The Second Circuit has outlined five factors to consider before entertaining a declaratory judgment action:

(i) whether the judgment will serve a useful purpose in clarifying or settling the legal issues involved; (ii) whether a judgment would finalize the controversy and offer relief from uncertainty; (iii) whether the proposed remedy is being used merely for ‘procedural fencing’ or a ‘race to res judicata’; (iv) whether the use of a declaratory judgment would increase friction between sovereign legal systems or improperly encroach on the domain of a state or foreign court; and (v) whether there is a better or more effective remedy.

The New York Times Co. v. Gonzales, 459 F.3d 160, 167 (2d Cir. 2006) (citing Dow Jones & Co., Inc. v. Harrods Ltd., 346 F.3d 357, 359-60 (2d Cir. 2003)). “In deciding whether to exercise its permissive jurisdiction, a district court may consider [*10]  equitable, prudential, and policy arguments . . . and should examine the situation in its entirety.” Fleisher v. Phoenix Life Ins. Co., 858 F. Supp. 2d 290, 301 (S.D.N.Y. 2012).

b. Analysis

The Court declines to exercise jurisdiction over this declaratory judgment action. In light of the pending Utah state court action between Prime and JCA, this judgment will not serve a useful purpose or finalize the controversy to offer relief from uncertainty, since a judgment in this action could be contradictory to a judgment in the Utah action, if, for example, this Court finds that Prime has no coverage obligations and the Utah court finds that Prime does. See Jakobovits v. All. Life Ins. Co. of N. Am., No. 15 Civ. 9977, 2017 U.S. Dist. LEXIS 111471, 2017 WL 3049538, at *8 (S.D.N.Y. July 18, 2017) (dismissing declaratory judgment claim in part because declaration would not offer relief from uncertainty). Additionally, the Utah action was filed first, Doc. 16-1 at 15, and this action deals primarily with issues of state law that can adequately be decided in Utah state court.

Further, the Court hesitates to exercise jurisdiction in JCA’s absence, since the matter primarily concerns Prime’s insurance coverage of JCA and there is a risk that JCA could be subject to contradictory judgments. JCA cannot be added to this action through conventional means, since their presence in this action would destroy diversity [*11]  were they to be added as a defendant, Doc. 20 at 3; Doc. 21 at 6, and their interests are not perfectly aligned with Wesco’s were they to be added as a plaintiff under Rule 19(a)(2), Doc. 21 at 6. The Court also would not exercise supplemental jurisdiction over JCA as a third-party defendant due to the exceptional circumstance of the risk of inconsistent rulings with the Utah action. See Philip Morris Inc. v. Heinrich, No. 95 Civ. 328, 1998 U.S. Dist. LEXIS 3258, 1998 WL 122714, at *2 (S.D.N.Y. 1998) (declining to extend supplemental jurisdiction over third-party plaintiff’s claim pursuant to § 1367(c)(4) where there was “another action in existence in a New Jersey state court, addressing the same claims as those alleged in [the] third-party complaint.”).¹ Further, Prime and JCA indicated that Utah law would apply and selected Utah as their forum in the policy at issue, Doc. 16-1 at 18, and as a policy matter, the Court does not wish to disturb those preferences. See Roby v. Corporation of Lloyd’s, 996 F.2d 1353, 1361 (2d Cir. 1993) (explaining the “strong public policy in favor of forum selection . . . clauses.”). For all these reasons, the Court believes this matter will best be resolved in Utah, where Wesco may intervene.

IV. CONCLUSION

For the foregoing reasons, the case is dismissed. The Clerk of Court is respectfully directed to terminate the case.

It is SO ORDERED.

 [*12] Dated: March 11, 2022

New York, New York

/s/ Edgardo Ramos

Edgardo Ramos, U.S.D.J.

End of Document

---

¹ For these same reasons, the Court agrees with Prime’s arguments that JCA is a necessary and indispensable party. However, the Court does not dismiss this action on those grounds because Prime could remedy JCA’s absence by bringing third-party claims against JCA. See Ruffalo v. Coffaro, No. Civ. 87-1523 (JLC), 1989 U.S. Dist. LEXIS 19307, 1989 WL 83397, at *6 n.3 (E.D.N.Y. July 11, 1989), aff’d, 898 F.2d 137 (2d Cir. 1990), and aff’d, 898 F.2d 137 (2d Cir. 1990) (denying defendants’ motion to dismiss for failure to join an allegedly indispensable third party because “had defendants believed during the course of this litigation that [the third party] was indispensable to a proper adjudication of this matter, they could have brought her in as a third-party defendant, or moved to have her joined as a party pursuant to Rule 19(b) Fed.R.Civ.P.“.

March 15, 2022, Opinion Filed

B312094

Reporter

2022 Cal. App. Unpub. LEXIS 1565 *; 2022 WL 777308

LIBERTY MUTUAL FIRE INSURANCE COMPANY, Plaintiff and Appellant, v. MEHRANGIZ VAFI, Defendant and Respondent.

Notice: NOT TO BE PUBLISHED IN OFFICIAL REPORTS. CALIFORNIA RULES OF COURT, RULE 8.1115(a), PROHIBITS COURTS AND PARTIES FROM CITING OR RELYING ON OPINIONS NOT CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED, EXCEPT AS SPECIFIED BY RULE 8.1115(b). THIS OPINION HAS NOT BEEN CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED FOR THE PURPOSES OF RULE 8.1115.

Prior History:  [*1] APPEAL from an order of the Superior Court of Los Angeles County, No. 20STCP02362, Laura A. Seigle, Judge.

Disposition: Affirmed.

Core Terms

arbitrator, arbitration award, coverage, confirm, correction, insurer, damages, offset, trial court, policy limit, parties, underinsured, merits, costs, umbrella policy, adjudicated, attorney’s fees, motorist, clarify, vacate, statutory grounds, medical payment, matter of form, settlement, forfeited, imperfect, uninsured, contends, modify

Counsel: Law Offices of Wolf, O’Connor & Myers, Marjorie Motooka; Clyde & Co. US, Susan Koehler Sullivan, Brett C. Safford and Douglas J. Collodel for Plaintiff and Appellant.

Law Offices of Burg & Brock, Scott A. Kennedy and Craig D. Rackohn for Defendant and Respondent.

Judges: WILLHITE, J.; MANELLA, P. J., COLLINS, J. concurred.

Opinion by: WILLHITE, J.

Opinion

This appeal arises from an underinsured motorist arbitration between respondent Mehrangiz Vafi and her insurer, appellant Liberty Mutual Fire Insurance Company (Liberty Mutual). Based on Vafi’s automobile policy, the arbitration was limited to determining the damages that Vafi could recover from the underinsured motorist. The arbitration expressly omitted from consideration the scope of Liberty Mutual’s coverage under the policy. The arbitrator issued an award in favor of Vafi for $335,983.42. Thereafter, Liberty Mutual tendered a check to Vafi for $271,335.66 to cover her UIM claim. Liberty Mutual arrived at that amount by deducting from the arbitration award offset credits for a third-party settlement that Vafi had reached with the underinsured motorist’s [*2]  insurer ($50,000), and medical expenses Liberty Mutual had paid under Vafi’s medical payment coverage ($14,647.76).

When the parties disputed the amount of coverage, Liberty Mutual filed a petition in the trial court under Code of Civil Procedure section 1286.6, ¹ to correct the arbitration award, and to confirm the award. Conceding issues of coverage were not subject to arbitration, Liberty Mutual nevertheless sought to correct the award with language clarifying that Liberty Mutual was entitled to the offsets it had claimed. The court denied Liberty Mutual’s request to correct the arbitration award, and confirmed the award in a judgment. In doing so, the court found that Liberty Mutual had failed to provide any legal authority for the relief it sought, namely modifying an arbitration award by the judicial adjudication of an issue that was not arbitrated.

On appeal, Liberty Mutual contends the trial court erred by confirming the arbitration award without adding a provision to the award entitling Liberty Mutual the right to offset its coverage to Vafi. We conclude that the trial court correctly denied the petition to correct, and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. Pre-Arbitration Phase

In December 2017, Vafi was inside [*3]  her car waiting for a traffic light to change when she was struck by a vehicle driven by an underinsured driver. Vafi suffered bodily injuries as a result. Following the accident, Vafi was paid $50,000 by the driver’s insurer for the driver’s policy limits. Vafi then filed a claim with her own insurer, Liberty Mutual, under a personal automobile liability policy that included coverage for uninsured and underinsured motorists (“UIM”).

The UIM coverage in Vafi’s automobile policy contained a limit of $500,000 per accident. Liberty Mutual agreed to “pay compensatory damages which an ‘insured’ is legally entitled to recover from the owner or operator of an ‘uninsured motor vehicle’ [or underinsured motor vehicle] because of: [¶] 1. ‘Bodily injury’ sustained by an ‘insured’ and caused by an accident, and [¶] 2. ‘Property damage’ caused by an accident . . . . With respect to coverage [for accidents caused by underinsured motor vehicles], we will pay only after the limits of liability under any liability bonds or policies applicable to the ‘uninsured motor vehicle’ have been exhausted by payment of judgments or settlements.” The policy also reduced Liberty Mutual’s obligation to pay Vafi for [*4]  sums it would have already paid under Vafi’s medical payment coverage, and for any sums paid or payable by those legally responsible for causing a car accident.

The UIM coverage in Vafi’s automobile policy also contained an arbitration provision, which stated: “If we and an ‘insured’ do not agree: [¶] 1. Whether that person is legally entitled to recover damages under this coverage; or [¶] 2. As to the amount of damages; then the matter will be settled by arbitration. . . . Disputes concerning coverage under this part may not be arbitrated. [¶] . . . [¶] Any decision of the arbitrator will be binding as to: [¶] 1. Whether the ‘insured’ is legally entitled to recover damages; and [¶] 2. The amount of damages.”

Following several attempts at settling her UIM claim with Liberty Mutual, Vafi formally demanded arbitration under the automobile policy on September 25, 2019.

B. Arbitration Phase

The parties participated in arbitration beginning April 16, 2020, and continuing for a half-day on May 1, 2020. The arbitrator (the Honorable Jacqueline A. Connor, retired), issued her award on May 19, 2020. The award specified that the “matters at issue [were] the nature and extent of Ms. Vafi’s injuries [*5]  and damages.” Citing Insurance Code section 11580.2, ² the award provided that the “‘damages’ recoverable by the insured refers to the damages recoverable from the uninsured or underinsured motorist. . . . It does not refer to the amount recoverable by the insured from his or her insurer under the [UIM] policy.”

After summarizing the testimony presented during the arbitration proceeding and making its own findings concerning Vafi’s bodily injuries and damages, the arbitrator found “that the past economic damages . . . totaling $35,983.42, were reasonable and attributable to the accident. . . . [T]he need for continuing future monitoring and physical therapy are awarded to [Vafi] in the amount of $100,000. Past general damages to date are awarded in the amount of $100,000. . . . [F]uture general damages in the amount of $100,000 are also awarded. The total amount awarded is $335,983.42.”

Around June 2020, Liberty Mutual tendered a check to Vafi for $271,335.66—a number it had calculated after deducting from the arbitration award ($335,983.42) offset credits for Vafi’s third-party settlement ($50,000), and medical expenses Liberty Mutual had paid under Vafi’s medical payment coverage ($14,647.76).

In a June 23, [*6]  2020 letter to the arbitrator, Vafi requested clarification as to whether she was “entitled to the full amount of the award or is Liberty Mutual entitled to reduce the award by taking the [offset] credit[s] even though no such evidence was introduced by them at the time of the arbitration.” In its own letter to the arbitrator, Liberty Mutual noted that it was contractually entitled to offset its payment for the third-party settlement and medical payment coverage.

On July 6, 2020, the arbitrator issued a ruling upholding the award as submitted. The arbitrator construed Vafi’s request as a motion to correct the award, which was beyond the jurisdictional 10-day timeframe. (See § 1284.) ³ The arbitrator also noted that the issue of offsets “was not requested nor articulated orally in the hearing or in any of the briefs.”

Two days later, Vafi requested that the arbitrator reconsider her ruling. The arbitrator again denied Vafi’s request, this time noting that she no longer had jurisdiction to make any change or correction. (See § 1284 [an arbitrator may correct an award no later than 30 days after service of a signed copy of the award on the applicant seeking correction].)

C. Post-Arbitration Phase

On July [*7]  23, 2020, Liberty Mutual filed a petition to correct and confirm the arbitration award under section 1286.6, subdivisions (b) and (c). ⁴ The petition requested that the court confirm that the “award of $335,983.42 was and is exclusive of contractual and statutory offsets.” In support, Liberty Mutual argued that under the terms of Vafi’s policy, it was entitled to offset the third-party settlement and payments it had made on behalf of Vafi under the medical payments coverage.

In her opposition, Vafi argued that no grounds for the correction of an arbitration award existed under section 1286.6, “and thus the [c]ourt must confirm the award as rendered.” Vafi further argued that because setoffs were “[p]art and parcel of her damages,” and because the parties “did not stipulate to remove the issue of setoffs from arbitration,” Liberty Mutual’s right to setoffs was an issue to be decided in the arbitration. Vafi also asserted that she had not received $14,647.76 for prior medical expenses as alleged by Liberty Mutual. ⁵

Relying on Furlough v. Transamerica Ins. Co. (1988) 203 Cal.App.3d 40, 249 Cal. Rptr. 703 (Furlough) in its reply brief, Liberty Mutual argued that the trial court had authority under section 1286.6 to correct the arbitration award, which “embrace[d] matters outside the arbitration agreement.” Liberty Mutual also argued it [*8]  did not waive its offset rights by the failure to introduce evidence at the arbitration, as the parties had never stipulated to expand the scope of the arbitrator’s powers beyond those enumerated in Insurance Code section 11580.2, subdivision (f).

The trial court held a hearing on the matter on January 28, 2021. At the outset, the court informed Liberty Mutual that it had presented “no authority that the court can clarify an arbitration award that was—or consider evidence that was not put in front of the arbitrator.” Liberty Mutual responded that its request fell under section 1286.6, subdivision (c), because “the award is imperfect. We’re not asking the merits of the award or the outcome of the award be changed in any way. All we’re asking for is a clarification.”

After taking the matter under submission, the court issued an order denying Liberty Mutual’s petition to correct the arbitration award, and confirming the award. The court noted that it was not at all clear in what manner the award was imperfect. The court continued: Assuming Liberty Mutual was correct that the “issue of offsets is outside the scope of the arbitration and the only issue submitted to arbitration was the amount of damages [Vafi] suffered, . . . [Liberty Mutual] still did not submit legal [*9]  authority allowing the [c]ourt to modify or clarify an arbitration award. Having told the arbitrator that it would be error for the arbitrator to clarify the award and that no clarification or modification was needed, [Liberty Mutual] does not explain how—or provide legal authority that—the [c]ourt can do what [Liberty Mutual] said the arbitrator could not do.” The court noted that adding the additional language requested by Liberty Mutual was not merely a matter of correcting an award that was imperfect in form and that did not affect the merits of the arbitration award.

On February 18, 2021, the court entered judgment in favor of Vafi for $335,983.42 “as the prevailing party in this action against” Liberty Mutual. Liberty Mutual timely appealed.

DISCUSSION

The issue in this appeal is whether the trial court had the authority under section 1286.6 to “correct” the arbitration award with language clarifying that the “award . . . was and is exclusive of contractual and statutory offsets.” We conclude that the trial court in this case was correct in ruling it did not have that authority. The scope of the arbitration was limited to determining whether Vafi was entitled to recover an amount of “damages” [*10]  as that term was used in her policy and is understood in Insurance Code section 11580.2. (See Storm v. Standard Fire Ins. Co. (2020) 52 Cal.App.5th 636, 643-644, 266 Cal. Rptr. 3d 493; Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th 1190, 1197, 1200, 78 Cal. Rptr. 3d 519, 186 P.3d 1.) It did not include the matter of potential offsets.

A. Judicial Review of Arbitration Awards

An arbitration award under a UIM policy has the force and effect of a contract between the parties until it is vacated or confirmed with a judgment entered in conformity therewith. (See §§ 1287.4, 1287.6; Cinel v. Christopher (2012) 203 Cal.App.4th 759, 765, 136 Cal. Rptr. 3d 763; Pilimai v. Farmers Ins. Exchange Co. (2006) 39 Cal.4th 133, 141, 45 Cal. Rptr. 3d 760, 137 P.3d 939.) To obtain a correction of an arbitration award before it is confirmed, a party must file a petition with the trial court setting forth the statutory grounds on which the correction is sought. (See §§ 1285, 1285.8.)

A court’s review of an arbitration award is expressly limited to the statutory grounds for vacating an award under section 1286.2, or correcting an award under section 1286.6. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 33, 10 Cal. Rptr. 2d 183, 832 P.2d 899 (Moncharsh); see Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) 26 Cal.App.5th 743, 750, 237 Cal. Rptr. 3d 411 [judicial review is “‘extremely narrow’” because of “‘the strong public policy in favor of arbitration and according finality to arbitration awards’”].)

The “exclusive means” for correcting an arbitration award appear in section 1286.6. (Moncharsh, supra, 3 Cal.4th at pp. 24, 28; M. B. Zaninovich, Inc. v. Teamster Farmworker Local Union 946 (1978) 86 Cal.App.3d 410, 416, 150 Cal. Rptr. 233.) As relevant here, section 1286.6 provides that the court “shall correct the award and confirm it as corrected if the court determines that: [¶] . . . [¶] (c) The award is imperfect in a matter of form, not affecting the merits of the controversy.” Section 1286.6 does not authorize a court [*11]  to reconsider the merits of the original award, make a new award under the guise of correction of the award, or add a new element of damages not covered in the award as rendered. (Landis v. Pinkertons, Inc. (2004) 122 Cal.App.4th 985, 992, 18 Cal. Rptr. 3d 890; Severtson v. Williams Construction Co. (1985) 173 Cal.App.3d 86, 93, 95, 220 Cal. Rptr. 400.) Section 1286.6 does not authorize “a revision in substance” in which a court “add[s] an element of damages not covered . . . in the award as rendered.” (Banks v. Milwaukee Ins. Co. (1966) 247 Cal.App.2d 34, 37, 55 Cal. Rptr. 139 (Banks).)

Whenever a party files a petition to confirm, correct, or vacate an arbitration award, the trial court must confirm the award, correct the award and confirm it as corrected, vacate the award, or dismiss the proceeding. (§ 1286; Soni v. SimpleLayers, Inc. (2019) 42 Cal.App.5th 1071, 1085, 255 Cal. Rptr. 3d 842.)

We review the trial court’s order confirming the arbitration award de novo to determine whether the award can be corrected under the grounds listed in section 1286.6. (See EHM Productions, Inc. v. Starline Tours of Hollywood, Inc. (2018) 21 Cal.App.5th 1058, 1063-1064, 230 Cal. Rptr. 3d 862; Glaser, Weil, Fink, Jacobs & Shapiro, LLP v. Goff (2011) 194 Cal.App.4th 423, 433, 125 Cal. Rptr. 3d 26.)

B. No Statutory Ground Exists to Correct the Arbitration Award

Relying on subdivision (c) of section 1286.6, and Furlough, supra, 203 Cal.App.3d 40, Liberty Mutual contends that the court, through a petition to correct an arbitration award, can “confirm the correctness of the payment it tendered to Vafi as calculated by the Arbitration Award minus the . . . offsets to which Liberty Mutual is entitled.” ⁶ In other words, Liberty Mutual contends that under section 1286.6, the court could modify the award by adjudicating a coverage dispute never considered by the arbitrator. [*12]  Liberty Mutual is mistaken.

Subdivision (c) of section 1286.6 provides for the correction of an award that is “imperfect in a matter of form, not affecting the merits of the controversy.” Notably absent from Liberty Mutual’s briefing is any discussion or citation to relevant legal authority addressing section 1286.6, subdivision (c). “When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority,” we may treat the point as forfeited. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, 57 Cal. Rptr. 3d 363; see United Grand Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 153, 248 Cal. Rptr. 3d 294 [courts may treat as forfeited “‘conclusory arguments that . . . fail to disclose the reasoning by which the appellant reached the conclusions he wants us to adopt’”].) Liberty Mutual has thus forfeited this argument on appeal.

Even on the merits, Liberty Mutual’s argument fails. Under subdivision (c) of section 1286.6, correction of an arbitration award can be made only for “nonsubstantive matters of form that do not affect the merits of the controversy.” (Century City Medical Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal.App.4th 865, 877, 103 Cal. Rptr. 2d 605.) Several cases that have utilized subdivision (c) to correct an arbitration award have done so to clarify issues that had already been adjudicated during the arbitrator.

In Britz, Inc. v. Alfa-Laval Food & Dairy Co. (1995) 34 Cal.App.4th 1085, 40 Cal. Rptr. 2d 700 (Britz), the parties agreed to arbitrate a large sale and lease contract for miscellaneous plant equipment and machines. (Id. at p. 1090.) The arbitrator issued an interim award in favor [*13]  of the defendants on liability in January 1992, and a final award in their favor in the amount of $587,425, “plus costs and attorney fees in an unspecified amount” in March 1993. (Id. at p. 1091.) “After additional submissions by the parties, the arbitrator . . . issued a supplemental award of $1,412,953.75 for [the defendants’] attorney fees and $696,747.45 as costs.” (Ibid.)

On appeal from a judgment confirming the arbitration award including attorney fees and costs, the plaintiffs contended, inter alia, that the arbitrator did not have jurisdiction to issue the supplemental award for attorney fees and costs. (Britz, supra, 34 Cal.App.4th at pp. 1093, 1105.) The court rejected the contention, and reasoned that because the arbitrator’s January 1992 award did award attorney fees and costs, the failure “to establish an exact dollar amount for the award of fees and costs . . . is at most a defect in the form of the award” under section 1286.6, subdivision (c). (Id. at pp. 1105-1106.) In other words, the court found the omission of an exact dollar figure amount for an award of attorney fees and costs constituted a non-substantive matter of form subject to correction. (Ibid.)

In Krautner v. Johnson (1961) 189 Cal.App.2d 717, 11 Cal. Rptr. 447 (Krautner), an arbitrator issued an award in favor of the plaintiffs for “sums claimed due therefor” for constructing a residence [*14]  for the defendant. (Id. at p. 718.) The original award stated that the plaintiffs “‘have substantially completed the [construction] contract and are entitled to the sum of $3,880.00, the total amount due under the written contract.’” (Ibid.) This quoted language was “marked out, initialed by all arbitrators, and the words ‘We find that the amount of the last payment unpaid under the basic contract was the amount of $3,880.00’ were added to the next paragraph and similarly initialed. Apparently this form was forwarded to the parties, but before filing of the award with the court, the page was retyped so as to show only the corrected form.” (Ibid.)

On appeal from an order confirming the amended award, the defendant contended that the alteration “vitiate[d] it.” (Krautner, supra, 189 Cal.App.2d at p. 718.) The court disagreed, reasoning that “the alteration, even if made after furnishing of copies to the parties, is one of form only. It would be hypertechnical to hold that it voids the award. [The] alteration was even more clearly but one of form, rather than substance.” (Id. at p. 719.)

The foregoing cases used subdivision (c) of section 1286.6 to correct an arbitration award on issues that had already been adjudicated by the arbitrators. (See Britz, supra, 34 Cal.App.4th at pp. 1105-1106 [correction made to specify a dollar figure [*15]  amount for an award the arbitrator had already adjudicated]; Krautner, supra, 189 Cal.App.2d at pp. 718-719 [correction made to rephrase a portion of an award to more accurately reflect the grounds on which the arbitrator adjudicated an issue].)

The correction sought by Liberty Mutual in this case pertains to an issue that was never placed before the arbitrator. Indeed, throughout the entirety of this litigation, Liberty Mutual has maintained that the arbitrator did not, and could not, adjudicate a coverage dispute under Vafi’s policy. Granting the relief requested by Liberty Mutual would first require the judicial adjudication of a new issue before supplementing the arbitration award under the guise of a “correction.”

This type of judicial intervention is a not a correction of a matter of form in an award, but “a revision in substance,” requiring a recalculation of damages not covered in the award as rendered. (Banks, supra, 247 Cal.App.2d at p. 37.) Modifying the arbitration award to implement the offset provisions of the policy would reduce Liberty Mutual’s liability to Vafi, and would subject the entire award to vacation. (See Elliott & Ten Eyck Partnership v. City of Long Beach (1997) 57 Cal.App.4th 495, 501-503, 67 Cal. Rptr. 2d 140; Krautner, supra, 189 Cal.App.2d at pp. 718-719 [“[a] change in substance would require vacation of the award . . . if it resulted in prejudice to either party”].)

Liberty Mutual’s reliance [*16]  on Furlough, supra, 203 Cal.App.3d 40, is equally misplaced. Furlough relied on section 1286.6, subdivision (b), ⁷ a statutory ground not asserted by Liberty Mutual in this appeal. (See id. at pp. 46-47.) The circumstances under which Furlough was decided are also distinguishable.

In Furlough, the plaintiff was injured by a hit-and-run driver while driving a tractor-trailer rig that had been covered by various auto policies with the defendant-insurer. (Furlough, supra, 203 Cal.App.3d at p. 43.) The primary policy, which included UIM coverage with a limit of $300,000 per accident, was supplemented by two additional policies: (1) a personal umbrella policy, which provided UIM coverage of $25,000 maximum per accident; and (2) a $1 million commercial umbrella policy, which did not mention UIM coverage. (Ibid.) In his demand for arbitration, plaintiff sought $1.3 million in damages, and asserted the commercial umbrella policy provided a $1 million limit for UIM coverage limit beyond the $300,000 limit under primary policy. (Id. at p. 44.) Following arbitration proceedings, the arbitrator “rendered an award ordering [the insurer] to pay [the plaintiff] $744,695 ‘as general damages under the uninsured motorist provision on the policy.’” (Ibid.)

In response to the plaintiff’s petition to confirm the arbitration award, [*17]  the insurer sought to correct the award to $325,000, representing the policy limits for UIM coverage. (Furlough, supra, 203 Cal.App.3d at p. 44.) In seeking a correction, the insurer argued that the arbitrator had “exceeded his powers by making an award in excess of the applicable policy limits.” (Ibid.) The trial court agreed, and determined that the “commercial umbrella policy [did] not provide [UIM] coverage; such coverage is limited to $325,000 as provided by the primary policy and the personal umbrella policy.” (Ibid.) The court entered judgment reducing the award to $325,000, and confirmed the award as corrected. (Ibid.)

On appeal, the plaintiff contended that the parties had in fact submitted to arbitration the question of policy limits, and “therefore the award, which in effect determined that such coverage was afforded by the commercial umbrella policy, is binding.” (Furlough, supra, 203 Cal.App.3d at p. 46.) The court rejected the plaintiff’s argument.

The court first noted that “[t]he record on appeal does not include the papers purportedly submitted in the arbitration proceeding upon which the [plaintiff’s] argument was based. Further, the trial court issued no statement of decision, none having been requested. (Code Civ. Proc., § 632.) Under these circumstances it must be [*18]  presumed in support of the judgment that the trial court resolved against [the plaintiff] the issue of the parties’ claimed submission of coverage and policy limits to arbitration.” (Furlough, supra, 203 Cal.App.3d at p. 46.) The court continued: “An arbitration award which embraces matters outside the agreement and not submitted to the arbitrator is subject to modification under Code of Civil Procedure section 1286.6, subdivision (b). (See Meat Cutters Local No. 439 v. Olson Bros. (1960) 186 Cal.App.2d 200, 204, 8 Cal. Rptr. 789; Doyle v. Hunt Construction Co. (1954) 123 Cal.App.2d 51, 54, 266 P.2d 152.) The trial court impliedly determined that the issue of the extent of [UIM] coverage was not submitted to the arbitrator and therefore such issue was before the court for determination. (See Allstate Ins. Co. v. Shmitka [(1970)] 12 Cal.App.3d 59, 63, 90 Cal. Rptr. 399.)” (Furlough, supra, at pp. 46-47, fn. omitted.) Therefore tasked with resolving this issue in the arbitration award, the court in Furlough held that a correction was required to reduce the plaintiff’s recovery from the insurer to $325,000, as reflected as the UIM limits provided in the primary policy and supplemented personal umbrella policy. (Furlough, supra, 203 Cal.App.3d at p. 47.)

Liberty Mutual contends that Furlough “confirm[s] the validity of its post-arbitration requests for offsets,” as that case “implement[ed] Section 1286.6 to modify an arbitration award to reflect the amount an insurer is obligated to pay.” Liberty Mutual reads Furlough much too broadly. Absent from Furlough is any discussion on the issue of contractual or statutory offsets for UIM [*19]  coverage. Rather, the court’s analysis was limited to determining whether the arbitration award ordering the insurer to pay the insured $741,795 “embrace[d] matters outside the agreement,” as the amount ordered was in excess of the policy limits providing UIM coverage, but less than the policy limits of all three policies. In other words, the court determined that the arbitration award was subject to correction under section 1286.6, subdivision (b), because it adjudicated a coverage issue that was never submitted for arbitration.

The circumstances in this case are different. Here, the arbitration proceedings were mandated under only one policy with UIM policy limits of $500,000 per accident. The amount listed in the arbitration award ($335,983.42) was in an amount less than the policy limit. The arbitrator did not order Liberty Mutual to pay that specific amount, and as discussed ante, the arbitrator was not asked to and did not rule on any issue of coverage. Thus, under the reasoning of Furlough, the arbitrator in this case never determined a coverage issue or policy limit in excess of her powers. Furlough simply does not apply to the facts before us.

Thus, because no statutory ground exists under section 1286.6 to correct the arbitration award, [*20]  we conclude that the court properly denied Liberty Mutual’s petition to correct the arbitration award, and correctly confirmed the award as final. (§ 1286.) As we shall now discuss, however, Liberty Mutual is not without a remedy.

As raised for the first time at oral argument, counsel for Vafi contends that the judgment entered in this case has “forfeited” Liberty Mutual’s right to file a declaratory relief action to determine whether it can offset its coverage to Vafi. To begin with, this new argument cannot be raised for the first time in oral argument. (People v. Pena (2004) 32 Cal.4th 389, 403, 9 Cal. Rptr. 3d 107, 83 P.3d 506; BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 854, 14 Cal. Rptr. 3d 721.) Even on the merits, counsel has not demonstrated how a party may forfeit its right to file a cause of action to determine an issue neither litigated nor determined in a prior action. To the extent counsel argues the judgment is res judicata as to any future cause of action to determine scope of coverage issues, he is mistaken. (See Helfand v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 869, 896, 13 Cal. Rptr. 2d 295 [res judicata inapplicable to judgment confirming arbitration award that “did not impact or determine rights as between the insurer and its insureds”]; Sandler v. Casale (1981) 125 Cal.App.3d 707, 713, 178 Cal. Rptr. 265 [“the binding res judicata effect of the confirmed award” did not bar declaratory relief action to determine the parties’ rights and duties under the judgment].) [*21] 

DISPOSITION

The order is affirmed. Respondent shall recover her costs on appeal.

WILLHITE, J.

We concur:

MANELLA, P. J.

COLLINS, J.

End of Document

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¹ Unspecified statutory references are to the Code of Civil Procedure.

² The Uninsured Motorist Act (Ins. Code, § 11580.2 et seq.) requires auto insurance policies to provide UIM coverage for motorists whose liability insurance is less than the limits carried on the injured motorist’s insurance plan. (Id., § 11580.2, subd. (p)(2).) As used in Insurance Code section 11580.2, the term “damages” refers to “bodily injury or wrongful death from the owner or operator of an uninsured [or underinsured] motor vehicle.” (Id., § 11580.2, subd. (a)(1).)

³ Under section 1284, a party may submit an application to “correct” an award “not later than 10 days after service of a signed copy of the award on the applicant” seeking a correction.

⁴ A party to an arbitration in which an award has been made may petition the court to confirm, correct, or vacate the award. (§ 1285.)

As provided in section 1286.6, the grounds for the correction of an award include “(b) The arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted;” and “(c) The award is imperfect in a matter of form, not affecting the merits of the controversy.”

⁵ Vafi alleged that she had only received $8,166.76 under the medical payment coverage.

⁶ In the trial court, Liberty Mutual argued that the court could correct the arbitration award on two statutory grounds: subdivisions (b) and (c) of section 1286.6. Liberty Mutual does not raise subdivision (b) of section 1286.9 on appeal, and that subdivision is therefore not in issue.

⁷ Section 1286.6, subdivision (b), not in issue in this appeal (see fn. 6, ante), provides for the correction of an award if the arbitrator “exceeded [its] powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted.”