COURTS, NOT ARBITRATORS, DECIDE DISPUTED COVERAGE ISSUES IN UM AND UIM CASES; ARBITRATORS DECIDE WHETHER INSURED'S PRIOR JUDGMENT AGAINST TORTFEASOR BINDS INSURER.

Bouton v. USAA Casualty Insurance Co.; O'Hanesian v. State Farm Mutual Automobile Insurance Co. (June 9, 2008, S149847, S149851)

In these consolidated cases, the Supreme Court explained and applied Insurance Code section 11580.2, subdivision (f), which requires that, absent an agreement between insurer and insured, they must arbitrate the underinsured motorist's liability and the insured's damages.

The Supreme Court held:

1.   Whether a person claiming underinsured motorist policy benefits is an insured under the policy is a coverage question outside the scope of the statutory arbitration mandate and thus must be decided by the court, not by an arbitrator. The court overruled its contrary decision in Van Tassel v. Superior Court (1974) 12 Cal.3d 624.

This holding ensures that UM and UIM coverage determinations will be made by the courts and will be reviewable on appeal in the ordinary course.

2.   Whether the insured's default judgment against the underinsured motorist binds the underinsured motorist insurer is a question that falls within the scope of the statutory arbitration mandate and thus must be decided by an arbitrator, not by the court.

Horvitz & Levy represented State Farm in the O'Hanesian case.

For more information about the case, contact Mitch Tilner at (818) 995-0800, or mtilner@horvitzlevy.com.

Click here to visit Horvitz & Levy's punitive damages blog, http://www.calpunitives.com/.

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