Filed 3/1/19

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

THE INSURANCE COMPANY 

OF THE STATE OF 

PENNSYLVANIA, 

Plaintiff and Respondent,

v.

AMERICAN SAFETY 

INDEMNITY COMPANY,

Defendant and Appellant.

 B283684

 (Los Angeles County

 Super. Ct. No. BC587563)

APPEAL from a judgment of the Superior Court of Los 

Angeles County. Gregory Wilson Alarcon, Judge. Affirmed.

Chamberlin & Keaster, Robert W. Keaster and Michael A. 

Miller for Defendant and Appellant.

Herold & Sager, Andrew D. Herold, Michael D. Douglas 

and Brooke M. Finley for Plaintiff and Respondent.

__________________________
2

SUMMARY

This is a dispute between insurers. Under Insurance Code 

section 11580 (section 11580), when a judgment is obtained 

against an insured based upon property damage, the judgment 

creditor may bring an action on the policy against the insurer, to 

recover on the judgment. Here, plaintiff’s insured (a general 

contractor) secured a default judgment against defendant’s 

insured (a subcontractor), after a homeowner obtained an 

arbitration award of more than $1.1 million against the general 

contractor.

Plaintiff indemnified the general contractor for the 

arbitration award. Defendant refused to indemnify the 

subcontractor for the amount of the default judgment. In this 

lawsuit, plaintiff (as subrogee of its insured) sought recovery from 

defendant under section 11580 of the amount of the default 

judgment against the subcontractor. 

Both parties filed summary judgment motions, and the 

trial court granted summary judgment for plaintiff. Defendant 

appeals on three principal bases. Defendant contends the default 

judgment was void because the underlying complaint failed to 

specify the amount of damages sought. (Code Civ. Proc., § 580.) 

Defendant further contends the default judgment was an award 

for economic loss rather than property damage, and therefore not 

recoverable under section 11580. And, defendant contends 

plaintiff did not prove the default judgment was covered under 

any of defendant’s policies. Defendant also raises other points 

not presented to the trial court before it granted summary 

judgment.

We find no merit in defendant’s principal contentions, and 

do not consider claims not presented to the trial court until after 
3

it heard and ruled on the summary judgment motions. 

Accordingly, we affirm the judgment.

FACTS

1. The Parties and the Background

Plaintiff is The Insurance Company of the State of 

Pennsylvania. Plaintiff was the excess liability insurer for New 

Millennium Homes LLC and NM Homes One, Inc. (collectively, 

NMH).1 NMH was the builder and developer of a housing 

development in Calabasas. Amir and Brenda Moghadam bought 

one of the homes from NMH in December 2005 (the Moghadam

property). 

Defendant is American Safety Indemnity Company. 

Defendant was the commercial general liability insurer for 

Camarillo Engineering, Inc. (Camarillo). Defendant issued 

six different policies to Camarillo covering annual periods that 

began on December 1, 2003, and ended on August 1, 2009. Each 

of the policies provides that defendant will pay “those sums that 

the insured becomes legally obligated to pay as damages because 

of . . . ‘property damage’ to which this insurance applies.”

Property damage is defined as “[p]hysical injury to tangible 

 

1 Plaintiff issued NMH a “follow form excess liability policy” 

that was subject to the same warranties, terms and conditions as 

the underlying coverage. The underlying commercial general 

liability policy was issued by Everest Indemnity Insurance to 

NMH. One of its provisions was that “[i]f the insured has rights 

to recover all or part of any payment we have made under this 

Coverage Part, those rights are transferred to us. The insured

must do nothing after loss to impair them. At our request, the 

insured will bring ‘suit’ or transfer those rights to us and help us 

enforce them.” 
4

property, including all resulting loss of use of that property.”2 

The insurance applies to property damage if it is “caused by an 

‘occurrence’ that takes place in the ‘coverage territory’ ” and if the 

property damage “occurs during the policy period.” 

In 2004, Camarillo performed “mass grading, compacting, 

and finish grading” of the soils at the Moghadam property under 

a November 2004 subcontract with NMH. The subcontract 

required Camarillo to indemnify and hold NMH harmless from 

claims (including attorney fees “incurred as a result thereof”) for 

property damage “arising out of or resulting from the activities of 

or work performed” by Camarillo.

In early 2009, the Moghadams “ ‘began to notice drywall 

and stucco cracks, separation and cracking of interior tiles, and 

lifting of exterior flagstones’ ” on their property. They 

complained to NMH “ ‘[i]n approximately May 2009.’ ” An 

ensuing geotechnical investigation found the distress to the 

Moghadam residence was due to “ ‘differential fill settlement, as 

well as expansive soil activity,’ ” and that “an inadequate design 

and construction of the post-tension slab foundation system are 

exacerbating the distress.” A construction engineer hired to 

prepare a repair estimate concluded the entire structure was 

compromised and should be demolished and rebuilt at a cost of 

almost $1.9 million. 

 

2 The full definition of “property damage” is: “a. Physical 

injury to tangible property, 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.” 
5

In September 2011, the Moghadams filed a claim in 

arbitration against NMH for defective construction, alleging their 

total current damages were “at least $2,347,592.” Their claim 

alleged most of the stress features (the cracks and separations 

mentioned above) had occurred on the southeastern portion of the 

house, where the fill was deepest. The claim also described a 

floor tilted downward, as well as hairline wall and ceiling cracks 

throughout the house. 

In December 2011, while the arbitration was pending, 

NMH sued Camarillo and two other defendants for contractual 

and equitable indemnity, contribution and related causes of 

action.3 Paragraph 8 of the NMH complaint incorporated by 

reference, and attached as exhibit A, the Moghadams’ arbitration 

claim that alleged the Moghadams’ current damages were “at 

least $2,347,592.” The NMH complaint further alleged (par. 19) 

“that Defendants, and each of them, had and have a duty to 

defend, indemnify, and hold harmless [NMH] for the claims made 

in the Moghadam Claimants’ Arbitration Complaint, including 

attorneys’ fees and costs.” NMH’s complaint did not otherwise 

specify the amount of damages sought, alleging damages “in an 

amount to be established at the time of trial.”

 

3 Another of the defendants, Neblett & Associates, Inc.

prepared grading and geotechnical recommendations for site 

development and foundations, and performed grading 

observations and testing during development. 
6

Camarillo did not answer NMH’s complaint or otherwise 

appear in the NMH lawsuit, and its default was entered in March 

2012.4

In October 2012, after hearings in June and July, the 

arbitrator in the Moghadam arbitration entered an award 

against NMH. The arbitrator stated that, “[g]iven the various 

testing that was conducted, it is undisputed that the house is 

damaged due to differential settling resulting from improper soil 

compaction.”

5 The arbitrator also found “the soil is still settling 

and there is a potential for significant settlement over many 

years.” 

The final binding award gave the Moghadams “damages for 

diminution in value in the amount of $1,026,750, with interest at 

the legal rate accruing as of the date of the Interim Award dated 

August 13, 2012.” As the prevailing party under the purchase 

agreement and joint escrow instructions, the Moghadams were 

awarded attorney fees of $105,000 and costs of $8,840.38, with 

interest at the legal rate accruing as of the date of the final 

award (October 9, 2012). 

The award was confirmed in December 2012, in the 

principal sum of $1,140,590.38, plus prejudgment interest of 

 

4 In June 2012, after several tender letters from NMH to 

defendant, defendant advised NMH there was no “additional 

insured” coverage for NMH under the policies defendant issued to 

Camarillo. 

5 The arbitrator described the parties’ disputes as “whether 

the settling will continue and to what degree”; “what repairs are 

necessary”; and whether “overwatering” and alteration of the 

landscape and drainage by the Moghadams were factors 

contributing to the damage. 
7

$28,417.84, for a total award of $1,169,008.22. The Moghadams 

recovered an additional $7,625 for attorney fees and costs 

incurred in preparation and filing of the petition to confirm the 

award, bringing their total recovery to $1,176,633.22. 

Plaintiff fully indemnified NMH for the arbitration award 

to the Moghadams. 

On August 7, 2013, NMH obtained a final default judgment 

against Camarillo in the amount of $1,532,973.87, consisting of 

damages of $1,176,633.22 and attorney fees of $356,340.65.6 (The 

request for default judgment was supported by declarations and 

documents including the subcontract, evidence from the 

Moghadam arbitration, and the arbitration award.) 

2. The Complaint

In July 2015, plaintiff brought this lawsuit against 

defendant. Plaintiff alleged causes of action for declaratory 

relief, subrogation, recovery of the judgment under section 11580, 

and breach of contract. The complaint alleged defendant’s 

policies provided coverage for the entire amount of the default 

judgment; defendant had a duty under those policies to indemnify 

Camarillo for the amount of the default judgment; and plaintiff 

was subrogated to NMH’s rights to recover the amount of the 

default judgment, from Camarillo and defendant, by virtue of 

having indemnified NMH for the arbitration award.

3. The Motions for Summary Judgment

Both parties moved for summary judgment.

 

6 NMH also obtained a default judgment in the same amount 

against Neblett & Associates (see fn. 3, ante). Both default 

judgments stated: “joint and severally liable.” 
8

Defendant contended, in opposition to plaintiff’s motion, 

that plaintiff could not prove all the elements of any cause of 

action against defendants. First, defendant asserted the default 

judgment was void as a matter of law under Code of Civil 

Procedure section 580, because NMH’s complaint against 

Camarillo did not specify the amount of damages sought. Second,

defendant asserted the arbitration award on which the default 

judgment was based was for economic loss, not property damage, 

and section 11580 permits an action against the insurer only 

when the judgment against the insured is “in an action based 

upon bodily injury, death, or property damage.” (§ 11580, 

subd. (b)(2).) Third, defendant contended plaintiff did not satisfy 

its burden to prove the default judgment was covered under any 

of defendant’s policies. This was because (a) plaintiff did not 

prove “when property damage first occurred” at the Moghadam 

property, and (b) plaintiff did not prove that Camarillo satisfied 

the applicable self-insured retention (SIR) or deductible under 

any of the policies. (We will describe and discuss these and other 

policy provisions to the extent necessary in connection with our 

legal discussion, post.)

Defendant’s own summary judgment motion was based on 

the first two of defendant’s three contentions. 

Plaintiff argued that the default judgment was not void 

because the NMH complaint attached and incorporated by 

reference the Moghadam arbitration claim, specifying the 

damages sought from NMH for which NMH sought indemnity 

from Camarillo. Further, the arbitration award based on 

diminution in value was not an award for economic loss, because 

diminution in value was merely the measure of damages, and did 

not change the fact that the damages awarded arose from claims 
9

the home suffered property damage as defined in defendant’s 

policies. As for the coverage issues, defendant pointed out 

property damage was observed in May 2009, and argued expert 

testimony “indicated damages in other areas of the residence 

were likely occurring prior to that time, all of which was within 

the effective dates of [defendant’s] polices, and at the very least, 

during the effective dates of [the policy], effective August 1, 2008

to August 1, 2009.” Plaintiff argued the SIR and deductible 

provisions required defendant to request payment from its 

insured and there was no evidence defendant did so. Further, the 

2008-2009 policy contained a deductible, not an SIR, and, 

plaintiff argued, under California law a deductible does not 

require payment “prior to an insurer providing coverage.” 

On November 22, 2016, the trial court entered an order 

denying defendant’s motion and granting plaintiff’s motion. 

4. Proceedings After the Summary Judgment Ruling

Plaintiff served defendant with a proposed judgment that 

awarded plaintiff damages of $1,532,973.87 (the amount of the 

default judgment). Defendant filed objections to the proposed 

judgment. In substance, defendant reiterated the arguments it 

made in its summary judgment papers, and added a few new 

ones, including a claim that the judgment exceeded the per 

occurrence limits of defendant’s insurance policies, and that 

plaintiff could not recover NMH’s attorney fees and costs 

awarded in the default judgment, or any interest on the 

judgment, on the theory that those were costs, not damages, and 

thus fell under the “supplementary payments” provision of 

defendant’s policies, which plaintiff could not enforce under 

section 11580. Plaintiff responded by asserting that no California 

authority permits a party to use objections to a proposed 
10

judgment as a mechanism for reasserting arguments already 

raised or asserting new arguments after the court has issued a 

dispositive order. 

On May 8, 2017, the court entered judgment “in favor of 

Plaintiff and against Defendant in the amount of $1,532,973.87 

plus prejudgment interest at a rate of 10% per annum calculated 

from August 7, 2013.” 

On May 23, 2017, defendant filed a motion for a new trial, 

or alternatively to vacate the ruling and judgment. Defendant 

asserted irregularities and abuse of discretion preventing 

defendant from having a fair trial; excessive damages; 

insufficient evidence; and error in law. Defendant complained 

the court’s ruling failed to address or make any findings on the 

property damage and coverage issues defendant raised, failed to 

specify the reasons for granting summary judgment or 

specifically refer to any evidence supporting that determination, 

and failed to rule on material evidentiary objections. Defendant’s 

motion repeated all the arguments previously made (both before 

and after the summary judgment ruling), and added an argument 

that a “wrap-up” exclusion in its policies excluded coverage.

Plaintiff’s response addressed defendant’s substantive 

claims, and also contended that defendant’s arguments had 

already been adjudicated or were waived by the failure to raise 

them during the extensive briefing and oral argument on the 

summary judgment motions.

The trial court denied defendant’s motion, concluding 

“there was no error of fact or law, and no incorrect or erroneous 

legal basis for the decision, either as a matter of dispositive 

procedure, or of substantive law.” The court observed that it 

“general[ly] concurs with the opposing memorandum on the 
11

various substantive issues raised, and an exhaustive addressing 

of the issues in a ruling[] is not required.” 

Defendant filed a timely appeal from the judgment.

DISCUSSION

1. The Standard of Review

A plaintiff moving for summary judgment “has met his or 

her burden of showing that there is no defense to a cause of 

action if that party has proved each element of the cause of action 

entitling the party to judgment on the cause of action. Once the 

plaintiff . . . has met that burden, the burden shifts to the 

defendant . . . to show that a triable issue of one or more material 

facts exists as to the cause of action or a defense thereto.” (Code 

Civ. Proc., § 437c, subd. (p)(1).) Summary judgment is 

appropriate where “all the papers submitted show that there is 

no triable issue as to any material fact and that the moving party 

is entitled to a judgment as a matter of law.” (Id., subd. (c).)

Our Supreme Court has made clear that the purpose of the 

1992 and 1993 amendments to the summary judgment statute 

was “ ‘to liberalize the granting of [summary judgment] 

motions.’ ” (Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 

536, 542; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 

854.) It is no longer called a “disfavored” remedy. (Perry, at p. 

542.) “Summary judgment is now seen as a ‘particularly suitable 

means to test the sufficiency’ of the plaintiff’s or defendant’s 

case.” (Ibid.) On appeal, “we take the facts from the record that 

was before the trial court . . . . ‘ “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.” ’ ” (Yanowitz v. L’Oreal USA, Inc. (2005) 36 

Cal.4th 1028, 1037, citation omitted.)
12

2. Contentions and Conclusions

Section 11580 requires policies insuring against loss or 

damage resulting from liability for injury suffered by another 

person to contain certain provisions. (Id., subd. (a)(1).) One of 

these is a provision “that whenever judgment is secured against 

the insured . . . in an action based upon bodily injury, death, or 

property damage, then an action may be brought against the 

insurer on the policy and subject to its terms and limitations, by 

such judgment creditor to recover on the judgment.” (Id., 

subd. (b)(2).) 

Defendant contends plaintiff did not establish any of the 

elements required by section 11580, because the default 

judgment NMH obtained was void; the underlying action was not 

based on property damage; and defendant’s policies did not 

provide coverage of the underlying claims. We disagree.

a. The default judgment was not void

Under Code of Civil Procedure section 580 (section 580), the 

relief granted to a plaintiff in a default judgment “cannot exceed 

that demanded in the complaint . . . .” (Id., subd. (a).) The 

Supreme Court tells us that “section 580 is to be interpreted, in 

accordance with its plain language, to deprive a trial court of 

jurisdiction to enter a judgment against a defaulting defendant 

which awards greater relief than that sought in the plaintiff’s 

complaint.” (In re Marriage of Lippel (1990) 51 Cal.3d 1160, 

1167; id. at p. 1166 [“California satisfies . . . due process 

requirements in default cases through section 580.”]; Becker v. 

S.P.V. Construction Co. (1980) 27 Cal.3d 489, 493 (Becker) 

[permitting a collateral attack on a default judgment based on 

section 580 where the motion to vacate the judgment was not 

timely; “ ‘[c]ollateral attack is proper to contest [a judgment void 
13

on its face for] lack of personal or subject matter jurisdiction or 

the granting of relief which the court has no power to grant’ ”]; 

see, e.g., Dhawan v. Biring (2015) 241 Cal.App.4th 963, 975 

[courts considering default judgments awarding damages in 

violation of section 580 “have consistently viewed the judgments 

as void, not voidable, and subject to collateral attack at any 

time”].)7

Becker further tells us that “a prayer for damages according 

to proof passes muster under section 580 only if a specific amount 

of damages is alleged in the body of the complaint.” (Becker, 

supra, 27 Cal.3d at p. 494, italics added; see also Greenup v. 

Rodman (1986) 42 Cal.3d 822, 829 [“the allegations of a 

complaint may cure a defective prayer for damages”].)

In this case, the prayer for judgment in the NMH complaint

does not state a specific amount of damages. (The prayer for 

judgment does not specify damages “according to proof,” either.) 

And, as defendant points out, in the body of the complaint, NMH

refers several times to damage in an amount “according to 

proof”or the like. The complaint states, for example, that because 

 

7 Plaintiff tells us that because defendant chose not to defend 

Camarillo in the underlying action, and did not seek to vacate the 

default judgment NMH obtained, defendant cannot relitigate 

Camarillo’s liability in this section 11580 action, citing Clemmer 

v. Hartford Ins. Co. (1978) 22 Cal.3d 865, overruled on another 

point in Ryan v. Rosenfeld (2017) 3 Cal.5th 124, 134-135. In 

Clemmer, the court held that an insurer who rested on its claim 

of noncoverage instead of moving to set aside a default judgment 

against its insured was bound by the amount of the judgment 

against its insured. (Clemmer, at p. 884.) Clemmer did not 

involve section 580 and has no application here.
14

of the defects and damages at the Moghadam property caused by 

defendants, NMH “[has] incurred and continue[s] to incur costs, 

the sum of which [is] not currently known”; that as a direct result 

of the defendants’ failure to defend, indemnify and hold NMH 

harmless “for any claims or sums paid to the Moghadam 

Claimants,” NMH “[has] been damaged in an amount to be 

established at the time of trial, which is no less than the 

jurisdictional limits of this court”; and that NMH was damaged 

by defendants’ breaches of contract “in an amount according to 

proof at trial.” 

But in addition, as noted at the outset, NMH alleged in the 

body of the complaint that the Moghadams “served a Claim in 

Arbitration for Defective Construction . . . , attached hereto as 

Exhibit ‘A’ and incorporated herein by this reference, against 

[NMH] regarding alleged defects and/or deficiencies and related 

damages as to the Moghadam Property.” The Moghadam claim 

that was attached and incorporated by reference alleged the 

Moghadams’ “total current damages are at least $2,347,592.”8

The NMH complaint further alleged “that Defendants, and each 

of them, had and have a duty to defend, indemnify, and hold 

harmless [NMH] for the claims made in the Moghadam 

Claimants’ Arbitration Complaint, including attorneys’ fees and 

costs.” The complaint alleged that “the damages claimed by the 

Moghadam Claimants” involve damages to the Moghadam 

 

8 The Moghadam claim described the categories of damages 

it sought. These were all demolition and repair costs, relocation 

and storage expenses, lost home-business income, investigative 

costs, and other costs or fees, loss-of-use damages of at least 

$382,429, and at least $44,665 for expert fees in investigating 

and repairing the property. 
15

property caused by the defendants. The NMH complaint alleges 

NMH is “entitled to recover the funds they have expended and 

the costs they have incurred to date in addressing the claims of 

the Moghadam Claimants.” 

Despite all these factual allegations, defendant asks us to 

conclude the NMH default judgment was void for failure to allege 

“a specific amount of damages . . . in the body of the complaint” 

(Becker, supra, 27 Cal.3d at p. 494), thus violating the section 580 

requirement that the relief granted in a default judgment “cannot

exceed that demanded in the complaint” (§ 580, subd. (a)). We 

cannot do so, because the NMH complaint was quite plain that 

NMH sought indemnity “for the claims made in the Moghadam 

Claimants’ Arbitration Complaint,” and NMH properly 

incorporated by reference into the body of the complaint the 

Moghadam claim for damages of “at least $2,347,592.” The 

default judgment of $1,532,973.87 was significantly less than the 

amount demanded in the complaint.

Defendant does not dispute that “a copy of the Moghadam 

Claim was attached to NMH’s Complaint and incorporated 

therein by reference.” Instead, defendant contends that, as a 

matter of law, “incorporation by reference is inadequate to satisfy 

the strict and clearly worded statutory framework” of section 580 

and related statutes. Defendant’s briefs cite no pertinent 

authority supporting this contention.

9 While its argument on 

 

9 Defendant relies on Schwab v. Southern California Gas Co.

(2004) 114 Cal.App.4th 1308, which does not involve 

incorporation by reference. Schwab involved whether plaintiff 

timely served statements of damages as required in personal 

injury cases. Defendant cites Schwab’s statement that the 

statutes requiring a complaint to state the amount of damages 
16

this point is opaque throughout, defendant concludes that “it 

would be contrary to the basic notions of due process and fairness 

to find that Camarillo was put on notice of damages sought 

against it based upon an arbitration claim not filed against 

Camarillo,” and “[t]herefore” the default judgment is void.10 All 

we can say is that defendant’s assertion has no support in law

and is counter to the clear allegations of the NMH complaint.

After the briefs in this case were filed, the Fourth Appellate 

District decided the only case of which we are aware that 

concerns the principles of incorporation by reference in the 

context of section 580, Yu v. Liberty Surplus Ins. Corp. (2018) 

30 Cal.App.5th 1024 (Yu).11 Yu rejected a claim of incorporation 

 

“require formal notice of the amount of money damages or other 

relief sought by the party seeking relief.” (Id. at p. 1325.) Of 

course that is so, but NMH gave that notice to Camarillo here by 

incorporating the Moghadam claim by reference into the body of 

the complaint and expressly seeking indemnity for those very 

claims. We do not see anything in Schwab pertinent to or 

inconsistent with our resolution of this case.

10 Defendant states the Moghadam arbitration claim “also 

contained an allegation of ‘inadequate design and construction of 

the post tension slab foundation system,’ for which Camarillo 

could not be responsible because that claim does not fall within 

Camarillo’s scope of work.” That is correct, but defendant does 

not tell us why that is relevant to the notice issue. (The 

arbitrator ultimately rejected the Moghadams’ claims that the 

posttension slab was not properly constructed.) 

11 Defendant filed a letter informing the court of the Yu case 

under California Rules of Court, rule 8.254(a), permitting a party 

to inform the court of “significant new authority” not available 

before the party’s last brief was filed.
17

by reference, but did so under circumstances quite different from 

those in this case. Yu nowhere suggests that incorporation by 

reference of damage amounts is inadequate to satisfy section 580

as a matter of law. Yu merely held that the alleged incorporation 

by reference of the monetary demand in Yu was not “ ‘clear and 

unequivocal,’ ” as is required for incorporation by reference in 

other legal contexts. (Yu, at pp. 1032-1033.) That is not the case 

here.

As in this case, Yu involved a judgment creditor’s action 

under section 11580 to collect a default judgment against certain 

subcontractors (the Fitch entities) from their insurers. The 

question was whether a cross-complaint on which the Fitch 

entities defaulted incorporated by reference the amount of 

damages claimed in the initial complaint. The facts, briefly, were 

these. 

The plaintiff sued the general contractor for construction 

defects, and asserted damages of not less than $10 million. The 

general contractor filed a cross-complaint against the plaintiff 

and 20 subcontractors, including two known as the Fitch entities,

that prayed for damages according to proof, and did not set out a 

monetary amount sought. The general contractor eventually 

settled with the plaintiff and assigned its cross-complaint rights 

to the plaintiff, who obtained a default judgment against the 

Fitch entities. (Yu, supra, 30 Cal.App.5th at pp. 1027-1030.)

When the plaintiff in Yu sued the insurers to collect on her 

default judgment, the trial court voided the judgment, because 

the cross-complaint did not state an amount of damages. (Yu, 

supra, 30 Cal.App.5th at p. 1030.) On appeal, the plaintiff 

argued that the cross-complaint “incorporated by reference the 

damage amount she had asserted in her initial complaint 
18

against” the general contractor. (Id. at p. 1032.) Yu describes the 

cross-complaint as stating that the operative complaint “ ‘and any 

future amended complaints filed in this action and any crosscomplaints filed in this action are incorporated herein by 

reference as though fully set forth herein, for identification and 

informational purposes only . . . .’ ” (Ibid., italics added in Yu.) 

Yu found this alleged incorporation of the monetary demand from 

the plaintiff’s fourth amended complaint “was not ‘clear and 

unequivocal.’ ” (Ibid.)

The Yu court explained that “[a]lthough widely accepted,” 

there were no “formal requirements” for “ ‘ “permissible 

incorporation by reference” ’ ” in a cross-complaint of the 

pleadings in the original action. (Yu, supra, 30 Cal.App.5th at 

p. 1032.) But “in other legal contexts the doctrine of 

incorporation by reference generally ‘requires that (1) the 

reference to another document was clear and unequivocal; (2) the 

reference was called to the attention of the other party, who 

consented to that term; and (3) the terms of the incorporated 

documents were known or easily available to the contracting 

parties.’ ” (Ibid.) 

The Yu court pointed out the cross-complaint repeatedly 

stated that its damage demand was “according to proof” or “ ‘in 

an amount precisely unknown,’ ” and that was at odds with “the 

purported demand in [the plaintiff’s] complaint” asking for not 

less than $10 million in damages. (Yu, supra, 30 Cal.App.5th at 

p. 1033.) “Further, the cross-complaint stated that [the 

plaintiff’s] complaint was being referred to ‘for identification and 

informational purposes only.’ As a result, it is unreasonable to 

conclude that the damage demand was effectively called to the 

Fitch Entities’ attention, or that they ever consented to it, or that 
19

it was ‘readily accessible’ to them.” (Ibid.) Yu then agreed with 

the trial court that because the cross-complaint “ ‘specifically 

declined’ ” to state the amount of damages sought, it was 

“ ‘contradictory to basic notions of due process and fairness to 

find’ ” that the Fitch entities “ ‘have been put on notice of their 

potential damages by virtue of an allegation in a complaint filed 

not against them, but against [the general contractor].’ ” (Ibid.)

We do not see any facts in Yu that would cause us to 

conclude that the NMH complaint did not properly incorporate by 

reference the Moghadam arbitration claim. Unlike Yu, the 

arbitration claim was not “ ‘incorporated . . . for identification and 

informational purposes only’ ”; the arbitration claim and the 

Moghadam claimants were repeatedly referred to in the NMH 

complaint. Unlike Yu, the arbitration claim was attached as 

exhibit A to the complaint, describing in detail the property 

damage and related claims of loss, and stating the Moghadams 

sought to recover “at least $2,347,592.” And unlike Yu, the 

complaint expressly alleged that “the damages claimed by the 

Moghadam Claimants” involved damages to the Moghadam 

property caused by the defendants and for which they had a duty 

to indemnify NMH. These allegations were “clear and 

unequivocal” in calling to Camarillo’s attention that NMH was 

seeking indemnification in the amounts alleged in the 

Moghadams’ arbitration claim, which was “readily accessible” 

because it was attached as exhibit A to the complaint. Those 

allegations were more than adequate to put Camarillo on “formal 

notice” of the “maximum judgment that may be assessed against 

[it],” as required by due process. (Greenup v. Rodman, supra, 

42 Cal.3d at p. 826.)
20

Finally, in a two-paragraph argument, defendant asserts 

that the Moghadam arbitration claim “only sought unspecified 

attorneys’ fees, costs and interest”; the default judgment against 

Camarillo “included an award for these items”; and 

“[c]onsequently” the default judgment is void for violating 

section 580’s notice requirements. Again, there is no authority 

for defendant’s assertion. The default judgment entered against 

Camarillo was far less than the amount of damages identified in 

the arbitration claim, so there can be no legitimate claim of 

inadequate notice of Camarillo’s maximum liability.

b. The property damage issue

Defendant contends the judgment against Camarillo is not 

recoverable under section 11580 because it was not a judgment 

“based upon . . . property damage” within the meaning of 

section 11580. We disagree. To reach that conclusion would 

require us to ignore the facts and interpret the law in an 

irrational fashion.

In the arbitration, it was “undisputed that the house is 

damaged due to differential settling resulting from improper soil 

compaction.” The arbitrator explained: “The Property is settling 

toward the area where soil compaction depth was near 50 [feet]. 

The post-tension slab is cracked entirely through near the 

mid section of the home at the approximate point of the fill 

transition. Floor level surveys demonstrated a differential from 

high to low of 1.8 [inches] in 2009, 2.4 [inches] in 2010 and 3.3 

[inches] in 2012, contrasted to a normal of 3/4 [inch]. The parties 

also acknowledge that the residence walls contain numerous 

cracks on the interior and exterior and that posts and other 

structures are pulling away at points.” That is property damage. 
21

That is why the Moghadams sought arbitration, and it is why 

they obtained an award.

The law is equally clear. Under section 11580, when a 

judgment is secured against the insured (here, Camarillo) “in an 

action based upon . . . property damage,” the judgment creditor 

(here, plaintiff as NMH’s subrogee) may bring an action on the 

policy “to recover on the judgment.” (Id., subd. (b)(2).)

Defendant contends the judgment here was not for property 

damage, but rather was for indemnity of an arbitration award

that awarded “economic loss for diminution in property value,” 

and that, “[a]s a matter of law, diminution in value is economic 

loss, not property damage.” We decline to adopt this constricted 

view of section 11580.

First, NMH’s action against Camarillo for indemnity was 

plainly “based upon . . . property damage” (§ 11580, subd. (b)(2)), 

because NMH sought indemnity “for the claims made in the 

Moghadam Claimants’ Arbitration Complaint,” and those were 

claims for property damage, as we have just described above. 

(Defendant’s policies define property damage as: “Physical injury 

to tangible property, including all resulting loss of use of that 

property.”) 

Second, the fact that the arbitrator measured the damages 

by diminution in value, rather than by the cost of repair, changes 

nothing. In statutory actions for construction defects (Civ. Code, 

§ 895 et seq.), the homeowner’s “right to the reasonable value of 

repairing any nonconformity is limited to the repair costs, or the 

diminution in current value of the home caused by the 

nonconformity, whichever is less . . . .” (§ 943, subd. (b)). The 

arbitrator awarded the diminution in value because NMH’s 

proposed repair plans did not reflect the true value of the 
22

necessary repairs, and the claimants’ proposed repair costs 

exceeded the diminution in value – so the Moghadams’ damages 

were necessarily “limited to $1,026,750, the diminution in value.” 

To say the award was therefore not “based upon . . . property 

damage” is simply untenable.

Defendant’s insistence to the contrary is based on cases 

stating that diminution in value is not property damage. (E.g., 

New Hampshire Ins. Co. v. Vieira (9th Cir. 1991) 930 F.2d 696, 

701 (Vieira) [“diminution in value is not ‘physical damage’ to 

‘tangible property’ ” and so was not covered by the insurer’s 

policy].) But that is not the issue here, where there was physical 

damage to the property, and diminution in value was necessarily 

used as the measure of damages. (See Pruyn v. Agricultural Ins. 

Co. (1995) 36 Cal.App.4th 500, 510, fn. 6 (Pruyn) [“In the liability 

policy context, diminution in market value is accepted as a 

proper method of measurement of any property damages which 

may have been sustained.”].)12

 

12 Defendant also cites cases stating that property damage is 

not established “by the mere failure of a defective product to 

perform as intended,” nor by “economic losses such as the 

diminution in value of the structure [citations] or the cost to 

repair a defective product or structure.” (F & H Construction v. 

ITT Hartford Ins. Co. (2004) 118 Cal.App.4th 364, 372.) These 

cases, like Vieira, are inapt. F & H Construction discusses the 

principle that “the incorporation of a defective component or 

product into a larger structure does not constitute property 

damage unless and until the defective component causes physical 

injury to tangible property in at least some other part of the 

system.” (F & H Construction, at p. 372.) This case does not 

involve a defective “product,” and in any event Camarillo’s 

improper grading work did cause physical injury to the 

Moghadam home.
23

Third, defendant points out that the default judgment 

includes attorney fees and costs awarded to the Moghadams, and 

“these components of the default judgment also cannot satisfy the 

‘property damage’ requirement of section 11580 (b)(2).” 

Defendant misreads section 11580, which allows a judgment 

creditor to recover on the judgment when the judgment was 

secured “in an action based upon . . . property damage.” The 

statute on its face does not require every element of the damages 

in that judgment to be property damage; it requires the judgment 

to be “in an action based upon . . . property damage.” Here, all 

the components of the Moghadam arbitration award – the 

“diminution in value,” the attorney fees, the costs, the interest –

were the result of property damage that was “due to differential 

settling resulting from improper soil compaction.”

In short, we are in no doubt that the NMH default 

judgment was secured “in an action based upon . . . property 

damage,” and none of the authorities defendant cites requires a 

contrary conclusion.

c. The coverage issues

A judgment creditor’s direct action against the insurer 

under section 11580 is “on the policy and subject to its terms and 

limitations.” (Id., subd. (b)(2).) Defendant contends plaintiff did 

not prove the default judgment was covered under any of 

defendant’s policies. In the trial court, defendant asserted two 

bases for the claimed lack of coverage. We conclude defendant is 

mistaken on both points.

i. When the damage “first occurred”

Defendant first contends plaintiff did not prove when 

property damage first occurred at the Moghadam property, and 

therefore the damage is not covered by any of the policies. We 
24

disagree with defendant’s construction of the policy. It is clear 

there is coverage under at least one of the policies: the sixth 

policy in effect from August 1, 2008, to August 1, 2009.

(1) The policy language

Defendant issued six successive policies to Camarillo.

13

The policies define property damage as “[p]hysical injury to 

tangible property.” Each policy applies to property damage only 

if “(1) [t]he . . . ‘property damage’ is caused by an ‘occurrence’ that 

takes place in the ‘coverage territory’; and [¶] (2) [t]he . . .

‘property damage’ occurs during the policy period.” 

There is very little substantive difference in the six policies, 

but the sixth is slightly different from the others in the 

placement of some provisions. Where provisions differ, we use 

those in the sixth policy, since that is the one that definitively 

covers the property damage suffered by the Moghadams. 

The sixth policy defines “occurrence” to mean:

“an accident, including continuous or repeated 

exposure to substantially the same general harmful 

conditions that happens during the term of this 

insurance.” 

For sake of clarity, we note at the outset that there is no dispute 

that the property damage was “caused by an ‘occurrence’ that 

takes place in the ‘coverage territory’ ” (the United States) and 

that the causal act (Camarillo’s improper grading) need not have 

taken place during the term of the insurance policy that covers 

the damage. “Occurrence” in this context is construed to mean 

 

13 The policies covered December 1, 2003 to December 1, 

2004; December 1, 2004 to December 1, 2005; December 1, 2005 

to December 1, 2006; August 1, 2006 to August 1, 2007; August 1, 

2007 to August 1, 2008; and August 1, 2008 to August 1, 2009.
25

that what must happen “during the policy year to trigger 

coverage” is “damage to property, not the causal conduct.” 

(Pennsylvania General Ins. Co. v. American Safety Indemnity Co. 

(2010) 185 Cal.App.4th 1515, 1534 (Pennsylvania General).) 

Defendant does not contend otherwise.

The endorsement in the sixth policy (amending the 

definition of “occurrence” to read as just quoted) also added the 

following language to the coverage section of the policy (the 

language was previously a part of the definition of “occurrence”):

“ ‘Property damage’ . . . which commenced prior to the 

effective date of this insurance will be deemed to 

have happened in its entirety prior to, and not 

during, the term of this insurance.” 

The endorsement further states: 

“We will have no duty to defend or indemnify the 

insured against any ‘suit’ against an insured or any 

additional insured if such ‘suit’ does not allege an 

‘occurrence’ as defined and meet the timing 

conditions as to both ‘occurrence’ and ‘property 

damage’ . . . of this policy.”14

(2) Defendant’s argument

Defendant tells us that, because none of the policies 

provides coverage “for property damage which commenced prior 

to the policy period,” and plaintiff did not offer evidence to 

establish when property damage first occurred, there is no 

coverage under any of the policies. We disagree.

 

14 All the policies also have a damage exclusion endorsement 

stating the insurance does not apply to any occurrence “which 

first occurred prior to the inception date of this policy.” 
26

No “[p]hysical injury” to the Moghadams’ residence 

occurred until May 2009, and they advised NMH at that time, 

during the term of the sixth policy. Defendant’s contention is 

based, in effect, on plaintiff’s argument that all the policies cover 

the property damage (a point we need not decide), and on 

defendant’s own mistaken view that, even if property damage 

first “manifested” during the policy period, the insured must also

prove that the damage did not “first commence” at some earlier 

time. Defendant’s contention is contrary to the policy’s definition 

of property damage, without support in legal authority, and an 

unreasonable construction of the insured’s burden of proof.

We agree, of course, that “[t]he burden is on an insured to 

establish that the occurrence forming the basis of its claim is 

within the basic scope of insurance coverage.” (Aydin Corp. v. 

First State Ins. Co. (1998) 18 Cal.4th 1183, 1188.) But, “once an 

insured has made this showing, the burden is on the insurer to 

prove the claim is specifically excluded.” (Ibid.)

Plaintiff made its required showing. The “basic scope of 

insurance coverage” in this case is as we have just described: the 

policy applies to “property damage” – “[p]hysical injury to 

tangible property” – that “occurs during the policy period.” 

Plaintiff submitted the arbitration award as evidence. That 

award established that in 2009, the Moghadams noticed “drywall 

and stucco cracks, separation and cracking along the mortar joint 

of interior tiles . . . and lifting of exterior flagstone work,” and 

complained to NMH in May 2009. This is plainly evidence of 

property damage – “[p]hysical injury to tangible property” – that 

first appeared during the term of defendant’s sixth policy. We do 

not see how any other conclusion is possible. Defendant’s 

constant refrain that plaintiff “did not offer any evidence to 
27

establish when property damage first occurred at the Property” is 

simply wrong. 

Defendant’s challenge to this straightforward analysis

draws upon plaintiff’s argument that all the policies in effect 

“from the time Camarillo completed its work at the Moghadams’ 

residence forward provide coverage for the damages in question.” 

Defendant may well be correct when it contends this is not so.15 

 

15 Plaintiff’s contention that all the policies provide coverage 

relies on the “continuous injury trigger of coverage” the Supreme 

Court adopted in Montrose Chemical Corp. v. Admiral Ins. Co. 

(1995) 10 Cal.4th 645, 685 (Montrose). Montrose held that “[i]n 

the case of successive policies, . . . property damage that is 

continuous or progressively deteriorating throughout several 

policy periods is potentially covered by all policies in effect during 

those periods,” so that the insurer’s duty to defend arose under 

those policies. (Id. at p. 655.) The “continuing injury trigger of 

coverage” may well be inapt here, because it depends on the 

language of the policy, as Montrose itself tells us. (Id. at p. 677 

[“The precise question, of course, is what result follows under the 

language of the policies of insurance to which the 

parties agreed . . . .”]; cf. Croskey et al., Cal. Practice Guide: 

Insurance Litigation (The Rutter Group 2018) ¶ 7:176, p. 7A-93

[“[t]he ‘continuous injury’ trigger has been applied mostly in 

cases involving gradual release of pollutants and other 

environmental harms”].) After Montrose, defendant revised its 

policies to use the language that is in the policies issued to 

Camarillo, for the very purpose of “obviat[ing] the application of 

the ‘progressive damage-continuous trigger’ articulated 

in Montrose.” (Pennsylvania General, supra, 185 Cal.App.4th at 

p. 1534.) Thus, defendant’s policies state, as described ante, that 

property damage “which commenced prior to the effective date of 

this insurance will be deemed to have happened in its entirety

prior to, and not during, the term of this insurance.” 
28

But we need not decide that point, because coverage is 

established under the sixth policy.

Despite the evidence that physical injury to the Moghadam 

residence occurred in 2009 (and the lack of any evidence that 

there was earlier physical injury to the home), defendant, relying 

on Pennsylvania General, asks us to conclude plaintiff did not 

present evidence “of when property damage first occurred at the 

Property.” As just demonstrated, we cannot so conclude, and 

Pennsylvania General does not suggest otherwise.

Pennsylvania General involved defendant’s policies, 

containing language identical to the policies defendant issued to 

Camarillo. But the issue in Pennsylvania General was different. 

There, defendant contended the language in its policies defining 

“occurrence” – requiring the occurrence to “happen[] during the 

term of this insurance” (see ante, at p. 24) – “excludes coverage 

where the causal conduct takes place before the inception of the 

policy regardless of when the resulting damage first occurs.” 

(Pennsylvania General, supra, 185 Cal.App.4th at p. 1528.) The 

court rejected that contention (ibid.), concluding “the trigger of 

coverage was not when the insured completed its work, but was 

instead based on when the damages caused by the negligent 

causal acts of the insured first commenced.” (Id. at p. 1532.) 

We have no disagreement with Pennsylvania General’s 

conclusion, but it does not relieve defendant of liability on the 

sixth policy. The evidence showed physical injury to the property 

in 2009 (and not before). In its reply brief, defendant tells us, in 

effect, that it does not matter that the property damage 

“manifested” in 2009, because “it is the ‘occurrence’ of property 

damage during the policy period that triggers liability coverage 

under the policy,” not the “manifestation of loss.” That is simply 
29

a circular repetition of the same flawed argument, based on inapt 

authority.16

In Pennsylvania General, the court described the issue as 

“whether the ‘occurrence,’ which must happen during the policy 

year to trigger coverage under [defendant’s] policy, is the first 

manifestation of damage rather than [the insured’s] causal 

conduct.” (Pennsylvania General, supra, 185 Cal.App.4th at

p. 1530, italics added.) As discussed above, the court held a 

reasonable interpretation of defendant’s policy was that the 

trigger of coverage was damage to property, not the causal 

conduct. (Id. at p. 1534.) The court further noted the facts were 

disputed “on when the damages sought in the construction defect 

 

16 Defendant cites Pepperell v. Scottsdale Ins. Co. (1998) 

62 Cal.App.4th 1045, 1050-1053 for the proposition that 

(according to defendant and without further analysis), “under 

California law, manifestation of loss is not the applicable trigger 

of coverage for construction defect claims.” Pepperell does not 

state that proposition. In Pepperell, the complaint alleged that 

“latent and hidden” construction defects were not discovered until 

they began to manifest themselves in 1991, and the insured’s 

policy was in effect during construction of the home from 1988 to 

1989. (Id. at p. 1048-1049.) The court held that, in light of the 

terms of the policy in that case, the allegations of the complaint 

regarding construction defects, and the continuing or progressive 

damages caused by those defects, “the ‘continuous injury’ trigger 

of coverage must be applied as a matter of law,” rather than the 

“ ‘manifestation of loss’ ” trigger. (Id. at pp. 1050-1051.) Notably, 

the insurance policy in Pepperell was “identical in every material 

respect to the policy” in Montrose (Pepperell, at p. 1051) – which, 

as defendant has been at pains to tell us, is not the case with its 

policies, which were amended in order to circumvent the 

Montrose principle. 
30

litigation first commenced” (ibid.), specifically, “over whether 

damages attributable to [the insured’s] work first manifested 

themselves prior to the inception of [defendant’s] policy.” (Id. at 

p. 1519, fn. 2, italics added.)

Thus, Pennsylvania General itself puts the lie to 

defendant’s assertion that, despite the first appearance of actual 

property damage in 2009, plaintiff must prove something more. 

There is no legal support for that proposition. Defendant’s policy 

“deem[s]” property damage that commenced before the policy’s 

effective date (August 1, 2008) to have happened in its entirety 

before that date. The only reasonable construction of this clause 

is that it applies to circumstances where damage actually 

appeared before the effective date of the policy, in which case the 

damage “is deemed to have happened in its entirety” before that 

date. But once plaintiff showed property damage that first 

appeared in 2009, it was up to defendant to prove that property 

damage actually occurred before that date, and of course 

defendant did not and could not do so. 

And so we return to first principles. In sum:

The parties agree, both of them citing and quoting

Whittaker Corp. v. Allianz Underwriters, Inc. (1992) 

11 Cal.App.4th 1236, that “[f]or the purpose of determining 

whether there was coverage within the policy period, it is well 

established that the time of the relevant ‘occurrence’ or ‘accident’ 

is not when the wrongful act was committed but when the 

complaining party was actually damaged.” (Id. at p. 1241.) The 

Moghadam property was “actually damaged” when there was 

“physical injury” to their home in 2009. And it is a “settled rule” 

that “an insurer on the risk when continuous or progressively

deteriorating damage or injury first manifests itself remains 
31

obligated to indemnify the insured for the entirety of the ensuing 

damage or injury.” (Montrose, supra, 10 Cal.4th at p. 686; see 

Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, 

¶ 7:171, p. 7A-92 [“[i]f the . . . property damage was not known to 

the insured before the policy period, a [comprehensive general 

liability] policy covers any such . . . damage that occurs during 

the policy period, together with ‘any continuation, change or 

resumption’ of that damage after the end of the policy period”].) 

Defendant’s sixth policy by its terms covered the physical 

injury to the home in 2009, as well as any ensuing damage.

ii. The self-insured retention (SIR) claim

Defendant’s second basis for asserting no coverage under 

its policies is that plaintiff offered no evidence the applicable selfinsured retention (SIR) or deductible was satisfied under any of 

the policies. (The SIR’s ranged from $15,000 to $50,000 per 

occurrence for various coverages, and the deductible in the sixth 

policy was $10,000 per occurrence.) Defendant says that 

satisfaction of the SIR’s (in the first five policies) and the 

deductible (in the sixth policy) was a condition precedent to its 

coverage obligation, and plaintiff offered no proof the applicable 

SIR or deductible was satisfied under any of the policies. 

Notably, defendant refers us to the record containing its 

SIR and deductible endorsements, but does not quote the 

language of those provisions in its brief. The “condition 

precedent” language on which defendant relies is this: 

“As a condition precedent to our obligations to provide . . .

indemnity, coverage or defense hereunder, the insured, 

upon receipt of notice of any ‘suit’, incident or ‘occurrence’

that may give rise to a ‘suit’, and at our request, shall pay 

over and deposit with us all or any part of the deductible 
32

amount as specified in the policy, requested by us, to be 

applied by us as payment toward any damages or 

supplementary payments . . . incurred in the handling or 

settlement of any such incident, ‘occurrence’ or ‘suit’.” 

(Italics added and capitalization omitted.)

(The “condition precedent” language of the SIR’s is substantively 

identical. We quote the deductible provision because it is the 

sixth policy that we have held otherwise provides coverage, as 

discussed in part 2.c.i., ante.) 

We need not engage in a lengthy discussion of the law 

governing SIR’s and deductibles. As defendant points out, the 

authorities tell us that a deductible “generally is ‘a specific sum 

that the insured must pay before the insurer owes its duty to 

indemnify the insured for a covered loss.’ ” (Forecast Homes, Inc. 

v. Steadfast Ins. Co. (2010) 181 Cal.App.4th 1466, 1474 (Forecast 

Homes); see also Croskey et al., Cal. Practice Guide: Insurance 

Litigation, supra, ¶ 7:379, p. 7A-155.) The term SIR “ ‘refers to a 

specific sum or percentage of loss that is the insured’s initial 

responsibility and must be satisfied before there is any coverage 

under the policy.’ ” (Forecast Homes, at p. 1474; see also Croskey 

et al., supra, ¶ 7:384, p. 7A-160.) “Unlike a deductible, which 

generally relates only to damages, an SIR also applies to defense 

costs and settlement of any claim.” (Forecast Homes, at p. 1474.) 

There is a rather important caveat, however. “[C]ourts 

interpreting SIR’s are all careful to note an SIR, like any 

insurance provision, must be enforced according to its plain 

terms.” (Forecast Homes, supra, 181 Cal.App.4th at p. 1475.) We 

have just quoted those terms, and they twice specify that 

payment of the deductible or the SIR is required “at our request” 

and the insured “shall pay over and deposit with us all or any 
33

part of the deductible amount [or SIR amount] as specified in the 

policy, requested by us, to be applied by us as payment toward 

any damages . . . .” 

In its summary judgment papers, defendant presented no 

evidence that it ever requested Camarillo to “pay over and 

deposit with us all or any part of the deductible.” Under the 

plain terms of the endorsements, defendant’s request for payment 

is a part of the “condition precedent” to its indemnity obligation.

Because there is no evidence defendant made a request for 

payment of the deductible, there is necessarily no merit to 

defendant’s claim it has no indemnity obligation. The same is 

true of the SIR’s.

In its reply brief, defendant cites Evanston Ins. Co. v. 

American Safety Indemnity Co. (N.D.Cal. 2011) 768 F.Supp.2d 

1004 (Evanston), telling us the Evanston court “analyz[ed] the 

same language in [defendant’s] policies” and “rejected the 

argument that [defendant] must demand payment of the SIR to 

render the SIR endorsement enforceable.” If the court had done 

so, we would disagree, but that is not what the Evanston court 

said or did. 

In Evanston, the insured tendered its defense to defendant, 

and defendant did request payment of the SIR. (Evanston, 

supra, 768 F.Supp.2d at p. 1008.) The insured did not pay the 

SIR until about 15 months after its tender of defense, and the 

issue was when defendant’s duty to defend attached – at the time 

of tender of defense or upon payment of the SIR. The court held 

the policy “clearly conditioned Defendant’s defense duty on [the 

insured’s] payment of the SIR,” and “[n]o duty to defend attached 

until that payment was received.” (Id. at p. 1013.) 
34

In short, Evanston does not involve the insurer’s failure to 

demand payment of the SIR; quite the opposite. Nothing in 

Evanston in any way contradicts our construction of defendant’s 

deductible and SIR endorsements.

iii. The wrap-up exclusion claim

Defendant contends coverage is also excluded under a 

“wrap-up” exclusion in its policies, which states the insurance 

does not apply to “any work insured under a consolidated (Wrap 

Up) Insurance Program.”17 Defendant argues that plaintiff’s 

excess policy follows form to the underlying policy Everest 

Indemnity issued to NMH (see fn. 1, ante), and the 

supplementary declarations in the Everest policy identifying 

“other named insureds” lists “[a]ll contractors and subcontractors 

enrolled in the Owner Controlled Insurance Program (OCIP).”

From this, we are to conclude defendant’s policies do not cover 

Camarillo’s work.

We will not address this contention. It was not raised in 

defendant’s opposition to plaintiff’s summary judgment motion or 

in defendant’s own summary judgment motion. It is a classic 

 

17 The wrap-up exclusion states: “This insurance does not 

apply to any work insured under a consolidated (Wrap Up) 

Insurance Program and this insurance shall have no obligation to 

defend or indemnify for any claim or any project where such 

wrap-up insurance exists or has ever existed. This exclusion 

applies whether or not a claim is covered under such wrap-up 

insurance, the limits of such wrap-up insurance are exhausted, 

the carrier is unable or unwilling to pay or for any other reason. 

A consolidated (Wrap Up) insurance program as referred to 

herein includes any owner controlled insurance policy (OCIP) or 

similar insurance policy or program which insures most or all 

contractors and subcontractors involved in a project.” 
35

example of a claim that was not “factually presented, fully 

developed and argued to the trial court,” and that we will not 

consider for the first time on appeal. (Peart v. Ferro (2004) 

119 Cal.App.4th 60, 70 [“ ‘unless they were factually presented, 

fully developed and argued to the trial court, potential theories 

which could theoretically create “triable issues of material fact” 

may not be raised or considered on appeal’ ”].)

Defendant protests that it briefed the issue in its motion for 

a new trial, and that in any event it is “strictly a question of law” 

that we may decide even if not raised in the trial court. First, 

defendant cites no authority for the claim that raising a new 

theory in a new trial motion preserves it for appeal. New 

theories that could have been raised, but were not, is not one of 

the causes that permits a new trial. (See Code Civ. Proc., § 657.) 

Second, while an appellate court may decide pure questions of 

law not raised below, defendant cites no authority requiring an 

appellate court to do so or explaining why we should depart from 

established appellate principles to do so here. And third, plaintiff 

suggests there are questions of fact relevant to defendant’s new 

contention, from which we infer defendant has not presented a 

pure question of law. Accordingly, we find this a particularly 

appropriate case for declining to review defendant’s new theory 

for excluding coverage under its policy. 

d. The “per occurrence limits” claim

Next, defendant contends the award of $1,532,973.87 is 

excessive because “it exceeds the $1,000,000 per occurrence limits 

of each of [defendant’s] Policies.” (Under defendant’s sixth policy, 

the limits of insurance include an “Each Occurrence Limit” of 

$1 million and a “Products-Completed Operations Aggregate 
36

Limit” of $2 million.)18 Defendant says plaintiff offered no 

evidence or argument that the Moghadam claim involved more 

than one occurrence; the Moghadam claim “was a discrete, soil 

related construction defect claim involving one residence”; and so 

there is no basis to conclude the Moghadam claim involved 

multiple occurrences. 

Defendant’s opposition to plaintiff’s summary judgment 

motion did not raise policy limits as a defense to plaintiff’s claim 

for indemnification in the entire amount of the default judgment. 

Defendant did not raise its policy limits/single occurrence

argument until after the trial court’s dispositive ruling on the 

summary judgment motions. There is some irony in defendant’s 

complaint that, “[i]ndeed, the trial court’s ruling does not make 

any finding with respect to the number of occurrence(s) in the 

Moghadam Claim.” The court did not do so, because no one

raised the issue before the court ruled on the summary judgment 

motions.

Defendant again cites no authority for its assertion that 

raising a new theory in its objections to the proposed judgment, 

or in its new trial motion, preserves it for appeal. In short, for 

the same reasons we have discussed in connection with 

defendant’s wrap-up exclusion claim, we decline to review this 

new theory for reversal of the summary judgment.

e. NMH’s attorney fees and costs

Defendant contends that plaintiff cannot recover the 

portion of the default judgment – $356,340.65 – that represents 

 

18 The other policies also have limits of $1 million each 

occurrence. The first four policies have a $1 million (and the fifth 

a $2 million) products-completed operations aggregate limit. 
37

NMH’s attorney fees and costs. Defendant offers two bases for 

this assertion.

Defendant first says that under its policies, attorney fees 

and costs are not “property damage,” despite legal authority to 

the contrary. (Golden Eagle Ins. Co. v. Insurance Co. of the West 

(2002) 99 Cal.App.4th 837, 842 [“the indemnitee’s defense costs 

are sums the insured is legally obligated to pay as damages

because of property damage”].) Defendant makes an elaborate 

argument to the effect that its policy definition of “insured 

contract” is different from the standard definition in the policies 

in Golden Eagle, with the result (it claims) that NMH’s defense 

fees in the Moghadam claim are not covered. Then, defendant 

says the $356,340.65 in attorney fees and costs – as well as “prejudgment interest on the entirety of the default judgment” –

cannot be recovered in a direct action under section 11580. This 

is because attorney fees and prejudgment interest are “costs” 

under the “supplementary payments” provision of defendant’s 

policy, and, defendant claims, a judgment creditor’s right to 

recover does not extend to amounts payable under a policy’s 

supplementary payments provision. 

Both of defendant’s contentions suffer from the same defect

as defendant’s claims about the wrap-up exclusion and policy 

limits: They were not made during the summary judgment 

proceedings. Defendant raised these assertions only after the 

trial court’s summary judgment ruling. Moreover, defendant’s 

claim that prejudgment interest cannot be assessed on the 

amount of the default judgment misapprehends the law. NMH 

obtained the default judgment on August 7, 2013, and the 

judgment in this case assesses prejudgment interest calculated 

from August 7, 2013. Plaintiff is entitled to prejudgment interest 
38

under Civil Code section 3287, not because of any provision in 

defendant’s policy. 

DISPOSITION

The judgment is affirmed. Plaintiff is to recover its costs on 

appeal.

GRIMES, J.

WE CONCUR:

BIGELOW, P. J. 

WILEY, J.