Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-01403/USCOURTS-caed-2_07-cv-01403-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Contract Default

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

AMBER GINORIO, No. 2:07-cv-01403-MCE-DAD

Plaintiff,

v. MEMORANDUM AND ORDER

STATE FARM MUTUAL AUTOMOBILE

INSURANCE, and DOES 1 through

25, inclusive,

Defendants.

----oo0oo----

After sustaining injuries in an automobile accident and

recovering available insurance proceeds on behalf of the

responsible driver, Plaintiff Amber Ginorio (“Plaintiff”) sought

additional damages from her own carrier, Defendant State Farm

Mutual Insurance Company (“State Farm”). Plaintiff subsequently

filed a lawsuit against State Farm in state court, alleging that

State Farm was liable for breach of contract and breach of the

covenant of good faith and fair dealing because of its alleged

delay in paying remaining policy proceeds. 

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Case 2:07-cv-01403-MCE -DAD Document 14 Filed 08/30/07 Page 1 of 7
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 Because oral argument would not be of material assistance, 1

this matter was deemed suitable for decision without oral

argument. E.D. Local Rule 78-230(h).

2

State Farm removed Plaintiff’s action to this Court on grounds of

diversity of citizenship pursuant to 28 U.S.C. §§ 1332 and

1441(a). Now before the Court is State Farm’s Motion to Stay

these proceedings until after arbitration mandated by its

insurance policy with Plaintiff has been completed. For the

reasons set forth below, that Motion will be GRANTED.1

BACKGROUND

In 2001, Plaintiff was involved in an automobile accident

with another motorist, Aneel Singh. Singh had liability

insurance with a single policy limit of $30,000. Singh’s carrier

ultimately paid that entire limit to Plaintiff. Claiming that

her damages exceeded the coverage she received, Plaintiff sought

further compensation from her own insurance company, State Farm. 

 Plaintiff’s State Farm policy included underinsured

motorist coverage, which provides additional compensation to an

insured for an accident involving a motorist whose insurance will

not fully cover the damages. In February of 2005, Plaintiff made

a claim for the difference between the amount she received from

Singh’s carrier and the $100,000 policy limit available under her

own coverage with State Farm. 

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 Coverage U encompasses both uninsured and underinsured 2

motorist claims.

3

The terms of State Farm’s policy provide for binding

arbitration of an underinsured claim in the event that no

agreement as to the amount owed can be reached. The policy, in

accordance with the provisions of California Insurance Code

§ 11580.2(f), requires that both the liability of the alleged

underinsured motorist, and the amount of damages available as a

result of that liability, be resolved through arbitration as

follows:

Deciding Fault and Amount Under Coverage U2

Two questions must be decided by agreement between the

insured and us:

1. Is the insured legally entitled to collect damages from

the owner or driver of the uninsured [underinsured] motor

vehicle; and

If so, in what amount?

If there is no agreement, upon written request of the

insured or us, these questions shall be decided by

arbitration as provided by section 11580.2 of the California

Insurance Code....

State Farm policy, attached as Exhibit “A” to the Declaration of

Robert S. McLay.

The inability of the parties to agree on a mutually

acceptable resolution of Plaintiff’s underinsured motorist claim

prompted Plaintiff to demand arbitration under the abovereferenced policy provisions. The parties ultimately petitioned

the Sacramento County Superior Court to appoint an arbitrator

when they could not themselves agree on a selection. 

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4

After a hearing date of July 9, 2007 was set by Douglas Smith,

the attorney appointed to arbitrate the case, State Farm sought

to postpone the hearing on grounds that further discovery was

necessary. Plaintiff responded by filing the present lawsuit,

even though the arbitration itself had not transpired. As

indicated above, State Farm now asks the Court to stay the

instant action until the underinsured motorist arbitration is

completed.

STANDARD

The power to stay proceedings is a matter within this

Court’s discretion. Good v. Prudential Ins. Co., 5 F. Supp. 2d

804, 806 (N.D. Cal. 1998). The Supreme Court stated this power

is "incidental to the power inherent in every court to manage the

schedule of cases on its docket to ensure fair and efficient

adjudication." Landis v. North American Co., 299 U.S. 248,

254-255 (1936). A trial court has the power to stay proceedings

in the interest of saving time and effort for the court and the

parties involved, but in exercising this power, the court should

consider whether arbitration will conclude in a reasonable time. 

ATSA of California, Inc. v. Continental Ins. Co., 702 F.2d 172,

176 (9th Cir. 1983). “Where it is proposed that a pending

proceeding be stayed, the competing interests which will be

affected by the granting or refusal to grant a stay must be

weighed.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962).

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 See State Farm Mut. Auto. Ins. Co. v. Superior Court, 123 3

Cal. App. 4th 1424, 1434 (2004) (in an uninsured/underinsured

motorist case, whether or not the insurance carrier “paid in an

untimely manner, or engaged in other claims-handling misconduct,

is not an issue for the arbitrator”)

5

The Court should further consider the possible damage which may

result from the granting of a stay, the hardship or inequity a

party may suffer in being required to proceed, and “the orderly

course of justice measured in terms of the simplifying or

complicating of issues, proof, and questions of law which could

be expected to result from a stay.” CMAX, Inc., 300 F.2d at 268.

ANALYSIS

An order to stay an action should be granted when the action

involves a matter subject to pending arbitration, and the action

will be impacted by the result of that arbitration. See Federal

Insurance Company v. Superior Court, 60 Cal. App. 4th 1370, 1375

(1998). Here, Plaintiff’s contractual and bad faith claims

against State Farm defendant will likely be impacted by the

pending arbitration. Although is it undisputed that those claims

are not themselves subject to arbitration, the arbitrator’s 3

determination as to the amount owed by State Farm, if any, on

behalf of the underinsured motorist may well be critical in

determining whether State Farm’s handling of the claim was

flawed. 

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6

If, for example, the arbitrator finds that Plaintiff’s damages as

a result of the subject accident equal or exceed the remaining

coverage available under her underinsured motorist policy,

Plaintiff’s contractually based claims against State Farm may be

significantly strengthened. Under California law, an insurance

company’s failure to deal fairly with its insured by refusing to

timely compensate the insured for a loss covered by the policy

may give rise to a breach of an implied covenant of good faith

and fair dealing against the insurer. Gruenberg v. Aetna Ins.

Co., 9 Cal. 3d 566, 574 (1973). On the other hand, should the

arbitrator find that Plaintiff is not entitled to any additional

compensation, or even an amount substantially less than the

remaining policy limits she seeks, the defense position that

immediate payment was not required would obviously be bolstered. 

In any event, the result of the arbitration will likely affect

the viability of Plaintiff’s bad faith claim one way or the

other.

Moreover, were the bad faith claim to proceed forward at

this juncture, both the Court and the litigants may unnecessarily

expend time and resources determining factual matters that stand

to be clarified through arbitration. A determination as to what

Plaintiff was actually owed is obviously central to both

proceedings, and it would run counter to basic principles of

judicial economy to permit both the arbitration and this action

to simultaneously proceed forward as to that common factual

determination. Instead, it would be more prudent to allow for

the completion of arbitration proceedings before addressing the

bad faith claims presented by this litigation.

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CONCLUSION

Based on the foregoing, this Court GRANTS State Farm’s

Motion to Stay. This action will be held in abeyance until after 

the underinsured motorist arbitration provided for in State

Farm’s policy has been completed.

IT IS SO ORDERED.

Dated: August 30, 2007

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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