Fourth District, Division 1 So Holds in Recent Published Decision.
Certain Cumis (162 Cal.App.3d 358) fee disputes are subject to arbitration under Civil Code section 2860(c). However, the Fourth District, Division 1, in Intergulf Development v. Superior Court (Interstate Fire & Cas. Co.), Case No. D055459 (4th Dist., Div. 1 Mar. 24, 2010) (certified for publication), decided that an insurer is not entitled to binding Cumis arbitration against the insurer for breach of contract and bad faith where there has been no determination that the insurer had a duty to defend and the parties dispute whether the insurer satisfied that duty and its obligations under section 2860. Insured’s complaint was for bad faith and breach of contract, not a dispute over the amount insurer should pay Cumis counsel, an important distinction with a difference for the appellate court. Otherwise, a premature determination that insurer is entitled to Cumis arbitration might “trump” critical factual questions at the heart of insured’s breach of contract and bad faith claims.
We would predict that this decision is going to generate some controversy among insurance law practitioners.