Court Opinion

ID: 4578364
Source: CourtListenerOpinion
Date Created: 2020-10-19 20:02:26.425466+00
Date Added: 2024-06-11T13:40:49.263535
License: Public Domain

Filed 10/19/20 Natsu Corp. v. Penn-Star Ins. Co. CA1/3
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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 purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                DIVISION THREE

 NATSU CORPORATION,
           Plaintiff and Respondent,
                                                                        A158407
 v.
 PENN-STAR INSURANCE                                                    (Contra Costa County
 COMPANY, et al.,                                                       Super. Ct. No.
                                                                        CIV MSC17-01084)
           Defendant and Appellant.

         Penn-Star Insurance Company and Global Indemnity Group
(collectively Insurers) petitioned to compel appraisal of fire losses claimed by
policyholder Natsu Corporation. The trial court denied the petition, on the
basis that Insurers waived their right to an appraisal. On appeal, Insurers
contend the appraisal was a mandatory condition precedent to resolution of
Natsu’s claim and they did not waive it. We conclude the trial court applied a
proper standard when it determined Insurers waived an appraisal and
substantial evidence supported its finding. We affirm.
                                                  BACKGROUND
         Natsu operated a manufacturing facility in Richmond. Using thinly
sliced wood or veneer as raw material, Natsu created custom-manufactured
doors, cabinets, wall coverings, and related products.

                                                               1
      On September 30, 2016, a hot press machine at the facility used to fuse
veneer panels overheated and sparked a fire that destroyed the press and the
veneer being processed. Smoke, soot, and odor damage from the fire occurred
throughout Natsu’s facility and spoiled its raw material inventory.
      At the time of the fire, Natsu was insured under a policy issued by
Insurers (the Policy). The Policy covered losses of building and personal
property (Property) and business income (Income). The Property coverage
was subject to a $1.1 million limit with a 90% co-insurance provision, and the
Income coverage was subject to a $900,000 limit with an 80% co-insurance
provision.
      The Policy’s Property Coverage Form included the following provision:
“If we and you disagree on the value of the property or the amount of loss,
either may make written demand for an appraisal of the loss. In this event,
each party will select a competent and impartial appraiser. The two
appraisers will select an umpire. If they cannot agree, either may request
that selection be made by a judge of a court having jurisdiction. The
appraisers will state separately the value of the property and amount of loss.
If they fail to agree, they will submit their differences to the umpire. A
decision agreed to by any two will be binding. Each party will: [¶] a. Pay its
chosen appraiser; and [¶] b. Bear the other expenses of the appraisal and
umpire equally. [¶] If there is an appraisal, we will still retain our right to
deny the claim.”
      The Policy’s Income Coverage Form carried a similar provision: “If we
and you disagree on the value of the property or the amount of Net Income
and operating expense or the amount of loss, either may make written
demand for an appraisal of the loss.” The process for umpire selection and
decision-making was the same as described for the Property loss appraisal.

                                        2
      On the day of the fire, Natsu submitted a claim under the Policy for its
losses. Insurers acknowledged the claim under a reservation of rights
pending investigation. Insurers retained various third parties to assist in its
investigation, including an independent adjuster and a salvage company.
The salvage company inventoried Natsu’s equipment and wood veneer stock.
A forensic accountant assisted Insurers in evaluating the claimed loss of
business income.
      On November 3, 2016, Natsu submitted a claim to Insurers for
approximately $1.1 million. The claim was based on the actual cash value of
its lost and smoke-damaged wood stock of about $1.3 million less a
percentage for co-insurance recovery.
      On November 11, 2016, Insurers informed Natsu that its investigation
was continuing under a reservation of rights until the claim could be verified
and calculated. It specifically was “[w]aiving none and reserving to [Insurers]
all of its rights and defenses under and pursuant to [the Policy].”
      Insurers continued their investigation for the next several months and
requested backup documentation and business records from Natsu to
substantiate the origination and values of the lost inventory. Insurers also
paid thousands of dollars in advances to Natsu under the Policy during the
course of the investigation.
      Eventually, a disagreement arose regarding the reimbursement due to
Natsu under the Policy. Around April 12, 2017, Natsu emailed Insurers and
requested they pay $1 million to settle the claim before Natsu obtained
counsel. In response, Insurers disputed the value of Natsu’s wood veneer
inventory and lost business income. Insurers informed Natsu it would apply
a 50% depreciation fee to its $1.3 million lost inventory claim based on
questions about the age and origin of its inventory. Regarding Natsu’s

                                        3
claimed Income loss, Insurers acknowledged receiving additional support for
the claim and issued a check that brought the Income payment to
approximately $200,000. Insurers expressed their firm belief that this was
the amount due under the Income portion of the policy. They concluded by
extending an offer of an additional $120,683 to fully resolve the claim.
      Natsu rejected the settlement offer. It asserted the depreciation was
arbitrary and inapplicable under the circumstances. Acknowledging the
receipt of $104,302 from Insurers, Natsu stated its revised settlement
demand to close the claim was now $895,698. No settlement was reached.
      On June 6, 2017, Natsu sued Insurers alleging contract and tort
damages and seeking additional payments under the Policy. Natsu’s
complaint alleged Insurers still owed more than $600,000 for its Property loss
and more than $180,000 for its Income loss. In their Answer, Insurers
asserted Natsu was entitled to no damages, their own loss calculations were
correct and the claim already paid, and requested Natsu’s complaint be
dismissed with prejudice. Discovery followed.
      On December 1, 2017, Natsu’s counsel made an appraisal demand on
Insurers’ counsel: “Pursuant to Section E. Paragraph 2 of the Business
Personal Property Coverage Form in [the Policy], Natsu Corporation does
hereby demand appraisal of Natsu’s business personal property loss arising
from the September 30, 2016 fire loss at Natsu’s facility. [¶] Please contact
[my co-counsel] or me at your earliest convenience to discuss the choice of
appraisers and scheduling the appraisal process.”
      On December 28, 2017, Insurers’ counsel responded: “[Insurers] agree
to appraisal of the loss under the policy’s appraisal provision, as requested in
[Natsu’s counsel’s] letter. I’ll try to call you tomorrow (Friday) to discuss
selection of appraisers and how to do this as efficiently as we might.” On

                                        4
January 4, 2018, Natsu’s counsel followed up with an email to Insurers’
counsel: “This follows your email . . . agreeing to the use of appraisal. It also
follows your T/C with [my co-counsel] and the VM message I just left at your
office. You have agreed to go forward with ‘APPRAISAL’ per your policy as to
business personal property. We will send you a stipulation regarding same.”
Later that day, Natsu’s counsel emailed Insurers’ counsel again: “This
confirms our conversation: . . . [¶] . . . We are undertaking appraisal for
Property only and [my co-counsel] will send a stipulation for execution we can
supply to the court. . . .” On January 8, 2018, Insurers’ counsel replied,
“[A]greed.”
      In a declaration, Natsu’s counsel stated: “While [Insurers’ counsel]
expressed some interest in proceeding with the appraisal process as reflected
in correspondence . . . he never followed through. Instead, [he] advised me
that [Insurers] preferred to mediate the dispute in lieu of submitting the
dispute to the appraisal process at that time. This fact was communicated to
me during an April 5, 2018 site inspection at [Natsu’s] facility.”
      On April 26, 2018, the parties participated in a one-day mediation
which was unsuccessful.
      The parties disagree on whether appraisal was discussed in the 14
months following mediation. According to Natsu’s counsel, “neither
[Insurers’ counsel] or anyone else associated with insurer ever raised the
issue of appraisal during the balance of 2018 or the first 5 months of 2019.”
Insurers say their May 21, 2018 case management statement flagged a
“[p]ossible motion to compel appraisal under insurance policy” as a motion
they expected to file before trial. They also note they raised the possibility of
an appraisal at a later case management conference.

                                        5
      During this time, the parties continued to engage in discovery. In June
2018, the parties agreed to a referee in order to resolve their various
discovery disputes. Between October 2018 and August 2019, the referee
issued four substantive rulings, all of which were adopted by the trial court
after Insurers objected to most of them.
      During this period, the parties were before the court for multiple case
management conferences.
      In October 2018, Insurers reconsidered their position related to Natsu’s
Property claim. They informed Natsu they would not apply 50% depreciation
to the claimed losses and would pay based on Natsu’s approximate $1.3
million inventory valuation. Insurers tendered an additional $475,000 to
Natsu which included interest and brought its Property payments to
approximately $919,000. Along with the approximately $200,000 Insurers
had already paid towards the income loss claim, Insurers’ total payments to
Natsu at the time exceeded $1.1 million.
      Nevertheless, the dispute persisted, and according to Insurers’ January
2019 case management conference statement, issues remained with respect
to the co-insurance calculation, lost business income, and Natsu’s claim for
damages for Insurers’ unreasonable delay.
      In March 2019, Insurers associated in new counsel. In April 2019, the
parties participated in another mediation which was also unsuccessful.
      In May 2019, the court held another status conference. In their case
management statement, Insurers indicated they would file “possibly
discovery motions” before trial, but no longer expressly mentioned a potential
motion to compel appraisal. The court set a 10-day trial to begin on
November 4, 2019. After the trial date was set, Insurers’ counsel stated to
the court: “We’ll chat about this. In fact, the whole jury trial thing we’ll

                                        6
probably discuss between then and now, and maybe there’ll be some, I don’t
know, statutory things, like appraisal, that will happen in the meantime,
that could solve some issues.”
      In early June 2019, Natsu filed a Statement of Damages contending
that it has sustained approximately $2.7 million in covered losses under the
policy. This included approximately $1.5 million in Income losses.
      On June 26, 2019, Insurers requested an appraisal. Their letter to
Natsu stated, “You are hereby notified that [Insurers] . . . disagree[] with you
as to the amount of loss claimed under [the Policy] and an appraisal of the
business personal property and business income claim is hereby demanded
pursuant to the terms of the policy and Insurance Code section 2071. [¶] . . . .
[¶] This letter is a demand for an appraisal, and is not to be construed as a
denial or admission of liability in any amount whatsoever, nor as a waiver of
any of the terms or conditions of the policy, or of any rights or defenses now
or hereafter available to the undersigned insurer.” Natsu did not comply
with the appraisal demand.
      On July 3, 2019, Insurers petitioned to compel appraisal and moved to
stay the action pending completion of the appraisal.
      In August 2019, the court denied Insurers’ petition for appraisal. The
court’s written order stated, “Appraisal is not an unconditional requirement
of the policy. It is optional at the election of the parties.” The court noted
that appraisal under Insurance Code section 2071 is deemed an arbitration
as a matter of law and subject to statutory contractual arbitration law,
including concepts of waiver. The court explained that a waiver of
arbitration “does not require a voluntary relinquishment of a known right”
but rather could occur “by an untimely demand, even without intending to
give up the remedy.” It concluded with these findings: “The court finds that

                                        7
by failing to demand an appraisal when they first answered or to mention it
as an affirmative defense, by participating in the January and May 2019
Case Management Conferences without mentioning any demand for an
appraisal, by participating in discovery, by requesting relief from the court
regarding Discovery Orders recommended by the discovery referee, by not
demanding an appraisal immediately if the idea for it was recommended by
new defense counsel brought into the case in March 2019, and by not
demanding or moving for an appraisal until, and in apparent direct response,
to an earlier trial date than they wanted, [Insurers] have taken steps
inconsistent with an intention to do an appraisal, delayed unreasonably in
demanding one, and prejudiced [Natsu] by depriving her of the benefits of the
efficiencies and cost benefits that an appraisal was supposed to provide.” The
court also denied Insurers’ motion for stay.
      Insurers immediately appealed the court’s order pursuant to Code of
Civil Procedure section 1294, subdivision (a). The appeal triggered an
automatic stay of the litigation with the exception of matters pending before
the discovery referee. Thus, the court vacated the November 2019 trial date,
all pre-trial filing and cut off dates, and all hearing dates on pre-trial motions
pending resolution of this appeal.1
                                 DISCUSSION
A.    Applicable Law
      Insurance Code section 2071 sets forth the requirements of the
standard-form fire insurance policy. (See Aliberti v. Allstate Ins. Co. (1999)
74 Cal.App.4th 138, 142, fn. 5.) One requirement is a provision which gives
both the insurer and insured the right to an appraisal if they cannot agree

      1
        Before Insurers filed their opening brief, Natsu moved to dismiss the
appeal on the grounds that it was frivolous, filed in bad faith, and initiated
solely to delay trial. This court denied the motion.

                                        8
“as to the actual cash value or the amount of loss.” (Ins. Code, § 2071, subd,
(a); Gebers v. State Farm General Ins. Co. (1995) 38 Cal.App.4th 1648, 1651
[“Since its substance was first enacted in 1909, Insurance Code section 2071
has directed that the standard form for fire insurance policies include an
appraisal provision to settle disagreements concerning the amount of loss.”].)
      A policy provision for an appraisal included in a standard fire
insurance policy constitutes an “agreement” within the meaning of Code of
Civil Procedure section 1280, subdivision (a), which states in part:
“ ‘Agreement’ [as used in this title] includes but is not limited to agreements
providing for valuations, appraisals and similar proceedings.” (Code Civ.
Proc. § 1280, subd. (a).) Thus an appraisal agreement is “considered to be an
arbitration agreement subject to the statutory contractual arbitration law,”
and “[a]n appraisal pursuant to [Insurance Code] section 2071 is deemed an
arbitration as a matter of law.” (Kirkwood v. California State Automobile
Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 57 (Kirkwood).) Code of
Civil Procedure section 1281.2 subdivision (a) provides that a trial court shall
refuse to compel arbitration if it determines that “[t]he right to compel
arbitration has been waived by the petitioner.” (Code Civ. Proc., § 1281.2,
subd. (a).)
      In an appeal from an order granting or denying a petition to compel an
appraisal, we apply a de novo standard of review when the issue turns on the
interpretation of the insurance policy and the governing statutory scheme.
(Lee v. California Capital Ins. Co. (2015) 237 Cal.App.4th 1154, 1164) But
when the issue is whether there has been a waiver of the right to compel
arbitration, that is “ ‘ordinarily a question of fact, and a finding of waiver, if
supported by sufficient evidence, is binding on an appellate court.’ ” (Engalla

                                         9
v. Permanent Medical Group, Inc. (1997) 15 Cal.4th 951, 983 (Engalla); Davis
v. Bluecross of Northern California (1979) 25 Cal.3d 418, 425-426 (Davis).)
B.    Right to Appraisal is Waivable
      Insurers initial argument is that the trial court erred in ruling the
appraisal provision in the policy was not a mandatory condition precedent to
any judicial resolution of the parties’ dispute. According to Insurers, “[f]or
over 100 years, the California Legislature and courts have construed
appraisal conditions identical to [Insurers] policy as a mandatory condition
precedent to any adjudicated resolution of disputed claim regarding the
‘value’ or ‘amount of loss’ claimed due under standard insurance fire
insurance policies.” According to Insurers, “Failing an agreement on the total
amount of the covered loss, the mandatory appraisal process is a condition
that must precede the trial or other adjudication of those claims.”
      We readily dismiss this argument. While the appraisal provision is a
mandatory part of the standard fire insurance policy (see Ins. Code, § 2071)
and included in the Policy here, it is well established that the right to
appraisal can be waived. (See Code Civ. Proc., § 1281.2 [trial court may
refuse to compel arbitration on waiver grounds].) Although they disagree
with the standard applied by the trial court to determine whether they
waived their right, even Insurers acknowledge the right to appraisal may be
waived. Accordingly, because it can be waived, appraisal was not a
mandatory condition precedent to judicial resolution of the parties’ dispute.
C.    Standard for Waiver of Appraisal Right
      Insurers next contend the trial court applied the wrong legal standard
to assess whether they waived appraisal. Relying upon statutes pertaining to
contractual arbitration, the trial court noted that “a party waives the right to
arbitration by taking steps inconsistent with an intent to invoke arbitration,

                                       10
unreasonably delays in undertaking the procedure, or engages in bad faith or
willful misconduct.” Insurers argue the trial court erred when it applied this
forfeiture standard. They say it only applies in contractual arbitration cases,
and the court was wrong to conclude that “ ‘waiver does not require the
voluntary relinquishment of a known right.’ ” We agree with the trial court.
        “Waiver” has multiple meanings and courts “have used the term
‘waiver’ to refer to a number of different concepts. ” (Platt Pacific, Inc. v.
Andelson (1993) 6 Cal.4th 307, 315 (Platt Pacific).) “[S]ome decisions have
defined the term ‘waiver’ as the voluntary relinquishment of a known right.”
(Id. at p. 314.) “But it can also mean the loss of an opportunity or a right as a
result of a party’s failure to perform an act it is required to perform,
regardless of the party’s intent to abandon or relinquish the right.” (Id. at p.
315.)
        “In the past, California courts have found a waiver of the right to
demand arbitration in a variety of contexts, ranging from situations in which
the party seeking to compel arbitration has previously taken steps
inconsistent with an intent to invoke arbitration [citations] to instances in
which the petitioning party has unreasonably delayed in undertaking the
procedure. [Citations.] The decisions likewise hold that the ‘bad faith’ or
‘wilful misconduct’ of a party may constitute a waiver and thus justify a
refusal to compel arbitration.” (Davis, supra, 25 Cal.3d at pp. 425-426 )
Although “forfeiture” is not specifically enumerated in Code of Civil
Procedure section 1281.2, the use of “waiver” in the statute includes
“forfeiture” of that right as well. (Chase v. Blue Cross of California (1996) 42
Cal.App.4th 1142, 1151, fn. 8 (Chase).)
        As a result of the varied meanings of the term “waiver” and the variety
of contexts in which waiver of the right to compel arbitration has been found,

                                        11
the Supreme Court has recognized ‘that no single test delineates the nature
of the conduct of a party that will constitute . . . a waiver.’ ” (Engalla, supra,
15 Cal.4th at p. 983; Chase, supra, 42 Cal.App.4th at p. 1151 [“there is no
‘single test’ for establishing waiver” ]; Davis, supra, 25 Cal.3d at p. 426
[“[O]ur cases establish that no single test delineates the nature of the conduct
of a party that will constitute such a waiver.”].)
      Absent a single test to determine what conduct constitutes a waiver,
our Supreme Court has identified the following relevant factors for
consideration: “ ‘ “(1) whether the party’s actions are inconsistent with the
right to arbitrate; (2) whether ‘the litigation machinery has been
substantially invoked’ and the parties ‘were well into preparation of a
lawsuit’ before the party notified the opposing party of an intent to arbitrate;
(3) whether a party either requested arbitration enforcement close to the trial
date or delayed for a long period before seeking a stay; (4) whether a
defendant seeking arbitration filed a counterclaim without asking for a stay
of the proceedings; (5) ‘whether important intervening steps [e.g., taking
advantage of judicial discovery procedures not available in arbitration] had
taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the
opposing party.” ’ ” (St. Agnes Medical Center v. PacifiCare of California
(2003) 31 Cal.4th 1187, 1195-1196 (St. Agnes Medical Center).) But “[w]aiver
is not a mechanical process and no one factor is predominant.” (Fleming
Distribution Co. v. Younan (2020) 49 Cal.App.5th 73, 80.)
      These factors which the Supreme Court says are “relevant and properly
considered in assessing waiver claims” represent a range of considerations
untethered to a party’s intent. In light of the myriad factors California courts
may consider to determine whether there was a waiver of the right to
arbitration and the variety of contexts in which those courts have found

                                        12
waiver, the trial court here did not err when it applied a forfeiture standard
to evaluate whether Insurers waived their right to appraisal. (See Chase,
supra, 42 Cal.App.4th at p. 1151, fn. 8 [use of “waiver” in Code of Civil
Procedure section 1281.2 includes “forfeiture” of the right as well]; cf.
Engalla, supra, 15 Cal.4th at pp. 983-984 [waiver may be found from
evidence of a party’s unreasonable and substantial delay where claimant has
acted with reasonable diligence].)
      Insurers contend “[t]he analogy to contractual arbitration in the
statutory appraisal context is inapt.” In their view, “[b]ecause mandatory
appraisal of losses payable under fire insurance policies involves a
‘substantive’ right . . . that right cannot be waived by mere implication.”
They insist that “[w]aiver of the condition to appraise losses under a standard
fire policy requires the ‘intentional relinquishment’ of a known right.” We
disagree.
      It is well established that appraisals are a form of arbitration subject to
the rules governing arbitration. (See Doan v. State Farm General Ins. Co.
(2011) 195 Cal.App.4th 1082, 1094 [“ ‘[A]n appraisal is a special form of
limited arbitration.’ ”]; Kacha v. Allstate Ins. Co. (2006) 140 Cal.App.4th
1023, 1031 [“Appraisal hearings are a form of arbitration and are generally
subject to the rules governing arbitration.”].) While there are differences
between an arbitration and an appraisal (see, e.g., Kirkwood, supra,193
Cal.App.4th at pp. 58-59), Insurers provide no authority for their assertion
that these differences compel application of different rules to assess waiver.
They cite Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001)
92 Cal.App.4th 886, but that court acknowledged that a policy’s “appraisal
term creates an arbitration agreement subject to the statutory contractual
arbitration law” and the opinion includes no discussion of waiver. (Id. at p.

                                       13
893.) They also cite Appalachian Insurance Company v. Rivcom Corporation
(1982) 130 Cal.App.3d 818, but that case similarly acknowledges that “an
agreement providing for an appraisal is included within the concept of
agreements to arbitrate” and supports the view that a party’s conduct can
indeed support a finding of waiver. (Id. at pp. 824-826.)
      Nor do Insurers provide support for their argument that waiver of
appraisal requires the “intentional relinquishment” of the right. The
Supreme Court has recognized that waiver can turn on the “voluntary
relinquishment of a known right.” (Platt Pacific, supra, 6 Cal.4th at p. 315.)
Some cases, including a case cited by Insurers, apply this standard. (See,
e.g., Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.) But the
Supreme Court has also recognized that waiver “can also mean the loss of an
opportunity or a right as a result of a party’s failure to perform an act it is
required to perform, regardless of the party’s intent to abandon or relinquish
the right.” (Platt Pacific, supra, 6 Cal.4th at p. 315, italics added.)
Intentional relinquishment of a right is not required.
      Insurers proffer what they call a “proper test” for waiver of appraisal
focused on “whether the party intentionally relinquished or explicitly
abandoned that right.” This is not a test we can endorse. Not only is it
premised on non-controlling out-of-state authorities, it contravenes our own
Supreme Court which has made clear there is no single test for establishing
waiver.
D.    Substantial Evidence
      Under the factors St. Agnes Medical Center, supra, 31 Cal.4th 1187,
directs us to consider, substantial evidence supported the finding of waiver.
       There was ample evidence that Insurers took steps inconsistent with
any intent to invoke the appraisal process and unreasonably delayed

                                        14
invoking it. (See also Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th
1135, 1138 [“Unreasonable delay in seeking arbitration may, standing alone,
constitute a waiver of a right to arbitrate.”].) The fire occurred on September
30, 2016, and Natsu notified Insurers of the loss the same day. Natsu
submitted its claim to Insurers on November 3, 2016. By no later than April
2017, after months of Insurers’ investigation, it was apparent to the parties
that they disagreed as to the value of Natsu’s losses. Insurers did not
demand an appraisal. Rather, after Natsu filed suit a few months later in
June 2017, Insurers litigated. Over the course of two years, they engaged in
discovery, status conferences, and mediation but never pressed their demand
for appraisal. Moreover, Natsu demanded appraisal in December 2017, and
while Insurers appeared receptive, the record indicates they opted to mediate
the dispute rather than submit it to an appraiser.2 Nor did they ever demand
appraisal following their unsuccessful mediation. In October 2018, Insurers
relented on the core dispute between the parties. They accepted Natsu’s $1.3
million valuation of its lost inventory and paid out the Property loss based on
that valuation.
      In light of this record, we see how the June 2019 demand for appraisal
and the follow-on stay request were unexpected and contrary to the apparent
resolution of the Property loss claim. Insurers’ appraisal demand arrived
nearly two years and nine months after they were notified of the claimed
losses, two years after Insurers’ filed suit for additional payments and the

      2
        Insurers contested this finding with a declaration from a Global
Indemnity Group assistant vice president who attested that Insurers never
agreed that mediation was in lieu of appraisal. But “[w]hen reviewing for
substantial evidence, ‘all conflicts must be resolved in favor of the prevailing
party, and all legitimate and reasonable inferences must be indulged in order
to uphold the trial court’s finding.’ ” (In re Marriage of Berman (2017) 15
Cal.App.5th 914, 920.)

                                       15
parties had actively litigated and mediated the claim, and four months before
the scheduled trial date. The June 2019 demand was also the first time
appraisal of Natsu’s claimed Income losses in addition to Property losses was
ever mentioned. The demand was exceedingly tardy. On this record, we
would conclude “ ‘the litigation machinery [was] substantially invoked’ and
the parties ‘were well into preparation of a lawsuit before the party notified
the opposing party of an intent to arbitrate.’ ” (St. Agnes Medical Center,
supra, 31 Cal.4th at p. 1195.) Viewing the evidence in the light most
favorable to Natsu (see Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660),
these facts supported the trial court’s finding of waiver.
      Contrary to the Insurers’ argument, there was also substantial
evidence showing Natsu would be prejudiced by submitting to Insurers’
appraisal demand at this juncture. (See St. Agnes Medical Center, supra, 31
Cal.4th at p. 1196.) Prejudice can be found “where the petitioning party has
unreasonably delayed seeking arbitration or substantially impaired an
opponent’s ability to use the benefits and efficiencies of arbitration.” (Hoover
v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1205). The
record shows Natsu engaged in nearly two years of active litigation prior to
Insurers’ appraisal demand. During that time, Natsu retained counsel, filed
suit, propounded substantial discovery, defended multiple contested
discovery requests before a referee, attended status conferences, and twice
mediated its claim. As the trial court found, compelling appraisal at this
stage after the valuation dispute had been vigorously litigated for two years
would deprive Natsu of the benefits and efficiencies the “informal process” of
appraisal was designed to achieve. (Ins. Code, § 2071.)
      There was also other evidence demonstrating prejudice to Natsu from
the delayed demand. The losses Natsu claimed arose largely from raw

                                       16
material damaged in a September 2016 fire. In the ensuing months and
years Natsu endeavored to settle the claim. Finally, in October 2018, nearly
two years after the fire and one year and two months after Natsu sued
Insurers for its losses, Insurers decided to pay out Natsu’s Property claim
based on the approximately $1.3 million valuation Natsu tendered in
November 2016. At that time, Insurers noted that the original inventory
used in Natsu’s claim was “the result of a joint project between [Insurers] and
Natsu” and that the “the effort needed to undertak[e] a second inventory
would be extensive, especially where the inventory has been moved since the
first project and stacked in the back of the warehouse.” Insurers then
informed Natsu they would “not impose the burden of hosting or
participating in a second, more detailed inventory”. Revisiting Natsu’s lost
inventory, a step we can infer would be part of an appraisal, would involve a
process even Insurers describe as extensive and burdensome. Doing so
nearly three years after the fire and 9 months after they had “accept[ed]
Natsu’s compilation of $1,301,626 as the cost to replace all the lost veneers
with new veneers of the same type” further underscores the prejudice to
Natsu that would result from appraisal.
      Insurers argue there was no evidence they intentionally relinquished
an appraisal and emphasize how the record shows they never rejected such a
request. Because intent is not a necessary element of waiver, we need not
address these arguments.
                               DISPOSITION
      The order denying Insurers’ petition to compel appraisal is affirmed.
Natsu is awarded its costs on appeal.

                                        17
                    SIGGINS, PJ.

We concur.

FUJISAKI, J.

PETROU, J.

(A158407)

               18