Filed 7/19/24 APR Construction v. Colony Insurance Company 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication 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

APR CONSTRUCTION, INC. et al.,

Plaintiffs and Appellants,

v.

COLONY INSURANCE COMPANY,

Defendant and Respondent.

 D081146

 (Super. Ct. No. 37-2019-00012784-

 CU-IC-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, 

Keri G. Katz, Judge. Affirmed. Requests for judicial notice denied. 

Adler Law Group and Erwin E. Adler for Plaintiffs and Appellants.

Sheppard, Mullen, Richter & Hampton, Todd E. Lundell, Peter H. Klee, 

Marc J. Feldman and Andrea S. Warren for Defendant and Respondent.
2

Appellants APR Construction, Inc. and Eric Scarbrough1 (collectively 

APR) appeal from the trial court’s grant of summary judgment in favor of 

Respondent Colony Insurance Company (Colony) in a multiparty insurance 

dispute. 

APR entered into construction contracts with the San Diego Housing 

Commission (the Commission) regarding multiple rehabilitation and 

accessibility upgrade projects at different sites in San Diego. After purported 

problems with its ability to complete the projects as contracted, the 

Commission filed two lawsuits against APR in connection with these projects. 

In this separate action, APR alleges that Colony breached its contract with 

APR and acted in bad faith by not providing a defense to the Commission’s 

lawsuits. APR also seeks a declaration that Colony continues to have a duty 

to defend it in the one lawsuit that remains pending,2 and that as part of 

that duty to defend Colony is required to fund the prosecution of APR’s 

affirmative cross-claims against the Commission.

Colony moved for summary judgment and set out a number of issues 

that it believed were ripe for adjudication, including (a) whether it owed a 

continuing duty to defend in the pending lawsuit, (b) whether Colony was 

required to fund APR’s prosecution of its affirmative claims for relief against 

the Commission, given APR’s assertion that those claims were intertwined 

with its defense, and (c) whether APR could demonstrate it was damaged by 

Colony’s denial of a defense when it was provided a full defense by another 

1 Eric Scarbrough is “part owner and President of APR Construction, 

Inc.”

2 The other lawsuit settled before APR brought this action against 

Colony.
3

insurer. The trial court agreed that Colony was entitled to a favorable 

adjudication as to each of these issues and that, as a result, APR could not 

succeed on any of its claims. The court then entered judgment in favor of 

Colony. 

On appeal, APR asserts that the trial court erred in reaching its 

conclusions in connection with the issues summarily adjudicated, and it sets 

forth at least three arguments for reversal, one of which has transformed 

over the course of briefing on appeal. We conclude that APR has forfeited 

certain of these arguments by failing to raise them in the trial court and/or 

that its arguments are without merit. We therefore affirm the judgment in 

favor of Colony.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Relevant Insurance Policies

From March 2014 to March 2015, APR was insured under a commercial 

general liability policy issued by Colony (the Policy). It provided property 

damage liability coverage, under which Colony agreed to (a) pay any sums 

APR became obligated to pay as damages “because of . . . ‘property damage,’ ” 

and (b) defend APR in any suit seeking those damages.3 The Policy defined

“ ‘property damage’ ” to means “a. Physical injury to tangible property, 

3 The insuring language provides:

“1. Insuring Agreement [¶] a. We will pay those sums that 

the insured becomes legally obligated to pay as damages 

because of ‘bodily injury’ or ‘property damage’ to which this 

insurance applies. We will have the right and duty to 

defend the insured against any ‘suit’ seeking those 

damages. However, we will have no duty to defend the 

insured against any ‘suit’ seeking damages for ‘bodily 

injury’ or ‘property damage’ to which this insurance does 

not apply. . . .”
4

including all resulting loss of use of that property. All such loss of use shall 

be deemed to occur at the time of the physical injury that caused it; or b. Loss 

of use of tangible property that is not physically injured. All such loss of use 

shall be deemed to occur at the time of the ‘occurrence’ that caused it.” These 

provisions were to apply only if the “property damage” was caused by an 

“occurrence,” which was defined as “an accident, including continuous or 

repeated exposure to substantially the same general harmful conditions.” 

In addition, the Policy excluded coverage for any property damage 

caused by APR’s own work. Specifically, Exclusion 2.j.(6) disclaimed coverage 

for “[t]hat particular part of any property that must be restored, repaired or 

replaced because ‘your work’ was incorrectly performed on it.” Exclusion 

2.m.(1) denied coverage for “ ‘[p]roperty damage’ to ‘impaired property’ or 

property that has not been physically injured, arising out of: (1) A defect, 

deficiency, inadequacy or dangerous condition in ‘your product’ or ‘your 

work’.” The policy defined “ ‘[y]our work’ ” to mean “(1) Work or operations 

performed by you or on your behalf; and (2) Materials, parts or equipment 

furnished in connection with such work or operations.”4

Upon expiration of the Colony Policy, APR obtained a commercial 

general liability insurance policy from HDI Global Specialty SE (HDI), which 

covered the period between March 2015 and March 2016.

B. The Underlying Lawsuits

In April 2016, the Commission filed two lawsuits against APR arising 

out of construction contracts under which APR was to perform rehabilitation 

and accessibility upgrades at two separate public works projects. The two 

4 “ ‘[Y]our work” also included any “[w]arranties or representations made 

at any time with respect to the fitness, quality, durability, performance or use 

of ‘your work’ . . . .”
5

actions based on the separate public works projects were referred to by the 

parties as the Two Sites Action and the Three Sites Action. 

Both complaints alleged that in bidding the projects, APR made 

material misrepresentations about its financial capacity, resources available 

to devote to each project, qualifications, and workforce in order to induce to 

Commission to select APR’s bids. The Commission claimed that as a result of 

those misrepresentations, APR was awarded the contracts, pursuant to which 

each project was to be completed within 120 days. APR was unable to meet 

the construction schedule, and at the end of the 120-day period had 

completed only 25 to 35 percent of each project. The Commission declared 

APR in default and terminated its right to proceed with the projects.

Although the complaints in the two lawsuits were substantially similar, 

there was at least one important difference. The complaint in the Two Sites 

Action alleged that APR left the two project sites with insulation exposed to 

the elements and with the roof open, which allegedly caused water damage to 

multiple units in the projects. In contrast, the Three Sites complaint, which 

remains pending, does not contain these or similar allegations of damage 

caused to other property as a result of APR’s work.

In both lawsuits, the Commission asserted claims for (i) intentional 

misrepresentation, (ii) negligent misrepresentation, (iii) breach of contract, 

and (iv) declaratory relief seeking two determinations—whether the 

Commission had lawfully determined APR in default and terminated its 

right to proceed, and whether APR had breached the parties’ agreement. 

In addition, the Three Sites complaint contains an additional claim against 

APR for bad faith.

In June 2016, APR filed cross-claims against the Commission in which 

it asserted claims for breach of contract and bad faith, as well as for three 
6

types of tortious interference. In its cross-complaints, APR sought to recover 

damages for a broad range of harm, including losses APR suffered from the 

alleged disruption of its relationships with its vendors, suppliers, and 

sureties, and the added costs and expenses of its ongoing operations due to 

that disruption.

C. The Two Sites Action Litigation and Settlement 

In late June 2016, APR tendered the Two Sites action to both HDI and 

Colony. Colony denied coverage and declined to provide APR with a defense, 

but HDI retained defense counsel to defend APR. APR also retained the 

services of independent counsel to pursue its cross-claims against the 

Commission.

In December 2018, a global settlement of the Two Sites action was 

negotiated among the Commission, HDI, and Allegheny Casualty Company, 

which was the surety for APR in connection with the Two Sites project. 

Allegheny, acting pursuant to a power of attorney granted by the surety 

contract with APR, approved the settlement agreement on APR’s behalf.

Colony did not participate in negotiating the global settlement.

APR initially objected to the global settlement of the Two Sites Action

because the settlement required the dismissal of APR’s cross-claims against 

the Commission. Because APR had indicated its objection to the settlement, 

the Commission filed in the trial court a motion to enforce the settlement

that had been entered into by the Commission, HDI, and Allegheny, acting on 

APR’s behalf.

The day before the hearing on the Commission’s motion to enforce the 

settlement, APR formally withdrew its objection. APR’s filing explained that 

it was withdrawing its objection to enforcement of the settlement because 

APR had “agreed to enter into the subject settlement agreement.” At the 
7

hearing the next day, counsel for APR and Eric Scarbrough confirmed that 

APR had agreed to the global settlement.

At some point in time, Colony agreed to reimburse HDI for 50 percent 

of the costs that were incurred in defending APR in the Two Sites Action, and 

it agreed to pay 25 percent of the settlement amount due from HDI.

D. The Three Sites Action Litigation

APR tendered the Three Sites Action to Colony and HDI in late June 

2016, as well. The Colony Policy insured APR for nine days of work at the 

Three Sites project.5 Colony informed APR that its review of the Three Sites 

complaint revealed no potential for coverage under the Policy.

HDI, however, retained counsel to defend APR in the Three Sites 

Action. HDI paid all of APR’s defense costs in this matter through January 

2020. At that point, HDI and Colony entered into an agreement to apportion

the defense costs between them, with Colony agreeing to pay 40 percent.

E. APR’s Initiation of the Current Lawsuit 

In December 2020, APR filed the current action against Colony, HDI, 

and Premier Claims Management, which is HDI’s independent third-party 

claims adjuster.6

With respect to Colony, the complaint sets out three causes of action: 

breach of contract, bad faith, and declaratory relief. In connection with the 

breach of contract and bad faith causes of action, APR asserts claims for 

recovery in connection with Colony’s handling of both the Two Sites Action 

and Three Sites Action. Specifically, APR alleges that Colony breached its 

5 The construction contract for the Three Sites project was signed on 

March 11, 2015; the Policy expired on March 21, 2015. 

6 The operative complaint is the third amended complaint. 
8

contract and acted in bad faith by refusing to defend APR in both of the 

underlying lawsuits, participating with HDI in settling the Two Sites Action 

without informing APR, and agreeing to share defense costs with HDI in the 

Three Sites action without advising APR.

APR’s declaratory relief cause of action relates solely to the Three Sites 

Action. It seeks a declaration “confirming that Colony has a duty to defend 

[APR] in the Three Sites Lawsuit,” which it contends includes the duty to pay 

“the fees Plaintiffs have incurred and continue to incur in connection with its 

compulsory cross-complaint.”

F. Colony’s Motion for Summary Judgment

In April 2022, Colony moved for summary judgment. Colony argued 

it was entitled to judgment as a matter of law because (a) it has no 

contractual duty to fund the prosecution of an insured’s cross-complaint; 

(b) APR is unable to establish that it was damaged by Colony’s decision to 

deny a defense in both underlying actions because it was fully defended 

throughout both actions and continues to be defended in the still-pending 

Three Sites Action, and because it could not demonstrate damage resulting 

from the required dismissal of its cross-complaint arising out the settlement 

despite its “conspiracy” assertions because it ultimately agreed to the 

settlement; and (c) Colony owes no duty to defend APR in the Three Sites 

Action because that action does not involve even potentially covered claims. 

Colony further argued that because APR could not demonstrate bad faith or 

its entitlement to punitive damages, given its inability to demonstrate 

damages arising from the failure to provide a defense and or the potential for 

coverage in the Three Sites Action.
9

The trial court granted Colony’s motion for summary judgment. 

It agreed that summary adjudication in favor of Colony was appropriate on

the question whether the Policy required Colony to fund the prosecution of 

APR’s cross-claims in the Two Sites and Three Sites Actions. The court 

rejected APR’s assertion that it had been damaged as a result of incurring the

fees spent on prosecuting APR’s cross-complaint against the Commission, 

noting that “it is only an insured’s increased exposure to defense liability or 

costs of defense that supports a finding of damages as a result of an insurers’ 

duty to defend or liability under a breach of the covenant of good faith and 

fair dealing cause of action.” Second, the court concluded that APR could not 

establish its claims for breach of contract or breach of the implied covenant of 

good faith and fair dealing. It reasoned that “because [APR was] fully 

defended in both the Two Sites Action and the Three Sites Action, [it] cannot 

establish damages as a result of Colony’s alleged failure to defend.” 

Third, the court determined that Colony did not owe a duty to defend 

APR in the Three Sites action because the Commission’s lawsuit in that 

action “does not seek damages for any physical damage caused by [APR],”

which are the only damages that are covered under the Policy To the extent 

the Three Sites complaint identifies defects in APR’s own work, the Policy 

specifically excluded such defective workmanship from coverage. Finally, 

because of the court’s other determinations established that APR’s breach of 

contract and bad faith claims were without merit, APR’s request for punitive 

damages also failed. 

Because the undisputed facts demonstrated that APR could not succeed 

on any of its claims, the court entered judgment in favor of Colony on August 

29, 2022.
10

DISCUSSION

A. Summary Judgment Standards

The function of summary judgment “is to provide courts with a 

mechanism to cut through the parties’ pleadings in order to determine 

whether, despite their allegations, trial is in fact necessary to resolve their 

dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) 

Thus, a trial court properly grants summary judgment when there are no 

triable issues of material fact and the moving party is entitled to judgment as 

a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant who moves 

for summary judgment bears the initial burden to show the action has no 

merit—that is, “one or more elements of the cause of action, even if not 

separately pleaded, cannot be established, or that there is a complete defense 

to the cause of action.” (Id., subds. (a), (p)(2).) Once the defendant clears this 

initial hurdle, the burden shifts to the plaintiff to demonstrate the existence 

of a triable issue of material fact. (Aguilar, at pp. 850–851.)

When a “ ‘case comes before us after the trial court granted a motion for 

summary judgment, we take the facts from the record that was before the 

trial court when it ruled on that motion.’ ” (Wilson v. 21st Century Ins. Co. 

(2007) 42 Cal.4th 713, 716–717.) “ ‘ “ ‘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.’ ” (Id. at p. 717.) 

B. APR’s Appellate Contentions

In addressing APR’s arguments on appeal, we adopt an organizational 

structure for our opinion that differs somewhat from the presentation of the 
11

arguments in the briefs. APR’s complaint asserts various legal theories, but 

all concern Colony’s responsibilities with respect to two separate pieces of 

litigation filed by the Commission. We start by addressing APR’s contention 

that the trial court erred in granting summary adjudication in favor of the 

insurer as to the claims arising out of the Three Sites Action. As we will 

explain, summary adjudication was proper based on the fact that the 

Commission’s complaint in that action did not seek relief for covered 

“property damage” within the meaning of the Policy. As to APR’s claims

arising out of the Two Sites Action,7 we likewise conclude that summary 

adjudication was proper, albeit for different reasons.

C. Analysis

1. Colony is entitled to summary adjudication of APR’s claims for 

relief regarding the Three-Sites Action, given that there is no 

coverage—and no potential for coverage—of the claims asserted

in that lawsuit.

APR’s declaratory relief cause of action seeks a determination that 

Colony continues to have a duty to defend APR in the Three Sites action. 

7 One of APR’s arguments as to the Two Sites Action asserts that the 

trial court “erred in granting summary judgment on APR’s conspiracy claim” 

(boldface and some capitalization omitted), because an insurer who 

“dismisses its policyholder’s cross-complaints to subsidize a settlement” “acts 

improperly and in bad faith.” Although it refers to its contention as a 

“conspiracy claim,” APR appears to be referring to its allegation that Colony 

breached the covenant of good faith and fair dealing by improperly 

negotiating a lower settlement by agreeing to the dismissal of APR’s crosscomplaint in the Two Sites Action. Although elsewhere in the record APR 

concedes that Colony was never involved in the global settlement discussions, 

APR nevertheless argues on appeal that Colony somehow induced APR’s 

surety (Allegheny) to enter into the settlement negotiations, and that on this 

ground Colony may be held liable for bad faith. APR thus appears to use the 

phrase “conspiracy claim” to refer to its theory that Colony engaged in bad 

faith in connection with the Two Sites Action, alone.
12

The trial court granted summary adjudication on the declaratory relief cause 

of action, concluding that the undisputed facts demonstrate that “the Three 

Sites complaint does not seek damages for any physical damage caused by 

Plaintiffs,” as would be required to trigger coverage. Our review of the 

complaint in the Three Sites Action demonstrates that there is no possibility 

of coverage under the Policy—a conclusion consistent with the trial court’s 

determination of this issue.

An insurer’s duty to defend is broad, in that an insurer is required to 

“ ‘ “defend a suit which potentially seeks damages within the coverage of the 

policy.” ’ ” (Montrose Chem. Corp. v. Superior Ct. (1993) 6 Cal.4th 287, 295; 

In other words, a liability insurer only owes a duty to defend against claims 

that “create[e] a potential for indemnity” under a policy. (Albert v. MidCentury Ins. Co. (2015) 236 Cal.App.4th 1281, 1289.) Thus, “ ‘[t]o prevail in 

an action seeking declaratory relief on the question of the duty to defend, 

“the insured must prove the existence of a potential for coverage, while the 

insurer must establish the absence of any such potential. In other words, 

the insured need only show that the underlying claim may fall within policy 

coverage; the insurer must prove it cannot.” [Citation.] The duty to defend 

exists if the insurer “becomes aware of, or if the third party lawsuit pleads, 

facts giving rise to the potential for coverage under the insuring 

agreement.” ’ ” (Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co. 

(2018) 5 Cal.5th 216, 222.) 

“[T]he determination whether the insurer owes a duty to defend usually 

is made in the first instance by comparing the allegations of the complaint 

with the terms of the policy.” (Waller v. Truck Ins. Exchange, Inc. (1995) 

11 Cal.4th 1, 19 (Waller).) “An insured may not trigger the duty to defend by 

speculating about extraneous ‘facts’ regarding potential liability. . . .” 
13

(Gunderson v. Fire Ins. Exch. (1995) 37 Cal.App.4th 1106, 1114 (Gunderson).) 

An insured also “ ‘ “may not speculate about unpled third party claims to 

manufacture coverage” ’ [citation], and the insurer has no duty to defend 

where the potential for liability is ‘ “tenuous and farfetched.” ’ ” (Shanahan v. 

State Farm General Ins. Co. (2011) 193 Cal.App.4th 780, 786.)

APR’s policy with Colony provides coverage for “those sums that the 

insured becomes legally obligated to pay as damages because of . . . ‘property 

damage’ to which this insurance applies.” There is coverage only when the 

“ ‘property damage’ ” for which the insured is liable “is caused by an 

‘occurrence’ that takes place in the ‘coverage territory.’ ” Thus, to trigger 

Colony’s duty to defend, the Commission’s Three Sites complaint must allege, 

or extrinsic facts known to Colony must have demonstrated the possibility of, 

the existence of “property damage” that resulted from an “occurrence.” 

“ Property damage’ ” is defined in the policy as “[p]hysical injury to tangible 

property” or “[l]oss of use of tangible property that is not physically injured.” 

An “ ‘[o]ccurrence’ ” is defined by the policy to “mean[a] an accident, including 

continuous or repeated exposure to substantially the same general harmful 

conditions.” (Italics added.)

We first look to the Three Sites complaint to assess whether it alleges 

facts giving rise to the potential for coverage. (See Waller, supra, 11 Cal.4th 

at p. 19.) A review of that complaint makes clear that the Commission is not

seeking damages from APR related to any “property damage” in the Three 

Sites Action. Not only is there no claim for damages from “property damage” 

asserted in the Three Sites complaint, but APR concedes the Commission has 

not alleged that APR caused any damage to property on which it was not 

working—in other words, there is no allegation that “property damage,” 
14

as defined in the Policy, occurred at all.8 Instead, the Three Sites Action 

includes five causes of action—two sounding in fraud (intentional and 

negligent misrepresentation) and three sounding in contract (breach of 

contract, breach of implied covenant of good faith and fair dealing, and 

declaratory relief regarding APR’s alleged default under the construction 

contract and breach of the contract). These claims for relief are based on 

allegations that APR failed to perform its contractual obligations in a timely 

manner, failed to pay its workers legally required wages, provided inaccurate 

and incorrect documentation during the project, gave false information about 

its progress and the basis for delays, and engaged in fraud in the bidding 

process. None of these claims seek compensation for “property damage” 

within the meaning of the Policy, and none of the allegations even suggest 

or imply that any “property damage” occurred.

8 While the Three Sites complaint does include a paragraph in which it 

sets forth allegations that APR’s own work was defective in certain ways, 

(i.e., “electrical work not performed in compliance with plans and 

specifications, installation of windows . . . not installed in accordance with the 

plans and industry standards, sites . . . not free of the debris of each day’s 

work as required by the Agreement, and stairs manufactured incorrectly”), 

these allegations do not form the basis for a claim for damages, but merely 

provide context for the Commission’s actual claims for relief. Further, it is 

clear that even if these allegations themselves formed the basis for relief, 

such claims would not create the potential for coverage because coverage 

does not exist where the only damage alleged is the insured’s defective 

construction damage, with no allegation of damage to other property. (See, 

e.g., Regional Steel Corp. v. Liberty Surplus Ins. Corp. (2014) 226 Cal.App.4th 

1377, 1393 (Regional Steel).) APR concedes this point, as it does not rely on 

these allegations as a basis for demonstrating the potential for coverage and 

it expressly acknowledges that commercial general liability policies “do not 

cover the cost of remediating deficiencies in the contractor’s own work,” such 

that “if APR did any work deficiently, APR would have to bear the cost of 

repairing its own work.” 
15

In the trial court, APR conceded the Commission had not alleged 

“property damage” at any of the three projects at issue in the Three Sites 

Action. Instead, it relied exclusively on the fact that Colony had settled a 

dispute with HDI over funding APR’s defense by agreeing to contribute funds 

to that defense. In APR’s view, there was a fatal inconsistency “between 

[Colony’s] non-coverage position which is being advanced against APR and its 

confidential Settlement Agreement with HDI in which Colony has agreed to 

continue to cover 40% of Three Sites Lawsuit defense costs.” This fact alone, 

according to APR, was “sufficient to create a genuine issue of material fact” 

and defeat summary judgment. 

In other words, APR did not dispute that the Three Sites complaint 

contains no allegations of any “property damage” occurring in connection 

with the projects at issue in that lawsuit. Nor did APR suggest its complaint 

could be construed as alleging Colony was aware of facts outside of the 

pleadings in the Three Sites Action that would have indicated a possibility of 

coverage for the claims asserted by the Commission in the Three Sites Action. 

Instead, it contended only that Colony’s decision to settle a dispute with HDI 

over coverage and pay for some percentage of APR’s defense in the Three 

Sites Action created a triable issue of fact. 

But an insurer’s business decision not to spend additional funds 

disputing coverage with another insurer is not evidence demonstrating that 

the potential for coverage actually exists. In fact, Colony’s settlement with 

HDI specifically stated that it could not be “deemed, construed or treated in 

any respect as an admission of liability by any Party for any purpose 

whatsoever,” and the agreement gave Colony the “right to withdraw from 

participation in the defense of the underlying Three Sites Action.” As the 

trial court ruled, APR’s reliance on Colony’s decision to voluntarily pay HDI 
16

for a portion of APR’s defense in the Three Sites Action did not create a 

triable issue of fact as to whether Colony has a duty to defend based on a 

potential for coverage for claims seeking damages arising from “property 

damage.”

Perhaps sensing the futility of the approach it took in the trial court, 

APR has abandoned that contention on appeal. Instead, it initially argued in 

its opening brief that Colony was not entitled to summary adjudication on 

APR’s declaratory relief cause of action because certain allegations in the 

Two Sites complaint demonstrated the potential for coverage in the Three 

Sites Action. For example, APR asserted that “when the City served its Two 

Sites complaint, it alleged APR had caused water intrusion at the Two Sites 

and the Three Sites projects . . . .” (Italics added.) This, APR maintained, 

demonstrates that there remains the potential for coverage of the 

Commission’s claims in the still-pending Three Sites Action. 

As an initial matter, this is a new argument that was never presented 

to the trial court, and we may reject as forfeited a theory newly raised on 

appeal. “ ‘Generally, the rules relating to the scope of appellate review apply 

to appellate review of summary judgments. [Citation.] An argument or 

theory will . . . not be considered if it is raised for the first time on appeal.’ ” 

(DiCola v. White Brothers Performance Products, Inc. (2008) 158 Cal.App.4th 

666, 676; see Meridian Financial Services, Inc. v. Phan (2021) 67 Cal.App.5th 

657, 698.) Therefore, “ ‘ “possible theories that were not fully developed or 

factually presented to the trial court cannot create a ‘triable issue’ on appeal.” 

[Citation.] “A party is not permitted to change his position and adopt a new 

and different theory on appeal. To permit him to do so would not only be 

unfair to the trial court, but manifestly unjust to the opposing litigant.” ’ ” 

(Los Angeles Unified School District v. Torres Construction Corp. (2020) 
17

57 Cal.App.5th 480, 502–503 (Torres Construction); see also Saville v. Sierra 

College (2005) 133 Cal.App.4th 857, 873.)9

Moreover, this new theory has no merit. APR relies on the fact that the 

Two Sites complaint repeatedly refers to multiple “sites” as having suffered 

water damage to support its contention that the Two Sites complaint alleged 

water damage at both the Two Sites projects and the Three Sites projects. 

But the use of the plural term “sites” in the Two Sites complaint is a 

reference to the two project sites at issue in the Two Sites Action, as that is 

how the term is defined. Thus, there is no possibility that the Two Sites 

complaint is also referring to one or more of the projects at issue in the Three 

Sites Action. Obviously, allegations regarding completely separate projects 

that are not the subject of the Three Sites Action have no ability to create a 

material dispute as to whether Colony has a continuing duty to defend in the 

Three Sites Action. Indeed, APR concedes in its reply brief that this 

argument was based on an erroneous reading of the Two Sites complaint.

Still undeterred, APR’s reply brief raises yet a third theory as to why 

summary adjudication of its claim for declaratory relief against Colony 

should not have been granted. It claims “the City’s records and its 

contractor’s testimony plainly identify a substantial amount of work as being 

deficient at the Three Sites project, i.e., 3919 Mason Street,” and that “those 

deficiencies potentially involve numerous potential claims of property 

damage claims attributable to APR’s work.” APR’s references to records and 

testimony regarding the Mason Street project are based on a request for 

9 In reply, APR does not address any of the assertions of forfeiture raised 

by Colony in response to APR’s opening brief and, in particular, does not 

contend that the normal rules of forfeiture should not apply to its newly 

raised theories.
18

judicial notice filed in this court regarding documents APR submitted in the 

trial court in connection with a summary judgment motion filed by HDI. 

Even assuming we were to take judicial notice of these documents, 

however, APR’s latest theory on why there might be the potential for 

coverage as to the Three Sites Action is forfeited based on its failure to make 

the argument in the trial court (see Torres Construction, supra, 57 

Cal.App.5th at pp. 502–503) as well as because of the unfairness to Colony of 

raising it for the first time on reply (see, e.g., L.A. Taxi Cooperative, Inc. v. 

The Independent Taxi Owners Assn. of Los Angeles (2015) 239 Cal.App.4th 

918, 926, fn. 7). And if we were to consider the contention on its merits, 

APR fails to convince us there is any genuine triable issue as to Colony’s

continuing duty to defend in the Three Sites Action. First, any allegedly 

deficient work on APR’s part at one of the sites involved in the Three Sites 

Action is not the basis for any of the actual claims for relief asserted against 

APR in the Three Sites complaint. Again, the Commission has not pled any 

claims seeking recovery of damages arising out of APR’s alleged defective 

work. Rather, it is alleging damages as a result of APR’s mischaracterizing

its experience and ability to complete the contracted work, its failure to pay 

its workers as required by law, its inability to perform its contractual 

obligations in a timely manner, and its misrepresentations related to project 

progress and the basis for delays in the work being completed. Moreover,

even if the Commission were seeking recovery of damages from APR’s 

defective work, such claims also would not themselves have the potential to 

trigger coverage, as they would relate to defective construction damage, not 

damage to other property. (See, e.g., Regional Steel, supra, 226 Cal.App.4th 

at p. 1393.) Thus, the Commission has not pled claims that the Policy even 

potentially covers. 
19

APR’s argument for coverage is really based on the contention that the 

Commission could at some point in the future amend its complaint to add a 

claim for “property damage” that may have occurred as a result of APR’s 

allegedly defective work. This kind of speculation is insufficient to avoid 

summary judgment. “[A]n insured cannot manufacture a duty to defend by 

speculating that the third party plaintiff might amend or could have 

amended its complaint to allege a claim for damages arising from bodily 

injury or property damage when the operative complaint d[oes] not contain 

any such claim.” (Tidwell Enterprises, Inc. v. Financial Pacific Ins. Co., Inc. 

(2016) 6 Cal.App.5th 100, 113 (Tidwell); see Hurley Construction Co. v. State 

Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533, 538; Gunderson, supra, 

37 Cal.App.4th at p. 1117.) Rather, the potential for coverage is 

demonstrated by a showing that a “claim that [a third party] had already 

pleaded might be covered.” (Tidwell, supra, 6 Cal.App.5th at p. 113.) 

Further, APR’s assertion that the identified deficiencies “potentially involve 

numerous potential claims of property damage claims attributable to APR’s 

work” offers nothing but conjecture. There is nothing in the Three Sites 

complaint, in the record in the Three Sites action, or elsewhere in the record 

in this case to suggest that the purported “deficiencies” in APR’s work have 

resulted in any other property damage at any of the sites at issue, let alone 

that the Commission is seeking relief for such damage in the Three Sites 

Action.10 Thus, APR’s last-ditch argument fails to create a genuine disputed 

10 In March 2023, APR requested that this court judicially notice a set of 

documents it asserts “were filed in the San Diego Superior Court in 

opposition to the motion for summary judgment filed by HDI Global 

Insurance in a related action involving appellants,” and identifies the 

documents as a “Notice of Lodgment (limited to Exhibit N)” and a 

“Declaration of Vanessa Scarbrough.” According to APR, the documents may 

be judicially noticed as records of a court in this state, pursuant to Evidence 
20

issue as to whether the claims set forth in the Three Sites complaint could

potentially be covered under the Policy.

Because APR has no ability to prevail on its assertion that the potential 

for coverage exists in connection with the Three Sites Action, APR is also 

unable to prevail on its breach of contract and bad faith claims that are 

premised on Colony’s failure to defend (or even investigate) in response to 

APR’s tender of the Three Sites Action. This is because, absent a duty to 

defend, there can be no meritorious claim for breach of contract or bad faith.

(Waller, supra, 11 Cal.4th at p. 36 [“[I]f there is no potential for coverage and, 

Code section 452. As a reviewing court, we “may take judicial notice of any 

matter specified in Section 452.” (See Evid. Code, § 459, subd. (a).) However, 

APR’s request for judicial notice is lacking any explanation as to exactly what 

the documents are and how they are relevant to the issues on appeal; such 

explanation is required of motions seeking judicial notice. (See Cal. Rules of 

Court, rule 8.252(a)(2)(A)(2) [“The motion must state: [¶] (A) Why the matter 

to be noticed is relevant to the appeal.” (Italics added.)].) 

Further, we cannot discern their relevance. According to APR’s 

briefing, at least one of the documents purports to “itemize numerous 

problems which potentially create a wide variety of property damage claims,” 

in that it is a “construction report” by a contractor that includes notes about 

work being done at one of the Three Sites locations. However, even if we 

were to take judicial notice of the fact of the filing of the documents, we do 

not take judicial notice of the truth of the factual matters asserted in those 

documents. (See Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 

1090.) Further, even assuming that the connection between the documents 

and the argument APR seeks to advance could be made through the taking of 

judicial notice, as we have already explained, a duty to defend cannot be 

based on speculation as to how a third party might amend its complaint to 

allege relief that would be covered when the operative complaint does not 

contain such a claim. (Tidwell, supra, 6 Cal.App.5th at p. 113.) Given that 

these documents do not have the ability to create the possibility of coverage, 

they are not relevant to our consideration of this issue and we decline to take 

judicial notice. (See Guarantee Forklift, Inc. v. Capacity of Texas, Inc. (2017) 

11 Cal.App.5th 1066, 1075 (Guarantee Forklift) [an appellate court “may 

decline to take judicial notice of matters not relevant to dispositive issues on 

appeal”].)
21

hence, no duty to defend under the terms of the policy, there can be no action 

for breach of the implied covenant of good faith and fair dealing because the 

covenant is based on the contractual relationship between the insured and 

the insurer.”]; see Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 

1078 [an insurer’s failure to investigate is not separately actionable if there 

is no coverage, because if there is no coverage, any failure to properly 

investigate would not have caused the insured to suffer damage].) Colony 

was therefore entitled to summary adjudication as to all of APR’s claims 

based on its refusal to defend the Three Sites Action.

2. APR cannot establish its claims for relief regarding the Two 

Sites Action because it cannot show that it suffered damages.

In concluding that Colony was entitled to judgment as a matter of law 

on APR’s claims arising from Colony’s failure to defend it in the Two Sites 

Action, the trial court determined there was no dispute that APR suffered no 

damages as a result of Colony’s failure to defend because it was otherwise 

fully defended in that lawsuit by HDI. 

On appeal, APR seems to be arguing either that damages are not 

necessary to be proven because Colony’s conduct constitutes a breach as a 

matter of law, or that damages may still be proven, despite the fact that APR 

was provided a full defense to the Commission’s claims in the Two Sites 

Action. For example, APR contends that the trial court erred in summarily 

adjudicating APR’s claim for breach of the implied covenant of good faith and 

fair dealing in connection with the Two Sites Action because it failed to 

acknowledge that Colony’s failure to investigate the tendered claims, as 

opposed to its failure to provide a defense, constituted “bad faith toward 

APR” “as a matter of law.” (Italics added.) Next, APR contends that the 

trial court erred in summarily adjudicating its claim for breach of the implied 
22

covenant of good faith and fair dealing by failing to acknowledge its 

allegation that Colony conspired with the Commission, HDI, and APR’s 

surety to dismiss APR’s cross-claims against the Commission as part of the 

settlement of the Two Sites Action. According to APR, in the process of 

providing a defense HDI agreed to dismiss APR’s cross-claims in order to 

settle the case, thereby damaging APR. And third, APR contends the trial 

court erred in ruling there were no damages because APR was entitled to 

have Colony pay for the costs of prosecuting its cross-claims as part of its 

“defense.” 

As we explain, APR’s contentions fail to convince us that reversal is 

warranted.

a. Colony’s failure to investigate APR’s claim for coverage in connection 

with the Two Sites Action did not cause APR damages.

APR cites Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 819,

and Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 220, to 

assert that Colony’s failure to investigate the possibility of coverage for 

claims in the Two Sites Action constituted “bad faith toward APR” “as a 

matter of law” (italics added). It argues that because the failure to 

investigate constitutes a breach of the implied covenant of good faith and fair 

dealing as a matter of law, the trial court should not have summarily 

adjudicated its bad faith claim in favor of Colony. APR spends a good deal of 

its briefing discussing why the failure to investigate a claim constitutes a 

breach of the implied covenant of good faith and fair dealing, and seems to 

assume that the existence of a breach automatically leads to liability. 

However, what APR fails to acknowledge is that while it may be true that an 

insurer breaches the implied covenant of good faith and fair dealing by failing 

to investigate an insured’s claim, a plaintiff must also still prove that the 

asserted breach proximately caused damage to the insured. 
23

“An insurer’s breach of the implied covenant of good faith and fair 

dealing ‘will provide the basis for an action in tort.’ ” (PPG Industries, Inc. v. 

Transamerica Ins. Co. (1999) 20 Cal.4th 310, 314–315.) As an action in tort, 

a claim for breach of the implied covenant of good faith and fair dealing 

includes the element of damages. (Id. at p. 315 “[T]he measure of damages 

for tort actions applies [to bad faith claims], and the insurance company 

generally is liable for ‘any damages which are the proximate result of that 

breach.’ ”]; see Bennett v. Ohio National Life Assurance Corp. (2023) 92 

Cal.App.5th 723, 729.) Further, to prevail on a bad faith claim, a plaintiff 

must present proof of actual economic loss. (Waters v. United Services Auto. 

Assn. (1996) 41 Cal.App.4th 1063, 1078.) 

As an initial matter, APR did not allege that it suffered any specific, 

independent harm as a result of Colony’s alleged failure to investigate. 

Nor did it make any argument as to how it was harmed, separate from 

Colony’s refusal to provide a defense, by Colony’s failure to investigate the 

tendered Two Sites Action. Instead, APR acknowledged in the trial court, 

through the declarations of Eric and Vanessa Scarbrough, that the only 

damaging outcome resulting from Colony’s alleged failures was that Colony 

did not provide APR a defense. APR maintains this same position on appeal, 

contending only that had Colony investigated its claims, it would have 

determined that the Policy covered the Commission’s lawsuits, and 

accordingly provided APR with a defense. Thus, the only possible economic 

harm that resulted from Colony’s alleged failure to investigate are the costs 

associated with APR’s defense.

The undisputed facts, however, demonstrate that APR was provided

with a full defense in the Two Sites Action by another insurer—HDI. 

“An insured is entitled to only one full defense.” (Safeco Ins. Co. of America v. 
24

Parks (2009) 170 Cal.App.4th 992, 1004.) An insurer that has allegedly 

breached its duty to defend may show that its insured suffered no damages 

from the breach by demonstrating that the insured received a full and 

complete defense. (Emerald Bay Community Ass’n v. Golden Eagle Ins. Corp. 

(2005) 130 Cal.App.4th 1078, 1094 (Emerald Bay); Horace Mann Ins. Co. v. 

Barbara B. (1998) 61 Cal.App.4th 158, 164.) Here, Colony submitted

evidence that APR was fully defended in the Two Sites Action from the time 

APR tendered its claim to both of its insurers until the conclusion of the 

litigation pursuant to settlement because HDI paid all of APR’s defense 

invoices. Indeed, APR does not dispute that HDI provided it a complete 

defense in the Two Sites Action. 

b. APR cannot demonstrate that Colony or HDI caused APR harm by

dismissing its cross-claims without APR’s consent.

Despite the fact that it concededly received a full defense in the Two 

Sites Action, APR attempts to create a triable issue of material fact by

arguing that it did not receive a beneficial defense from HDI. According to 

APR’s response to Colony’s separate statement of undisputed facts, the 

defense HDI provided purportedly caused APR harm through the dismissal 

of its cross-claims for relief: “[I]n the process of providing their defense, HDI 

damaged [APR’s] Cross-Claims by entering into a global settlement with San 

Diego Housing Commission without obtaining [APR’s] consent. Thus, while 

on paper it appears that defense costs were paid, in reality the net result was 

significant damage to [APR].” (Italics added.) 
25

On appeal, APR repeats its contention that it did not consent to the 

settlement with the Commission and that therefore it was damaged by the 

defense HDI provided. For example, APR asserts in appellate briefing that 

Colony has “misrepresent[ed] [that] APR voluntarily consented to the 

insurance carriers shifting the bulk of the settlement costs onto APR; Colony 

thus represents APR agreed to the insurers’ dismissal of its cross-complaint,” 

which, APR asserts, is an “unqualified misrepresentation.” (Italics omitted.)

In APR’s view, the record citations to which Colony refers to support its 

factual assertion that APR consented to the settlement contain only “APR’s 

statements to the court acknowledging the insurers had settled the Two Sites 

claim.” Thus, according to APR, “Colony erroneously conflates and 

commingles two different concepts: (1) a policyholder’s acknowledgment

its insurance carriers had settled a claim; and (2) the insurance carriers’ 

failure to obtain their policyholder’s consent before using that 

policyholder’s assets to subsidize a settlement.”

The problem with APR’s theory is that the record in the Two Sites 

Action does not match APR’s description of what occurred. APR did not

merely acknowledge that someone other than APR had settled the Two Sites 

Action. Rather, this evidence unequivocally demonstrates that APR itself 

did in fact consent to the global settlement terms, which included dismissing

its cross-claims against the Commission, albeit after the other involved 

parties had reached that agreement. Documents from the Two Sites Action 

indicate that although APR did initially register opposition to a January 7, 

2019 settlement reached by the Commission, HDI, and APR’s surety, 

Allegheny, it later expressly agreed to the settlement. Prior to agreeing, 

however, APR disputed whether Allegheny had the authority to act on APR’s 

behalf and at that point did not agree to the dismissal of its cross-claims. 
26

When the Commission became aware of APR’s opposition to the settlement, 

it filed a motion to enforce the settlement agreement. APR initially 

submitted a formal opposition to the Commission’s motion. However, the 

documentary evidence from the Two Sites Action also demonstrates that the 

day before the March 22, 2019 hearing on the motion, APR filed a document 

in the trial court affirmatively withdrawing its opposition to the motion. 

In that document, APR stated it was withdrawing its opposition because it 

“[had] agreed to enter into the subject settlement agreement.”11 (Italics 

added.) 

The transcript of the hearing held on March 22 further confirms that 

APR consented to the full and complete settlement of the Two Sites Action, 

including the dismissal of its cross-claims. Indeed, counsel for APR 

repeatedly acknowledged that APR was agreeing to the full settlement of all 

claims in the action. For example, one of APR’s attorneys began the hearing 

by stating, “We settled the case yesterday.” When the court later asked to 

“hear from APR” as to whether the case was “settled,” a different attorney 

representing APR responded, “[Y]es, the case is settled.”12 The attorney 

representing APR as to its cross-claims explained, “We are counsel for APR, 

at least with respect to the cross-complaint. We were substituted in . . .

recently and we negotiated the settlement and concluded the settlement on 

behalf of our clients, APR and Mr. Scarbrough, yesterday.” (Italics added.) 

In fact, Eric Scarbrough himself confirmed that the case had been settled. 

After hearing repeatedly that the case had been settled, the trial court sought 

11 The document identified the agreeing “Defendants” as “APR 

Construction, Inc. and Eric Scarbrough.”

12 Present on behalf of APR were both the attorney provided by HDI for 

its defense in the Two Sites Action and an attorney APR hired to represent it 

for purposes of litigating its cross-claims.
27

final clarification as to whether the settlement being referenced was the 

original settlement the Commission was seeking to enforce, or whether there 

was a new, different settlement. Attorneys for APR confirmed that APR was 

in agreement with the original settlement—i.e., the settlement under which 

both the Commission’s and APR’s claims would be dismissed.13

13 In October 2023, APR filed a second request for judicial notice, this one 

made in conjunction with the filing of its reply brief. In this request, APR

seeks judicial notice of a document titled “Tentative Rulings”— a document 

that appears to have been filed by the trial court in connection with the 

Commission’s motion to enforce the settlement in the Two Sites Action—and

asserts that the document is judicially noticeable as a record of a court of this 

state, pursuant to Evidence Code section 452. As with APR’s other request 

for judicial notice, this motion is also devoid of any explanation as to how the 

document is relevant to the issues on appeal, and thereby fails to comport 

with the procedural requirements set out in the California Rules of Court. 

(See Cal. Rules of Court, rule 8.252(a)(2)(A) [“The motion must state: [¶] 

(A) Why the matter to be noticed is relevant to the appeal.” (Italics added.)].) 

The failure to meet this procedural requirement provides a sufficient basis 

for denying the request.

More importantly, perhaps, the document itself reveals it is not 

relevant to our decision-making. Specifically, from the face of the document 

we can discern that it represents the trial court’s tentative ruling, provided to 

the parties in connection with the Commission’s motion to enforce the 

settlement. “[A] trial court’s tentative ruling is not binding on the court; the 

court’s final order supersedes the tentative ruling.” (Silverado Modjeska 

Recreation & Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 300; 

see also Cal. Rules of Court, rule 3.1590.) Despite the fact that what it has 

proffered to this court is a tentative ruling, APR relies on this document to 

argue in its appellate briefing that the trial court actually ruled that APR’s 

“consent was not necessary,” from which APR implies that the trial court 

understood that it never gave its consent to the settlement. Absent some 

indication that a tentative ruling has been adopted as the court’s final ruling, 

however, it cannot be relied on as the reasoning for the court’s final decision

and, accordingly, is not relevant to our determination of the issues on appeal. 

We therefore decline to take judicial notice. (See Meridian Financial 

Services, Inc. v. Phan (2021) 67 Cal.App.5th 657, 700, fn. 14.) 
28

Thus, because APR consented to the dismissal of its cross-claims in the 

Two Sites Action, it cannot prevail on a claim for breach of contract or breach 

of the implied covenant of good faith and fair dealing based on damages it 

allegedly suffered as a result of those dismissals. 

c. APR cannot establish that it was damaged on the theory that its

“defense” should encompass the cost of prosecuting APR’s crossclaims against the Commission in the Two Sites Action.

Finally, APR asserts that the trial court erred in concluding that 

Colony was entitled to summary adjudication on the issue of whether it had a 

duty to pay for the costs of litigating APR’s cross-claims against the 

Commission.14 

As the trial court recognized, in general, an insurer has only a duty to 

provide a defense and is not obligated to fund an insured’s affirmative claims 

for relief. (See, e.g., James 3 Corp. v. Truck Ins. Exchange (2001) 91 

Cal.App.4th 1093, 1104 (James 3); Emerald Bay, supra, 130 Cal.App.4th at 

pp. 1095–1096 (Emerald Bay); Barney v. Aetna Casualty & Surety Co. (1986) 

185 Cal.App.3d 966, 975; Silva & Hill Constr. Co. v. Employers Mut. Liab. 

Ins. Co. (1971) 19 Cal.App.3d 914, 927.) This is because insurance policies 

are contracts, and while a general commercial liability policy obligates the 

insurer to provide the insured with a defense to covered claims, absent a 

contractual provision obligating the insurer to fund and prosecute an 

insured’s affirmative relief counterclaims or cross-complaints, no such duty to 

14 Although APR contends that Colony had a duty to pay for the costs of 

prosecuting its claims in both the Two Sites Action and Three Sites Action, 

we limit our discussion of this question to considering Colony’s duty in the 

Two Sites Action, since we have already concluded that the trial court 

properly determined APR was owed no defense (and thus could be owed no 

duty to pay for the costs of prosecuting its cross-claims) in connection with 

the Three Sites Action. 
29

pursue affirmative relief exists. (James 3, supra, 91 Cal.App.4th at p. 1104.) 

Here, a review of the Policy demonstrates that it does not include a provision 

obligating Colony to fund and/or provide legal counsel to prosecute APR’s 

affirmative claims against the Commission.

In the trial court, APR did not address these authorities head-on, 

choosing instead to argue that Colony was not entitled to summary 

adjudication of this issue as to the Two Sites Action because the question of 

Colony’s duty to fund the prosecution of its cross-claims was moot, given that 

the case had been settled: 

“The settlement extinguished APR’s cross-complaint. 

Therefore, it is no longer relevant whether Colony had a 

duty to prosecute APR’s Cross-Complaint especially since 

Colony did not participate in APR’s defense. The damage 

has already been done by HDI and the gist of the plaintiffs’ 

complaint as it relates to Colony is based on interference 

with APR's rights under the Colony Policy and Colony’s 

breach of its responsibilities and not with why Colony did 

not prosecute APR’s Cross-Complaint. Based on these facts, 

[t]he issue is moot and not appropriate for summary 

adjudication when it comes to Colony.” 

This was the entirety of APR’s argument on the question of Colony’s 

duty to fund the prosecution of affirmative claims for relief. Now on appeal,

however, APR yet again abandons the only argument it raised in the trial 

court and instead offers an entirely new theory as to why the trial court 

should not have summarily adjudicated the question whether Colony could be 

liable for breach of contract based on its failure to pay for the prosecution of 

APR’s cross-claims against the Commission. APR’s current contention is that 

the prosecution of its cross-claims was “affirmatively linked to [APR’s] 

defense,” and, therefore, the cost of that prosecution should have been borne 

by Colony. APR asserts that its cross-claims are the “ ‘mirror image’ ” of
30

the claims asserted by the Commission, and that Aerojet-General Corp. v. 

Transport Indemnity Co. (1997) 17 Cal.4th 38 (Aerojet-General) “requires 

insurance carriers to pay – as a ‘defense cost’ – their policyholder’s

prosecution expenses if those expenditures tend to reduce liability.” 

According to APR, its cross-claims were doing “ ‘double duty,’ ” in that some 

of the issues to be litigated in those cross-claims could have minimized or 

eliminated APR’s liability as to the Commission’s claims.

As should be clear from this summary, APR never argued to the trial 

court that under Aerojet-General, an insurer has a duty to pay for the 

prosecution of affirmative claims for relief as defense costs. Indeed, we have 

found no mention of Aerojet-General or the other authorities on which APR 

relies, let alone the argument APR is making on appeal. And, again, APR 

does not address the issue of appellate forfeiture, and certainly does not 

articulate any reason why this court should now consider an argument 

never presented to the trial court. Thus, we once again observe that APR 

has forfeited its argument on appeal by failing to raise it in the trial court. 

(See Torres Construction, supra, 57 Cal.App.5th at pp. 502–503.) 

Even if we were to consider the argument on its merits, however, 

we remain unconvinced. We begin by noting that Aerojet-General, supra, 17 

Cal.4th at 38, did not involve the question whether insurers may be required 

to pay for prosecution of insureds’ affirmative claims for relief. Rather, the 

Supreme Court was addressing only the question “whether site investigation 

expenses—broadly, expenses for determining the existence, nature, extent, 

effect, etc., of the discharge of hazardous substances at a location—may 

constitute defense costs that the insurer must incur in fulfilling its duty to 

defend.” (17 Cal.4th at p. 45, italics added.) The Aerojet-General court held 

that an insurer may be responsible for paying for the cost of site 
31

investigations, as part of providing a defense to the insured, but only where, 

among other things, “the site investigation . . . amount[s] to a reasonable 

and necessary effort to avoid or at least minimize liability.” (Id. at p. 61.) 

The court reasoned that such costs should be borne by the insurer if they are 

“reasonable and necessary” to the defense, even if the investigation also 

provided a benefit to the insured, because “[e]ven if the insured may happen 

to derive some added benefit, the insurer does not shoulder any added 

burden.” (Id. at p. 66.)

The Aerojet-General court’s holding was narrow, and the court never 

indicated it was considering the more expansive proposition whether 

expenses arising from anything other than site investigations might be borne 

by an insurer. Thus, Aerojet-General does not purport to alter the general 

principle that an insurer is not obligated to take affirmative action to recover 

money for the insured through a cross-claim.15 

APR argues, however, that where an insured’s affirmative claims for 

relief are effectively the “ ‘mirror image’ ” of the claims being asserted against 

the insured, the cost of pursuing those affirmative claims for relief constitute 

“defense costs.” It contends, for example, that APR and the Commission 

“[e]ach claimed [that] although it had complied with the contracts, the other 

had not.” This means, so the argument goes, that the prosecution of APR’s

affirmative breach of contract claims “tend[ed] to reduce [APR’s] liability,” 

and should therefore be covered as defense costs. But critical to the holding 

in Aerojet-General was that the expense at issue be “reasonable and necessary

to avoid or at least minimize liability.” (Aerojet-General, supra, 17 Cal.4th at 

p. 67, italics added.) It is difficult to discern how the cost of prosecuting an 

15 Indeed, James 3 and Emerald Bay were both issued after the decision 

in Aerojet-Jet General. 
32

affirmative claim for relief, even one that might eliminate the insured’s

potential responsibility for paying damages, would be necessary to the 

insured’s defense against the unsuccessful third-party claims where the 

insured has already been provided with a full defense against the thirdparty’s action. So even if Aerojet-General may be read as APR contends 

regarding “mirror image” claims, it still does not extend so far as imposing on 

an insurer a duty to provide funds for an insured to pursue its affirmative 

claims for relief as a “defense cost” where, as here, the undisputed facts 

demonstrate that the insured has been provided a full defense. Any litigation 

work completed in connection with affirmative claims could not be considered 

“necessary” to the defense in such a scenario.

DISPOSITION

The judgment of the trial court is affirmed. Colony is entitled to its 

costs on appeal.

DATO, Acting P. J.

WE CONCUR:

KELETY, J.

CASTILLO, J.