Originally from Dispute Resolution Journal

CALIFORNIA UNINSURED MOTORIST

Recoverable Costs Can Exceed Policy Limits

The California Supreme Court held (1) that the cost-shifting provisions of Code of Civil Procedure § 998 apply to an uninsured motorist arbitration pursuant to Insurance Code § 11580.2(2) the “maximum liability” provision of Insurance Code § 11580.2(p)(4) does not preclude recovery of costs under Civil Procedure Code § 998 that, added to the arbitration award, exceed the coverage limits; (3) prejudgment interest is not available in the present action because it is not an action for “personal injury” within the meaning of Civil Procedure Code § 3291; and (4) such costs may include deposition and exhibit preparation expenses.

Isofea Pilimai was injured in a car accident with an uninsured driver. He filed a petition to compel arbitration with Farmers, his insurance carrier, under the uninsured motorist provisions of his policy. The policy limit for UIM coverage was $250,000. Prior to the arbitration, Pilimai served a settlement demand on Farmers pursuant to Civil Procedure Code § 998, offering to settle for $85,000. The offer was refused. The arbitrator found Pilimai was entitled to $556,972 in damages and entered an award “in that amount less the $15,000 credit that [Farmers] is entitled to, or the amount of the UIM limits which will have to be proven by declaration of the court upon a petition to confirm this arbitration award.” The award was silent on the subject of costs and prejudgment interest.

Both parties filed petitions to confirm the award as a judgment in the trial court. Farmers, however, sought to reduce the judgment to the policy limit, less the $15,000 credit. Pilimai claimed he was entitled to recover his costs of suit and prejudgment interest based on Civil Procedure Code §§ 998 and 3291.