Unpublished Disposition, 921 F.2d 282 (9th Cir. 1990)

MEMORANDUM^* 

Plaintiffs (collectively, "Verdin") appeal the district court's grant of summary judgment in favor of General Accident Insurance Company of America ("General"). Verdin was involved in an automobile accident with Harold Carmichael, who was insured by General. His personal injury suit against Carmichael was settled. Because Verdin was uninsured, Carmichael filed a separate claim under the "uninsured motorist" clause of his policy. General's liability under the uninsured motorist provision was determined by arbitration between General and Carmichael.

Subsequently, Verdin brought the present action against General, alleging various "unfair practices" in violation of California Insurance Code section 790.03. The district court dismissed the action, holding that Verdin lacked standing to sue because there was no "judicial determination" of Carmichael's liability as required by California law. We affirm.

We review de novo the district court's grant of summary judgment. West v. Northwest Airlines, No. 89-35820, slip op. 10989, 10992 (9th Cir. Sept. 11, 1990). We must determine, "viewing the evidence in the light most favorable to the nonmoving party, whether there existed any genuine issue of material fact and whether the district court correctly applied the relevant substantive law." Id.

We review the district court's application of state law de novo. Abramson v. Brownstein, 897 F.2d 389, 391 (9th Cir. 1990); Los Angeles Nut House v. Holiday Hardware Corp., 825 F.2d 1351, 1353 (9th Cir. 1987). The federal courts are "bound to follow the decision of a state's highest court in interpreting that state's law." Olympic Sports v. Universal Athletic Sales, 760 F.2d 910, 912-13 (9th Cir. 1985), cert. denied, 474 U.S. 1060 (1986) (citing Aydin Corp. v. Loral Corp., 718 F.2d 897, 904 (9th Cir. 1983).

California Insurance Code section 790.03 enumerates various "unfair methods of competition and unfair and deceptive acts or practices in the business of insurance." Cal.Ins.Code Sec. 790.03 (West 1990). In Royal Globe Ins Co. v. Superior Court, 23 Cal. 3d 880, 592 P.2d 329, 153 Cal. Rptr. 842 (1979), the California Supreme Court held that injured parties, after suing the insured for damages, could bring a second, "bad faith" action against the insurer under section 790.03. The private right of action was later abolished in Moradi-Shalal v. Fireman's Fund Ins. Cos., 46 Cal. 3d 287, 304, 758 P.2d 58, 250 Cal. Rptr. 116 (1988), which overruled Royal Globe. For Royal Globe actions not yet concluded when Moradi-Shalal was decided, such as Verdin's, the court held that a "final judicial determination of the insured's liability is a condition precedent to a section 790.03 action against the insurer." Moradi-Shalal, 46 Cal. 3d at 313.

Verdin's underlying action against Carmichael was settled. Verdin concedes that the settlement does not constitute a "final judicial determination" of Carmichael's liability as required by Moradi-Shalal. He contends, however, that the arbitration proceeding between General and Carmichael satisfies the requirement. We disagree.

California Insurance Code section 11580.2 articulates rules for uninsured motorist arbitrations. Section 11580.2(f) provides, in part:

An award or a judgment confirming an award shall not be conclusive on any party in any action or proceeding between (i) the insured, [or] his or her insurer ..., and (ii) the uninsured motorist to recover damages arising out of the accident upon which the award is based.

Cal.Ins.Code Sec. 11580.2(f) (West 1990). The arbitration proceeding between General and Carmichael does not determine Carmichael's liability to Verdin for purposes of Verdin's section 790.03 action against General.

Even so, argues Verdin, because his settlement must be reduced by the amount awarded to Carmichael under the "uninsured motorist" policy provision, the arbitration is "binding" on him and therefore satisfies Moradi-Shalal's "final judicial determination" requirement.¹  We do not agree.

Verdin relies primarily on State Farm Mutual Auto. Ins. Co. v. Superior Court, 211 Cal. App. 3d 5, 259 Cal. Rptr. 50 (1989), which held that a judgment following judicial arbitration between the insured and the injured party was a "conclusive judicial determination" of the insured's liability as required by Moradi-Shalal. State Farm is inapplicable, however, because the arbitration was between the third party claimant and the insured. In the case at bar, the arbitration was between the insured and his insurer under the uninsured motorist provision of the policy, and the arbitration is "not conclusive" as to Verdin.

Verdin also cites Goulart v. Crum & Forster Personal Ins. Co., 222 Cal. App. 3d 527, 271 Cal. Rptr. 627 (1990), holding that an arbitration between the insured and the insurer under an uninsured motorist provision of an insurance contract is binding as between the insured and the insurer. Again, Goulart does not help Verdin because he was not a party to the arbitration. The district court's grant of summary judgment is

AFFIRMED.