McMillin Management Services v. Gemini Ins. Co. CA4/1

Filed 1/18/23 McMillin Management Services v. Gemini Ins. Co. CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

MCMILLIN MANAGEMENT D079513
SERVICES, LP et al.,

Plaintiffs and Appellants,
(Super. Ct. No. 37-2018-
v. 00054403-CU-IC-CTL)

GEMINI INSURANCE COMPANY,

Defendant and Appellant.

APPEAL from a judgment of the Superior Court of San Diego County,
Gregory W. Pollack, Judge. Affirmed.
Ryan & Associates and Greg J. Ryan for Plaintiffs and Appellants.
Selman Breitman, Sheryl W. Leichenger, Bridget A. Moorhead, and
Rachel E. Hobbs for Defendant and Appellant.
McMillin Management Services, LP and McMillin Homes
Construction, Inc. (together McMillin) filed this insurance coverage action
against Gemini Insurance Company (Gemini), alleging causes of action for
declaratory relief, breach of contract, and breach of the covenant of good faith
and fair dealing. The superior court granted Gemini’s motion for summary
adjudication as to the cause of action for breach of the covenant of good faith
and fair dealing. The parties proceeded to a bench trial on the remaining
claims.
The superior court found that Gemini breached its duty to defend

McMillin. However, it concluded Gemini was entitled to an equitable offset,1
based on a settlement payment from another insurance company to McMillin,
and reduced McMillin’s net recovery to zero. After trial, the court also denied
McMillin’s motion to be awarded prejudgment interest.
McMillin appeals, claiming the superior court erred: (1) in granting
summary adjudication; (2) applying an equitable offset; and (3) denying
McMillin’s request for prejudgment interest. We conclude that none of

McMillin’s arguments has merit. Accordingly, we affirm the judgment.2
FACTUAL AND PROCEDURAL BACKGROUND
The Gemini Insurance Policies and the Construction Defect Litigation
The facts underlying the dispute are primarily uncontested. McMillin
served as the developer and general contractor for the construction of
multiple single-family homes located in Brawley, California (the Project).
McMillin retained several subcontractors to assist in the construction of the
Project. The subcontractors were obligated to hold McMillin harmless from

1 We will use the word “offset,” although we do not differentiate between
the words “offset” and “setoff” in the various authorities cited. (See
Dillingham Construction, N.A., Inc. v. Nadel Partnership, Inc. (1998) 64
Cal.App.4th 264, 278.)

2 Gemini brought a cross-appeal, arguing the superior court erred in
finding Gemini had a duty to defend McMillin under the subject insurance
policy. Gemini expressly states it is raising this issue only in the event that
this court determines the superior court erred in applying the equitable
offset. Because we affirm the judgment, we do not reach Gemini’s argument.

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any loss or liability arising out of the subcontractors’ work and to secure
liability insurance naming McMillin as “additionally insured.”
During the construction of the Project, McMillin had general liability
insurance policies with Evanston Insurance Company (Evanston) (from
June 1, 2004 to June 1, 2005), American International Specialty Lines
Insurance Company (American International) (from June 1, 2005 to June 1,
2009), and Illinois Union Insurance Company (Illinois Union) (from June 1,
2009 to June 1, 2010). However, Gemini issued four different policies, each
lasting a year, to retroactively replace American International’s policies.
These policies were issued on November 17, 2011, and backdated to replace
American International’s policies that had been in effect between June 1,
2005 and June 1, 2009. Gemini’s policies were not exact replacements of
American International’s policies. Gemini’s insurance policies were general
liability policies that provided a duty to defend McMillin after tender of a
suit, subject to additional requirements and conditions precedent to coverage.
Gemini’s insurance policies provided that Gemini “will pay those sums
that the insured becomes legally obligated to pay because of ‘bodily injury’ or
‘property damage’ to which this insurance applies.” Under those policies,
Gemini had “the right and duty to defend the insured against any ‘suit’
seeking those damages” but had “no duty to defend the insured against any
‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this
insurance does not apply.” Further, the policies allowed Gemini, at its
“discretion,” to “investigate any ‘occurrence’ and settle any claim or ‘suit’ that
may result.”
The Gemini insurance policies also stated that the insurance was
“excess over” “[a]ny other primary insurance available to [McMillin] covering
liability for damages arising out of the premises or operations, or the

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products and completed operations, for which you have been added as an
additional insured by attachment of an endorsement.” The policies further
clarified that Gemini had “no duty . . . to defend the insured against any ‘suit’
if another insurer has a duty to defend the insured against that ‘suit.’ ”
However, if no other insurer would defend McMillin, the policies stated that
Gemini would undertake McMillin’s defense, “but [would] be entitled to the
insured’s rights against all those other insurers.”
The Gemini insurance policies also included a self-insured retention
endorsement (SIR), which stated Gemini had no duty to defend unless the
retained limit ($250,000) was exhausted. In other words, before coverage
under Gemini’s insurance policies began, McMillin had to spend $250,000
defending and/or investigating any claim.
In securing insurance coverage from Gemini, McMillin negotiated with
Vela Insurance Services, LLC (Vela), the underwriter for Gemini. In its
discussions with Vela, McMillin provided a list of all of its construction defect
claims, including a lawsuit against McMillin in Imperial County Superior
Court entitled, Cosio et al. v. McMillin Homes, LLC, et al., case
No. ECU05937 (Cosio). That case arose out of the Project and was filed on
June 25, 2010. McMillin further represented to Vela that it tendered its
defense in construction defect actions to the subcontractors’ insurance
carriers because it was named as an additional insured under the
subcontractors’ various policies. As such, McMillin would tender to these
additional insurance carriers (AI Carriers) but not to its direct insurers, like
Evanston, American International, or Illinois Union. Indeed, in Cosio,
McMillin filed a cross-complaint, on May 26, 2011, against various
subcontractors that performed work on the Project.

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 At the time Gemini issued its policies to McMillin, McMillin used a
very sophisticated claims and litigation management for construction defect
claims, which was memorialized in a document entitled “McMillin Coverage
Litigation Procedures.” That document was provided to Gemini while
McMillin was negotiating the Gemini insurance policies with Vela. The
McMillin Coverage Litigation Procedures stated that two of McMillin’s goals
were to “[p]reserve to the maximum degree, McMillin’s ability to enforce its
legal rights to defense and indemnity from its subcontractors and AI carriers”
and “[r]ecover 100% of McMillin’s defense costs[.]”
Before agreeing to provide coverage to McMillin, Gemini required
McMillin sign a representation and warranty statement that McMillin would
continue its current claims handling practices and procedures as described in
the McMillin Coverage Litigation Procedures. The representation and
warranties statements also provided in relevant part:
“As a material inducement to the issuance of a policy of
insurance by Gemini . . . . McMillin . . . represents and
warrants that in connection with the investigation and
defense of future construction defect claims it will maintain
its current claims handling practices and procedures as
have been described to . . . Vela . . . including without
limitation the following:

“. . .

“2. The attorneys listed in Exhibit B attached hereto will
be retained by McMillin to defend McMillin and to pursue
as appropriate all rights of McMillin, including the tender
of coverage on behalf of McMillin to insurers for
subcontractors and to timely file and prosecute litigation
against such insurers and subcontractors to enforce all
rights of McMillin as an additional insured of such insurers
and as express indemnitee of such subcontractors . . .

...

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 “[¶] . . . [¶]

“3. . . . McMillin agrees promptly to provide to Gemini
upon request a list of all individual claims where
management has estimated a reserve in excess of fifty
percent (50%) of the $250,000 self-insured retention; . . . ”

As relevant to the instant action, McMillin appeared to act consistently
with its representations regarding its handling of construction defect
litigation. For example, it did not tender the defense of Cosio to Gemini
during the course of that litigation. Instead, McMillin tendered the defense
to its AI Carriers and four of them accepted the tender: American Home
Assurance Company, Federal Insurance, The Hartford, and Zurich American
Insurance (Zurich). Yet, only Hartford and Zurich eventually paid any
defense costs.
In all, McMillin incurred $913,301.31 in fees and costs in Cosio.
Hartford paid $197,070.02, and Zurich paid $188,673.12 in defense of
McMillin in Cosio. In addition, under Crawford v. Weather Shield Mfg., Inc.
(2008) 44 Cal.4th 541 (Crawford), various subcontractors paid McMillin
$34,164.50 for defense costs in Cosio.
In July 2013, Cosio was settled in the amount of $426,400. Regarding
the settlement amount paid, $286,000 was funded by subcontractor
settlements with McMillin, which totaled $315,164.50. Two other
subcontractors agreed to pay $140,400. McMillin did not contribute to the
settlement with its own funds. Cosio was dismissed on December 5, 2013.
On March 25, 2014, McMillin reported to Evanston, one of its direct insurers,
that it “ha[d] not yet exhausted the SIR.”
After Cosio was settled and the complaint dismissed, McMillin had paid
$464,763.76 in fees and costs, which had not been reimbursed, to defend the
action.

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 The AI Coverage Action
On October 5, 2012, while Cosio was pending, McMillin filed an action
against AI Carriers based upon McMillin’s inclusion as an additional insured
on the subject insurance policies. (See McMillin Management Services,
L.P. v. Financial Pacific Ins. Co. (2017) 17 Cal.App.5th 187, 191 (McMillin v.
Financial Pacific). The suit named the following defendants: American
Home, Arch Specialty Insurance Company (Arch), Financial Pacific
Insurance Company (Financial Pacific), First Specialty Insurance Company
(First Specialty), Lexington Insurance Company (Lexington); and Probuilders
Specialty Insurance Company, RRG (Probuilders). The action was filed
specifically to recover defense costs incurred in Cosio for the insurers’ failure
to defend McMillin.
McMillin dismissed First Specialty, American Home, Arch Specialty,
and Probuilders without settlement. And McMillin incurred attorney fees in
prosecuting the litigation against those AI Carriers.
The two remaining defendants in the litigation, Financial Pacific and
Lexington, successfully moved for summary judgment. Judgment was
entered in Financial Pacific’s favor on December 7, 2015, and judgment was
entered in Lexington’s favor on January 29, 2016.
McMillin appealed both judgments, and this court affirmed the
judgment in favor of Financial Pacific, but reversed the judgment in favor of
Lexington. (See McMillin v. Financial Pacific, supra, 17 Cal.App.5th at
p. 210.)
After the case was remanded to the superior court, McMillin and
Lexington settled the dispute, on August 29, 2018, with Lexington paying
$525,000 to McMillin (Lexington Settlement). The amount paid was not
allocated among the causes of action against McMillin or otherwise

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attributed to Brandt fees.3 Indeed, the subject settlement agreement stated
that each party was to bear its own attorney fees and costs. Further, the
Lexington Settlement included a provision explicitly stating that Lexington
did not admit any wrongdoing, liability, or coverage under its policy for any of
the claims made by McMillin.
McMillin’s Request to Gemini to Pay its Defense Fees and Costs in Cosio
On September 7, 2016, McMillin reported to Gemini that it was
pursuing recovery from the AI Carriers but McMillin had paid defense costs
of $460,837.90, exceeding the $250,000 SIR. After McMillin provided
additional material at Gemini’s request, coverage counsel for Gemini
informed McMillin, on August 16, 2017, that Gemini declined to pay any of
McMillin’s defense costs, arguing that McMillin had not provided evidence
that it had paid, itself, $250,000 in defense costs and fees in Cosio as required
by the policy’s SIR. However, Gemini stated that its denial letter should not
be read as a waiver of any rights under the subject policies or “an exhaustive
recitation of policy terms, conditions, exclusions, or endorsements that may
potentially apply to Gemini’s coverage determination.”

3 In Brandt v. Superior Court (1985) 37 Cal.3d 813 (Brandt), our high
court determined that an insured that is able to prove breach of the implied
covenant of good faith and fair dealing may recover as damages its
reasonable attorney fees incurred in obtaining the policy benefits wrongfully
denied. (Id. at p. 817; see Essex Ins. Co. v. Five Star Dye House, Inc. (2006)
38 Cal.4th 1252, 1257-1258.)

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 McMillin Sues Gemini
McMillin brought suit against Gemini and Illinois Union on October 25,

2018.4 The complaint included three causes of action against Gemini for: (1)
declaratory relief; (2) breach of contract; and (3) breach of the implied
covenant of good faith and fair dealing. The gravamen of McMillin’s suit was
its claim that Gemini refused to pay and/or reimburse defense fees and costs
incurred by McMillin in Cosio. Gemini answered the complaint, alleging
several affirmative defenses including equitable setoff.
On December 22, 2020, Gemini brought a motion for summary
judgment, or in the alternative, summary adjudication. It argued that
McMillin’s breach of contract was without merit because, among other
contentions, McMillin first notified Gemini of its claimed unreimbursed
defense fees years after the underlying litigation (Cosio) concluded. Thus,
Gemini asserted there was no longer any action to defend under the subject
policies and relevant law. Additionally, Gemini maintained that McMillin
had already recovered its defense fees and costs and was not entitled to a
double recovery.
Gemini also argued that it did not breach the covenant of good faith
and fair dealing under the “genuine dispute” doctrine. Put differently,
Gemini maintained that it did not withhold policy benefits in bad faith, but,
at most, did not pay McMillin’s defense fees and costs based on mistake or
negligence.

4 McMillin had an insurance policy with Illinois Union. The parties
settled the lawsuit whereby McMillin dismissed the suit with prejudice as to
Illinois Union in exchange for early commutation of Illinois Union’s policy
and return of the premiums paid in the amount of $988,951.

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 McMillin filed an opposition to Gemini’s motion, to which Gemini filed
a reply.
The superior court denied Gemini’s motion for summary judgment,
finding a triable issue of fact existed as to the breach of contract claim.
However, the court granted Gemini’s motion for summary adjudication as to
McMillin’s claim of breach of the covenant of good faith and fair dealing. To
this end, the court found there was a ‘‘ ‘genuine dispute’ ” regarding Gemini’s
requirement to pay McMillin’s defense fees. The court based this finding on
the following:
“1. Other than this court’s finding there is a triable
issue of fact as to tolling, this lawsuit, filed more than 4
years after completion of the dismissal of the Cosio case,
would be barred by the statute of limitations.

“2. Gemini’s policy was excess to the coverage provided
by McMillin’s additional insured carriers. Moreover,
McMillin and Gemini had agreed that McMillin would
aggressively proceed to obtain defense costs from other
available carriers prior to tendering such claim to Gemini.
McMillin was still pursuing coverage from additional
insured carriers up through its Lexington settlement on
August 29, 2018. Ironically, McMillin’s tender demand of
September 9, 2016, while McMillin was still in hot pursuit
of Lexington, arguably may have actually been violative, at
least in spirit, of the Representations and Warranties
regarding McMillin’s Coverage Procedures upon which
Gemini had materially relied in issuing insurance to
McMillin.

“3. While there remains a triable issue of fact regarding
the precise amount of defense costs recovered from the
other carriers based upon there being no allocation, it is
undisputed that McMillin still received monies totaling
100% of its total defense costs beyond its $250,000 SIR
even if one allocates almost one-quarter of a million dollars
to Brandt fees and other non-defense costs.

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 “4. Gemini’s duty to defend does not include
reimbursement for McMillin’s costs incurred in prosecution
of its cross-complaint against the additional insureds’
insurers. James 3 Corporation v. Truck Insurance
Exchange (2001) 91 Cal. App.4th 1093, 1104-1105 (“The
duty to defend could not extend to requiring the insurer to
take affirmative action to recover money . . .”); Emerald
Bay Community Association v. Golden Eagle Insurance
Corp. (2005) 130 Cal.App.4th 1078, 1095 (“Liability
insurance policies impose on an insurer the obligation to
defend and indemnify an insured, but these policies
generally do not impose an obligation to purse claims for
affirmative relief against third parties.”). Thus, Gemini
should not be responsible for McMillin[’s] Brandt fees
incurred chasing after the additional insured carriers.

“5. As late as March 25, 2014, a date more than 3
months after dismissal of the Cosio action, McMillin
reported to another direct insurer, Evanston, that it ‘has
not yet exhausted the SIR.’ Of course, until such
exhaustion, there is no duty to defend. General Star
Indemnity Co. v. Superior Court (1996) 47 Cal.App.4th
1586, 1593-1594.”

The matter then proceeded to a bench trial. At the trial, the trial court
noted that the parties stipulated to many of the facts underlying the breach
of contract claim. For example, the parties stipulated regarding certain
aspects of McMillin’s construction defect litigation strategy. To this end, the
stipulation set forth, among other things, the following:
“McMillin coordinates the efforts of defense counsel and
coverage counsel to implement an approach that will best
accomplish the following goals:

“[¶] . . . [¶]

“(3) Preserve to the maximum degree, McMillin’s ability to
enforce its legal rights to defense and indemnity from its
subcontractors and AI carriers;

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 “(4) Recover 100% of McMillin’s defense costs (both pre-
tender and post-tender) incurred in underlying litigation;
and

“(5) Recover 100% of McMillin’s Brandt fees and costs
incurred in pursuing its coverage litigation[.]”

The parties also agreed that McMillin incurred total defense fees and
costs of $913,301.13, in Cosio, which were offset by McMillin’s receipt of
$34,164.50 in Crawford fees, $28,629.91 in vendor invoice adjustments, and
$385,743.14 from two AI Carriers, resulting in McMillin incurring unpaid
defense costs of $464,763.76. However, under the subject policy, McMillin
had a $250,000 SIR, so McMillin claimed its breach of contract damages were
$214,763.76. Gemini expressly did not challenge whether the amounts paid
by McMillin in defense fees and costs in Cosio were reasonable and
necessary.
The parties stipulated that McMillin incurred $335,509 in fees and
costs to pursue six AI Carriers, including Lexington. Lexington was the only
AI Carrier that settled or otherwise paid any money to McMillin based on
McMillin’s litigation against those entities.
At trial, Gemini argued that the $525,000 Lexington paid McMillin
should be treated like the other AI Carrier’s payments made to McMillin
during Cosio. Alternatively stated, Lexington’s settlement payment should
be credited to McMillin’s unpaid defense costs, extinguishing any contract
damages. Without any damages, Gemini argued that McMillin could not
prove its breach of contract claim.
The trial court found that Gemini had a duty to reimburse McMillin for
its defense costs in Cosio. Although the court determined that Gemini’s
argument that McMillin’s tender could be considered premature because
McMillin was still pursuing a defense from Lexington at the time McMillin

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requested payment from Gemini, the court concluded there was nothing in
the subject policy “that absolutely precluded McMillin from making its tender
demand when it did.” The court referred to its breach of contract
determination as “a close call.”
In finding that Gemini breached the subject insurance policy, the court
rejected Gemini’s assertion that the Lexington Settlement negated any
contract damages. To this end, relying on McMillin Companies, LLC v.
American Safety Indemnity Company (2015) 233 Cal.App.4th 518 (American
Safety), the court reasoned that Gemini, who denied a defense tender, was
not entitled to an offset from settlements with other carriers, that also owed a
defense and failed to accept a tender and participate in the defense but
eventually settled with McMillin. Thus, the court concluded that McMillin
suffered damages in the amount of $214,763.76 (the stipulated amount).
Nevertheless, the trial court found that the Lexington Settlement could
be considered as an offset in a posttrial proceeding regarding McMillin’s
“ultimate recovery” of its damages. And the court noted that “McMillin and
Gemini stipulated that since the evidence received during the trial
included the evidence that the court would consider in any such
posttrial proceeding to determine equitable offset, the court would
decide the issue of equitable offset in this proceeding.”
The court thus determined that Gemini was entitled to an equitable
offset based on the Lexington Settlement. The court explained:
“Lexington, like Zurich and Hartford, was an AI carrier.
The applicable contractual documents between Gemini and
McMillin expressly recognize that McMillin was obligated
to pursue 100% of defense costs from AI carriers. The
Representations and Warranties agreement, signed by
McMillin, expressly states that McMillin would continue its
current claims handling practices and procedures,
‘including the tender of coverage on behalf of McMillin to

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insurers for subcontractors and to the subcontractors, and
to timely file and prosecute litigation against such insurers
and subcontractors to enforce all rights of McMillin as an
additional insured of such insurers and as express
indemnitee of such subcontractors.’ (Exh. 9). This
representation was ‘a material inducement to the issuance
of a policy of insurance by Gemini Insurance
Company . . . [and] specifically relied upon by Gemini in the
determination of the insurability of McMillin.’ (Exh. 9).
Indeed, McMillin Coverage Litigation Procedures, which
McMillin was obligated to follow while insured with
Gemini, provides an ‘Overall Strategy,’ which includes
accomplishing the goal of ‘[r]ecover[ing] 100% of McMillin’s
defense costs’ against AI carriers, an effort that may
involve ‘vigorously pursu[ing] litigation with its AI carriers
through discovery, depositions, motions, and trial. In most
instances, disputes over the duty to defend are resolved on
an AI carriers’ motion for summary judgment. Denial of an
AI carriers’ motion establishes its duty to defend, leaving it
liable for McMillin’s defense costs and potentially liable for
McMillin’s Brandt fees and costs in pursuing the action
against it.’ (Exh. 8). This court has already held that this
language protected Gemini from bad faith liability for
denying McMillin’s defense tender.

“Thus, the agreement between Gemini and McMillin, upon
which Gemini expressly relied in issuing its policy of
insurance to McMillin and, presumably, in setting the
premiums, was that McMillin would vigorously pursue
recovery of its defense costs from the AI carriers, thereby
creating a direct dollar-for-dollar benefit to Gemini since
Gemini’s obligation to pay defense costs would effectively
be reduced by defense costs paid by these other carriers, an
obvious result recognized by McMillin, itself: ‘McMillin
does not seek a double recovery of its defense costs in its
coverage litigation. It is entitled to only one defense.’ (Exh.
8.) See Safeco Insurance Company of America v. Parks
(2009) 170 Cal.App.4th 992, 1004 (“An insured is entitled to
only one full defense.”). Thus, the concept that Gemini
receive an equitable offset from a settlement with an AI
carrier McMillin was chasing after, consistent with its

14
 agreement with Gemini, does not strike this court as
inequitable.”

The court then determined how to equitably allocate the $525,000
settlement payment. In doing so, it explicitly found McMillin’s argument
that applying any of the Lexington Settlement to an offset would not be
equitable because McMillin incurred $335,509 in legal fees and costs in

pursuing the AI Carriers was “not persuasive.”5 Further, the court made
specific findings regarding the Lexington Settlement as follows:
(1) McMillin’s attorney conceded at trial that none of the $525,000 could be
attributable to Brandt fees, highlighting the fact that the subject settlement
agreement stated that each party was to bear its own costs and fees; (2) a
“considerable chunk of the claimed $335,509” McMillin incurred as part of its
Brandt fees was attributable to its unsuccessful pursuit of Lexington’s five
codefendants; (3) the Gemini insurance policy did not require Gemini to
reimburse McMillin for any of its Brandt fees; (4) “very little of the $525,000
Lexington settlement ought to be properly allocated to extinguishing the
potential bad faith/punitive damages exposure faced by Lexington” because
“[t]here was absolutely no evidence adduced at trial that Lexington had
committed bad faith necessary to trigger bad faith/punitive damages or
Brandt fees”; and (5) the negotiations between McMillin and Lexington
“centered upon McMillin’s claim for unpaid defense costs in Cosio and not
Lexington’s potential exposure to an award of Brandt fees or bad
faith/punitive damages.” Based on these factual findings, the court,

5 Because the amount Lexington paid to McMillin per their settlement
was unallocated, Lexington represented that it allocated the $525,000
settlement proceeds as follows: $250,000 to reimburse itself for the SIR
under its policies with Gemini and the remaining amount to pay a portion of
the $335,509 it incurred in pursuing the AI Carriers.

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“recogniz[ing] that the Lexington settlement . . . extinguish[ed] ‘any and all
claims’ McMillin might have against Lexington,” allocated $75,000 of the
$525,000 Lexington Settlement to Lexington’s potential bad faith/punitive
damages and Brandt fees while setting the equitable offset at $450,000. As
such, the court concluded that this equitable offset “far exceed[ed] McMillin’s
contractual damages of $214,763.76,” and “McMillin’s net recovery [was] zero
($0).”
The court then ordered that judgment be entered in favor of Gemini
and against McMillin and that Gemini be considered the prevailing party
under Code of Civil Procedure section 1032.
Before judgment was entered, McMillin filed a posttrial motion for

prejudgment interest, under Civil Code6 section 3287, subdivision (a),
seeking prejudgment interest at a rate of 10 percent on $214,763.76 from the
date on which Gemini denied coverage. Gemini opposed the motion on the
ground that, among other things, the damages were not liquidated pending a
determination that they were actually owed. McMillin filed a reply.
The trial court denied the motion, finding whether the defense fees and
costs were “reasonable” (and thus recoverable) was not determined until the
time of the parties’ stipulation shortly before trial. Accordingly, the amount
of the defense costs were not certain or capable of being made certain as of
August 16, 2017 under section 3287, subdivision (a).
Subsequently, the court entered judgment on August 25, 2021. Both
McMillin and Gemini timely appealed.

6 Further statutory references are to the Civil Code unless otherwise
specified.
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 DISCUSSION
I
MOTION FOR SUMMARY ADJUDICATION
A. McMillin’s Contentions
McMillin contends the trial court erred in granting Gemini’s motion for
summary adjudication as to the cause of action for breach of the covenant of
good faith and fair dealing. We disagree.
B. Standard of Review and Applicable Law
A trial court properly grants a motion for summary judgment only if no
issues of triable fact appear and the moving party is entitled to judgment as a
matter of law. (Code Civ. Proc., § 437c, subd. (c).) Summary adjudication
works the same way, except it acts on specific causes of action or affirmative
defenses, rather than on the entire complaint. (Id., subd. (f).) Motions for
summary adjudication proceed in all procedural respects as a motion for
summary judgment. (Id., subd. (f)(2).) “ ‘The moving party bears the burden
of showing the court that the plaintiff “has not established, and cannot
reasonably expect to establish,” ’ the elements of his or her cause of action.”
(Zubillaga v. Allstate Indemnity Co. (2017) 12 Cal.App.5th 1017, 1026
(Zubillaga).) “ ‘ “ ‘ “We review the trial court’s decision de novo, considering
all the evidence set forth in the moving and opposing papers except that to
which objections were made and sustained.” ’ [Citation.] We liberally
construe the evidence in support of the party opposing summary judgment
and resolve doubts concerning the evidence in favor of that party.” ’ ”
(Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347.)
“The law implies in every contract, including insurance policies, a
covenant of good faith and fair dealing. ‘The implied promise requires each
contracting party to refrain from doing anything to injure the right of the

17
other to receive the agreement’s benefits. To fulfill its implied obligation, an
insurer must give at least as much consideration to the interests of the
insured as it gives to its own interests. When the insurer unreasonably and
in bad faith withholds payment of the claim of its insured, it is subject to
liability in tort.’ ” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720
(Wilson).)
“While an insurance company has no obligation under the implied
covenant of good faith and fair dealing to pay every claim its insured makes,
the insurer cannot deny the claim ‘without fully investigating the grounds for
its denial.’ [Citation.] To protect its insured’s contractual interest in security
and peace of mind, ‘it is essential that an insurer fully inquire into possible
bases that might support the insured’s claim’ before denying it. [Citation.]
By the same token, denial of a claim on a basis unfounded in the facts known
to the insurer, or contradicted by those facts, may be deemed unreasonable.
‘A trier of fact may find that an insurer acted unreasonably if the insurer
ignores evidence available to it which supports the claim. The insurer may
not just focus on those facts which justify denial of the claim.’ ” (Wilson,
supra, 42 Cal.4th at pp. 720-721.)
“[A]n insurer denying or delaying the payment of policy benefits due to
the existence of a genuine dispute with its insured as to the existence of
coverage liability or the amount of the insured’s coverage claim is not liable
in bad faith even though it might be liable for breach of contract.” (Chateau
Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001) 90
Cal.App.4th 335, 347 (Chateau Chamberay).) “This ‘genuine dispute’ or
‘genuine issue’ rule was originally invoked in cases involving disputes over
policy interpretation, but in recent years courts have applied it to factual
disputes as well.” (Wilson, supra, 42 Cal.4th at p. 723.)

18
 “The genuine dispute rule does not relieve an insurer from its
obligation to thoroughly and fairly investigate, process and evaluate the
insured’s claim. A genuine dispute exists only where the insurer’s position is
maintained in good faith and on reasonable grounds. [Citations.] Nor does
the rule alter the standards for deciding and reviewing motions for summary
judgment. ‘The genuine issue rule in the context of bad faith claims allows a
[trial] court to grant summary judgment when it is undisputed or
indisputable that the basis for the insurer’s denial of benefits was
reasonable—for example, where even under the plaintiff’s version of the facts
there is a genuine issue as to the insurer’s liability under California law.
[Citation.] . . . On the other hand, an insurer is not entitled to judgment as a
matter of law where, viewing the facts in the light most favorable to the
plaintiff, a jury could conclude that the insurer acted unreasonably.’ ”
(Wilson, supra, 42 Cal.4th at pp. 723-724, fn. omitted.)
“Thus, an insurer is entitled to summary judgment based on a genuine
dispute over coverage or the value of the insured’s claim only where the
summary judgment record demonstrates the absence of triable issues (Code
Civ. Proc., § 437c, subd. (c)) as to whether the disputed position upon which
the insurer denied the claim was reached reasonably and in good faith.”
(Wilson, supra, 42 Cal.4th at p. 724.)
“When determining if a dispute is genuine, we do ‘not decide which
party is “right” as to the disputed matter, but only that a reasonable and
legitimate dispute actually existed.’ ” (Zubillaga, supra, 12 Cal.App.5th at
p. 1028.) A dispute is legitimate if “it is founded on a basis that is reasonable
under all the circumstances.” (Wilson, supra, 42 Cal.4th at p. 724, fn. 7.)
“ ‘This is an objective standard.’ ” (Zubillaga, at p. 1028.) “Moreover, the
reasonableness of the insurer’s decisions and actions must be evaluated as of

19
the time that they were made; the evaluation cannot fairly be made in the
light of subsequent events that may provide evidence of the insurer’s errors.”
(Chateau Chamberay, supra, 90 Cal.App.4th at p. 347.)
C. Analysis
Here, McMillin points us toward Gemini’s letter dated August 16, 2017,
wherein Gemini’s coverage counsel informs McMillin’s coverage counsel that
Gemini does not believe it has any obligation to pay defense costs McMillin
incurred in Cosio. Gemini’s counsel explained that she had reviewed
materials provided by McMillin and found “no evidence that McMillin itself
paid” the required SIR. McMillin argues at the time of the August 16 letter,
Gemini “had information from its insured[,] which showed McMillin had paid
its SIR under its policy.” As such, according to McMillin, there could be no
genuine dispute regarding whether Gemini should have reimbursed McMillin
for its defense costs incurred in Cosio.
In support of its argument that Gemini had proof that McMillin had
paid the SIR, McMillin cites to two portions of the record. First, McMillin
relies on paragraph 44 of the trial stipulation, which states: “On May 12,
2017, McMillin provided supporting documentation requested by Gemini,
including accountings, checks, and invoices showing that McMillin itself had
paid defense costs in the amount of [$]464,763.76.” However, the stipulation
on which McMillin relies was signed by the parties on May 6, 2021.
Therefore, it was not before the trial court when it ruled on Gemini’s motion
for summary adjudication on March 12, 2021, and we will not consider it on
appeal. (See Szadolci Hollywood Park Operating Co. (1993) 14 Cal.App.4th
16, 19 [in reviewing a trial court’s ruling on a motion for summary judgment,
an appellate court can only consider the evidence presented to the trial court
and cannot consider evidence submitted later or for the first time on appeal];

20
Wiler v. Firestone Tire & Rubber Co. (1979) 95 Cal.App.3d 621, 627 [“The
trial court’s decision must be reviewed on the basis of the papers filed at the
time the court considered the motion, not in the light of documents filed
subsequent to the trial court’s resolution of the issue”].)
Second, McMillin cites to Gemini’s response to McMillin’s separate
statement of undisputed material facts in opposition to the motion for

summary judgment.7 Specifically, McMillin relies on a statement that
provides the following: “McMillin had paid defense costs in excess of the
SIR.” This is statement that originated with McMillin as its separate
statement of “undisputed facts.”
A separate statement is not evidence “of anything,” but rather a “mere
assertion.” (See Stockinger v. Feather River Community College (2003) 111
Cal.App.4th 1014, 1022.) McMillin therefore was required to cite to those
pages in the record where the evidence could be found, in addition to the
corresponding separate statement of disputed facts. (See ibid.; Cal. Rules of
Court, rule 8.204(a)(1)(C) [requiring “any reference to a matter in the record”
to be supported by a citation to its location].)
McMillin’s failure to do so constitutes a forfeiture of his claim that the
court erred in finding there were no triable issues of material fact. This is
because our obligation to conduct a “de novo review [of the grant of summary
adjudication] does not obligate us to cull the record for the benefit of the
appellant in order to attempt to uncover the requisite triable issues. As with

7 When a party files a motion for summary judgment, “[t]he supporting
papers shall include a separate statement setting forth plainly and concisely
all material facts that the moving party contends are undisputed. Each of
the material facts stated shall be followed by a reference to the supporting
evidence.” (Code Civ. Proc., § 437c, subd. (b)(1).)

21
an appeal from any judgment, it is the appellant’s responsibility to
affirmatively demonstrate error and, therefore, to point out the triable issues
the appellant claims are present by citation to the record and any supporting
authority. To put it another way, review is limited to issues which have been
adequately raised and briefed.” (Lewis v. County of Sacramento (2001) 93
Cal.App.4th 107, 116; see Del Real v. City of Riverside (2002) 95 Cal.App.4th
761, 768 [recognizing the principle that an “appellate court is not required to
search the record on its own seeking error”]; Guthrey v. State of California
(1998) 63 Cal.App.4th 1108, 1111, 1115 [rejecting appellant’s challenge to the
grant of summary judgment because, although appellant alleged a “ ‘plethora
of admissible evidence’ indicate[d] a triable issue of fact existed” on many of
his claims, appellant’s failure to “identify this evidence and where it can be
found in the record” constituted a waiver of any such error on appeal].)
McMillin commits the same mistake in making the assertion, “There is
no dispute that Gemini was aware that McMillin paid the SIR and it
deliberately chose to ignore it.” It only cites to the separate statement of
facts. There is no citation to anywhere in the record where evidence may
exist to support this assertion.
Indeed, in reviewing McMillin’s discussion of facts in its opening brief,
we observe that McMillin simply cited to the same statement of undisputed
facts (and not evidence) purportedly establish McMillin provided Gemini with
documents proving it had paid in the SIR. However, in a portion of its
recitation of the facts, McMillin does cite directly to evidence (Gemini’s claim
file notes) wherein it argues a Gemini representative “admitted McMillin had
provided proof that it actually paid more than the $250,000 SIR.” Thus,
while McMillin does not cite to additional evidence supporting its assertions

22
here (and we find its reliance on that evidence forfeited), we will consider the
claim file notes to evaluate whether they support McMillin’s position.
Again, the basic premise of McMillin’s argument is as follows. The only
reason on which Gemini could base a genuine dispute defense is set forth in
the August 16, 2017 letter in which Gemini refuses to contribute to
McMillin’s defense costs in Cosio: Gemini’s claim that McMillin had not paid
the SIR out of pocket. Gemini could not reasonably dispute McMillin’s
payment of the SIR because McMillin provided Gemini with information
conclusively establishing that it had paid the required SIR. Further, Gemini
was fully aware that McMillin had paid the SIR with its own funds at the
time Gemini sent the August 16 letter. And McMillin contends certain claim
notes establish its theory. Yet, in reviewing that evidence, the claim file
notes are not as clear as McMillin represents.
The notes on which McMillin relies, dated October 3, 2017, state the
following:
“4. Gemini’s limits are excess over the SIR, which has to be
paid by McMillin. McMillin disagrees and says we’ve
breached the contract (SIR endorsement) and cannot take
advantage of the SIR provision

“5. McMillin has provided proof that it actually paid more
than $250,00, but there are certain issues relating to
information and in any event, McMillin appears to have
recovered some of this amount from others

“One of the main problems here is that McMillin is
demanding the entire $460,837.90 (difference from what
the costs of defending were less what has been paid by AI
insurers) without taking off their own $250,000 retention.
The other issue is, as stated above how they’re allocating
money they’ve collected for Crawford fees as they appear to
be saying these are for their costs to pursue, i.e., Brandt
fees . . . [¶] Taking these factors into account, the total
costs of defending the underlying action, to McMillin, was

23
 $876,404.90. We have confirmed that Hartford and Zurich
issued checks that total $401,148.04. There was also a
credit of $66,283.67, which wasn’t explained but when
added to the total paid toward defense brings the total
alleged outstanding unpaid fees to $408,973.19. After
applying the $250,000 SIR, this brings the potentially owed
fees to $158,973.19

“McMillin[’]s case against Lexington was remanded on
appeal and continues [¶] There are several issues of
accounting that are left unresolved and we’ve asked
McMillin to explain.”

In addition, as part of McMillin’s argument that Gemini knew McMillin
had, itself, paid the SIR, McMillin points to additional claim notes dated
March 27, 2018. Those notes state:
“We will see what comes of counsel’s further requests to
McMillin on unresolved accounting issues and seek to settle
based upon the total information. While McMillin still has
no outstanding claim against Lexington for AI, the matter
is not ‘ripe’ for settlement anyway.”

Although in the October 3, 2017 claim notes, a Gemini representative
states that “McMillin has provided proof that it actually paid more than
$250,000,” the rest of the notes qualify that statement. Indeed, the notes
make clear that: (1) “there are certain issues relating to the” documentation
that McMillin provided; (2) Gemini believed McMillin had recovered at least
some of the amount of the SIR it paid; (3) there was a question about how
McMillin allocated the Crawford fees it collected it; (4) there existed an
unexplained $66,283.678 credit; and (5) “[t]here are several issues of
accounting that are left unresolved and we’ve asked McMillin to explain.” As
such, these notes do not establish that Gemini knew that McMillin had paid
the SIR when Gemini sent its letter on August 17, 2017. To the contrary, the
claim notes, written almost two months after the letter, support Gemini’s

24
position in the letter that there was some question regarding whether
McMillin had paid the SIR out of pocket. Further, the additional claims
notes on which McMillin relies, show that “unresolved accounting issues”
remained over seven months after Gemini declined to pay any of McMillin’s
defense costs. And these notes suggest that the parties were continuing to
discuss these issues as well.
Thus, the subject claim notes support the trial court’s finding that the
parties had a genuine dispute about coverage. McMillin believed that it had
provided information sufficient to establish it had paid the SIR itself. Gemini
questioned some of McMillin’s accounting and did not appear sure that
McMillin had paid the SIR.
Further, in granting the motion for summary adjudication, the trial
court also noted that “[a]s late as March 25, 2014, a date more than 3 months
after dismissal of the Cosio action, McMillin reported to another direct
insurer, Evanston, that it ‘has not yet exhausted the SIR.’ ” The court
observed that until the SIR was exhausted, Gemini’s obligations under the
subject insurance policies was not triggered. The court’s finding further
undermines McMillin’s position that it was undisputed that Gemini knew
McMillin had paid the SIR when Gemini declined to pay any defense costs on
August 16, 2017. Rather, it begs the questions how and why McMillin
incurred additional defense costs for Cosio months after it settled. McMillin
neglects to answer these questions in its brief. At most, it cavalierly
dismisses the court’s finding because it was based on “a letter between
McMillin and another carrier obtained in discovery in this action.”
Against this backdrop, McMillin’s failure to cite to specific evidence in
the record that supports its position that it was undisputed Gemini knew
McMillin had, itself, paid the SIR at the time Gemini declined to contribute

25
to McMillin’s defense costs looms all the more large. Again, the only evidence
McMillin actually cites in the record suggests there existed a genuine dispute
regarding whether McMillin had paid the SIR. At the very least, Gemini
appeared to have questions about the documents McMillin provided and the
manner in which it accounted its fees and costs as well as payment for those
fees and costs McMillin received from AI Carriers and subcontractors.
Simply put, without more evidence and discussion of how that evidence
supports McMillin’s position, we conclude McMillin has not carried its burden
here as an appellant and shown the trial court erred. (See Dinslage v. City
and County of San Francisco (2016) 5 Cal.App.5th 368, 379; accord, Centex
Homes v. St. Paul Fire & Marine Ins. Co. (2018) 19 Cal.App.5th 789, 796.)
Moreover, although we review this issue de novo, based on the only evidence
McMillin specifically cites in this appeal, we would reach the same conclusion
as the trial court.
Although we determine that McMillin has not carried its burden here,
we also briefly address McMillin’s argument that the trial court could not
properly consider any of Gemini’s arguments regarding the breach of the
covenant of good faith and fair dealing unless Gemini made those same
arguments in its August 16, 2017 letter. McMillin bases its argument on the
principle that we analyze the reasonableness of the insurer’s decision and
actions at the time they were made. (See Chateau Chamberay, supra, 90
Cal.App.4th at p. 347.) This rule is intended to prevent the parties from
relying on subsequent events to justify or question the insurer’s actions.
(Ibid; see Filippo Industries, Inc. v. Sun Ins. Co. (1999) 74 Cal.App.4th 1429,
1441 (Filippo).) The trial court’s ruling below does not seem to implicate this
rule. Alternatively stated, the trial court did not rely on post-denial discovery
of evidence that renders the insurer’s decision and actions reasonable.

26
 We acknowledge that in its August 16, 2017 letter Gemini focused on
the SIR and its claim that McMillin had not paid it. As such, Gemini argued
it was not obligated to pay any defense costs for Cosio. However, Gemini, in
rather boilerplate fashion, did explicitly reserve and not waive any of its
rights under the policy with McMillin.
When McMillin first requested Gemini contribute to its Cosio defense
costs, it explicitly informed Gemini that it was still pursuing AI Carriers.
Further, the claim notes on which McMillin relies here also mention that
McMillin was continuing to pursue Lexington. In other words, it is
undisputed that Gemini knew, at the time it declined McMillin’s request for
payment, that McMillin had not yet exhausted its efforts against all the AI
Carriers. Moreover, the claim notes indicate there was some disagreement
between the parties regarding how McMillin should allocate certain
payments from AI Carriers. And the claim notes show that, although Gemini
calculated what it believed might be its exposure for McMillin’s claim, it did
not believe settlement was “ripe” because it was waiting to see what
happened in McMillin’s lawsuit against Lexington. Put differently, the claim
notes support the position that Gemini did not believe it owed McMillin any
reimbursement while it was still pursuing an AI Carrier. In addition, the
evidence before the court at the time of the motion for summary adjudication
included McMillin’s litigation protocols that stated it aggressively pursued AI
Carriers to cover 100 percent of its defense costs, as well as the subject
insurance policy that set forth Gemini was in excess to the coverage provided
by the AI Carriers. Thus, we do not conclude the trial court erred in finding a
genuine dispute based upon the following:
“Gemini’s policy was excess to the coverage provided by
McMillin’s additional insured carriers. Moreover, McMillin
and Gemini had agreed that McMillin would aggressively

27
 proceed to obtain defense costs from other available
carriers prior to tendering such claim to Gemini. McMillin
was still pursuing coverage from additional insured
carriers up through its Lexington settlement on August 29,
2018. Ironically, McMillin’s tender demand of September
9, 2016, while McMillin was still in hot pursuit of
Lexington, arguably may have actually been violative, at
least in spirit, of the Representations and Warranties
regarding McMillin’s Coverage Procedures upon which
Gemini had materially relied in issuing insurance to
McMillin.”

In short, based on the record before us, we agree with the trial court
that a genuine dispute existed between the parties at the time Gemini
declined McMillin’s request to contribute to defense costs in Cosio, regarding
McMillin’s payment of the SIR (out of its own pocket) and whether Gemini
should contribute to defense costs while McMillin was still pursuing an AI
Carrier. The trial court did not err in granting summary judgment as to the
cause of action for breach of the implied covenant of good faith and fair
dealing.
II
EQUITABLE OFFSET
A. McMillin’s Contentions
McMillin contends the trial court erred in applying an equitable offset
based on the Lexington Settlement and reducing its net recovery of damages
for Gemini’s breach of contract to zero. To this end, McMillin advances three
primary arguments: (1) As a matter of law, Gemini, as a breaching insurer,
was not entitled to an equitable offset until it proved that McMillin received a
double recovery (as defined by McMillin); (2) the Gemini insurance policies
and related documents required that McMillin be made whole, including
being reimbursed for its litigation fees and costs incurred pursuing the AI
Carriers, before Gemini could benefit from an equitable offset; and (3) the
28
Lexington Settlement agreement prohibited the trial court from making
certain findings in allocating the settlement proceeds. We reject these
contentions.
B. Standard of Review
As a threshold matter, we note the parties disagree on the appropriate
standard of review. Citing American Safety, supra, 233 Cal.App.4th 518,
McMillin argues that we should apply de novo review. Gemini asserts that
an abuse of discretion standard is applicable to the trial court’s
determination that an equitable offset was appropriate. (See Plut v.
Fireman’s Fund Ins. Co. (2000) 85 Cal.App.4th 98, 103 (Plut).) To the extent
McMillin is challenging any factual findings of the court, Gemini maintains
we should apply a substantial evidence review. Gemini has the better
argument.
In American Safety, we reversed an order granting motions in limine to
preclude certain evidence and argument because in so doing, the trial court
essentially granted summary adjudication on an element of the plaintiff’s
claim and nonsuit on the issue of damages, without requiring the statutory
procedural protections associated with summary judgment and nonsuit
proceedings. (American Safety, supra, 233 Cal.App.4th at pp. 541, 543.)
However, we did not, as McMillin claims here, establish that the standard of
review on a claim for equitable offset was de novo. Rather, because the trial
court’s “grant of the motion [became] a substitute for a summary adjudication
or nonsuit motion,” we applied a de novo review to the trial court’s legal
ruling. (Id. at p. 529.)
Here, the procedural posture is much different than that before us in
American Safety. Unlike the trial court’s ruling in American Safety that
precluded McMillin from presenting evidence or argument that the subject

29
settlement proceeds should not offset contract damages or should be allocated
to Brandt fees, the trial court in the instant action allowed McMillin to argue
and present evidence regarding how it believed the Lexington Settlement
should be allocated. In addition, the court allowed Gemini to argue and
present evidence how it believed the Lexington Settlement should be
allocated as well. Ultimately, the court made its findings based on the
evidence presented at trial.
In this sense, the court simply addressed the parties’ competing claims
whether an equitable offset was appropriate under the specific facts of the
case. Such a determination is well within the court’s discretion. (See
Margott v. Gem Properties, Inc. (1973) 34 Cal.App.3d 849, 854; Plut, supra, 85
Cal.App.4th at p. 103.) Indeed, the parties here stipulated that the court
should make such a determination because the evidence that the court would
consider “during the trial included the evidence the court would consider in
any such posttrial proceeding to determine equitable offset.” As such, we
apply an abuse of discretion standard. Under that standard, we uphold the
court’s decision if any reasonable judge would have made it, even if we would
not have reached the same conclusion. (See Harman v. City and County of
San Francisco (2007) 158 Cal.App.4th 407, 428.) Further, under an abuse of
discretion standard, “the deference it calls for varies according to the aspect
of a trial court’s ruling under review. The trial court’s findings of fact are
reviewed for substantial evidence, its conclusions of law are reviewed de
novo, and its application of the law to the facts is reversible only if arbitrary
and capricious.” (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-
712.)

30
 C. Analysis
“ ‘At common law, a setoff is based upon the equitable principle that
parties to a transaction involving mutual debts and credits can strike a
balance between them.’ [Citations.] Setoffs routinely are allowed in actions
to enforce a money judgment. [Citation.] The right of offset rests upon the
inherent power of the court to do justice to parties appearing before it.
[Citations.] . . . [¶] It is the rule that ‘if one joint tortfeasor satisfies a
judgment against all joint tortfeasors the judgment creditor cannot obtain a
double recovery by collecting the same judgment from another of the
tortfeasors.’ [Citation.] The rationale is that ‘[a]n injured person is entitled
to only one satisfaction of judgment for a single harm, and full payment of a
judgment by one tortfeasor discharges all others who may be liable for the
same injury.’ [Citation.] . . . ‘[W]here fewer than all of the joint tortfeasors
satisfy less than the entire judgment, such satisfaction will not relieve the
remaining tortfeasors of their obligation under the judgment. Stated
otherwise, “partial satisfaction has the effect of a discharge pro tanto [for so
much].” ’ The single satisfaction rule is equitable in nature, and its apparent
purpose is to prevent unjust enrichment. [Citation.] The plaintiff is entitled
only to a single recovery of full compensatory damages for a single injury.”
(Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 753-754.)
We are concerned here with insurers, not joint tortfeasors, but the
worry of a double recovery is the same. As such, we are mindful that similar
rules should apply to the situation before us so that the insured (here,
McMillin) does not receive a double recovery. “The fact that several
insurance policies may cover the same risk does not increase the insured’s
right to recover for the loss, or give the insured the right to recover more than
once. Rather, the insured’s right of recovery is restricted to the actual

31
amount of the loss. Hence, where there are several policies of insurance on
the same risk and the insured has recovered the full amount of its loss from
one or more, but not all, of the insurance carriers, the insured has no further
rights against the insurers who have not contributed to its recovery.”
(Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th
1279, 1295.)
Here, McMillin frames the salient issue before us as one of simple
math. It notes that when it settled with Lexington on August 29, 2018, it had
incurred and paid $464,763.76 (including the $250,000 SIR) in unreimbursed
Cosio defense fees and costs as well as $335,509 in pursuit of the litigation
against the six AI Carriers for a total of $800,272.76. Thus, according to
McMillin, the Lexington Settlement left McMillin with a $275,272.76 loss in
unreimbursed litigation expenses that would not have been satisfied even if
Gemini actually paid the $214,763.76 in contract damages.
Based on these calculations, McMillin claims Gemini could not prove
that McMillin would receive a double recovery if Gemini had paid
$214,763.76. Moreover, McMillin asserts here that an equitable offset should
only be permitted if Gemini proved that McMillin has been made whole. In
essence, only after McMillin received payment from AI Carriers covering all
its outstanding litigation expenses (whether they were incurred in defending
Cosio or pursuing other AI Carriers) could Gemini then seek to offset its
contract damages to avoid McMillin receiving a double recovery.
Underlying McMillin’s position is its rather expansive view of what is
required to make it whole, especially in terms of its relationship to Gemini.
To illustrate just how sweeping McMillin’s definition of whole is, we briefly
discuss what damages McMillin is entitled to for Gemini’s breach of contract.
When a defendant (such as Gemini here) is found liable for breach of

32
contract, the recoverable damages are limited to the amount that will
compensate the plaintiff for the detriment caused by the breach because “no
one shall profit more from the breach of an obligation than from its full
performance.” (Patent Scaffolding Co. v. William Simpson Constr. Co. (1967)
256 Cal.App.2d 506, 511.) The contract limitation on recoverable damages is
applicable when the insurer breaches its contractual duty to defend and
indemnify an insured. (Ringler Associates Inc. v. Maryland Casualty Co.
(2000) 80 Cal.App.4th 1165, 1187 (Ringler Associates Inc.).) Generally, when
a defendant breaches its contract, a plaintiff who suffers no injury because a
third party pays for the loss cannot recover damages from the breaching
party. However, as we previously held and the trial court noted, when an
insurer breaches its duty to defend, it may not use the settlement proceeds
paid by other insurers as a liability shield. Rather, those settlement proceeds
have the potential to reduce the insured’s right to recover damages from the
breaching insurer. (American Safety, supra, 233 Cal.App.4th at pp. 540-541.)
Here, the court found Gemini breached its contract with McMillin for its
failure to reimburse defense fees and costs that McMillin incurred in Cosio
and therefore was liable for $214,763.76. As such, that amount is the entire
amount of damages to which McMillin is entitled for Gemini’s breach.
Despite the Lexington Settlement eclipsing more than double the
amount Gemini owes McMillin in damages, McMillin asserts none of the
Lexington Settlement proceeds can be applied to offset the damages Gemini
owes because McMillin must first be made whole. And to be made whole,
according to McMillin, it must be fully reimbursed for all its defense fees and
costs in Cosio, including the SIR it was contractually required to pay before
Gemini’s duty to defend is triggered, and all the litigation fees and costs it
incurred in pursuing the six AI Carriers. Consistent with this position,

33
McMillin represents that it allocated the Lexington Settlement proceeds as
follows: $250,000 to reimburse itself for the SIR in Cosio and $275,000 to
reimburse it for the fees and costs it incurred in litigating against the six AI
Carriers.
We observe two primary issues with McMillin’s calculations regarding
what would make it whole. First, it assumes that any payment of defense
costs by an AI Carrier must first reimburse McMillin for its payment of the
SIR. McMillin offers no reason why this must be so. It is undisputed that
the Gemini insurance policies required McMillin to pay, out of its own pocket,
the SIR before Gemini was obligated to defend or otherwise pay any of
McMillin’s defense costs in Cosio. Indeed, the SIR requirement explains why
the parties agreed that, at most, Gemini would be responsible for $214,763.76

if McMillin proved a breach of contract at trial.8 And McMillin offers no
cogent argument, supported by legal authority, that it must be reimbursed
for the SIR it was required to pay under subject policy before any of the
proceeds of the Lexington Settlement could be applied as an equitable offset.
Second, McMillin assumes that it must be paid all the $335,509 it
incurred litigating against the six AI Carriers. However, as the trial court
found based on McMillin’s legal invoices produced at trial, a “considerable
chunk of the claimed $359,509” “was, in fact, spent in the unsuccessful
pursuit of Lexington’s five co-defendants.” McMillin offers no authority that
it was required to be reimbursed for the fees and costs incurred in its
unsuccessful litigation against the AI Carriers.

8 $464,763.76 in Cosio defense fees and costs minus the $250,000 SIR
equals $214,763.76.

34
 Despite this lack of legal authority, McMillin argues that the subject
insurance policies and related documents required it to be made “whole”
before the damages Gemini owed for breach of contract could be reduced by
the AI Carriers’ payments. To this end, McMillin points out that the parties
agreed, in the Representations and Warranties, that McMillin would try to be
made whole in litigation against AI Carriers. It appears McMillin is actually
referring to a document entitled “McMillin Coverage Litigation Procedures,”
which was exhibit 8 at trial, wherein McMillin represents that it seeks to
“[r]ecover 100% of McMillin’s defense costs (both pre-tender and post-tender)
incurred in underlying litigation[ ] and [¶] [r]ecover 100% of McMillin’s
Brandt fees and costs incurred in pursuing its coverage litigation.” In that
same document, McMillin also states the following:
“McMillin does not seek a double recovery of its defense
costs in its coverage litigation. It is entitled to only one
defense. McMillin’s purpose in pursuing its coverage
litigation is to be made whole for its defense and indemnity
costs and for its Brandt fees and costs. In the event there
is any surplus recovery, McMillin offers its participating AI
carriers reimbursement for any overpayments.” (Italics
added.)

Based on the above language, McMillin argues that it was understood
by Gemini that McMillin first pursued AI Carriers to be made “whole,” which
included payment of all its defense costs as well as its Brandt fees and costs.
As such, according to McMillin, it was improper for Gemini to argue it was
entitled to an equitable offset, and the trial court erred in allocating the
proceeds of Lexington Settlement in a manner to apply an equitable offset to
reduce its damages to zero. We disagree. We see no such limitation in the
language on which McMillin relies. Instead of applying a formula by which
settlement proceeds with AI Carriers are to be allocated or clearly indicating
that any monies received from AI Carriers must first reimburse McMillin for
35
its litigation costs for pursuing those AI Carriers, the subject language
appears to be little more than aspirational. Indeed, the paragraph describing
McMillin’s purpose to be made whole is part of an explanation of McMillin’s
litigation procedures and, as the parties agree, was an important piece of
McMillin’s disclosures in persuading Gemini to provide the subject insurance
policies. In this sense, the McMillin Coverage Litigation Procedures are a
means to convey McMillin’s sophistication and efficiency in dealing with
construction defect litigation and ensuring AI Carriers cover McMillin’s
defense costs. As such, it is not surprising that, within the same document,
McMillin described two of the “goals” of its “[o]veral [s]trategy” as recovering
100 percent of its defense costs as well as 100 percent of its Brandt fees and
costs. We read nothing in this language that would require any settlement
McMillin receives from an AI Carrier be first allocated to its Brandt fees or
otherwise reimburse McMillin for the fees it incurred in unsuccessfully
pursuing AI Carriers.
In addition, the language on which McMillin relies undermines its
definition of what constitutes making it whole. McMillin’s argument rests on
the following sentence in its litigation procedures: “McMillin’s purpose in
pursuing its coverage litigation is to be made whole for its defense and
indemnity costs and for its Brandt fees and costs.” Thus, according to
McMillin, to be made whole, all its defense costs and its Brandt fees must be
paid. However, the $335,509 fees and costs that McMillin incurred in
litigation against the six AI Carriers cannot all be categorized as Brandt fees.
In fact, at most, only the fees and costs incurred litigating against Lexington
could be Brandt fees as a matter of law.
In Brandt, our high court concluded that when an insurer tortiously
withholds benefits, attorney fees, reasonably incurred to compel payment of

36
the policy benefits, were recoverable as an element of the damages resulting
from such tortious conduct. (Brandt, supra, 37 Cal.3d at p. 815.) The court
observed, “The attorney’s fees are an economic loss—damages—proximately
caused by the tort. [Citation.] These fees must be distinguished from
recovery of attorney’s fees qua attorney’s fees, such as those attributable to
the bringing of the bad faith action itself.” (Id. at p. 817.) The court
compared such fees to the recovery of medical fees in a personal injury action.
(Ibid.) Moreover, the court emphasized it was not dealing with the measure
and mode of compensation of attorneys, but with damages wrongfully caused
by the insurer’s improper action. (Ibid.)
The court concluded: “The fees recoverable, however, may not exceed
the amount attributable to the attorney’s efforts to obtain the rejected
payment due on the insurance contract. Fees attributable to obtaining any
portion of the plaintiff’s award which exceeds the amount due under the
policy are not recoverable.” (Brandt, supra, 37 Cal.3d at p. 819.)
Furthermore, as these fees are recoverable as damages, the determination of
recoverable fees must be made by the trier of fact unless the parties stipulate
otherwise. (Ibid.)
Because Brandt fees are damages as part of a successful suit to compel
payment of policy benefits, none of the fees and costs McMillin incurred in its
unsuccessful pursuit of five of the six AI Carriers constitute Brandt fees. Yet,
McMillin ignores this legal distinction and lumps together all the fees and
costs it incurred pursuing all six AI Carriers and labels them “Brandt fees”
for purposes of being made whole. Thus, even if we were to accept McMillin’s
argument that to be made whole, it must be reimbursed for all its defense
fees and costs in Cosio as well as its Brandt fees, at most, McMillin could be
entitled to the Brandt fees it incurred against Lexington only. However,

37
there is no indication in the record McMillin delineated between the fees and
costs incurred in its litigation with Lexington and those fees and costs it
incurred pursuing the other five AI Carriers. Therefore, on the record before
us, McMillin cannot establish the amount of Brandt fees that would be

required to make it whole.9
Further, our analysis is not altered when we consider two out of state
cases on which McMillin relies: Weyerhaeuser Co. v. Commercial Union
Insurance Company (2000) 142 Wash.2d 654 (Weyerhaeuser) and Puget
Sound Energy v. ALBA Gen. Ins. Co. (2003) 149 Wash.2d 135 (Puget Sound).
Weyerhaeuser involved a large hazardous waste cleanup, required
under Federal and Washington law, at about 130 sites nationwide.
(Weyerhaeuser, supra, 142 Wash.2d at p. 661.) The plaintiff filed suit for
declaratory relief against 34 insurance companies, and after some procedural
and appellate maneuvers, all but one of the insurance companies settled with
the plaintiff. (Id. at p. 662.) The defendant (the only insurance company that

9 To the extent McMillin is arguing that the California made-whole rule
applies here, we summarily reject that argument. The made-whole rule is a
common law principle that limits the insurer’s reimbursement right in
situations where the insured has not recovered his or her “entire debt.” (See
Sapiano v. Williamsburg Nat. Ins. Co. (1994) 28 Cal.App.4th 533, 536; Plut,
supra, 85 Cal.App.4th at p. 104.) The rule precludes an insurer from
recovering any third party funds paid to the insured until the insured has
“ ‘been fully compensated for [his or] her injuries. . . .’ ” (Plut, at p. 104.)
Here, McMillin is not seeking to be made whole based on its insured loss or
damages. Rather, it is seeking reimbursement for its attorney fees and costs.
The “established California rule” is that the made-whole doctrine does not
cover attorney fees. (Sapiano, at pp. 536-537; see 21st Century Ins. Co. v.
Superior Court (2009) 47 Cal.4th 511, 519 [“[N]o California court has ever
held that an insured was not made whole because he or she had to bear the
attorney fees incurred in recovering damages not covered by the insurance
contract”].)

38
did not settle) successfully moved for partial summary judgment; then the
parties proceeded to trial. (Id. at pp. 663, 665.) After trial, the parties
appealed and cross-appealed a number of the trial court’s rulings. (Id. at
p. 664.) Relevant here, the defendant challenged the trial court’s ruling that
it was not entitled to an offset based on the payments made by other
insurance companies. (Id. at p. 671.)
Following Washington state law, the trial court found that the
defendant did not show, by a preponderance of the evidence, that the plaintiff
received a double recovery; thus, an offset was improper. (Weyerhaeuser,
supra, 142 Wash.2d at p. 671.) The trial court explained its ruling as follows:
“Given the facts that we have before us, the form that the
releases come in, the multiplicity of the claims and the
parties, it is impossible to be able to sort that out at this
point and for the court to say affirmatively that [the
defendant] has demonstrated that [the plaintiff] has been
made whole.” (Id. at pp. 671-672.)

As such, the trial court made clear that the unique and complicated facts
before it thwarted the defendant’s efforts to prove an offset was appropriate.
In affirming the trial court on this point, the Washington Supreme
Court held that an insurer bears the burden of establishing a double
recovery. (Weyerhaeuser, supra, 142 Wash.2d at p. 674.) The court then
concluded that the trial court’s finding that that the plaintiff was not made
whole was supported by substantial evidence. (Id. at p. 675.) In doing so, the
court noted the lack of evidence the defendant provided at trial. (Ibid.)
Here, we do not agree with McMillin that Weyerhaeuser has any
applicability to the issue before us. That case was decided under Washington
law. There was no discussion of what fees and costs the court considered in
calculating whether the plaintiff had been made whole. There is no
indication in the opinion that the defendant was required to prove that the

39
plaintiff had been compensated for attorney fees and costs it incurred in
pursuing the 33 other insurance companies before the court would find an
offset appropriate. Moreover, the facts in front of the trial court in
Weyerhaeuser appear to be much more complicated than the facts before the
trial court in the instant action. Consequently, we conclude Weyerhaeuser is
not instructive here.
Similarly, we do not find Puget Sound, supra, 149 Wash.2d 135 helpful
either. There, in another environmental insurance coverage action, the “sole
issue before [the] court [was] whether the Court of Appeals holding [was]
consistent with Weyerhaeuser regarding who has the burden of proof.” (Id. at
p. 140.) In concluding the lower court had erred, Washington’s high court
reiterated: “[I]f a nonsettling insurer seeks to offset its responsibility for a
claim using proceeds from . . . a settlement, it has the burden of establishing
what part of the settlement was attributable to the claim it seeks to offset.”
(Id. at p. 141.) However, in reaching this holding, the court merely concluded
that summary judgment was not appropriate on the record before it. (Id. at
p. 142.) We read nothing in Puget Sound that offers any support for
McMillin’s position here.
In short, we find no support for McMillin’s position that the proceeds of
the Lexington Settlement must have covered all its defense fees and costs in
Cosio, including the SIR, as well as all its litigation fees and costs in pursuit
of the AI Carriers before the trial court could have allocated it for purposes of
an equitable offset. Moreover, we find examples under California law where
courts have applied the principle of an equitable offset even where an insurer
allegedly breached its duty to defend or indemnify an insured for a loss that
also was covered by other insurers with defense or indemnification
obligations for the loss.

40
 For example, in Plut, supra, 85 Cal.App.4th 98, the jury found the
insurer liable for breaching a homeowner policy by declining to pay for a loss
sustained when a third party’s negligence damaged the insured’s property.
The insurer argued it was entitled to offset payments from the third parties
that compensated the insured for the damage. The court held that, because
the jury’s damage award against the insurer was for the total amount of
property damage sustained by the insured, and the collateral source rule was
inapplicable to breach of contract recoveries, the insurer was entitled to offset
the amounts collected from other responsible parties against the damages
awarded for breach of contract. (Id. at pp. 107-111.)
Similarly, in Atlantic Mutual Ins. Co. v. J. Lamb, Inc. (2002) 100
Cal.App.4th 1017 (Lamb), two insurers allegedly breached their obligations to
defend and indemnify the insured against a third party claim, and the
insured therefore defended the claim (incurring approximately $90,000 as
defense costs) and settled with the third party at the insured’s own expense.
The insured sued both insurers, Atlantic and Granite, and one insurer
(Granite) settled with the insured for $120,000. (Id. at pp. 1024-1027.) In
the resulting litigation, the insured argued in part that no portion of the
Granite settlement should be available as an offset against the insured’s
rights against the nonsettling insurer Atlantic because Granite’s payment
was solely to settle its bad faith exposure. (Id. at p. 1042.) The appellate
court, after noting that nothing in the record supported the insured’s effort to
allocate the settlement solely to bad faith, reasoned at pages 1042-1043:
“In short, we agree with the proposition . . . that [the
insured] is simply trying to collect twice for the same claim.
If it was [the insured’s] intent to allocate the $120,000 paid
by Granite . . . , or any portion thereof, to a claim of tortious
bad faith on the part of Granite . . . , then [the insured]
should have caused such allocation to be explicitly set forth

41
 in the Settlement Agreement. . . . [¶] The most that [the
insured] is entitled to recover is the balance of the
unreimbursed indemnification expense that it incurred.
Such recovery, as we explain below, will depend on a
determination by the trial court that (1) there is actual
coverage under the Atlantic . . . policy and (2) [the insured]
has proven the actual value of its settlement with [the third
party] . . . exceeds the amount paid to [the insured] by
Granite . . . over and above the defense cost . . . .”

Thus, the court in Lamb employed the approach that, when an insured
has collected from one liability insurer, his claim against another liability
insurer for the same defense and indemnity costs is reduced pro tanto by the
amounts he collected from the settling liability insurer attributable to
defense and indemnity costs. Other California courts that have considered
analogous issues appear to adhere consistently to this approach. (See, e.g.,
Ringler Associates Inc., supra, 80 Cal.App.4th at p. 1187; Tradewinds Escrow,
Inc. v. Truck Ins. Exchange (2002) 97 Cal.App.4th 704, 712; Prichard v.
Liberty Mutual Ins. Co. (2000) 84 Cal.App.4th 890, 909.)
Finding no legal impediment to the court exercising its equitable
powers to allocate the proceeds of the Lexington Settlement as part of an
equitable offset, we move on to McMillin’s additional arguments that the
allocation was otherwise improper. For example, McMillin asserts that the
settlement agreement between it and Lexington prohibited the trial court
from making certain factual findings critical to the court’s allocation of the
settlement proceeds. To this end, McMillin emphasizes that the Lexington
Settlement was the resolution of a dispute between McMillin and Lexington
and “not an acknowledgment by Lexington that it was obligated to defend or
indemnify McMillin.” McMillin further points out that California law treats
settlement agreements like any other contract for purposes of interpretation
(Vaillette v. Fireman’s Fund Ins. Co. (1993) 18 Cal.App.4th 680, 686), and the

42
intent of the parties controls the meaning of the contract (Civ. Code, §§ 1636,
1638).
McMillin then notes that the agreement made clear that, even though
the parties settled the litigation, Lexington’s duty to defend and indemnify
McMillin was disputed:
“6. Disclaimer of Liability/No Admission

“6.1 McMillin hereby agrees and acknowledges that neither
the release by McMillin as set forth in Paragraph 4 above,
nor any event occurring during the negotiations of this
Agreement, nor any statement or communication made in
connection therewith by Lexington and/or its attorneys
and/or representatives shall be considered an admission by
Lexington of coverage and that the Parties further
acknowledge that no past or present wrongdoing on the
part of Lexington shall be implied therefrom.

“6.2 This Agreement is made with the understanding that
it is not to be construed as an admission of liability by the
Parties and that it is made solely for the purpose of
compromise of the disputed issues.

“6.3 This Agreement shall be without precedential value
and is not intended to nor shall it be construed as an
interpretation of any insurance policy and shall not be used
as evidence, or in any other manner, in any court or dispute
resolution proceeding to create, prove or interpret the
obligations of Lexington . . . .”

McMillin therefore argues this language prohibited the court from
evaluating and trying Lexington’s liability for defense costs and bad faith.
However, the trial court did not try Lexington or otherwise find it liable for
any damages. Instead, the court simply allocated the proceeds of the
Lexington Settlement to calculate the appropriate equitable offset. In other
words, nothing in the trial court’s findings here modified the Lexington

43
Settlement agreement or subjected Lexington to any liability. Its liability
and/or obligations remained as stated in the settlement agreement.
Further, the court’s allocation appears to be consistent with the terms
of the settlement agreement, not contrary to it. As the settlement agreement
makes clear, the dispute arose when Lexington denied McMillin’s tender
based on Casio. Because of Lexington’s denial, McMillin brought suit against
it for declaratory relief, breach of contract, and breach of the implied
covenant of good faith and fair dealing. The settlement agreement explicitly
stated that McMillin and Lexington were resolving all disputes arising out
the tender, Cosio, McMillin’s suit against Lexington, and any potential
contract or tort causes of action based on the adjustment, handling, and/or
resolution of the tender. Lexington paid McMillin $525,000 to resolve these
disputes. Therefore, it logically follows that the trial court, in determining
whether an equitable offset was appropriate, would consider how that
payment related to the potential claims McMillin had against Lexington. If
the payment Lexington made to McMillin to resolve the coverage litigation
did not address Lexington’s potential liability and damages for breach of
contract and/or breach of the implied covenant of good faith and fair dealing
(including Brandt fees and punitive damages), what did it resolve? McMillin
was able to offer evidence and argument at trial that the settlement proceeds
involved other potential claims or damages it had against Lexington, thus
limiting its application to defense costs that Gemini otherwise owed it. Yet,
there is no indication in the record that McMillin did so, and it does not make
that argument on appeal.
Instead, McMillin seems to maintain that because the settlement
proceeds were not allocated in the settlement agreement, it could allocate
those fees however it pleased without regard to any claim for an equitable

44
offset. That is not the law. If McMillin wanted to specifically allocate
portions of the proceeds for certain damages, it should have explicitly done so
in the settlement agreement. (See Lamb, supra, 100 Cal.App.4th at p. 1042.)
Indeed, in other settlement agreements, McMillin specifically did so. (See
American Safety, supra, 233 Cal.App.4th at p. 524 [McMillin’s settlement
affirmatively allocated $274,154 of the total settlement amount of $690,154 to
defense expenses incurred in the underlying construction defect case].)
Having not done so here, it left open the possibility that Gemini would argue
the Lexington Settlement proceeds should be allocated to reduce the amount
McMillin was to recover for any breach of contract.
In addition, McMillin takes issue with the trial court’s conclusion that
the settlement’s proceeds were predominately for McMillin’s defense costs
and not Brandt fees or other bad faith damages. McMillin acknowledges the
court based its allocation on “four primary factors: (1) the [a]greement
provides that the [p]arties [McMillin and Lexington] bear their own attorneys
fees and expenses in the coverage action; (2) Gemini was not required to
reimburse McMillin for its fees and costs incurred in ‘chasing after AI
[C]arriers’; (3) the Lexington issue on appeal was a ‘close call’ demonstrated
by the fact that Lexington had prevailed on the issue in the trial court on
summary judgment; and (4) settlement negotiations leading up to the
agreement centered on unpaid defense costs, not bad faith damages.”
However, McMillin insists “[n]one of these factors justified an offset
allocation of the” Lexington Settlement agreement.
In challenging the first factor, McMillin claims the trial court “stated
that, in closing argument, ‘McMillin readily conceded that none of the
$525,000 could be attributable to Brandt fees, noting that the [Agreement]
itself, at ¶10.1 expressly provides that “[t]he Parties shall assume and bear

45
their own attorneys’ fees, if any, and all their expenses in connection with the
Coverage Action.” ’ ” McMillin then stated it “consistently argued throughout
the closing argument there should be no allocation” of the Lexington
Settlement proceeds and that its “agreement to bear its own fees and
expenses in the coverage action does not constitute an allocation of the
settlement amounts to Brandt fees” or “defense costs.” McMillin thus seems
to suggest that the trial court was confused or somehow mixed up the
argument and evidence. However, McMillin’s argument hinges on a
misreading of the record.
Contrary to McMillin’s representations here, the trial court did not find
that McMillin conceded during closing argument that none of the $525,000
could be allocated to Brandt fees. Rather, the court noted that, “at trial[,]
McMillin readily conceded that none of the $525,000 could be attributable to
Brandt fees,” but the court explicitly recognized that “during his closing
argument McMillin’s attorney backed away from this concession.” (Italics
added.) The trial court, therefore, considered McMillin’s testimony at trial,
McMillin’s attorney’s closing argument, and the actual terms of the
settlement agreement in finding little of the Lexington Settlement could be
allocated to Brandt fees. And McMillin does not address the court’s reliance
on McMillin’s witness’s concession that the Lexington Settlement proceeds
could not be allocated to Brandt fees.
In addition, we are puzzled by McMillin’s argument that our holding in
American Safety, supra, 233 Cal.App.4th 518 supports its argument here that
the Lexington Settlement agreement prohibited the trial court’s allocation of
the settlement proceeds. We do not share McMillin’s expansive reading of
that case.

46
 American Safety, supra, 233 Cal.App.4th 518, concerned insurance
coverage litigation brought by McMillin against ASIC, an insurer of a
subcontractor that named McMillin as an additional insured. ASIC denied
McMillin’s tender, which lead to a lawsuit wherein, in the final iteration,
McMillin sued ASIC for declaratory relief, breach of contract, and breach of
the implied covenant of good faith and fair dealing. (Id. at pp. 522-523.)
While the matter was pending, McMillin settled with eight other insurance
carriers (who had also been named as defendants in the suit with ASIC). Of
the $690,154 in settlement proceeds, the settlement documentation
affirmatively allocated $274,154 to defense expenses McMillin incurred in the
underlying construction defect suit, with the remaining amount $416,000
unallocated. (Id. at p. 524.)
Among other motions in limine filed by the parties, ASIC and McMillin
filed dueling motions regarding McMillin’s settlement with the other
insurers. McMillin moved to exclude evidence or argument about the
settlement (or any of its details) while ASIC moved to prevent McMillin from
arguing either (a) that the settlement proceeds were not offsets to McMillin’s
alleged damages for breach of contract or (b) that the settlement proceeds
were allocated to McMillin’s alleged damages for breach of the implied
covenant of good faith and fair dealing. (American Safety, supra, 233
Cal.App.4th at p. 525.) In support of its motion, ASIC argued that McMillin
suffered no contract damages because McMillin had recovered more in its
settlement proceeds than its fees and costs in the underlying construction
defect litigation. (Id. at p. 527.) The trial court ultimately granted ASIC’s
motion, which precluded McMillin from presenting evidence or argument that
the settlement proceeds were not offsets to ASIC’s potential contract damages
or are allocated to Brandt fees. In so doing, the trial court “necessarily

47
allocated at least $309,957 of the previously unallocated Settlement proceeds
($416,000) to McMillin’s breach of contract cause of action . . . completely
offsetting McMillin’s contract damages[.]” (Id. at p. 528.) The parties agreed
the effect of this ruling was that McMillin could not prove any contract
damages, and without contract damages, it could not maintain a cause of
action for breach of the implied covenant of good faith and fair dealing. As
such, the parties agreed that judgment could be entered in favor of ASIC,
with all parties reserving their rights to appeal. (Ibid.)
On appeal, we concluded that the trial court erred in granting ASIC’s
motion in limine because it “essentially grant[ed] a nonsuit in ASIC’s favor.”
(American Safety, supra, 233 Cal.App.4th at p. 540.) We explained that
ASIC’s arguments about offsets based on the settlement proceeds did not
defeat McMillin’s breach of contract claim but only impacted “McMillin’s
potential right to recover damages from ASIC, not whether McMillin suffered
damages as a result of ASIC’s alleged breaches.” (Id. at pp. 540-541.)
We read nothing in American Safety that supports McMillin’s position
here. The error that occurred in that case (not allowing McMillin to argue
and present evidence that the settlement proceeds could not offset its
contract damages) is not present in the instant action. Indeed, the trial court
followed American Safety. It concluded the Lexington Settlement could not
negate the element of damages for purposes of determining liability for
breach of contract but could offset the amount McMillin recovered for that
breach. This is precisely what we deemed proper in American Safety. “The
fact that the 11 other insurer defendants settled with McMillin should not,
and does not, affect whether ASIC breached the duty to defend or the implied
covenant of good faith and fair dealing. At best, the Settlement proceeds
from the other 11 insurers may reduce (by way of offset) the amount ASIC

48
ultimately owes McMillin for contract or tort damages.” (American Safety,
supra, 233 Cal.App.4th at p. 535.)
Nevertheless, McMillin points us to two footnotes in American Safety
that it claims “are most germane here.” First, McMillin emphasizes our
statement in American Safety that “[o]n remand, McMillin and ASIC may
each present whatever evidence it has regarding the intent of the settling
parties here.” (American Safety, supra, 233 Cal.App.4th at p. 541, fn. 30.)
Based on this portion of footnote 30, McMillin asserts, “It is the intent of the
parties to the [Lexington Settlement] [a]greement that is most pertinent to
[the] allowance of an offset.” McMillin appears to imply that because neither
Lexington nor McMillin specifically allocated the settlement proceeds,
McMillin, and only McMillin, can allocate those proceeds in the instant action
(even if, McMillin allocates a significant portion of the settlement proceeds to
fees and costs that do not constitute its defense costs in Cosio or Brandt fees,
as it purports to do here). Essentially, McMillin argues that it may allocate
the settlement proceeds to reimburse itself for legal fees and costs to which it
is not entitled (here, its fees and costs incurred in its unsuccessful litigation
against the five AI Carriers), and the trial court is not permitted to consider
any of those proceeds for an equitable setoff. However, there is no California
authority imbuing an insured with such unfettered discretion.
In addition, McMillin ignores the context of footnote 30 in American
Safety, supra, 233 Cal.App.4th at page 541. In that footnote, we were
rejecting ASIC’s argument that, under Lamb, supra, 100 Cal.App.4th 1017,
McMillin could not argue that any portion of the unallocated settlement
proceeds be allocated to Brandt fees before allocating sufficient settlement
proceeds to fully reimburse McMillin for its defense costs in the underlying
construction defect litigation. We noted in Lamb, in the context of an

49
equitable subrogation dispute between two insurers, that the court stated
that a settlement agreement between an insurer and its insured, “which does
not even reflect a claim for bad faith was pending or existed,” combined with
the testimony of a representative from the settling insurer regarding the
insurer’s intent, was not evidence that the settlement proceeds were intended
by the settling parties as “a payment ‘for defense and indemnity of bad
faith.’ ” (Id. at p. 1042.) (See American Safety, at p. 541, fn. 30.) Here,
Gemini is not making a similar argument based on Lamb. Accordingly, we do
not find McMillin’s reliance on footnote 30 of American Safety helpful to its
position. That said, Lamb, as well as American Safety, both support the
approach the trial court took in allocating the Lexington Settlement proceeds
based upon the terms of the settlement agreement and the evidence offered
by the parties. (See Lamb, at p. 1042; American Safety, at pp. 535, 541.)
Second, McMillin relies on footnote 26 of American Safety, supra, 233
Cal.App.4th at page 538, arguing that footnote stands for the proposition that
“[a]ffording Gemini a reduction in damages for its liability based on an
evaluation of Lexington’s separate and independent obligation, violates” the
rule that the “fact one insurer may owe a duty to provide a defense will not
excuse a second insurer’s failure to honor its separate and independent
obligation to defend.” Again, McMillin misreads our footnote. There, we
stated we were not considering ASIC’s argument that because other insurers
had accepted McMillin’s tender those other insurers were required to
“ ‘defend immediately and entirely.’ ” (American Safety, supra, 233
Cal.App.4th at p. 538, fn. 26.) We noted that ASIC did not present any record
references or arguments as to how its contention would apply to the issues
before us. (Ibid.) As such, far from providing any guidance here, footnote 26
only summarily rejected one of ASIC’s implicit arguments.

50
 Also, McMillin faults the trial court for justifying its allocation of the
Lexington Settlement proceeds based on the court’s conclusion that Gemini
was not required to reimburse McMillin for its fees and costs pursuing the AI
Carriers. McMillin claims that it did not make a demand that Gemini pay its
fees and costs for its AI Carrier litigation but merely demanded that Gemini
pay for its defense costs in Cosio. To this end, McMillin again points out that,
even had Gemini paid it $214,763.76 in contract damages, it would not have
been made whole for its litigation expenses. This argument is simply a
variation of McMillin’s previous argument that it must be made whole before
Gemini could be entitled to an equitable offset. For the reasons we discussed
ante, we again reject this contention.
Next, McMillin takes issue with the court basing its allocation of the
Lexington Settlement’s proceeds on a lack of evidence that Lexington denied
coverage in bad faith. Here, McMillin insists “the trial court had no evidence
that Lexington lacked bad faith in denying coverage.” We disagree. In
finding Lexington’s potential bad faith exposure was “minimal,” the trial
court noted that McMillin conceded at trial that the coverage issue was a
“close call,” Lexington prevailed on the coverage issue at summary judgment,
and that other trial courts had similarly interpreted the applicable law
“precisely as Lexington had in denying coverage to McMillin.” The court
further observed that the law was unsettled when we decided McMillin v.
Financial Pacific, supra, 17 Cal.App.5th 187. (See id. at pp. 207-210
[discussing the lack of California law governing the issue before the court and
analyzing out of state authority].)
Here, McMillin essentially ignores most of the trial court’s findings in
support of its conclusion that Lexington’s potential bad faith exposure was
minimal and argues that the court erred as a matter of law in relying on the

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summary judgment ruling in favor of Lexington “to show a lack of bad faith.”
We reject this contention, primarily because McMillin does not refute or even
address the other findings on which the trial court based its conclusion. In
addition, we do not find the case on which McMillin relies, Filippo, supra, 74
Cal.App.4th 1429, helpful to McMillin’s position on this point. That case
stands for the proposition that an initial trial court summary judgment
ruling for the insurer on the issue of coverage that is subsequently reversed
on appeal does not establish, as a matter of law, that the insurer lacked bad
faith in denying coverage. (Id. at p. 1441.) Nothing analogous occurred here.
This is not a situation where an insurer is attempting to spin its one-shot
success in convincing a single trial court of its position into proof that its
position was reasonable. To the contrary, as discussed ante, the trial court
based its conclusion that Lexington’s potential bad faith exposure was slight
on several grounds, not just its summary judgment success.
Finally, McMillin argues the trial court could not base its finding of a
lack of Lexington’s bad faith on the negotiations between Lexington and
McMillin because the subject settlement agreement explicitly states that no
“event occurring during the negotiations” of the agreement or “any statement
or communication made in connection . . . by Lexington and/or its attorneys
and/or representatives shall be considered an admission by Lexington of
coverage[.]” In addition, McMillin emphasizes that the settlement agreement
contains an integration clause that “supersedes and replaces any and all
prior or contemporaneous oral or written communications, agreements, or
understandings between [Lexington and McMillin] and their representatives
with respect to the matters set forth in it.” Neither of these provisions is of
the moment here. The trial court did not make any coverage findings as to
Lexington or otherwise find Lexington liable for any breach of contract or bad

52
faith. Nor did the court add terms to the Lexington Settlement agreement or
ignore its terms. As we discuss in detail ante, the court simply analyzed the
evidence to determine how Lexington’s unallocated settlement payment
should be allocated for purposes of an equitable offset. The provisions that
McMillin point to here do not impact that determination whatsoever.
McMillin also maintains that it presented evidence to the trial court
regarding “the practical reasons that counsel in insurance cases reference
calculable defense costs in their negotiations, not some general bad faith
damages.” This argument goes to the weight of the evidence and is
inappropriate for our review here. (See DeNike v. Matthew Enterprise, Inc.
(2022) 76 Cal.App.5th 371, 382.)
In summary, McMillin has not established that it must be made
“whole” before the trial court was permitted to allocate the Lexington
Settlement proceeds as part of an equitable offset. Indeed, we reject
McMillin’s definition of what would make it “whole” on the record before us.
Further, nothing in the Gemini insurance policies or the Lexington
Settlement agreement prohibited the trial court from allocating the
settlement proceeds as it did below. And the court’s factual findings in so
allocating those proceeds are largely unchallenged by McMillin on appeal and
are supported by substantial evidence in any event. Against this backdrop,
we conclude the trial court did not abuse its discretion in finding the entirety
of McMillin’s damages for breach of contract were equitably offset by the
proceeds of the Lexington Settlement.

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 III
PREJUDGMENT INTEREST
A. McMillin’s Contentions
McMillin argues that the court erred in denying its motion for
prejudgment interest under section 3287, subdivision (a) because the court
incorrectly found that damages were not certain until the parties stipulated
that they were reasonable and necessary at trial. We disagree.
B. Standard of Review and Applicable Law
Section 3287, subdivision (a), provides, in relevant part, “[a] person who
is entitled to recover damages certain, or capable of being made certain by
calculation, and the right to recover which is vested in the person upon a
particular day, is entitled also to recover interest thereon from that day.” If
the requirements of section 3287, subdivision (a), are met, an award of
prejudgment interest is mandatory. (North Oakland Medical Clinic v. Rogers
(1998) 65 Cal.App.4th 824, 828-829.) “Damages are certain or capable of
being made certain by calculation, or ascertainable, for purposes of the
statute if the defendant actually knows the amount of damages or could
calculate that amount from information reasonably available to the
defendant. [Citation.] In contrast, damages that must be determined by the
trier of fact based on conflicting evidence are not ascertainable.” (Collins v.
City of Los Angeles (2012) 205 Cal.App.4th 140, 151.) “The denial of
prejudgment interest under section 3287, subdivision (a) presents a question
of law we must review on an independent basis.” (Employers Mutual
Casualty Co. v. Philadelphia Indemnity Ins. Co. (2008) 169 Cal.App.4th 340,
347.)

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 C. Analysis
Relying on State of California v. Continental Ins. Co. (2017) 15
Cal.App.5th 1017, McMillin notes that a dispute over a factual issue may
preclude the required certainty under section 3287; a dispute over a legal
issue does not. (See Continental, at pp. 1038-1039, 1041.) Here, McMillin
points out that the parties stipulated as to the amount of defense fees and
costs McMillin incurred and that such fees and costs were reasonable and
necessary. Consequently, McMillin insists the only issue to be decided at
trial was a legal one—whether Gemini breached the subject insurance policy.
In other words, there was no factual dispute as to the amount of damages,
only a disagreement as to whether an agreed upon amount was owed (a
liability question). As such, McMillin argues that the amount of damages
was certain and prejudgment interest should have been awarded under
section 3287, subdivision (a).
In contrast, Gemini argues that it could have challenged whether the
defense costs were reasonable and necessary (a factual dispute as to the
amount of damages) but chose to stipulate to the amount of damages at trial,
“in the interests of efficiency.” To this end, Gemini emphasizes that, in its
answer, it raised an affirmative defense that the defense fees and costs were
not reasonable and necessary. Moreover, Gemini maintains that until it
elected to stipulate to the reasonableness and necessity of the fees and costs,
the “issue remained undetermined, and the amount remained unliquidated.”
Here, we need not resolve the dispute between the parties on this
prejudgment issue because we see a more foundational problem undermining
McMillin’s argument that it is entitled to prejudgment interest. As discussed
ante, we rejected McMillin’s argument that the trial court erred in using a
portion of the Lexington Settlement proceeds as an equitable offset for any

55
breach of contract damages. Thus, we agree with the trial court that
McMillin is not entitled to recover any damages. Subdivision (a) of
section 3287 applies when an entity is “entitled to recover damages
certain . . . ” However, although the trial court may have found that Gemini
breached the subject insurance policy amounting to damages in the amount
of $214,763.76, the court ultimately concluded that McMillin was not entitled
to recover any damages because “the equitable offset of $450,000 far
exceed[ed] McMillin’s contractual damages[.]” Moreover, the conclusion that
McMillin was not entitled to recover any damages is buttressed by the
judgment wherein the court decreed that “McMillin shall take noting
from . . . Gemini by reason of its complaint filed herein.” And the court
entered judgment in favor of Gemini and found that Gemini was entitled to
its costs as the prevailing party under Code of Civil Procedure section 1032.
As such, there are no damages to which the court stated, via order or
judgment, that McMillin is entitled to recover, and section 3287 is not
applicable.

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 DISPOSITION
The judgment is affirmed. Gemini is entitled to its costs on appeal.

HUFFMAN, Acting P. J.

WE CONCUR:

O’ROURKE, J.

DATO, J.

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