Filed 4/15/15 Diamond Blue Enterprises v. Continental Ins. CA2/8 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

SECOND APPELLATE DISTRICT 

DIVISION EIGHT 

DIAMOND BLUE ENTERPRISES, LLC 

et al., 

 Plaintiffs and Appellants, 

 v. 

CONTINENTAL INSURANCE 

COMPANY et al., 

 Defendants and Respondents. 

 B254256 

 (Los Angeles County 

 Super. Ct. No. BC488022) 

 APPEAL from judgments of the Superior Court of Los Angeles County, Richard 

Fruin, Judge. Affirmed. 

 Franceschi Law Corporation and Ernest J. Franceschi, Jr., for Plaintiffs and 

Appellants. 

 Elenius Frost & Walsh and Brian W. Walsh for Defendant and Respondent 

Continental Insurance Company. 

 Charlston, Revich & Wollitz, Howard Wollitz and Goli Akhavan for Defendant 

and Respondent Gemini Insurance Company. 

* * * * * * 
2 

 We affirm the entry of summary judgments in favor of Continental Insurance 

Company (Continental) and Gemini Insurance Company (Gemini). Appellants Diamond 

Blue Enterprises, LLC (Diamond) and Tyrone and Don Byrd demonstrate no triable issue 

of material fact. 

FACTS AND PROCEDURE 

 According to the first amended complaint, appellant (Diamond) is a limited 

liability company. Also according to the first amended complaint, appellant Tyrone Byrd 

was a member of Diamond and appellant Don Byrd was Diamond’s managing member. 

Tyrone Byrd represented to Gemini and represented in a declaration in the trial court that 

he was the sole member and president of Diamond. Diamond’s business included 

repairing and storing boats. 

 In April 2007, Robert and Linda Whitmarsh purchased a boat, which they financed 

through Bank of America. They later conveyed their interest in the boat to their family 

trust. After the Whitmarshes defaulted on their loan with Bank of America, the 

Whitmarshes gave possession of the boat to Diamond for repairs. Eventually, Diamond 

held a lien sale and took title to the boat. 

 In October 2007, Gemini issued a general liability policy to Diamond. According 

to Tyrone Byrd, Diamond paid the premium for the policy but did not receive a copy of 

the policy from its insurance broker. In October 2009, Continental issued a yacht policy 

to Diamond, expressly identifying Diamond as the insured. 

 On July 24, 2009, Bank of America sued the Whitmarshes and their family trust 

for breach of written agreement, claim and delivery, conversion, and goods sold and 

delivered. The lawsuit named Tyrone Byrd doing business as Best Storage as defendant 

in the causes of action for claim and delivery and conversion. The lawsuit alleged the 

Whitmarshes failed to pay the principal of $135,040 and failed to pay interest according 

to a security agreement with the bank regarding the boat. The complaint alleged that the 

boat was in the possession of Tyrone Byrd. In the claim and delivery cause of action, the 

bank alleged that Tyrone Byrd refused to return the boat and wrongfully retained it. In 
3 

the conversion cause of action, the bank alleged that Tyrone wrongfully and unlawfully 

converted the property. 

 In August 2010, the Whitmarshes cross-complained in the Bank of America 

lawsuit alleging causes of action against Diamond, and Tyrone and Don Byrd. Among 

other allegations, the cross-complaint alleged that the radar on the boat was damaged 

when Tyrone Byrd moved the boat. The bulk of the remaining allegations described 

Tyrone Byrd’s alleged concealment of the boat, and the alleged improper lien sale. In 

November 2010, Tyrone Byrd tendered the cross-complaint to Gemini through 

Diamond’s insurance broker Brilliant Insurance Services. 

 After receiving information that Tyrone Byrd damaged the boat, Gemini agreed to 

defend the cross-complaint under a reservation of rights. Gemini did not pay defense 

costs incurred in defending the cross-complaint prior to the tender. 

 In February 2011, Tyrone Byrd tendered the Bank of America complaint to 

Gemini. Gemini refused to defend against the complaint. 

 During the pendency of the litigation, Bank of America repossessed the boat. 

Diamond demanded compensation from Continental for loss incurred when Bank of 

America repossessed the boat. On October 18, 2010, Continental demanded Diamond 

undergo an examination under oath. Diamond refused to undergo an examination under 

oath. Its attorney or Don Byrd indicated they would “answer any questions in writing 

that are relevant and necessary to process this claim.” 

 On November 8, 2010, November 22, 2010, December 20, 2010, January 14, 

2011, March 7, 2011, April 14, 2011, April 26, 2011, May 9, 2011, and July 12, 2011, 

Continental again requested Diamond submit to an examination under oath. Don Byrd 

responded that he was not a principal, officer, or shareholder of Diamond but would 

answer questions in writing. 

 Continental eventually denied Diamond’s claim because Diamond refused to 

submit to an examination under oath. 

 Diamond and Tyrone and Don Byrd sued Gemini and Continental, alleging causes 

of action for breach of contract and breach of the implied covenant of good faith and fair 
4 

dealing.1 Following motions for summary judgment, the trial court awarded judgment in 

favor of both insurers. 

DISCUSSION 

 “‘“[S]ummary judgment is properly granted when there is no triable issue of 

material fact and the moving party is entitled to judgment as a matter of law. ”’ 

[Citation.] A moving defendant can meet its initial burden by presenting evidence 

showing plaintiffs’ causes of action have no merit or are precluded by an affirmative 

defense. [Citations.] If the defendant makes its initial showing, the burden shifts to 

plaintiffs to show a triable issue of material fact exists. [Citations.] We review the trial 

court’s ruling de novo [citation], construing ‘the evidence in the light [most] favorable to 

the opposition to the motion, and liberally constru[ing] the opposition’s evidence, while 

strictly scrutinizing the successful party’s evidence and resolving any evidentiary 

ambiguities in the opposition’s favor’ [citation]. We will affirm a summary judgment if 

it is correct on any ground, as we review the judgment, not its rationale.” 

(Overstock.Com, Inc. v. Goldman Sachs & Co. (2014) 231 Cal.App.4th 513, 528, fn. 10.) 

 Code of Civil Procedure section 437c, subdivision (c) states: “The motion for 

summary judgment shall be granted if 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. In determining whether the papers show that there is no triable issue as 

to any material fact the court shall consider all of the evidence set forth in the papers, 

except that to which objections have been made and sustained by the court, and all 

inferences reasonably deducible from the evidence, except summary judgment may not 

be granted by the court based on inferences reasonably deducible from the evidence, if 

contradicted by other inferences or evidence, which raise a triable issue as to any material 

fact.” 

 

1 The complaint also alleged causes of action for legal malpractice and breach of 

fiduciary duty against persons who are not parties on appeal. 
5 

1. Continental Insurance 

 In granting Continental’s motion for summary judgment, the trial court concluded 

that because Diamond failed to submit to an examination under oath it forfeited any 

benefits under the policy. On appeal, Diamond argues (1) there was no requirement the 

examination under oath be conducted orally and (2) neither Tyrone nor Don Byrd are 

insured persons for purposes of an examination under oath. Appellants’ arguments are 

not persuasive. 

 A. Continental Policy 

 The policy issued by Continental provided in pertinent part: “Following a loss 

you must: [¶] . . . [¶] . . . [c]ooperate with us in the investigation, defense, or settlement 

of any loss, and agree to be examined under oath if we so request.” 

 Under the policy, “insured” is defined as “any insured named on the Declarations 

Page, the spouse of any insured named on the Declarations Page, a family member of any 

insured named on the Declarations Page, an officer, director, partner or shareholder of 

any insured named on the Declarations Page, the spouse of any officer, director, partner 

or shareholder of any insured named on the Declarations Page, or any other person or 

organization using the insured boat with your permission and without compensation. If 

the Named Insured(s) on the Declarations Page is not an individual or individuals, then 

‘you’, ‘your’, ‘insured’, and ‘insured person’ is defined as the legal entity named on the 

Declarations Page . . . .” 

 B. Diamond Failed to Submit to the Required Examination Under Oath 

 “‘The right to require the insured to submit to an examination under oath 

concerning all proper subjects of inquiry is reasonable as a matter of law.’” (California 

Fair Plan Assn. v. Superior Court (2004) 115 Cal.App.4th 158, 162.) Diamond’s 

argument that its attorney and Don Byrd’s willingness to answer questions in writing was 

sufficient to satisfy the examination under oath requirement lacks merit. 

 Appellants’ proposal to answer questions in writing is not the same as answering 

questions in an examination under oath, which is akin to cross-examination. “The 

purpose of the examination under oath is to enable the insurer to obtain the information 
6 

necessary to process the claim: “‘“As the facts with respect to the amount and 

circumstances of a loss are almost entirely within the sole knowledge of the insured, . . . 

it is necessary that it [the insurer] have some means of cross-examining, as it were, upon 

the written statement and proofs of the insured, for the purpose of getting at the exact 

facts before paying the sum claimed of it. Such considerations justify the provision . . . 

requiring the insured as often as demanded to submit to an examination under oath 

touching all matters material to the adjustment of the loss, and provisions of that 

character are held to be reasonable and valid.”’ [Citation.] An insured’s failure to 

comply with the policy requirement for examination under oath deprives the insurer of a 

means for obtaining information necessary to process the claim.” (Brizuela v. CalFarm 

Ins. Co. (2004) 116 Cal.App.4th 578, 591-592.) 

 Here Continental was deprived of the opportunity of cross-examining the insured’s 

statements. Appellants’ argument that they agreed to answer written questions is 

irrelevant because under the terms of the policy they were required to submit to an 

examination under oath—not simply respond to written questions.2

 C. Diamond Was the Insured and Was Required Through Its Members to Submit 

to an Examination Under Oath 

 Appellants’ argument that neither Tyrone nor Don Byrd were required to submit to 

an examination under oath also lacks merit. Diamond was the insured as it was identified 

as the insured on the declaration page. As a limited liability company Diamond could 

“speak” only through its members. “‘“A limited liability company is a hybrid business 

entity formed under the Corporations Code and consisting of at least two ‘members’ 

[citation] who own membership interests [citation]. The company has a legal existence 

separate from its members. Its form provides members with limited liability to the same 

extent enjoyed by corporate shareholders [citation], but permits the members to actively 

participate in the management and control of the company [citation].”’” (Denevi v. 

LGCC (2004) 121 Cal.App.4th 1211, 1214, fn. 1.) Because Diamond could “speak” only 

 

2 Appellants only volunteered to answer questions in writing but not under oath. 
7 

through its members—who managed the company—at least one of its members had to 

submit to the examination. 

 According to the first amended complaint, Tyrone Byrd was a member of 

Diamond and Don Byrd was its managing member. As the trial court found, their refusal 

to submit to an examination under oath caused Diamond to forfeit any benefits of the 

insurance policy. (California Fair Plan Assn. v. Superior Court, supra, 115 Cal.App.4th 

at pt. 166.) Appellants cite no authority supporting their claim that neither Tyrone nor 

Don Byrd was required to submit to an examination under oath because the insured was a 

company not a corporation. 

2. Gemini 

 Appellants challenge the entry of summary judgment in favor of Gemini, arguing 

that Tyrone Byrd’s declaration raised a triable issue of material fact as to the 

voluntariness of their pre-tender payments. Appellants also argue that the definition or 

property damage was ambiguous requiring Gemini to defend against the Bank of 

America complaint. We first describe the relevant policy provisions and then consider 

appellants’ arguments. 

 A. Gemini Insurance Policy 

 Gemini issued Diamond a commercial general liability policy for the period 

October 10, 2007, through October 10, 2008. The policy provides: “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.” The policy defined 

property damage as: “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 [¶] . . . 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.” The term “occurrence” was defined as: “an accident, 

including continuous or repeated exposure to substantially the same general harmful 

conditions.” 
8 

 The insurance policy provides: “[n]o insured will, except at the insured’s own 

cost, voluntarily make a payment, assume any obligation, or incur any expense without 

our prior written consent.” 

 B. Gemini Was Not Required to Pay Pre-tender Costs on the Whitmarshes’ Crosscomplaint 

 Appellants concede that they defended against the Bank of America lawsuit for 

over a year prior to submitting a claim with Gemini. With respect to the cross-complaint, 

they claim to have incurred over $383,805 in defense costs prior to tendering the claim to 

Gemini. Appellants argue the payments were made “involuntarily” because Tyrone Byrd 

was not aware of the Gemini policy until he asked his wife to ask his insurance broker for 

a copy of it. He asked his wife after a deposition in the underlying Bank of America 

litigation because the attorney questioning him inquired about insurance. Tyrone Byrd 

learned that he did not receive a copy of the policy because he did not pay the service 

charge for it. 

 The question of voluntariness may be decided as a question of law on undisputed 

facts. (Tradewinds Escrow, Inc. v. Truck Ins. Exchange (2002) 97 Cal.App.4th 704, 

710.) Payments may be “involuntary,” removing them from the prohibition against a 

voluntary payment if the payments are out of the insured’s control. (Jamestown Builders, 

Inc. v. General Star Indemnity Co. (1999) 77 Cal.App.4th 341, 348 (Jamestown).) 

Payments may be out of the insured’s control when the insured is unaware of the identity 

of the insurer or the contents of a policy. (Ibid.) For example, an appellate court held it 

was error to sustain a demurrer where an insured waited four or five months before 

tendering a defense while they searched for insurance policies. (Fiorito v. Superior 

Court (1990) 226 Cal.App.3d 433, 436 (Fiorito).) The insured engaged counsel to file 

and answer and cross-complaint within statutory time periods. (Id. at p. 436.) Fiorito

“turned largely on the possibility that the defense of the underlying action had to begin 

‘before the insured had time to identify the insurer and then tender the defense.’” (Faust 

v. The Travelers (9th Cir. 1995) 55 F.3d 471, 473.) In Shell Oil Co. v. National Union 
9 

Fire Ins. Co. (1996) 44 Cal.App.4th 1633, 1648-1649, the court followed Fiorito and 

found pre-tender payments involuntary. 

 Here, citing Jamestown and Fiorito, appellants argue its payments were 

involuntary because it did not know the identity of the insurer. But, in contrast to Fiorito 

a case decided on demurrer, for purposes of summary judgment Diamond was required to 

present evidence that it had to incur costs before it could timely identify its insurer. 

Tyrone’s testimony that he did not ask his wife to investigate the possibility of insurance 

until deposed about insurance does not excuse his obligation under the policy because it 

fails to show he timely investigated insurance and incurred costs before he could identify 

the insurer. There was no evidence that the costs incurred were necessary to protect 

Diamond’s legal interest or respond to legal process. There was no evidence the delay 

was out of appellants’ control because appellants could have investigated insurance as 

soon as the complaint was served upon them. In short, the evidence that Tyrone testified 

that he did not search for a policy until questioned in a deposition in the Bank of America 

litigation is insufficient to raise a triable issue of material fact to support an inference that 

the payments were out of Diamond’s control. (Jamestown, supra, 77 Cal.App.4th at p. 

348; cf. Insua v. Scottsdale Ins. Co. (2002) 104 Cal.App.4th 737, 747.) 

 When “the insured has failed to demand a defense and relinquish control over the 

case, it cannot expect the quid pro quo of pre-tender voluntary payments, expenses, or 

other obligations incurred by the insured pre-tender without the insurer’s consent.” 

(Tradewinds Escrow, Inc. v. Truck Ins. Exchange, supra, 97 Cal.App.4th at p. 710.) The 

trial court properly concluded as a matter of law Gemini was not required to pay pretender defense costs on the cross-complaint in the Bank of America litigation. 

 C. Costs of Defense in Bank of America Complaint 

 Finally, we turn to whether appellants raised a triable issue of material fact to 

support the inference that Gemini was required to provide a defense against the Bank of 

America complaint. “An insurer owes a broad duty to defend against claims that create a 

potential for indemnity under the insurance policy. [Citation.] An insurer must defend 

against a suit even ‘“where the evidence suggests, but does not conclusively establish, 
10 

that the loss is not covered.”’” (Hartford Casualty Ins. Co. v. Swift Distribution, Inc.

(2014) 59 Cal.4th 277, 287.) “‘Determination of the duty to defend depends, in the first 

instance, on a comparison between the allegations of the complaint and the terms of the 

policy. [Citation.] But the duty also exists where extrinsic facts known to the insurer 

suggest that the claim may be covered.’ [Citation.] This includes all facts, both disputed 

and undisputed, that the insurer knows or ‘“becomes aware of”’ from any source 

[citation] ‘if not “at the inception of the third party lawsuit,” then “at the time of tender.”’ 

[Citation.] ‘Moreover, that the precise causes of action pled by the third party complaint 

may fall outside policy coverage does not excuse the duty to defend where, under the 

facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be 

amended to state a covered liability.’ [Citation.] Thus, ‘[i]f any facts stated or fairly 

inferable in the complaint, or otherwise known or discovered by the insurer, suggest a 

claim potentially covered by the policy, the insurer’s duty to defend arises and is not 

extinguished until the insurer negates all facts suggesting potential coverage.’ [Citation.] 

In general, doubt as to whether an insurer owes a duty to defend ‘must be resolved in 

favor of the insured.’” (Ibid.) 

 The trial court found that there was no potential for coverage in the Bank of 

America complaint under the language of the Gemini policy. We agree. Appellants 

identify no construction of the policy that potentially could have brought Bank of 

America’s claims within the coverage provision of the policy. 

 Appellants argue that the claim was covered “because it [(Bank of America)] 

sought ‘loss of use damages.’” (Boldface and capitalization omitted.) Appellants’ 

argument is foreclosed by well established case law. In Advanced Network, Inc. v. 

Peerless Ins. Co. (2010) 190 Cal.App.4th 1054, the court held that “‘loss of use’ and 

‘loss’ are not interchangeable for insurance purposes.” (Id. at p. 1063.) “Coverage for 

‘loss of use’ does not apply to an underlying action in which the claimant seeks only the 

replacement value of converted property.” (Id. at p. 1064.) The court explained: “the 

measure of damages of a stolen car cannot be its rental value ad infinitum on the ground 

there was a permanent ‘loss of use’ of the property. Interpreting the term ‘loss of use’ to 
11 

include a permanent loss would lead to absurd results.” (Ibid.) Similarly, in Collin v. 

American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 812, 817, the court held that a 

conversion cannot occur accidentally and does not constitute “property damage.” The 

court emphasized that “‘[l]oss of use’ of property is different from ‘loss’ of property.” 

(Id. at p. 818.) These cases illustrate that because Bank of America sought damages for 

conversion and wrongful possession it did not seek “loss of use” damages. 

 To avoid this result appellants attempt to characterize the Bank of America 

complaint as seeking recovery for the temporary detention of the boat. Undermining this 

argument is the undisputed fact that the Bank of America lawsuit concerned appellants’ 

unlawful conversion of the boat.3 No fact in appellants’ “responding separate statement” 

supported the inference that Bank of America was seeking a loss for a temporary 

detention. Moreover, appellants identify no language in the Bank of America complaint 

which supported that assertion. Bank of America alleged that appellants unlawfully 

converted the boat and refused to return it to Bank of America. Appellants’ argument 

that the lawsuit was for temporary detention is not supported by any evidence and 

therefore fails to raise a triable issue of material fact to defeat summary judgment. 

 Next appellants appear to argue that, because the Gemini policy ambiguously 

defines property damage, the allegations in the Bank of America complaint were 

potentially covered. As claimed support appellants quote extensively from purported 

deposition testimony, but they cite only to their papers in the trial court. The 

interpretation of an insurance policy is a question of law (Hartford Casualty Ins. Co. v. 

 

3 The following facts were undisputed: (1) “In the claim and delivery cause of 

action, Bank of America alleged the boat was in the possession of Tyrone Byrd, that 

Bank of America was ‘entitled to immediate possession of the property,’ that defendants 

failed and refused to return the property which is ‘wrongfully retained’ by defendants, 

and by virtue of defendants’ ‘wrongful possession’ Bank of America demanded 

‘immediate possession.’” (2) “In the conversion cause of action, Bank of America 

alleged it was the owner of the collateral under the Agreement, and that defendants 

‘wrongfully and unlawfully converted said property to their own use by refusing to pay or 

deliver said property.’” 
12 

Swift Distribution, Inc., supra, 59 Cal.4th at p. 288), and as explained the cases uniformly 

reject appellant’s theory that a conversion may constitute a “loss of use.” Even assuming 

appellants could show a deponent disagreed with the uniform case law, we would follow 

the law not the deponent’s interpretation. Moreover, appellants fail to show that any fact 

in their separate statement support their theory that the language of the policy is 

ambiguous.4

 Appellants further argue that Gemini’s willingness to settle the cross-complaint 

indicated that they should also have defended against the complaint. But the allegations 

in the complaint and cross-complaint were not the same. Most importantly the 

undisputed facts indicate that Gemini agreed to defend the cross-complaint after 

receiving information that Tyrone Byrd was responsible for the damage to the boat. 

“Based on the new factual information presented by Tyrone Byrd, Gemini reconsidered 

its disclaimer of the Whitmarsh cross-complaint. With a letter dated January 7, 2011, 

Gemini agreed to defend . . . against the Whitmarsh cross-complaint under a reservation 

of rights.” There was no similar allegation of damage to the boat in the complaint, 

explaining why Gemini agreed to defend one and not the other. 

 

4 The trial court also concluded that the allegations in the Bank of America 

complaint did not constitute an “occurrence.” “Occurrence” was defined as “an accident, 

including continuous or repeated exposure to substantially the same general harmful 

conditions.” Appellants offer no theory as to how the allegations in the complaint or 

extrinsic facts suggest that the lien sale and assuming title to the boat and refusing to give 

possession to Bank of America was accidental. 
13 

DISPOSITION

 The judgments are affirmed. Respondents are entitled to costs on appeal. 

 FLIER, J. 

WE CONCUR: 

 BIGELOW, P. J. 

 GRIMES, J.