Court Opinion

ID: 5289377
Source: CourtListenerOpinion
Date Created: 2022-01-07 23:01:41.069418+00
Date Added: 2024-06-11T08:28:54.492334
License: Public Domain

Filed 1/7/22 Truck Insurance Exchange v. Kaiser Cement CA2/4
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.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 FOUR

 TRUCK INSURANCE EXCHANGE,                                                      B278091
           Plaintiff and Appellant,
                                                                                (Los Angeles County
           v.                                                                    Super. Ct. No.
                                                                                BC249550)
 KAISER CEMENT et al.,
      Defendants, Cross-complainants
 and Appellants;

 LONDON MARKET INSURERS,
      Defendant and Appellant.
 INSURANCE COMPANY OF THE
 STATE OF PENNSYLVANIA,

     Cross-Defendant and Appellant.
 GRANITE STATE INSURANCE
 COMPANY, et al.,

      Defendants and Respondents.

      APPEAL from a judgment of the Superior Court of
California, Kenneth R. Freeman, Judge. Affirmed in part and
reversed in part.
      The Cook Law Firm, Philip E. Cook and Brian J. Wright, for
Defendant and Appellant, Kaiser Cement and Gypsum
Corporation.
      Pia Anderson Moss Hoyt, Scott R. Hoyt, Adam L. Hoyt,
Greines, Martin, Stein & Richland, Robert A. Olson and Jonathan
H. Eisenman, for Plaintiff, Appellant, and Respondent Truck
Insurance Exchange.
      Duane Morris, Brian A. Kelly, Paul J. Killion and Kathryn
T.K. Schultz, for Defendants, Respondents and Appellants London
Market Insurers.
      Lynberg & Watkins and Wendy E. Schultz for Cross-
Defendant, Respondent and Appellant the Insurance Company of
the State of Pennsylvania and Defendant and Respondent Granite
State Insurance Company.
      Squire Patton Boggs, David Godwin and Tania L. Rice for
Cross-Defendant and Respondent Continental Insurance.
Company (for itself and its successor to certain policies issued by
London Guarantee & Accident Company of New York).
      Selman Breitman, Elizabeth M. Brockman and Calvin S.
Whang for Defendants and Respondents National Casualty
Company and Sentry Insurance a Mutual Company, as
assumptive reinsurer of Great Southwest Fire.
      Crowell & Moring, Mark D. Plevin and Christine E.
Cwiertny for Defendants and Respondents Fireman’s Fund
Insurance Company and Allianz Underwriters Insurance
Company f/k/a Allianz Underwriters.
      Kendall Brill & Kelly, Alan Jay Weil; Shipman & Goodwin,
James P. Ruggeri, Katherine M. Hance and Edward B. Parks II for
Defendant and Respondent First State Insurance Company.

                                 2
      Aiwasian & Associates and Deborah A. Aiwasian for
Defendant and Respondent Westchester Fire Insurance Company.
      Davis Wright Tremaine, Everett W. Jack, Jr. Lawrence B.
Burke for Defendant and Respondent Transport Insurance
Company, successor in interest to Transport Indemnity Company.
      Traub Lieberman Straus & Shrewsberry, Kevin P.
McNamara for Defendant and Respondent Evanston Insurance
Company as successor by merger with Associated International
Insurance Company and TIG Insurance Company (formerly known
as Transamerica Insurance Company and as successor by merger
to International Insurance Company).
                       __________________

                       INTRODUCTION

       This is the latest of several opinions issued by this court in
litigation concerning comprehensive general liability (CGL)
insurance coverage for asbestos bodily injury claims (referred to by
the parties as ABIC) against Kaiser Cement and Gypsum
Corporation (Kaiser). The ABIC were brought mostly by laborers
who became ill and/or died from exposure to asbestos-containing
products manufactured by Kaiser over more than 30 years.
       Truck Insurance Exchange (Truck), Kaiser’s primary
insurer, commenced this action in 2001, after making more than
$50 million in indemnity payments to resolve ABIC against Kaiser.
Truck sought declaratory relief that its primary coverage of ABIC
had been exhausted and it had no further duty to defend or
indemnify Kaiser. Truck also sought contribution from certain of
Kaiser’s excess insurers. Kaiser cross-claimed against Truck and
Kaiser’s excess insurers, seeking a declaration of coverage.

                                 3
      A.    Earlier Opinions

      In the first opinion, London Market Insurers v. Superior
Court (2007) 146 Cal.App.4th 648 (LMI), a different panel of this
court resolved what it described as a matter of first impression in
California: the meaning of “occurrence” in CGL policies as it relates
to per occurrence limits of liability and deductibles in the context of
ABIC. (Id. at p. 651.) LMI held that for purposes of per occurrence
limits and deductibles, an “occurrence” under Truck’s CGL policies
is each claimant’s “injurious exposure to [Kaiser’s] asbestos
products,” not (as Truck had contended) Kaiser’s manufacture and
distribution of those products. (Id. at pp. 652, 672.)
      On June 3, 2011, this court issued a second opinion: Kaiser
Cement & Gypsum Corp. v. Insurance Co. of the State of
Pennsylvania (2011) 196 Cal.App.4th 140. After granting review,
the Supreme Court transferred the case back to this court with
directions to vacate the decision and reconsider it in light of State
of California v. Continental Ins. Co. (2012) 55 Cal.4th 186
(Continental Insurance).
      Having done so, this court issued a third opinion, Kaiser
Cement and Gypsum Corp. v. Insurance Co. of the State
Pennsylvania (Apr. 8, 2013) B222310, opn. ordered nonpub. Jul. 17,
2013 (ICSOP)).1 As discussed further below, that opinion decided
issues relating to obligations of the Insurance Company of the
State of Pennsylvania (ICSOP) under an excess insurance policy it
had issued to Kaiser. (Id. at pp. 16–36.)

1    While ICSOP is unpublished, it is citable as law of the case
under California Rules of Court, rule 8.1115(b)(1).

                                  4
      B.    The Present Dispute

      This opinion resolves an appeal and a cross-appeal from a
judgment entered following a three-phase bench trial involving
Kaiser, Truck, and certain of Kaiser’s excess insurers: ICSOP,
London Market Insurers,2 Granite State Insurance Company,
Continental Insurance Company, National Casualty Company,
Sentry Insurance, Fireman’s Fund Insurance Company, Allianz
Underwriters Insurance Company, First State Insurance
Company, Westchester Fire Insurance Company, Transport
Insurance Company, Evanston Insurance Company, and TIG
Insurance Company. The trial commenced in 2014 on Truck’s
Fourth Amended Complaint and Kaiser’s Third Amended Cross-
Complaint. The Honorable Kenneth R. Freeman presided over all
three phases.

            1.    Phase I

      Phase I addressed whether Truck’s claim to recover certain
per occurrence deductibles from Kaiser for ABIC was barred by the
applicable statute of limitations. Truck provided primary insurance
coverage to Kaiser over 19 annual policy periods. Kaiser was and
continues to be subject to ABIC arising from exposure to its
asbestos-containing products during some or all those 19 years.3

2    London Market Insurers refers to Certain Underwriters at
Lloyd’s of London and Certain London Market Insurance
Companies.

3     ABIC are “long-tail” claims alleging “a series of indivisible
injuries attributable to continuing events . . . . [that] produce
progressive damage that takes place slowly over years or even

                                 5
While most CGL policies have per occurrence deductibles, per-
occurrence limits, and aggregate limits of liability, during a nine-
year period from 1971 to 1980, Truck’s primary policies had no
aggregate limits.
       A dispute arose between the parties about Kaiser’s obligation
to pay deductibles because, before LMI, the meaning of
“occurrence” under the primary policies as it related to per
occurrence deductibles for ABIC was uncertain. The parties
therefore operated under a “billing convention” (Convention)
whereby Truck charged a single deductible for each policy year
regardless of the number of individual claims instead of charging a
per claim deductible. The parties each unilaterally reserved the
right to challenge the Convention through various correspondence
exchanged over the years.4
      In January 2007, after this court in LMI defined “occurrence”
as the separate injurious exposure of each individual claimant,
Truck reimbursed Kaiser for defense and indemnity costs. Kaiser
incurred those costs because of Truck’s previous incorrect
interpretation of “occurrence.” But Kaiser argues Truck improperly
withheld approximately $9.5 million in per occurrence deductible
charges from the reimbursement. In August 2007, Truck filed a
second amended complaint seeking to recover the disputed per-
occurrence deductible payments from Kaiser for the period the
Convention was in effect. In defense, Kaiser argued the four-year
statute of limitations applicable to contract actions barred any

decades. Traditional CGL insurance policies . . . are typically
silent as to this type of injury. [Citation.]” (Continental
Insurance, supra, 55 Cal.4th at pp. 195–196.)
4      For example, in June 1991 correspondence to Truck, Kaiser
asserted it “reserve[d] its right to . . . challenge the [C]onvention.”

                                   6
claim for deductibles arising before 2003 (four years prior to
Truck’s second amended complaint). Kaiser cross-complained to
receive what it contended it was entitled to under Truck’s
insurance policies, including the withheld deductible payments.
       The trial court opined “that the issues presented in Phase I
present a very close call.” Ultimately, it held Truck’s claim for
additional deductibles did not accrue until this court clarified the
definition of occurrence in the 2007 LMI decision. It also concluded
the parties’ Convention “essentially operated as a tolling
agreement,” allowing Truck to pursue collection of deductibles for
claims resolved before 2003. The trial court certified its ruling for
review pursuant to Code of Civil Procedure section 166.1, stating it
presented “controlling questions of law as to which there are
substantial grounds for difference of opinion.” The Phase I decision
was incorporated into the final judgment. Kaiser appeals.
       We agree with the trial court that the Phase I issues present
a close call. With the benefit of additional time and substantial
additional briefing, however, we have come to different conclusions
on the merits. Truck’s right to collect a deductible accrued each
time it paid a settlement or judgment on each claim, including
claim payments made before LMI. Moreover, we see no evidence
that the parties intended the Convention to “operate[ ] as a tolling
agreement.” Because any purported waiver of a statute of
limitations defense must be in writing pursuant to Code of Civil
Procedure section 360.5, and no such writing exists, Kaiser did not
waive the statute of limitations. Thus, we conclude the statute of
limitations bars Truck from recovering from Kaiser (or using as a
set-off against amounts it owes Kaiser) any unpaid deductible
payments for claims where Truck made any indemnity payment

                                  7
more than four years before Truck filed its second amended
complaint.
       Accordingly, we reverse the portion of the judgment relating
to the Phase I decision and remand for further proceedings
consistent with this opinion.

            2.    Phase II

      Phase II addressed whether Truck could apportion losses
against all its policies, not just against Truck’s no-aggregate limit
1974 policy that Kaiser selected pursuant to Armstrong World
Industries Inc. v. Aetna Casualty & Surety Co. (1996) 45
Cal.App.4th 1 (Armstrong).
      We begin with a brief summary of Armstrong, supra, and
related cases, in order to frame the issue addressed in Phase II.
Armstrong holds that once a policy is triggered, the policy
typically obligates the insurer to pay “all sums” that the insured
shall become liable to pay as damages. (Armstrong, supra, 45
Cal.App.4th at p. 105.) With long-tail injuries such as ABIC, this
may include damages attributable to other policy periods. (Ibid.)
      The term “trigger” is used to describe the operative event
that must happen during the policy period to activate the
insurer’s defense and indemnity obligations. (Montrose Chemical
Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 655, fn. 2
(Montrose I); Continental Insurance, supra, 55 Cal.4th at p. 196.)
A trigger may be (1) “a single event resulting in immediate
injury[;]” (2) “a single event resulting in delayed or progressively
deteriorating injury[;]” or (3) a continuing event resulting in
single or multiple injuries over time. (Montrose I, supra, 10
Cal.4th at p. 666.)
      The trigger determines which policy or policies may provide
coverage. (Stonelight Tile, Inc. v. California Ins. Guarantee Assn.

                                 8
(2007) 150 Cal.App.4th 19, 35 (Stonelight Tile).) Where damages
continue throughout successive policy periods, as with ABIC, all
insurance policies in effect during those periods are triggered.
(Montrose I, supra, 10 Cal.4th at p. 677, fn. 17.) Coverage is not
limited to the policy in effect at the time of the precipitating
event or condition. (Ibid.) Thus, the insurer on a triggered policy
may be liable (up to its policy limit) for the entirety of the
ensuing damage or injury, not just the injury or damage
occurring during that policy period. (Continental Insurance,
supra, 55 Cal.4th at pp. 199–200; Aerojet-General Corp. v.
Transport Indemnity Co. (1997) 17 Cal.4th 38, 56-57 (Aerojet);
Armstrong, supra, 45 Cal.App.4th at p. 105.)
       As a result, where a continuous loss is covered by multiple
policies, the insured may elect to seek indemnity under a single
policy with adequate policy limits. (Montrose I, supra, 10 Cal.4th
at p. 664.) If that policy covers “all sums” for which the insured is
liable, as most CGL policies do, that insurer may be held liable
for the entire loss. (Id. at p. 665; Armstrong, supra, 45
Cal.App.4th at pp. 49–50.) “The insurer called upon to pay the
loss may seek contribution from the other insurers on the risk.
[Citation.]” (Stonelight Tile, supra, 150 Cal.App.4th at p. 37.)
       Kaiser selected Truck’s 1974 primary policy, which has no
aggregate limit of liability, to respond to all ABIC, obligating
Truck to pay “all sums” for which Kaiser was liable. The parties
have stipulated that the “continuous trigger” and “all sums”
approach, as applied in Aerojet, supra, 17 Cal.4th 38, and
Armstrong, supra, 45 Cal.App.4th 1, govern and support Kaiser’s
selection of the Truck 1974 policy, when triggered, to respond to
ABIC.

                                  9
      This brings us to the Phase II issue, which relates to
Truck’s effort to apportion liability to policies other than its 1974
no-aggregate limit policy. In ICSOP, this court held that all of
Kaiser’s primary policies must horizontally exhaust before ICSOP’s
excess policies attached. (ICSOP, supra, at p. 34.) After ICSOP,
and in spite of Kaiser’s Armstrong election of the 1974 policy,
Truck sought to exhaust other primary policies in other years by
apportioning claims triggering the 1974 policy across other
primary policies it had issued to Kaiser. Unlike the 1974 policy,
those other policies did contain aggregate limits. The trial court
rejected Truck’s apportionment scheme, finding it would erode
Kaiser’s coverage for asbestos claims available under Truck’s
aggregate-limit policies and the excess policies above them.
      Truck appeals the trial court’s Phase II decision. We affirm.

      3.    Phase III-A

       The Phase III-A trial5 dealt with two issues. The trial court
first addressed whether horizontal or vertical exhaustion applied to
Truck’s claims against the excess insurers. Because Truck was a
primary insurer whose policies had not exhausted, the trial court
rejected Truck’s argument that the excess insurers had an
obligation to “dropdown” and into Truck’s shoes as a primary
insurer. Truck appeals, based on the recent California Supreme
Court decision in Montrose Chemical Corp. of California v.
Superior Court (2020) 9 Cal.5th 215 (Montrose III). Montrose III
held that vertical exhaustion applied to multiple layers of excess
insurance, but did not address exhaustion of primary insurance.
       The second Phase III-A issue considered whether Truck’s
$5,000 per occurrence deductible operated to reduce Truck’s per

5     There was no Phase III-B trial.

                                 10
occurrence indemnity obligation under the 1974 policy from
$500,000 to $495,000, with Kaiser being responsible for a $5,000
per occurrence deductible, or—as the excess insurers contend—
Truck had to pay $500,000 in addition to the $5,000 deductible
paid by Kaiser. The trial court found that per the policy language,
the $5,000 deductible operated to reduce Truck’s indemnity
obligation to $495,000. Excess insurers LMI and ICSOP
cross- appeal the second issue.
      We affirm on both Phase III-A issues.

           PHASE I: STATUTE OF LIMITATIONS

       As noted above, Phase I addressed a statute of limitations
issue. The parties adopted the Convention to address their
uncertainty over the meaning of an “occurrence” under the policies,
as it relates to per-occurrence limits and deductibles. When LMI
resolved the question, the issue of accrual of claims for deductibles
came to the fore. The trial court concluded the parties’ unilateral
reservations of rights to challenge the Convention tolled the
running of the statute of limitations, presumably meaning Truck
could recover unpaid deductibles for all past claims. Kaiser
challenges this result, arguing Truck’s claim for unpaid deductibles
accrued when each claim was paid, and the statute was not tolled.
This would mean that any claim for deductibles relating to claims
where Truck made an indemnity payment more than four years
before Truck filed its second amended complaint in August 2007
was untimely and barred by the statute of limitations. We agree
with Kaiser and reverse and remand to the trial court for further
proceedings consistent with this opinion.

                                 11
      A.    FACTUAL BACKGROUND

            1.    Stipulated Facts

      In the trial court, Kaiser and Truck stipulated to the
following facts relating to Phases I and II:

                  a. Common Facts

      Kaiser Cement and Gypsum Corporation (“Kaiser Cement”)
and its subsidiary Kaiser Gypsum Company (“Kaiser Gypsum,”
and with Kaiser Cement, “Kaiser’’) have been the subject of
thousands of ABIC alleging exposure to asbestos-containing
products manufactured by Kaiser Cement or Kaiser Gypsum.
      Kaiser was issued primary insurance coverage, covering
the period from 1947 to 1987, by four different insurance
companies.6

6     Three other insurance carriers issued primary insurance
policies to Kaiser, but their policy limits have been exhausted.
These policies were not at issue in Phase I. Fireman’s Fund
Insurance Company (“Fireman’s Fund”) issued primary
insurance policies to Kaiser covering the period from January 1,
1947 through December 31, 1964. Fireman’s Fund’s aggregate
policy limits have been paid, exhausting all of the limits of
Fireman’s Fund primary coverage that apply to ABIC as of April
30, 2004. Home Indemnity Company (“Home”) issued primary
insurance policies to Kaiser covering the period from April 1,
1983 through April 1, 1985. Home’s aggregate policy limits of $2
million have been paid, exhausting all of the limits of Home
primary coverage that apply to ABIC as of December 14, 1999.
National Union Fire Insurance Company of Pittsburgh, PA
(“National Union”) issued primary insurance policies to Kaiser
covering the period from April 1, 1985 through April 1, 1987.
National Union’s aggregate policy limits of $2 million have been

                                 12
       Truck issued primary CGL policies to Kaiser covering the
period from December 31, 1964 through April l, 1983. Truck’s
policies provide coverage for bodily injury and property damage
up to per occurrence limits of liability. For many—but not all— of
the policy years, the policies also contain an annual aggregate
limit for product liability claims:
       a. Truck’s policies in effect from December 31, 1964 to
          January 30, 1971 have a $100,000.00 per person, a
          $300,000.00 per occurrence, and a $300,000.00 annual
          aggregate limit for all bodily injury products liability
          claims.
       b. Truck’s policies in effect from January 30, 1971 to April
          1, 1980 have per occurrence limits of $500,000.00 for
          bodily injury with no annual or other aggregate limits
          for products liability claims.
       c. Truck’s policies in effect from April 1, 1980 to April 1,
          1983 have per occurrence limits of $500,000.00 for bodily
          injury and $1,500,000.00 annual aggregate limits for
          products liability claims.
       Each of the policies required Kaiser to assume a portion of
the losses in the form of deductibles and loss adjustment
expenses.
       The policies defined “occurrence” as “an event, or
continuous or repeated exposure to conditions which results in
personal injury or property damage during the policy period. All
such exposure to substantially the same general conditions
existing at or emanating from each premises location shall be
deemed one occurrence.”

paid, exhausting all of the limits of National Union primary
coverage that apply to ABIC as of August 31, 2000.

                                13
      Beginning in the late 1970s, Kaiser tendered ABIC, along
with a number of early asbestos property damage claims, to
Truck, which began defending against such claims and
indemnifying Kaiser.
      Kaiser’s other primary insurers, Fireman’s Fund, Home,
and National Union, refused to participate. In February 1990,
Kaiser and Truck filed suit against Fireman’s Fund, Home, and
National Union. Kaiser entered into three separate settlement
agreements with the other primary insurers in 1992 and 1993.
      Under those settlement agreements, Truck continued
handling the defense of Kaiser’s ABIC while each of the other
three primary insurers contributed to both defense and
indemnity for ABIC according to specific formulas set forth in the
settlement agreements.
      As a result of the exhaustion of the Fireman’s Fund, Home,
and National Union primary policy limits, Truck has been the
only remaining primary insurer responding to ABIC as of April
30, 2004.
      On April 30, 2001, Truck filed its initial complaint in this
action, alleging its policy limits for ABIC were exhausted, and
seeking a judicial declaration that Truck had no further
obligation to defend or indemnify Kaiser for ABIC.
      In 1981, Truck made the following assumptions regarding
application of its policies to the ABIC filed against Kaiser:
(a) California would adopt the “exposure theory” for triggering
insurance coverage; and (b) all ABIC against Kaiser would be
considered as arising out of one occurrence.
      Prior to 1987, Truck had set up one claim file for each
policy year. Truck did not allocate indemnity and expenses for
any individual asbestos claimant to more than one policy year but

                               14
instead allocated payments to policy years by using a single date
of loss to place the claimant within a single, specific policy year.
       Beginning in approximately 1987, Truck established the
Convention, under which it set up a master asbestos claim file for
each policy year that broke down each indemnity payment and
expense item (per claimant) into the number of years of exposure
to Kaiser’s product(s) and prorated it into each policy year.
       Kaiser agreed to this allocation method for deductible
billing purposes, as it was beneficial to Kaiser, but Kaiser
reserved its rights to challenge Truck’s allocation of indemnity
payments later.
       During this coverage action, which began in 2001, Kaiser
has taken different positions on the number of occurrences giving
rise to ABIC, including its allegations that ABIC arise from a
single occurrence, and that ABIC arise from a small number of
occurrences.
       Until the January 2007 LMI decision, Truck and Kaiser
both believed the number of occurrences arising from ABIC and
Kaiser’s per occurrence deductible obligation as called for under
the Truck policies were unresolved questions of law that a court
would ultimately have to decide.

            b.    Facts Relating to Truck’s Deductible
                  Billings

      Each of Truck’s policies requires Kaiser to pay a deductible
for each occurrence and, in most cases, a deductible for certain
specified loss adjustment expenses. From December 31, 1964
through December 31, 1968, Kaiser was responsible for a
$5,000.00 deductible per occurrence (per occurrence deductible)
plus certain specified loss adjustment expenses. From January 1,
1968 through December 31, 1968, Kaiser was responsible for a

                                15
$15,000.00 “per-occurrence” deductible plus loss adjustment
expenses. From January 1, 1969 through December 31, 1973,
Kaiser was responsible for a $5,000.00 “per-occurrence’’
deductible plus certain specified loss adjustment expenses. From
January 1, 1974 through December 31, 1975, Kaiser was
responsible only for a $5,000.00 per occurrence deductible. From
January 1, 1976 through March 31, 1981, Kaiser was responsible
for a $50,000.00 “per-occurrence” deductible plus certain specified
loss adjustment expenses. From April 1, 1981 through April 1,
1983, Kaiser was responsible for a $100,000.00 per occurrence
deductible plus certain specified loss adjustment expenses.
       Under the Convention Truck established in 1987, Truck
charged and Kaiser paid one per occurrence deductible for the
Truck policy years 1973-1983. Before this action was filed, Kaiser
was charged by and had paid to Truck per occurrence deductibles
of $420,000.00, allocated loss adjustment expense deductibles of
$916,844.88, and unallocated loss adjustment expense
deductibles of $59,500.00 for asbestos-related litigation. The
$420,000.00 per occurrence deductibles were already credited to
Kaiser. In the event Truck’s 2007 billings for per occurrence
deductibles are not barred by Kaiser’s defenses, the allocated and
unallocated expenses paid by Kaiser to Truck shall be credited to
Kaiser. The expenses paid by Kaiser are subject to Truck’s right
to a credit, which Kaiser disputes, for $362,776.06 that Kaiser
received as a result of the Fireman’s Fund settlement agreement.
       Effective July 1, 2004, Truck began allocating to Kaiser a
pro-rata share of each ABIC settlement. As a result, Kaiser
funded approximately 10 percent of ABIC settlement payments
from July 1, 2004 through February 1, 2006.

                                16
       In a letter dated August 31, 2004, Kaiser objected to
Truck’s allocation of indemnity payments to it. In its letter,
Kaiser selected the 1974 or 1975 Truck policy years to respond to
ABIC and cited Aerojet, supra, 17 Cal.4th 38 and Armstrong,
supra, 45 Cal.App.4th 1, as a basis for its selection.
       In October 2004, Truck sought summary adjudication on its
claims that ABIC were a single occurrence, that Truck had paid
the occurrence limits for each primary policy it issued to Kaiser,
and that Truck thus had no further obligation to defend or
indemnify Kaiser. (LMI, supra, 146 Cal.App.4th at pp. 652–653.)
       When the trial court granted Truck’s motion in January
2006, Truck withdrew all defense and indemnity for ABIC,
effective February 1, 2006. Thereafter, Kaiser incurred 100
percent of defense and indemnity for each ABIC pending and
settled after that date.
       As noted above, in a January 9, 2007 decision, this court
reversed the trial court’s summary adjudication order, holding
that an “occurrence” for purposes of determining per occurrence
limits and deductibles meant “injurious exposure to asbestos,”
and it remanded the case to the trial court for a factual
determination of how many “occurrences” gave rise to ABIC.
(LMI, supra, 146 Cal.App.4th at pp. 651, 672.)
       In a January 24, 2008 order, the trial court ruled that each
asbestos-related bodily injury claim shall be deemed to have been
caused by a separate and distinct occurrence within the meaning
of the Truck policies.
       Following the January 2007 LMI decision, Truck
acknowledged it owed Kaiser a complete defense and indemnity
under its 1974 policy, retroactive to July 1, 2004, and resumed
the defense and indemnity of ABIC as of September 1, 2007.

                                17
Kaiser had paid $25,988,284.05 in defense costs and
$51,464,477.35 in indemnity costs between July 1, 2004 and
September 1, 2007 for ABIC that were covered under Truck’s
1974 policy.
       By letter dated July 23, 2007, Truck calculated, billed
and—from amounts it otherwise owed to Kaiser at that time—
withheld various sums from its reimbursement payment,
including $9,521,158.50 in per occurrence deductibles under the
1974 policy that Truck claimed it was owed by Kaiser.
       Since its July 23, 2007 billing, Truck has continued to bill
Kaiser for a separate per occurrence deductible on each ABIC
resolved with payment. Truck billed Kaiser $1,264,000.00 on
August 12, 2009 (which Kaiser paid on September 10, 2009), and
$2,245,500.00 on October 4, 2013 (which Kaiser has not yet paid).
       Truck’s July 23, 2007 per occurrence deductibles billing
was the first time Truck asked Kaiser to pay a separate
deductible for each claimant, and Kaiser did not object to Truck’s
per occurrence deductible billing on grounds it was untimely until
after July 23, 2007.
       The Truck policy issued to Kaiser effective January 1, 1974
contains the following language concerning Kaiser’s obligation to
pay a deductible to Truck: “$5,000 shall be deducted from the
total amount to be paid for all damages which the Insured
becomes legally obligated to pay on account of each occurrence.”
       Truck filed its second amended complaint in this action on
August 23, 2007, alleging for the first time (in paragraph 51) that
Kaiser owed a separate per occurrence deductible for each ABIC.
       For the 1,472 ABIC resolved with payment before August
23, 2003, four years before Truck filed its second amended
complaint, Truck withheld deductibles on July 23, 2007 from its

                                18
payment for Kaiser’s reimbursement in the amount of
$6,629,391.00.
       For the 802 ABIC resolved with payment before October 1,
2000, four years before Truck filed its first amended complaint
for declaratory relief, Truck withheld deductibles on July 23,
2007 from its payment for Kaiser’s reimbursement in the amount
of $3,235,496.00.
       For the 426 ABIC resolved with payment before April 30,
1997, four years before Truck filed its original complaint for
declaratory relief, Truck withheld deductibles on July 23, 2007
from its payment for Kaiser’s reimbursement in the amount of
$1,657,003.50.
                   c.     Facts Relating to Truck’s Equitable
                          Allocation

                        i.     Kaiser’s Asbestos Claims

      Kaiser manufactured asbestos-containing products at 10
different facilities from the 1940s through the 1970s. (LMI, supra,
146 Cal.App.4th at p. 652.) Sometime in the late 1970s, Kaiser
began to tender to Truck bodily injury claims resulting from
exposure to Kaiser’s products containing asbestos. By October
2004, more than 24,000 claimants had filed products liability
actions against Kaiser, and Truck’s indemnity payments exceeded
$50 million.
                           ii.   Commencement of This Action

      In April 2001, Truck filed a declaratory relief action
asserting its aggregate limit policies (1965-1970 and 1980-1983)
were exhausted, it paid all applicable per occurrence limits on the
non-aggregate limit policies, and thus had no further duty to
indemnify Kaiser for asbestos claims. This initial complaint did not

                                19
make any allegations concerning deductibles. Kaiser cross-claimed,
alleging that all the asbestos claims arose from one occurrence and
sought a declaration that it was responsible for only one deductible.
Kaiser also sought a declaration of coverage under the excess
policies in the event the Truck policies were deemed exhausted.
(LMI, supra, 146 Cal.App.4th at p. 652.)

      B.    THE CONVENTION

      As noted above, in the 1980s, when Kaiser began to receive
asbestos claims, California law did not define what constituted an
“occurrence” with respect to ABIC. Before 1987, Truck set up one
claim file for each policy year, but did not allocate payments for
any individual claimant to more than one policy year. Instead,
Truck used a single date of loss.
      Beginning in 1987, Truck adopted the Convention pursuant
to which Truck set up a “master” claim file for each policy. Truck
broke each of Kaiser’s asbestos claims into indemnity and expenses
and allocated it across the number of years of exposure to Kaiser’s
products, thereby prorating it into each applicable policy year.
Under the Convention, Kaiser paid one deductible per policy year
for the policy years 1973-1983, rather than one deductible per
occurrence.7

7      The trial court observed in its Phase I Statement of
Decision that the Convention benefitted both parties. LMI
explained, “[u]nder the 1964 policy, Kaiser was responsible for
the first $5,000 of loss for each ‘occurrence’; by 1981, the per
occurrence deductible was $100,000. Thus, Kaiser’s share of the
total asbestos liability increases as the number of occurrences
increases. Additionally, although asbestos claims against Kaiser
collectively exceed tens of millions of dollars, many individual

                                 20
       Although the parties adhered to the Convention, they never
reached an express agreement concerning the definition of
“occurrence” and hence a final resolution of how deductibles would
be allocated. Instead, during the time the Convention was in effect,
the parties agreed it was an interim arrangement not in writing,
and that the definition of an “occurrence” was an unresolved
question of law.
       As noted above, at the time the Convention was initiated,
what constituted an “occurrence” for purposes of calculating per
occurrence limits and per occurrence deductibles with respect to
ABIC was an open legal question. Thus, Truck and Kaiser were
uncertain of how to bill the losses and how to calculate any
deductibles. Testimony at the Phase I trial showed Truck
instigated the Convention and Kaiser, under a unilateral
reservation of rights, agreed to the Convention’s procedure for
deductible billing purposes because it benefitted from it.
       For example, in a June 1991 letter concerning deductible
billings, Kaiser stated that “Kaiser hereby reserves its right to
further consider and, as may be appropriate with respect to policy
terms and conditions, to challenge the convention established by

claims apparently are within the applicable deductibles. Thus, if
each claim is treated as a separate occurrence, Kaiser may have
no coverage for a substantial number of claims.” (LMI, supra, 146
Cal.App.4th at p. 653, fn. 2.) In addition, the Convention
benefitted Truck’s reinsurers because if Truck’s indemnity
payments were based upon a separate occurrence for each
claimant, the payments would likely not implicate the reinsurers’
obligations because most asbestos claims would be settled for
small amounts. Under Truck’s reinsurance agreement Truck paid
$150,000 for each occurrence and the reinsurers paid everything
in excess of that.

                                21
[Truck] of combining all asbestosis claims into one master claim
per policy period[.]” Kaiser’s general counsel Carl Pagter stated
that under the Convention, the parties treated the deductible as
arising from a single claim. The parties recognized the issue was
open until decided by a court. Kaiser, however, realized at some
time in the future the legal issue of what constituted an occurrence
would be decided.
      Truck acquiesced (as stated by Truck employee Dennis
Patterson) that “there was a general understanding that this was a
mutually agreed-upon method of allocating and billing for Kaiser’s
asbestos claims, and that if, . . . the case law changed, that we may
have to do it some different way. So I think there was always an
understanding that both parties reserved the right.” Truck sought
and received concurrence in the Convention from its reinsurers.
      During the course of this coverage action, Kaiser took
different positions on the number of occurrences giving rise to
asbestos claims, including the position that such claims arose from
a single occurrence, or that asbestos claims arose from a small
number of occurrences.
      Effective July 1, 2004, Truck began allocating to Kaiser a
pro-rata share of each asbestos settlement. As a result, Kaiser
funded approximately 70 percent of settlement payments from July
1, 2004 through February 1, 2006.

            1.    Truck’s October 2004 Summary Judgment
                  Motion

       In October 2004, Truck sought summary judgment on its
exhaustion claim. (LMI, supra, 146 Cal.App.4th at p. 652.) Truck
argued the per occurrence limit in the policies capped its liability
for injuries arising from any one occurrence. (Ibid.) Furthermore, it
argued, because it had paid the occurrence limits for each primary

                                 22
policy, it had no further indemnification obligation to Kaiser. (Id.
at p. 653.) Truck based this argument on the Convention’s one-
occurrence-per year-structure and on its assertion that the
occurrence was “‛the design, manufacture and distribution by
Kaiser and its subsidiaries of asbestos-bearing products,’” rather
than each claimant’s exposure to asbestos. (Ibid.) As a result, it
contended the indemnity payments made exceeded the per
occurrence limits in the policies. (Ibid.) Truck also relied on the
parties’ course of conduct in paying a single deductible per policy
year and asserted this conduct supported its interpretation of the
policies. (Ibid.) Kaiser agreed the asbestos claims resulted from a
single annual occurrence, but contended that neither it nor Truck
ever believed they reached an agreement on the number-of-
occurrences issue and that Kaiser retained the right to challenge it.
(Ibid.)
       The trial court granted Truck’s motion, finding that “as a
matter of law, . . . the manufacture and decision to place asbestos
into products by the Kaiser entities constituted a single occurrence
under the applicable policies.” (LMI, supra, 146 Cal.App.4th at p.
655.) The trial court concluded the policies were exhausted. (Ibid.)
After the trial court’s January 2006 ruling, Truck withdrew its
defense and indemnity from Kaiser as of February 1, 2006.

            2.    The LMI Decision and the Meaning of an
                  “Occurrence”

      As noted above, in LMI, this court disagreed with the trial
court’s summary judgment ruling on the “occurrence” issue, and
rejected Truck’s position. (LMI, supra, 146 Cal.App.4th at pp. 651,
672.) After noting that the dispute centered on the policies dating
from 1971 to 1980 (which contained no aggregate limits, only per
occurrence limits), this court held each “occurrence” under the

                                 23
policy was the claimant’s exposure to Kaiser’s asbestos containing
products, not Kaiser’s manufacture of asbestos containing
products. (Id. at pp. 660.) “[W]e conclude that the parties did not
understand or intend ‘event’ to mean “‘anything that happens,’”
including ‘the conscious inclusion of asbestos in products
manufactured and distributed by the policyholder.’ . . . . Instead,
we conclude that the parties intended ‘event’ to mean an
identifiable, single injury-causing episode—an ‘accident’ under the
older CGL form—as distinct from ‘continuous or repeated
exposure.’” (Id. at p. 662.) The case was remanded for a factual
determination of the number of occurrences. (Id. at p. 672.)
       Following LMI, Truck resumed its indemnity obligations to
Kaiser retroactively to July 1, 2004. Also based on LMI, Truck filed
its second amended complaint in August 2007, asserting it was
entitled to payment of a separate deductible for each asbestos
claim it had paid or would pay, and that this method of deductible
assessment accrued with the 2007 LMI decision. This was the first
time Truck assessed a deductible for each claimant, and Truck
withheld $9,521,158.20 in per occurrence deductibles from
amounts owed to Kaiser. This included $6,629,391.00 in
deductibles that predated Truck’s second amended complaint by
more than four years.
       In response to Truck’s assessment of the deductibles, Kaiser
filed a third amended cross-complaint, asserting Truck had not
exhausted the policy limits for asbestos claims, Kaiser was entitled
to select an insurance policy during any triggered policy year
pursuant to Armstrong, and Kaiser was only responsible for the
deductible and/or loss expenses per the policies.

                                24
      In January 2008, pursuant to the holding of LMI, the trial
court confirmed that each asbestos claim would be deemed to have
been caused by a separate occurrence.

      C.    PHASE I TRIAL

       Kaiser asserted Truck’s claims for deductibles accrued at the
time each claim was paid, and not with the January 2007 decision
in LMI. As a result, Kaiser contended any claim for a deductible
assessed more than four years before Truck’s August 23, 2007
second amended complaint was untimely under the four-year bar
of Code of Civil Procedure section 337. Truck asserted that Kaiser’s
acquiescence in Truck’s billing Convention and the parties’
respective reservations of rights with respect to the deductible in
effect barred any statute of limitations defense.

            1.     Evidence

     The Phase I trial commenced in November 2014 and
addressed the issue of when Truck’s claim for unpaid deductibles
accrued under the policies as interpreted by LMI. The trial was
conducted based upon stipulated facts, documentary evidence, and
deposition testimony.

            2.     Trial Court Ruling

      In its statement of decision, the trial court identified a
“breach” as the non-payment of a per occurrence deductible under
the 1974 policy. The trial court reasoned the parties were operating
under the Convention, treating each claim as arising from one
occurrence, and billing one deductible per policy year. The court
observed that with respect to the right to challenge the deductible
calculation, the parties agreed “both sides were willing to go along
without prejudice to each other’s rights in the future.” Further, each

                                 25
party believed the calculation, whether annual or per occurrence,
was an unresolved question of law resulting from ambiguities in
the policy. Finally, Kaiser did not challenge the Convention before
2007.
       As a result, the trial court concluded that deductibles for
individual claims “could not have been ‘available’ until this critical
issue had been decided by the Court of Appeal [in LMI], and could
not have accrued until that time.” The trial court observed that
LMI identified the issue— “the meaning of ‘occurrence’” in a CGL
policy “as applied to bodily injuries caused by exposure to
asbestos”—as one of “first impression.”
       The trial court found there was no consequence to the lack of
a tolling agreement because one would only have been required if
the claims had in fact accrued before LMI. Even if the statute of
limitations began to run at a time earlier than LMI, the court
found the parties’ reservation of rights essentially operated as a
tolling agreement. Because it determined the claim did not accrue
until LMI, the trial court found equitable estoppel did not apply
and the question of waiver was moot. “The weight of evidence
before the court shows that both Truck and Kaiser were always
operating under the assumption that the convention controlled the
number of occurrences, and hence, the number of deductibles—
notwithstanding the mutual view held by both parties that the
‘number of occurrences’ issue was unresolved and would ultimately
have to be decided by the courts.”
       Finding the parties did not dispute Truck’s calculation of
$9,521,158.50 in offsets, the trial court ruled Truck properly
assessed deductibles Kaiser owed for all claims settled before
August 23, 2003 (four years before the filing of Truck’s second
amended complaint).

                                 26
      D.    STANDARD OF REVIEW

      Where, as here, the relevant facts are undisputed, it is a
question of law whether a claim is barred by the statute of
limitations. Accordingly, we apply the de novo standard of review.
(Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185,
1191.)

      E.    DISCUSSION

            1.     Truck’s Claim for Deductibles Accrued
                   When Truck Paid or Otherwise Resolved
                   Each Claim
       The parties dispute when the claim for each deductible
accrued. Kaiser asserts it was when each deductible was or could
have been assessed on a claim. Truck asserts its claims did not
accrue until LMI defined an “occurrence.” We agree with Kaiser.
       The statute of limitations is a legislatively prescribed time
period to bring a cause of action. (Gilkyson v. Disney Enterprises,
Inc. (2016) 244 Cal.App.4th 1336, 1341.) It aims to promote the
diligent assertion of claims and “‘ensure defendants the
opportunity to collect evidence while still fresh,’” while providing
“‘repose and protection from dilatory suits once excess time has
passed.’ [Citation.]” (Ibid.) “Under the statute of limitations, a
plaintiff must bring a cause of action within the limitations period
applicable thereto after accrual of the cause of action. [Citations.]”
(Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.)
       For breach of a written contract, the period is four years from
the time the claim accrues. (Code Civ. Proc., § 337.) The elements
of a cause of action for breach of contract are: the contract,
plaintiff’s performance or excuse for nonperformance, defendant’s
breach, and the resulting damages to plaintiff. (Coles v. Glaser

                                 27
(2016) 2 Cal.App.5th 384, 391.) Generally, a claim for breach of
contract accrues when all these elements have occurred. (Howard
Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809,
815 [statute of limitations runs from occurrence of the last element
essential to the cause of action].) To determine whether a breach
has occurred, we look to the terms of the contract. (Weddington
Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.)
       Pursuant to the language of the policies, “$5,000 shall be
deducted from the total amount to be paid for all damages which
the Insured becomes legally obligated to pay on account of each
occurrence.” (Emphasis added.) Thus, Truck’s claim for a deductible
accrued when Truck became obligated to indemnify Kaiser and
assess a deductible. (See, e.g., Specialty Nat’l Ins. Co. v. U-Save
Auto Rental of Am., Inc. (M.D. Fla. Nov. 12, 2008, Civ. A. No. 8:07-
cv-878-33MAP) 2008 U.S.Dist. Lexis 94931, pp. 15–16 (Specialty).)
Specialty involved the timeliness of an insurer’s suit for unpaid
deductibles. (Id. at p. 8.) The insurer argued it could not have
brought suit against the insured until it demanded reimbursement
of the deductibles and the insured refused payment, because at
that time the insurer would be damaged. (Id. at pp. 11–12.)
Specialty held the deductibles claim accrued when the insurer
settled the claims—nothing in the contract prevented the insurer
from demanding payment at any time. Its claim for deductibles due
before the statute of limitations bar date was therefore untimely.
(Id. at pp. 17–18) The court observed that statutes of limitation
were designed to prevent parties from sleeping on their rights. (Id.
at p. 17.) Similarly, Hahn Automotive Warehouse, Inc. v. Am.
Zurich Ins. Co. (2012) 18 N.Y.3d 765, 768-769 [967 N.E.2d 1187]
(Hahn) involved the inadvertent failure to bill for deductibles not
discovered until an audit performed six years after the statute of

                                28
limitations had expired. Hahn held the claim accrued with the
right to demand payment. (Id. at pp. 770–771.)
       Under this authority, and Truck’s policy language, Truck’s
claim for deductibles arose at the time it first made indemnity
payments for a claim, whether by settlement or judgment, unless
the parties agreed to toll the statute of limitations or there was a
waiver of the statute of limitations by Kaiser.

            2.     LMI Did Not Revive Stale Claims
      Kaiser asserts LMI was retroactive and did not create a new
deductible claim or revive old claims. According to Kaiser, Truck
always had the ability to charge Kaiser a deductible for each ABIC
under the language of its policies; LMI did not create that right.
We agree.
      “‘The general rule is that judicial decisions are given
retroactive effect. [Citation.] Departure from that rule is limited to
those narrow circumstances in which considerations of fairness and
public policy preclude retroactivity. . . .’ [Citation.]” (Doe v. San
Diego-Imperial Council (2015) 239 Cal.App.4th 81, 90.) “The
exception to the principle of retroactivity is inapplicable where . . .
a court is deciding a legal question in the first instance, rather
than overturning prior appellate decisions. [Citation.]” (Id. at p. 91;
see also Alvarado v. Dart Container Corp. of California (2018) 4
Cal.5th 542, 573 [judicial decision retroactive where party “cannot
claim reasonable reliance on settled law.”].)
      Here, LMI decided an issue of first impression. (LMI, supra,
146 Cal.App.4th at p. 651 [the meaning of “occurrence” as used in
per occurrence limits and deductibles in a CGL policy as applied to
bodily injuries caused by exposure to asbestos is “an issue of first
impression in this state.”].) Truck, therefore, could not have
reasonably relied on contrary authority prior to the decision in LMI

                                  29
because no such authority existed. Accordingly, we agree with
Kaiser that the holding in LMI (“occurrence” as used in the policies
at issue with respect to per occurrence limits and deductibles
means injurious exposure to asbestos) applies retroactively.

            3.    A “Reservation of Rights” Did Not Toll the
                  Four-Year Statute of Limitations

                  a.    A Reservation of Rights, Without
                        More, Is Not a Tolling Agreement

      We reject Truck’s assertion that the reservation of rights
tolled the running of the statute of limitations.8 A statute of
limitations may be tolled by express agreement of the parties.
(See, e.g., Wind Dancer Production Group v. Walt Disney Pictures
(2017) 10 Cal.App.5th 56, 79.) Here, there is no such express

8     Reservations of rights commonly occur in the insurance
context when an insurer notifies its insured that it will furnish a
defense to the injured party’s suit against the insured but at the
same time reserves the right to refuse to indemnify the insured
against any judgment on the ground that the claim was not
covered under the policy, and to withdraw its defense upon the
same ground. (Truck Ins. Exchange v. Superior Court (1996) 51
Cal.App.4th 985, 994.) Such a reservation of rights prevents
waiver of coverage defenses: the insurer meets its obligation to
furnish a defense without waiving its right to assert coverage
defenses against the insured later. (Blue Ridge Ins. Co. v.
Jacobsen (2001) 25 Cal.4th 489, 497–498.) Thus, in that context a
reservation of rights is used to separate the insurer’s indemnity
obligation from its defense obligation and does not involve the
statute of limitations because the insured’s claim has already
accrued at the time of litigation and the statute is no longer
running. Such an open-ended reservation of rights in that context
has no effect upon the statute of limitations.

                                30
agreement, and furthermore, the record does not demonstrate the
parties agreed to such an implied term. “‘The only distinction
between an implied-in-fact contract and an express contract is
that, in the former, the promise is not expressed in words but is
implied from the promisor’s conduct. [Citations.] Under the
theory of a contract implied in fact, the required proof is
essentially the same as . . . [on an] express contract, with the
exception that conduct from which the promise may be implied
must be proved. [Citation.]’” (Chandler v. Roach (1957) 156
Cal.App.2d 435, 440, emphasis omitted.) Indeed, the record is
silent on whether the parties intended to toll or waive any statute
of limitations with respect to the deductibles. At most, the
evidence presented details the parties’ understanding of the
Convention and its purpose and effect. Other than the parties’
joint realization that at some point the law would be clarified,
there is nothing further. This is consistent with the fact that the
Convention was, in the words of Kaiser, “not really an
agreement” but merely a procedure under which they agreed to
operate.
       Nonetheless, Truck asserts that final collection of the
deductibles was tolled until the time for performance ripened with
LMI’s ruling on the definition of an “occurrence.” Because
deductibles would have normally accrued with the settlement of
each claim, Truck asserts the reservation of rights rendered the
policies executory contracts because each deductible was subject to
later change. (See Civ. Code, § 1661 [executed contract is one in
which the object has been fully performed; all others are
executory]; State Comp. Ins. Fund. v. WallDesign, Inc. (2011) 199
Cal.App.4th 1525, 1529-1530 [statute of limitations does not run on
an executory contract until the time for full performance has

                                31
arrived.].) Thus, Truck argues the time for “full performance,”
namely, identification of the method of deductible assessment as
being per-claim, and accrual of the statute of limitations, did not
occur until the 2007 LMI decision.
       Because Truck’s approach reads the Convention too broadly
and finds no support in the record, we disagree. Truck relies on
Schuler v. Community First National Bank (Wyo. 2000) 999 P.2d
1303 for the proposition that “[a]s a general rule, if the parties
mutually adopt a mode of performing their contract differing from
its strict terms or if they mutually relax the contract’s terms by
adopting a loose mode of executing them, neither party can go back
upon the past and insist upon a breach because the contract was
not fulfilled according to its letter. [Citation.]” (Id. at p. 1305, fn. 1;
see also Ghirardelli v. Peninsula Properties Co. (1940) 16 Cal.2d
494, 498 (Ghirardelli) [where parties agreed no payment due until
account of trustee rendered, statute of limitations did not run].)
That is not the case here. We see no reason why the parties, had
they actually agreed to toll the statute of limitations, would not
enter into a written agreement to that effect or bring a declaratory
relief action. Further, unlike Ghirardelli, there was no agreement
to defer performance.

                    b.     The Discovery Rule Does Not Apply

      In an attempt to avoid this result, Truck asserts the
discovery rule and claims it only discovered after LMI that it was
injured by the Convention and thus the four-year statute of
limitations did not begin to run until LMI. (See, e.g., April
Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 831 [in
breach of contract action, claim accrued when plaintiffs discovered
they were harmed].) The discovery rule “may be applied to
breaches [of contract] which can be, and are, committed in secret

                                    32
and, moreover, where the harm flowing from those breaches will
not be reasonably discoverable by plaintiffs until a future time.”
(Id. at p. 832; Gryczman v. 4550 Pico Partners, Ltd. (2003) 107
Cal.App.4th 1, 5 [discovery rule applicable to breach of contract
action where defendant “not only breached the contract ‘within the
privacy of its own offices’ but the act which constituted the
breach . . . was the very act which prevented plaintiff from
discovering the breach.”].)
       Under the discovery rule, the plaintiff must show that,
“despite diligent investigation of the circumstances of the injury, he
or she could not have reasonably discovered facts supporting the
cause of action within the applicable statute of limitations period.”
(Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 809.)
       But the discovery rule applies to ignorance of the facts, not
the law. (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136,
1144-1145 [knowledge of the facts, rather than knowledge of
available legal theories or remedies, starts the statute of
limitations].) Our Supreme Court’s decision in Jolly v. Eli Lilly &
Co. (1988) 44 Cal.3d 1103 (Jolly) is closely on point. In Jolly, the
plaintiff delayed bringing suit for injuries resulting from her
mother’s use of diethylstilbestrol (DES), while plaintiff was in
utero, because she could not identify and name the specific
manufacturer of the drug supplied to her mother. (Id. at pp. 1107–
1108.) Appellate case law prevailing at the time plaintiff discovered
the facts creating her cause of action held a plaintiff must identify
the manufacturer of the drug. (Id. at pp. 1114, 1116.) In Sindell v.
Abbott Laboratories (1980) 26 Cal.3d 588 (Sindell), however, our
Supreme Court held a plaintiff who was harmed by DES and who
was unable to identify the particular manufacturer could state a
cause of action by joining defendants that manufactured a

                                 33
substantial percentage of the market for the drug. (Id. at pp. 612–
613; Jolly, supra, at p. 1108.) In Jolly, the plaintiff filed her
complaint less than one year after Sindell, but more than one year
after her action would ordinarily be deemed to have accrued. (Jolly,
supra, at pp. 1108, 1113–1114.) She therefore attempted to avoid
the bar of the one-year statute of limitations by arguing that the
issuance of the court’s opinion in Sindell was what started the
limitations period running. (Jolly, supra, at p. 1114.) The Jolly
court rejected her argument, holding the decision in Sindell did not
constitute a “fact” that activated the one-year statute of
limitations: “Sindell demonstrated the legal significance of facts
already known to plaintiff. The statute had started to run for
plaintiff well before Sindell was decided.” (Jolly, supra, at p. 1115.)
       Like the plaintiff in Jolly, Truck was fully informed of the
facts, precluding application of the discovery rule. The only
unknown was the legal issue of how California courts would
construe “occurrence” with respect to calculating deductions for
ABIC. Truck’s argument incorrectly asserts that uncertainty about
a legal issue has the same effect as ignorance of factual issues,
such as the existence of an injury.

                   c.    There Is No Equitable Tolling

       Truck further asserts that under the doctrine of equitable
tolling, the statute of limitations did not run because Kaiser
obtained the benefits of lower deductible payments and it cannot
equitably avoid the burdens of LMI. Equitable tolling has no place
here. Equitable tolling is a judicially created, nonstatutory doctrine
that suspends or extends a statute of limitations as necessary to
ensure fundamental practicality and fairness. (Saint Francis
Memorial Hospital v. State Dept. of Public Health (2020) 9 Cal.5th
710, 716–717.) “The doctrine applies ‘occasionally and in special

                                  34
situations’ to ‘soften the harsh impact of technical rules which
might otherwise prevent a good faith litigant from having a day in
court.’ [Citation.]” (Id. at pp. 719–720.) There is no reason to apply
the doctrine where, as here, the parties were fully aware that
controlling law was uncertain, were sophisticated and assisted by
competent counsel, and could have protected their right to bring
suit by either bringing suit or executing a tolling agreement.

                   d.    Kaiser is Not Equitably Estopped to
                         Assert the Statute of Limitations

       Finally, Kaiser is not equitably estopped to assert the bar of
the statute of limitations merely because it agreed to the
Convention. The doctrine of equitable estoppel is founded on
principles of equity and fair dealing. (Krolikowski v. San Diego City
Employees’ Retirement System (2018) 24 Cal.App.5th 537, 564.) It
provides that a party may not deny the existence of facts if that
party has intentionally led others to believe a particular
circumstance to be true and to rely upon that belief to their
detriment. (Ibid.) “‘“‘Generally speaking, four elements must be
present in order to apply the doctrine of equitable estoppel: (1) the
party to be estopped must be apprised of the facts; (2) he [or she]
must intend that his [or her] conduct shall be acted upon, or must
so act that the party asserting the estoppel had a right to believe it
was so intended; (3) the other party must be ignorant of the true
state of facts; and (4) he or she must rely upon the conduct to his
[or her] injury.’” . . .’ [Citation.]” (Id. at pp. 564–565.) Nothing in
the record supports an assertion that Truck was unaware of the
true state of the relevant facts. Moreover, Truck knew the Supreme
Court had yet to define “occurrence” in the context of calculating
deductibles for ABIC.

                                  35
            4.     Code of Civil Procedure Section 360.5
                   Requires a Writing, Renewed Every Four
                   Years, for Waiver of the Statute of
                   Limitations
       Kaiser correctly notes that waiver of the statute of
limitations cannot, as Truck asserts, be created by implication.
Code of Civil Procedure section 360.5 states, in relevant part: “No
waiver shall bar a defense to any action that the action was not
commenced within the time limited by this title unless the waiver
is in writing and signed by the person obligated. No waiver
executed prior to the expiration of the time limited for the
commencement of the action by this title shall be effective for a
period exceeding four years from the date of expiration of the time
limited for commencement of the action by this title and no waiver
executed after the expiration of such time shall be effective for a
period exceeding four years from the date thereof, but any such
waiver may be renewed for a further period of not exceeding four
years from the expiration of the immediately preceding waiver.”
       Truck’s reliance on Don Johnson Productions, Inc. v. Rysher
Entertainment LLC (2012) 209 Cal.App.4th 919 (Don Johnson) is
misplaced. Truck relies on Don Johnson for the proposition that an
“equitable tolling agreement can exist independent of a written
waiver of the statute of limitations.” In Don Johnson, the court
held section 360.5 applies to waivers of the statute of limitations,
not tolling agreements; thus, it was not necessary for the parties to
renew their written tolling agreement after four years. (Don
Johnson, supra, at p. 930.) Here, however, as discussed in sections
E.3.a and E.3.c, ante, there is no evidence in the record that the
parties intended to toll the statute of limitations, and, in any event,
there is no reason to apply the equitable tolling doctrine here.

                                  36
Accordingly, for the statute of limitations to permit the assertion of
pre-2003 claims, Kaiser must have affirmatively and in writing
waived the statute. The record contains no such written waiver.

            5.     Truck’s Claimed Setoff Can Apply Only to
                   Those Deductibles Not Barred by the
                   Statute of Limitations
                   a.    Factual Background and Trial Court
                         Ruling
       In its Third Amended Complaint, Truck’s first cause of
action sought a declaratory judgment “that it must pay a net total
of its per[ ]occurrence limit minus the applicable deductible for any
ABIC, and that it is not liable to Kaiser . . . for any additional
amounts.” In its answer to Kaiser’s Third Amended Cross
Complaint, Truck asserted as its tenth affirmative defense that
“[t]o the extent Truck may be held liable to Kaiser, Truck is
entitled to set off from any such liability amounts owed to Truck by
Kaiser.” In its Phase I trial brief, Truck alleged that “[w]ith no
breach and no statute of limitations bar, Truck was entitled to
offset the full $9,521,158.50 for a $5,000 deductible per ABIC
under the 1974 policy. Truck acknowledges that with this outcome
it owes Kaiser $613,968.82, in reimbursement for allocated and
unallocated expenses Kaiser had paid under policies other than the
1974 policy. . . . Thus, [Truck asserts,] because [it] was entitled to
offset the whole $9,521,158.50 in deductible billings, [it] owes
Kaiser [only] $613,968.82, representing allocated and unallocated
loss expenses Kaiser previously paid Truck.” The trial court found
Truck’s setoff claim “could not have been ‘available’ until [LMI] and
could not have accrued until that time.” The court concluded that
Truck properly offset amounts for ABIC settled before 2003.

                                 37
                   b.      Truck’s Setoff Claim Does Not Revive
                           Stale Deductible Claims But Only
                           Permits Offset Against Post-2003
                           Deductibles
       Both parties assert waiver with respect to the setoff issue.
Truck asserts Kaiser’s failure to address the setoff nature of its
deductible claim waives its limitations period argument, which
operates differently for a setoff defense, while Kaiser argues Truck
did not raise the setoff issue at trial. As discussed above, the record
demonstrates the issue was raised by both parties and ruled on by
the trial court.
       In any event, Truck’s setoff claim does not revive pre-2003
deductibles or permit the parties to revisit those claims in any
fashion. Code of Civil Procedure section 431.70 allows the
offsetting of cross-demands that have coexisted at some point in
time, notwithstanding that one of the claims is now barred by the
statute of limitations. (Jones v. Mortimer (1946), 28 Cal.2d 627,
633; Sunrise Produce Co. v. Malovich (1950) 101 Cal.App.2d 520,
523 [applying previous version of section 431.70].) Section 431.70
provides that where cross-demands for money exist between
plaintiff and defendant, defendant “may assert in the answer the
defense of payment.”9 In general, a setoff prevents the superfluous

9     Code of Civil Procedure section 431.70 provides: “Where
cross-demands for money have existed between persons at any
point in time when neither demand was barred by the statute of
limitations, and an action is thereafter commenced by one such
person, the other person may assert in the answer the defense of
payment in that the two demands are compensated so far as they
equal each other, notwithstanding that an independent action
asserting the person’s claim would at the time of filing the

                                  38
exchange of money between parties and is asserted at the end of
litigation. (Los Angeles Unified School Dist. v. Torres Construction
Corp. (2020) 57 Cal.App.5th. 480, 500.) The affirmative defense of
setoff is equitable in nature. (Granberry v. Islay Investments (1995)
9 Cal.4th 738, 743–744.)
       Code of Civil Procedure section 431.70 does not toll running
of statutes of limitations, but permits assertion of setoff—if at the
time of the assertion of underlying claim—the statute of
limitations has not run. (See Safine v. Sinnott (1993) 15
Cal.App.4th 614, 618-619.) In this context, a defendant may use
setoff only “defensively to defeat the plaintiff’s claim in whole or in
part[,]” but may not use setoff offensively as an independent basis
for relief. (Construction Protective Services, Inc. v. TIG Specialty
Ins. Co. (2002) 29 Cal.4th 189, 197–198.) “[T]o the extent a
defendant seeks affirmative relief, the applicable statute of
limitations applies to the defendant’s [setoff] claim, just as it would
if the defendant were asserting its claim in an independent action.”
(Id. at p. 198)
       The trial court’s calculations were based upon its finding
that none of the deductibles were time-barred. As we have
concluded Truck may not revisit pre-August 2003 deductibles
because they are time-barred, Truck cannot rely on Code of Civil
Procedure section 431.70 to revive these claims. Truck may,
however offset against deductibles accruing after 2003; such
deductibles must be recalculated as per occurrence deductibles.

answer be barred by the statute of limitations. If the cross-
demand would otherwise be barred by the statute of limitations,
the relief accorded under this section shall not exceed the value of
the relief granted to the other party.”

                                  39
      F.    Conclusion

      Truck’s withholding of deductibles in the amount of
$6,629,391 for the 1,472 ABIC claims resolved before August 23,
2003 was improper; Truck’s claim to recover those deductibles is
time-barred. Accordingly, the portion of the final judgment relating
to Phase I, in which the trial court rendered judgment “in favor of
plaintiff and cross-defendant Truck and against defendant and
cross-complainant Kaiser with respect to Truck’s Third Amended
Complaint (for Declaratory Relief) and Kaiser’s Fourth Amended
Cross-Complaint according to the Phase One Decision” is reversed.
The matter is remanded to the trial court for further proceedings
consistent with this opinion.

     PHASE II: ALLOCATION TO NON-1974 PRIMARY
                     POLICIES

      In Phase II, Truck sought an order permitting it to allocate
defense and indemnity payments for claims under its 1974
primary policy (which has no aggregate limit) across all of its
triggered primary policies, including those with aggregate limits.
The trial court denied relief. The issue on appeal is whether,
consistent with Armstrong, Truck can obtain what is essentially
intra-insurer contribution from itself.
      As noted above, Armstrong holds that once a policy is
triggered, the policy obligates the insurer to pay “all sums” which
the insured shall become liable to pay as damages. (Armstrong,
supra, 45 Cal.App.4th at p. 105.) With a long-tail injury, this may
include damages attributable to other policy periods. (Ibid.) In
that case, the insured may elect to seek indemnity under a single
policy with adequate policy limits, and if such policy covers “all
sums” for which the insured may be liable, the insurer may be

                                40
held liable up to the policy limits. (Id. at p. 50.) An insured may
obtain full indemnification and defense from one insurer, leaving
the selected insurer to seek equitable contribution from other
insurers covering the same loss. (Id. at p. 52.) Kaiser selected
Truck’s 1974 no-aggregate limits policy under Armstrong.
       ICSOP addressed the scope of ICSOP’s obligations as
excess insurer to the Armstrong-selected 1974 policy and the
attachment point of ICSOP’s excess policies. (ICSOP, supra, at
pp. 20–21.) As explained below, the ICSOP decision was the
starting point for Truck’s arguments in Phase II.
       At the Phase II trial, Truck asserted it could allocate
indemnity to its other policy years—apparently to access
reinsurance funds associated with those other policies and access
excess insurance above those policies. Kaiser, on the other hand,
believed Truck’s proposal would disadvantage it because it would
exhaust the aggregate-limit policies, and perhaps the excess
policies above them, thereby reducing the amount of insurance
available to Kaiser and the asbestos claimants. The trial court
refused to grant Truck the relief it sought. We affirm.

I.    FACTUAL BACKGROUND

       As noted above, in July 2004, Truck started to allocate to
Kaiser a pro-rata share of each asbestos settlement, resulting in
Kaiser shouldering approximately 70 percent of the settlement
payments during the period from July 1, 2004 to February 1,
2006. Kaiser responded to Truck’s action by selecting the no-
aggregate limit 1974 policy pursuant to Armstrong to respond to
asbestos claims, asserting Truck was obligated to indemnify it for
“all sums” due.
       Following the LMI decision in 2007, Truck’s Second
Amended Complaint asserted the right to equitably allocate

                                41
payments for each occurrence among all triggered Truck policies.
Kaiser’s Third Amended Cross-Complaint asserted that ICSOP,
which provided excess insurance to the Truck 1974 policy, was
responsible to pay all amounts in excess of the 1974 policy’s per
occurrence limit of $500,000.

      A.    The 2013 ICSOP Decision

       In ICSOP, Kaiser argued that after the 1974 Truck policy
responded to an individual claim by paying its per occurrence
limit of $500,000, ICSOP was obligated to indemnify Kaiser for
amounts in excess of $500,000 up to the $5,000,000 per
occurrence limit of the ICSOP policy. (ICSOP, supra, pp. 6–7.)
ICSOP, on the other hand, argued that because the ABIC
potentially trigger up to 19 policy periods, “the policy limits for
these 19 separate policy periods must be ‘stacked’ 10 such that
                                                    [   ]

‘not only must the Truck $500,000 [per occurrence] limit in the
1974 policy period be exhausted, but so must all of Truck’s
primary limits in its other eighteen annual policy periods’” before
its policy attached. (Id. at pp. 15, 34.) Thus, ICSOP argued, while
the 1974 primary policy has been exhausted as to many claims
that exceed the $500,000 per occurrence limit, primary policies
for other years remain unexhausted. (Id. at pp. 22–23.) ICSOP
contended that it has “no indemnity obligations with regard to
any asbestos bodily injury claims until the per occurrence limits

10    “Stacking” occurs when more than one policy is triggered by
an occurrence. Each policy year can be called upon to respond to
the claim up to the full limits of that policy. The limits of each
policy triggered by an occurrence are added together to the
determine the amount of coverage available for the claim.
(ICSOP, supra, at p. 10, fn. 4.)

                                 42
of each of Truck’s annual policies . . . have been exhausted.” (Id.
at p. 23, original emphasis.)
       In ICSOP, this court determined that horizonal exhaustion
applied to the primary policies, in the sense that ICSOP’s excess
policy did not attach until all collectible primary policies were
exhausted. (ICSOP, supra, at p. 24.) Thus, ICSOP’s excess
liability was “excess to all other collectible primary insurance—
whether for 1974 or any other year[.]” (Id. at p. 18.) “[T]he
[ICSOP] policy does not attach immediately upon a loss, but only
after all available primary insurance has been exhausted.” (Id. at
p. 19.)
       ICSOP then noted that in Continental Insurance, the
Supreme Court endorsed an “all sums with stacking” rule for
long-tail injuries. Continental Insurance reasoned that stacking
suited continuous loss injuries. (Continental Insurance, supra, 55
Cal.4th at pp. 201–202.) ICSOP, however, concluded the rule
would not apply to the Truck policies because they prohibited
stacking—their language limited recovery to $500,000 “per
occurrence.” (ICSOP, supra, at pp. 32–33.)
       ICSOP concluded that the Truck policies were exhausted
(as to any given claim) after a claim was paid up to the single
policy limit, even though a claim was spread across multiple
policy periods. (ICSOP, supra, p. 35.) Thus, Kaiser could recover
from ICSOP to the extent that a claim exceeded the $500,000 per
occurrence limit of the 1974 policy. (Ibid.) “Accordingly, once
Truck has contributed $500,000 per asbestos bodily injury claim,
its primary policies are exhausted [with respect to such claim]
and Truck has no further contractual obligation to Kaiser.” (Ibid.)
The matter was remanded to the trial court to determine whether
Kaiser was entitled to summary adjudication of its fifth

                                43
(declaratory relief) and sixth (breach of contract against ICSOP)
causes of action of the cross-complaint. (Id. at pp. 35–36.)
       ICSOP, however, was only directed to ICSOP’s excess
obligations and did not discuss whether Truck could allocate
indemnity among its own policies. (ICSOP, supra at pp. 5–7.) On
March 28, 2014, Truck filed a Third Amended Complaint, the
operative complaint for the Phase II trial. Truck alleged it was
“entitled to allocate amounts paid in indemnity for each
occurrence among all triggered Truck Policies[.]” Truck asserted
it could do so based upon the principle that other primary
insurers at the same level of coverage could seek contribution
from each other.

      B.    Evidence at Phase II Trial and Statement of
            Decision

      For purposes of the Phase II trial, the parties defined the
issue as “‘whether Truck, after paying indemnity for an [asbestos
claim] under its 1974 policy year, can allocate that amount to its
other policy years that are triggered by the claim.’”

            1.    Evidence At Trial

      The 1971 to 1980 policies contain “anti-stacking”
provisions. These anti-stacking provisions prevent the insured
from combining the policy limits of all triggered policies, instead
limiting the insured to recovery under one policy. All of the
policies contain an “all sums” insuring agreement as set forth in
the 1974 policy. The agreement provides that Truck agrees “[t]o
pay on behalf of the insured all sums which the insured shall
become obligated to pay” for personal injury damages suffered by
a third party. While an insurance policy will ordinarily pay “all

                                44
sums” up to its aggregate limit, the 1974 policy had no aggregate
limit.
       At trial, Kaiser presented evidence showing that under
Truck’s proposal, Kaiser could potentially lose coverage and
defense of claims. For example, approximately $4 million
remained in aggregate coverage under the 1980-1983 primary
policies; if those policies were exhausted, Kaiser would have to
seek coverage under excess policies that did not provide a duty to
defend. Thus, Truck’s proposal could obligate Kaiser to pay some
portion of defense costs that it otherwise would not be required to
pay, and could erode the aggregate limits of both the primary and
excess policies, eventually leaving Kaiser without coverage for
those years.
              2.    Statement of Decision

      The trial court’s statement of decision discerned two bases
to deny Truck’s allocation proposal. First, because the other three
primary insurers’ policies had been exhausted, Truck was the
only primary insurer still on risk. Thus, Truck’s proposal, “if
adopted, would allow it to circumvent the ‘all sums’ requirement
under its policy . . . . it would potentially reduce (or even
eliminate) coverage for those ‘aggregate year’ policies for future
[asbestos claims].” Second, the trial court found “Truck’s proposed
equitable allocation would also contravene the ICSOP ruling. . . .
ICSOP makes clear that the only available primary insurance for
a continuing injury [asbestos claim] is the 1974 Truck policy.”
Truck’s proposed allocation to its other policy years “would, at the
very least, compromise Kaiser’s right to ‘pick a policy and use it
up to the policy limits.’ [Citation.]”
      Finally, after observing that California was an “all sums”
jurisdiction, the trial court concluded Truck’s proposal would blur

                                45
the distinction between “all sums” and “pro-rata” jurisdictions.
(See Viking Pump, Inc. v. Century Indem. Co. (Del. 2009) 2 A.3d
76 (Viking Pump)). The trial court concluded, “There is not a
basis under which Truck can equitably contribute benefits under
the 1974 policy to its other policy years. There are also no cases
cited by Truck permitting an ‘all sums’ insurer to allocate to its
own policies in this manner.”
       For the reasons discussed below, we agree with the trial
court that Truck’s proposal is impermissible, and we affirm the
Phase II ruling.

II.   DISCUSSION

      A.    Truck Cannot Apportion Indemnity Across
            Multiple Policies

        Truck asserts that the “all sums” rule does not bar intra-
insurer contribution. Kaiser, on the other hand, argues that any
such contribution claim would harm it by reducing or exhausting
insurance available under the aggregate-limit policies. Excess
insurers LMI, Fireman’s Fund and Allianz Underwriters
Insurance Company, who are parties to this phase of the
litigation, argue that Truck cannot obtain contribution from
itself.
             1.    Standard of Review

      Truck frames the issue here as one of contribution, an
equitable principle reviewed for abuse of discretion. The issue,
however, is the legal question of whether, consistent with the
insured’s Armstrong election, the insurer may apportion
indemnity payments across other policies it issued for other
policy years. If we agree an insurer may do so, how such

                                46
apportionment would be calculated would be an equitable
question. Whether the insurer may do so in the first place is a
legal question. (Thompson v. Asimos (2016) 6 Cal.App.5th 970,
985.)
            2.    Truck’s Proposal is Not Equitable
                  Contribution

       “Equitable contribution permits reimbursement to the
insurer that paid on the loss for the excess it paid over its
proportionate share of the obligation, on the theory that the debt
it paid was equally and concurrently owed by the other insurers
and should be shared by them pro-rata in proportion to their
respective coverage of the risk.” (Fireman’s Fund Ins. Co. v.
Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1293
(Fireman’s Fund).) The purpose of the rule “is to accomplish
substantial justice by equalizing the common burden shared by
coinsurers, and to prevent one insurer from profiting at the
expense of others. [Citations.]” (Id. at pp. 1293–1294)
       Equitable contribution is “predicated on the commonsense
principle that where multiple insurers or indemnitors share
equal contractual liability for the primary indemnification of a
loss or the discharge of an obligation, the selection of which
indemnitor is to bear the loss should not be left to the often
arbitrary choice of the loss claimant, and no indemnitor should
have any incentive to avoid paying a just claim in the hope the
claimant will obtain full payment from another coindemnitor.
[Citation.]” (Fireman’s Fund, supra, 65 Cal.App.4th at p. 1295.)
       The fact that several insurance policies may cover the same
risk does not give the insured the right to recover more than
once. (Fireman’s Fund, supra 65 Cal.App.4th at p. 1295.) “Rather,
the insured’s right of recovery is restricted to the actual amount

                                47
of the loss. Hence, where there are several policies of insurance
on the same risk and the insured has recovered the full amount
of its loss from one or more, but not all, of the insurance carriers,
the insured has no further rights against the insurers who have
not contributed to its recovery.” (Ibid.)
        Armstrong addressed contribution rights amongst different
insurers on the same risk. The court observed that successive
insurers had the obligation to “‘respond in full’” to the insured’s
claim, but that obligation was subject to “‘equitable contribution
from the issuers of other policies triggered by the same claim.’”
(Armstrong, supra, 45 Cal.App.4th at p. 51.) In discussing
contribution, Armstrong considered how such contribution
amongst insurers might be calculated, but did not consider intra-
insurer contribution. (Id. at pp. 51–52.) Armstrong therefore does
not support Truck’s proposition that there can be contribution
between policies issued by the same insurer, nor does any other
California case.
        Based on these authorities, we conclude Truck’s proposal is
not a theory of equitable contribution. Truck’s proposal could
expose Kaiser to detrimental exhaustion of Truck’s policies
having an aggregate limit, resulting in Kaiser losing coverage for
what could have been covered claims. Similarly, it could deplete
or exhaust layers of excess insurance above the other Truck
policies. Truck does not seek contribution from another insurer
on the same loss, but rather seeks to shift responsibility for
payment of future claims from itself to excess carriers or its
insured.
        Truck responds that its proposal would not necessarily
erode Kaiser’s coverage because some of those policy years have
no aggregate limit. Truck stresses that the proposal would allow

                                 48
it to access more reinsurance or excess insurance. (See, e.g., St.
Paul Fire and Marine Ins. Co. v. Ins. Co. (N.D.Cal. Mar. 7, 2017,
Case No. 15-CV-02744-LHK) 2017 U.S. Dist. LEXIS 32551, at p.
31.) Thus, Truck seeks to benefit itself while potentially injuring
its insured. The proposal therefore is inconsistent with the notion
of fairness underlying equitable contribution.
       Truck’s resort to the duty of good faith and fair dealing to
salvage its proposal similarly fails. Truck argues any
apportionment of damages over its policies is governed by its
duty of good faith and fair dealing and is subject to judicial
review. (See, e.g., U.S. Fidelity & Guar. Co. v. American Re-Ins.
Co. (2013) 20 N.Y.3d 407, 420 [985 N.E.2d 876] (U.S. Fidelity).)
In U.S. Fidelity, the insurer allocated its losses on no-aggregate
limit policies to its own advantage and to the disadvantage of its
reinsurer. (Id. at p. 486.) There, the court adopted a rule of
“objective reasonableness” to determine good faith allocation, but
on the facts before it, found no unreasonableness. (Id. at pp. 420–
421.) Aside from the fact that U.S. Fidelity involved reinsurance
and has little application here to primary level cross-policy
allocation, we see no reason to compel Kaiser to engage in after-
the fact litigation to enforce its rights under the policy through
the covenant of good faith and fair dealing.
       Nonetheless, Truck contends ICSOP did not consider the
intra-insurer allocation question because it only considered the
maximum amount of primary insurance available to pay any one
claim, a question controlled by the policy language and anti-
stacking provisions. As a matter of equity, however, Truck
asserts that issue is distinct from how the amount, once paid, can
be allocated among policies. Consequently, Truck contends it is

                                49
entitled to allocate losses it pays under one triggered policy to all
of its triggered policies.
        Contrary to Truck’s assertion, ICSOP does not further its
argument and does not permit allocating Kaiser’s losses across
non-1974 triggered policies. ICSOP concluded that based on the
policies’ anti-stacking provisions, the 1974 policy was the only
policy available to pay claims triggering that policy. (ICSOP,
supra, at p. 30.) This holding alone dooms Truck’s argument for
cross-policy allocation as it is law of the case. The doctrine
“precludes a party from obtaining appellate review of the same
issue more than once in a single action.” (Katz v. Los Gatos-
Saratoga Joint Union High School Dist. (2004) 117 Cal.App.4th
47, 62; Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 491.)
             3.     Truck’s Proposal Violates the All Sums
                    Rule of Armstrong

       In contrast to California’s rule of “all sums” is the “pro-
rata” approach, which “‘assigns a dual purpose to the phrase
“during the policy period” in the CGL policy’s definition of
“occurrence.” The phrase serves both as a trigger of coverage and
as a limitation on the promised “all sums” coverage. . . .’
[Citation.]” (Continental Insurance, supra, 55 Cal.4th at p. 198.)
As explained in Continental Insurance, “‘This approach
emphasizes that part of a long-tail injury will occur outside any
particular policy period. Rather than requiring any one policy to
cover the entire long-tail loss, [pro-rata] allocation instead
attempts to produce equity across time.’ [Citation.]” (Ibid.) As the
name implies, “[u]nder the most basic scheme of pro-rata
allocation, an equal share of the amount of damage is assigned to
each year over which a long-tail injury occurred. The amount
owed under any one policy is calculated by dividing the number of

                                 50
years an insurer was ‘on the risk’ by the total number of years
that the progressive damage took place. The resulting fraction is
the portion of the liability owed by the particular insurer.” (Id. at
p. 199.) Although some states have concluded that pro-rata
coverage is more equitable, in California the language of CGL
policies requires that the “all sums” approach is used. (Ibid.)
        As explained in Viking Pump, supra, 2 A.3d 76, “[t]he all
sums approach resembles joint and several liability in the sense
that the insured may collect against any insurer whose policy is
triggered, up to the policy’s relevant per occurrence total limits,
in the same way that a plaintiff, if exposed to asbestos by two
different defendants in the same case, might collect his entire
judgment from one of the defendants and leave the paying
defendant to seek contribution from the other defendant in a
later action. . . . ” (Id. at p. 111, fn. omitted.) Under the pro-rata
approach, “a court must somewhat arbitrarily divvy up the total
liability of the insured among its insurers, treating them as if
they were divisible injuries.” (Id. at p. 112.) If a court “applied the
so-called ‘time on the risk’ method for prorating liability, the
court would divide up liability according to what percentage of
the injury the insurance policy covered.” (Ibid., fn. omitted.)
       “For obvious reasons, the all sums approach tends to be
favored by insured[s] and the pro-rata approach by insurers. The
all sums approach lets the insured pick a policy and use it up to
the policy limits, and leave questions of apportionment to be
fought out later among the insurers themselves. The pro-rata
approach gives insurers material reductions in their exposure by
shifting from the insurer to the insured the risk of periods of
exposure when the insured lacked coverage or the insurer for
that period went bankrupt, or during which another defendant

                                  51
was responsible for exposure to the insured, even if the insured
itself was held jointly and severally responsible for the plaintiff’s
entire harm.” (Viking Pump, supra, 2 A.3d at pp. 112–113.)
       Here, Truck seeks to import the concept of contribution
among insurers into the “all sums” structure of its own 19
policies, analogizing its policies to those issued by multiple
insurers. We find to do so would contravene the “all sums”
language of the policies requiring Truck to pay all sums due to
Kaiser, and is inconsistent with Armstrong because it could
reduce the amount of insurance available to Kaiser and the
asbestos claimants by exhausting policies with aggregate limits.
       Truck’s proposal runs contrary to its contractual obligation
to Kaiser to pay “all sums” for which Kaiser is liable. For
example, asbestos claims with dates of first exposure after 1980
would trigger only Truck policies with aggregate limits. But those
policies might be exhausted by Truck’s allocation proposal. As
explained in Armstrong, “apportionment among multiple insurers
must be distinguished from apportionment between an insurer
and its insured. When multiple policies are triggered on a single
claim, the insurer’s liability is apportioned pursuant to the ‘other
insurance’ clauses of the policies [citations] or under the
equitable doctrine of contribution. [Citations.] That
apportionment [among insurers], however, has no bearing upon
the insurer’s obligation to the policyholder [Citation.] . . . .
[Citation.] The insurers’ contractual obligation to the policyholder
is to cover the full extent of the policyholder’s liability (up to the
policy limits).” (Armstrong, supra, 45 Cal.App.4th at pp. 105–
106.) In other words, the insurer must pay “all sums” under the
policy, rendering equitable contribution a matter between
insurers, unrelated to the insurer’s contractual indemnity

                                 52
obligation to its insured. (Aerojet, supra, 17 Cal.4th at p. 72
[equitable contribution “has no place between insurer and
insured”]; Dart Industries Inc. v. Commercial Union Ins. Co.
(2002) 28 Cal.4th 1059, 1080.)
       Truck’s proposal would be detrimental to Kaiser because it
could exhaust policies available to Kaiser for claims that do not
trigger the 1974 policy. Truck could exhaust those non-1974
policies that have aggregate limits with its proposal, leaving
Kaiser with no indemnification for future claims that trigger
those policies but not the 1974 policy. As explained in Flintkote
Co. v. General Accident Assur. Co. (N.D.Cal. Aug. 6, 2008, No.
C 04-01827 MHP) 2008 U.S. Dist. LEXIS 108245 (Flintkote),
upon which Truck relies, “where an insurer with unlimited
aggregate liability breaches, and the gap is filled by an insurer
whose performance [erodes] a liability policy with an aggregate
limit, the insured suffers damage directly when the policy with
an aggregate limit is unavailable to respond to later claims. In
other words, [the insured] is directly harmed insofar as it can no
longer rely on the policy with an aggregate limit to cover future
claims and is forced to pay the claim on its own.” (Id. at pp. 10–
11.)11

11     Generally, an unpublished California opinion may not be
cited or relied upon. (Cal. Rules of Court, rule 8.1115.) However,
citation to unpublished opinions from other jurisdictions for their
persuasive value does not violate this rule. (See Farm Raised
Salmon Cases (2008) 42 Cal.4th 1077, 1096, fn. 18, emphasis
omitted [“Citing unpublished federal opinions does not violate our
rules [Citation.]”].) Opinions from other jurisdictions—some of
which have different publication criteria than California—can be
cited without regard to their publication status and may be

                                53
       Truck posits that the only difference between all-sums and
pro-rata jurisdictions is when the allocation is made—after a
claim is handled, even under an all-sums approach the loss may
be equitably distributed between all triggered policies because
even Armstrong recognized the “‘method of allocation only affects
the timing of payments.’” (Armstrong, supra, 45 Cal.App.4th at p.
53, fn. 17.) We disagree. Truck’s cited portion of Armstrong’s
allocation discussion did not discuss intra-insurer allocation, but
instead related to equitable contribution among insurers on the
same risk. (Id. at p. 53.) On that basis, it is of no help to Truck.
       Thus, we reject Truck’s attempt to escape the confines of
the Armstrong rule by arguing it can obtain contribution from
itself via allocation of losses under the 1974 policy to other policy
years. Armstrong observed that although the all-sums approach
prevents an insurer from apportioning a share of the loss to the
insured, the insurers can apportion a loss among themselves as
long as at least one of them makes good on all sums owed to the
insured. (Armstrong, supra, 45 Cal.App.4th at p. 51.) This rule
does not mean Truck can obtain contribution from itself—Truck’s
self-contribution theory does not equate to contribution among
different insurers. (Ibid.; see also, Flintkote, supra, 2008
U.S.Dist. LEXIS 108245 pp. 17–21.)

regarded as persuasive. (Central Laborers’ Pension Fund v.
McAfee, Inc. (2017) 17 Cal.App.5th 292, 319, fn. 9.) In that
regard, unpublished federal opinions are citable as persuasive,
although not precedential, authority. (Pacific Shore Funding v.
Lozo (2006) 138 Cal.App.4th 1342, 1352, fn. 6.)

                                 54
PHASE III-A: (1) DUTY OF EXCESS CARRIERS TO DROP
     DOWN AND (2) AMOUNT OF TRUCK’S PER
OCCURRENCE INDEMNITY OBLIGATION UNDER THE
                     1974 POLICY

      The Phase III-A trial addressed two issues. The first issue
was “[w]hether the first layer excess/umbrella policies of [LMI,
First State, and Westchester Fire Insurance] ha[d] a duty to ‘drop
down’ and contribute a pro-rata share for their policy years to
Truck.”12 The trial court said no. We agree. The second issue was
whether Truck has a “contractual obligation to pay a [per
occurrence] limit of liability up to $500,000 or $495,000 under the
terms of its 1974 primary policy.” The trial judge ruled that
Truck was obligated to pay up to $495,000 in indemnity
payments, with Kaiser contributing $5,000 as a deductible. We
agree with that ruling as well.

                       Phase III-A, Part 1

I.    EVIDENCE AT PHASE III-A, PART 1 TRIAL

      Truck argued that because the other three primary
insurers’ policies had been exhausted, pursuant to the “other
insurance” clause in its own policies, as well as the excess
policies’ language requiring them to “drop down,” the excess

12     Previously, in ICSOP, the court held that ICSOP’s excess
policy attached when a claim exhausted the $500,000 per claim
limit. (ICSOP, supra, at p. 56.) Thus, the ICSOP policy was not at
issue in Phase III-A, part 1. (See, e.g., Trial Court’s Statement of
Decision, Phase III-A, p. 38, fn. 21.)

                                55
insurers13 were required to defend and indemnify Kaiser
“immediately upon the exhaustion of the aggregate limits of
liability of the primary policy directly beneath” them.

     A.    Excess Policy Provisions

      The excess policies14 contained the following relevant
provisions:
      LMI: The LMI policies were in effect from 1947 to 1964,
and stated that they would attach upon exhaustion of “other

13    Excess insurers LMI, Westchester and First State filed
separate respondents’ briefs in Truck’s Phase III-A appeal.
Joining in LMI’s respondent’s brief are excess insurers ICSOP,
Granite State Insurance Company, Continental Insurance
Company, Fireman’s Fund Insurance Company, Allianz
Underwriters Insurance Company, National Casualty Company,
Sentry Insurance, Evanston Insurance Company, Transport
Insurance Company, and TIG Insurance Company. Joining in
First State’s respondent’s brief are excess insurers Evanston
Insurance Company and TIG Insurance Company. Joining in
Westchester’s respondent’s brief are excess insurers Transport
Insurance Company, Granite State Insurance Company,
Evanston Insurance Company and TIG Insurance Company.

14    Excess insurance policies have several forms. An excess
policy may be written as (1) excess to a particular policy or
policies; (2) excess to coverage provided by a particular primary
insurer; (3) excess to any insurance coverage available to the
insured; or (4) excess to the applicable limits of scheduled
policies. (Croskey et al., Cal. Practice Guide: Insurance
Litigation (The Rutter Group 2021) ¶ 8:181 (Rutter Guide).)
Where the excess is excess to identified policies, it is called
“specific excess.” (Olympic Insurance. v. Employers Surplus Lines
Ins. Co. (1981) 126 Cal.App.3d 593, 598 (Olympic Insurance).)

                               56
insurances . . . whether recoverable or not . . .” The 1958 to 1961
policies provided if other valid and collectible insurance with
another insurer was available to the insured covering a loss also
covered by LMI, other than LMI’s excess insurance, “the
insurance afforded by this certificate shall be in excess of and
shall not contribute with such other insurance.” The 1961 to 1964
policies stated that the policies were excess of the limits of the
underling insurance, and specified that “[i]f other valid and
collectible insurance with any other insurer is available to the
Assured covering a loss also covered by this policy, other than
insurance that is in excess of the insurance afforded by this
policy, the insurance afforded by this policy shall be in excess of
and shall not contribute with other insurance.”
       Westchester: The Westchester policy was in effect from
May 1, 1984 to April 1, 1985. The policy provided that “the
company’s liability shall be only for the ultimate net loss in
excess of the insured’s retained limit defined as the greater of:
[¶] the total of the applicable limits of the underlying policies
listed in Schedule A hereof, and the applicable limits of any other
insurance collectible by the insured . . .” (Emphasis added.) The
policy also provided that in the event of reduction or exhaustion
of the underlying policies listed on Schedule A, the Westchester
policy “shall continue in force as underlying insurance.”
       First State: First State’s excess policy was issued for the
1983 to 1984 policy year. First State promised to indemnify “an
amount equal to the limits of liability indicated beside the
underlying insurance listed in the Schedule A of underlying
insurance, plus the applicable limits of any other underlying
insurance collectible by the insured[.]” (Emphasis added.)

                                57
      B.   Statement of Decision

       The trial court found the excess insurers had no duty to
“drop down” and equitably contribute to Truck under the 1974
policy, rejecting Truck’s argument there had been “vertical
exhaustion” of the other primary insurers’ policies. Instead, the
trial court found that the default California rule of “horizontal
exhaustion” controlled, as set forth in Community Redevelopment
Agency v. Aetna Casualty & Surety Co. (1996) 50 Cal.App.4th 329
(Community Redevelopment). Under that rule, all primary
insurance must exhaust before any excess policy must indemnify
the insured. (Id. at p. 339.) Horizontal exhaustion is contrasted
with “vertical exhaustion,” where “coverage attaches under an
excess policy when the limits of a specifically scheduled
underlying policy are exhausted and the language of the excess
policy provides that it shall be excess only to that specific
underlying policy.” (Id. at pp. 339–340, fn. omitted.)
       The trial court concluded that Community Redevelopment
and ICSOP controlled, having addressed identical excess policy
language, and as a result the excess carriers had no duty to drop
down until there was horizontal exhaustion, namely, all primary
policies on the risk exhausted. The court explained that
Community Redevelopment made it clear that in spite of a
reference to scheduled underlying insurance, where the excess
policy contained the phrase “other insurance,” the rule of
horizontal exhaustion applied, and that Truck’s interpretation
would convert excess insurers into primary insurers.

II.   DISCUSSION

      Truck argues that the 1974 no-aggregate limit primary
policy can trigger the excess insurers to drop down on a per

                               58
occurrence basis, rather than when all primary insurance has
been exhausted, thereby converting the excess policies into
policies that vertically exhaust by virtue of being “specific
excess.”
      Truck reaches this result by selectively focusing on the
“continue in force as underlying insurance” language providing
the excess policies attach upon exhaustion of specifically
scheduled underlying primary policies, thereby transforming the
policies into “specific excess” policies that need not horizontally
exhaust. Truck asserts it therefore falls within the exception to
the horizontal exhaustion rule set forth in Community
Redevelopment for policies “describing and limiting the
underlying insurance” as the policy language in both instances is
basically equivalent. (See Community Redevelopment, supra, 50
Cal.App.4th at p. 340, emphasis omitted.) In addition, Truck
argues that the recent decision of Montrose III, supra, 9 Cal.5th
215 supports its position because Montrose III has essentially
eliminated horizontal exhaustion where, as here, a specific
underlying primary insurance has exhausted. We disagree,
finding Community Redevelopment controls and as a result, all
primary policies must exhaust.

      A.    Standard of Review

      “Normal rules of policy interpretation [ ] apply in
determining coverage under excess policies.” (Croskey et al., Cal.
Practice Guide: Insurance Litigation (The Rutter Group 2020)
¶ 8:180.) “While insurance contracts have special features, they
are still contracts to which the ordinary rules of contractual
interpretation apply. [Citations.]” (Foster-Gardner, Inc. v.
National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868.) While
the primary policy may be consulted in interpreting an excess

                                59
policy, each policy is a separate document and is interpreted
separately. (Croskey et al., Cal. Practice Guide: Insurance
Litigation, supra, ¶ 8:180.5; Northrop Grumman Corp. v. Factory
Mut. Ins. Co. (9th Cir. 2009) 563 F.3d 777, 785 [primary policy
must be consulted in interpreting the excess policy, but court
does not treat the two documents as one contract].) Where, as
here, there are no factual disputes and hence the interpretation
of the contracts does not depend upon extrinsic evidence, their
interpretation is a matter of law. (Oh v. Teachers Ins. and
Annuity Assn. of America (2020) 53 Cal.App.5th 71, 84.)

      B.    Excess and Primary Insurance

       Primary insurance, or the first layer of insurance, provides
immediate coverage upon the occurrence of a loss. (St. Paul
Mercury Ins. Co. v. Frontier Pacific Ins. Co. (2003) 111
Cal.App.4th 1234, 1252-1253.) Excess insurance, or the second
(or higher) layer of insurance, provides coverage once primary
insurance is exhausted. (Montrose III, supra, 9 Cal.5th at p. 222.)
“An excess insurer’s obligation begins once a certain level of loss
or liability is reached; that level is generally referred to as the
‘“attachment point”‘ of the excess policy. [Citation.]” (Id. at p.
223.) As long as primary coverage exists, an excess insurer has no
duty to contribute to defense or indemnity. (Olympic Insurance,
supra, 126 Cal.App.3d at p. 601.) No contractual obligations exist
between primary and excess insurers; rather any rights and
duties flow from equitable principles. (Signal Cos. v. Harbor Ins.
Co. (1980) 27 Cal.3d 359, 369.)

                                60
      C.    Community Redevelopment and Horizontal
            Exhaustion

       Community Redevelopment applied the default “horizontal
exhaustion” rule in holding that an excess insurer had no duty to
drop down and provide a defense to an insured before the liability
limits of all primary policies had been exhausted. (Community
Redevelopment, supra, 50 Cal.App.4th at p. 341.) There, the
“unambiguous” excess policy language conditioned coverage on
the exhaustion of “‘any . . . valid and collectible’” underlying
insurance, which language Community Redevelopment held must
be read to include all available primary insurance. (Id. at pp.
338–339.) Community Redevelopment reasoned that applying the
horizontal exhaustion rule to continuous loss cases remained
consistent with Montrose I, which holds that long-tail losses are
covered by all policies in effect during the periods of injury.
(Montrose I, supra, 10 Cal.4th at p. 673.) “Absent a provision in
the excess policy specifically describing and limiting the
underlying insurance, a horizontal exhaustion rule should be
applied in continuous loss cases . . . [A]ll of the primary policies
in force during the period of continuous loss will be deemed
primary policies to each of the excess policies covering that same
period. . . . [Thus,] all of the primary policies must exhaust[.]”
(Community Redevelopment, supra, 50 Cal.App.4th at p. 340; see
also Stonewall Ins. Co. v. City of Palos Verdes Estates (1996) 46
Cal.App.4th 1810, 1853 (Stonewall) [horizontal exhaustion
approach more consistent with Montrose’s continuous trigger
approach].) As Stonewall further explained, “if ‘occurrences’ are
continuously occurring throughout a period of time, all of the
primary policies in force during that period of time cover these
occurrences, and all of them are primary to each of the excess

                                61
policies; and if the limits of liability of each of these primary
policies is adequate in the aggregate to cover the liability of the
insured, there is no ‘excess’ loss for the excess policies to cover.”
(Stonewall, supra, 46 Cal.App.4th at p. 1853.)

      D.     Montrose III and Vertical Exhaustion
       Community Redevelopment considered an underlying layer
of primary insurance. In contrast, Montrose III considered
multiple layers of excess insurance. (Montrose III, supra,
9 Cal.5th at p. 226.) Montrose III held that based on policy
language equivalent to that analyzed in Community
Redevelopment, a vertical exhaustion rule applied. (Id. at pp. 226,
237.) Addressing the order in which an insured may access excess
policies from different policy periods to cover liability arising
from long-tail injuries, the insurers argued that the “other
insurance” clauses in the excess policies providing “that each
policy shall be excess to other insurance available to the insured,
whether or not the other insurance is specifically listed in the
policy’s schedule of underlying insurance” mandated horizontal
exhaustion. (Id. at p. 230.) Thus, they reasoned, in the case of a
long-tail injury, “every policy with a lower attachment point from
every policy period triggered by the continuous injury” must
exhaust before a higher-level excess policy must contribute.
(Ibid.)
       Rejecting the insurers’ arguments, Montrose III applied a
rule of vertical exhaustion and concluded “that in a case involving
continuous injury, where all primary insurance has been
exhausted, the policy language at issue” permitted “the insured
to access any excess policy for indemnification during a triggered
policy period once the directly underlying excess insurance has

                                  62
been exhausted.” (Montrose III, supra, 9 Cal.5th at p. 237.)
Montrose III relied on both the policy language regarding “other
insurance” as well as the practicalities and equities of multiple
layers of excess insurance and long-tail injuries. (Ibid.)
       Examining the policy language, Montrose III first observed
that the “other insurance clauses” did not “speak clearly to the
question before” it. (Montrose III, supra, 9 Cal.5th at p. 233.)
Instead, “other aspects of the insurance policies strongly suggest
that the exhaustion requirements were meant to apply to directly
underlying insurance and not to insurance purchased for other
policy periods.” (Ibid.) Montrose III found that “other insurance”
clauses were traditionally used to prevent multiple recoveries
when more than one policy provided coverage for a particular
loss, and they “have not generally been understood as dictating a
particular exhaustion rule for policy holders seeking to access
successive [layers of] excess insurance policies in cases of long-
tail injury.” (Id. at p. 231.) Rather, such clauses “have generally
been used to address ‘[a]llocation questions with respect to
overlapping concurrent policies.’ [Citation.]” (Id. at p. 232,
emphasis in original.)
       Montrose III relied on the policies’ express statement of
their attachment point, “generally by referencing a specific dollar
amount of underlying insurance in the same policy period that
must be exhausted.” (Montrose III, supra, 9 Cal.5th at p. 233.)
Further, the excess policies included or referenced schedules of
underlying insurance, all covering the same policy period. (Id. at
p. 234.) Montrose III rejected the insurers’ interpretation and
concluded that “[r]ather, in the absence of any more persuasive
indication that the parties intended otherwise, the policies are
most naturally read to mean that [the insured] may access its

                                63
excess insurance whenever it has exhausted the other directly
underlying excess insurance policies that were purchased for the
same policy period.” (Ibid.)
       Applying an additional rationale, Montrose III found
myriad “practical obstacles to securing indemnification” that
precluded horizontal exhaustion, namely, the lack of
standardization of policy language that would require
examination of myriad different periods of time, differing levels of
coverage, and distinct exclusions, terms, and conditions.
(Montrose III, supra, 9 Cal.5th at p. 235.) “In sum, ‘[h]orizontal
exhaustion would create as many layers of additional litigation as
there are layers of policies.’ [Citation.]” (Ibid.) “A rule of vertical
exhaustion does not restrict the insured from accessing excess
coverage from other [excess] policy periods if the terms and
conditions are otherwise met; it merely relieves the insured of the
obligation of establishing whether all of the applicable terms and
conditions at any given ‘layer’ of excess coverage are met before it
accesses the next ‘layer’ of coverage.” (Id. at pp. 235–236.)
       Finally, Montrose III distinguished Community
Redevelopment, supra, 50 Cal.App.4th 329. (Montrose III, supra,
9 Cal.5th. at p. 237.) Montrose III noted that the procedural
posture of the case before it was different than Community
Redevelopment: Montrose III involved a dispute between an
insured and its excess insurers, while Community Development,
like the case before us, involved a dispute between a primary
insurer and an excess insurer. (Montrose III, supra, 9 Cal.5th. at
p. 237.)
       In spite of Montrose III’s directive with respect to primary
insurance, a recent case applied Montrose III to primary
insurance. In SantaFe Braun, Inc. v. Insurance Co. of North

                                  64
America (2020) 52 Cal.App.5th 19 (SantaFe Braun), the appellate
court extended Montrose III and concluded that primary
insurance need not be horizontally exhausted across all policy
years before excess coverage in a particular policy year is
triggered. (Id. at p. 29.) SantaFe Braun reasoned that the first-
level excess policies contained language comparable to that in
Montrose III, suggesting that the exhaustion requirements
applied to directly underlying insurance and not to insurance
purchased for other policy periods. (Id. at p. 28.) Thus, any
differences between primary and excess insurance “provide[d]
little justification for construing the policy language interpreted
in Montrose III differently simply because primary coverage
purchased often many years later for other policy periods
remain[ed] outstanding.” (Ibid.)
        SantaFe Braun found the difference in premiums paid
similarly provided no justification for distinguishing between
multiple levels of excess insurance on the one hand and primary
and excess insurance on the other. (SantaFe Braun, supra, 52
Cal.App.5th at pp. 28–29.) “If horizontal exhaustion of all
primary insurance were required to trigger the coverage, the
level of liability at which the excess coverage would attach would
be unascertainable. . . . The difference between premiums paid
for excess and for primary policies does not justify an
interpretation that renders the point of attachment so
unpredictable and unascertainable when the policy is issued.”
(Ibid.) Finally, the differing defense obligations of primary and
excess insurers did not compel horizontal exhaustion because the
rule that an excess insurer has no duty to defend absent policy
language to the contrary would apply whether horizontal or
vertical exhaustion was applied. (Id. at p. 29.) In conclusion,

                                65
SantaFe Braun found Community Redevelopment’s horizontal
exhaustion rule did not apply because it relied on an
interpretation of the policy language rejected by Montrose III. (Id.
at p. 30.)

      E.    All Primary Insurance Must Exhaust

       We disagree with SantaFe Braun that there is no
distinction between multiple layers of excess insurance, as in
Montrose III, and layers of primary and excess insurance. One of
the rationales of Montrose III—that it was too difficult to
determine attachment points when multiple layers of excess
insurance were implicated—does not apply here, where there is
only one underlying layer of insurance, namely, primary
insurance and it is easy to ascertain whether that insurance has
been exhausted.
       Second, primary and excess insurance are qualitatively
different. Primary policies attach as first-dollar coverage and
have an immediate obligation to respond; primary policies have
the right to control the defense without input from excess
insurers; and primary policies generally do not use defense costs
to reduce limits. (See, e.g., Columbia Casualty. Co. v. Northwest
Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 470–472.) Significantly,
the premiums charged for primary insurance differ from excess
insurance because the latter insurance may never be called upon
to indemnify the insured, whereas primary insurance is always
implicated if a claim is filed. (See, e.g., Padilla Construction Co.,
Inc. v. Transportation Ins. Co. (2007) 150 Cal.App.4th 984, 1003.)
       We therefore apply Community Redevelopment to the
language in the excess insurers’ policies, and find horizontal
exhaustion applies. Such policies all have language tracking the
horizontal exhaustion language examined in Community

                                 66
Redevelopment and in ICSOP. Both the Westchester and First
State policies expressly refer to “other insurance” or “other
underlying insurance” that must exhaust. The policies in LMI
have different language that expresses the same concept: “after
making deductions for all recoveries, salvages, and other
insurances[,]” “if other valid and collectible insurance with
another insurer was available to the insured covering a loss also
covered by LMI, other than LMI’s excess insurance, the
insurance afforded by this certificate shall be in excess of and
shall not contribute with such other insurance[,]” and that “[i]f
other valid and collectible insurance with any other insurer is
available to the Assured covering a loss also covered by this policy,
other than insurance that is in excess of the insurance afforded
by this policy, the insurance afforded by this policy shall be in
excess of and shall not contribute with other insurance.”
       In spite of the clear directive of the horizontal exhaustion
rule, Truck argues the 1974 no-aggregate limit primary policy
can still trigger excess drop-down on a per occurrence basis,
converting the excess policies into policies that vertically exhaust
by virtue of being “specific excess.” Truck does so by selectively
focusing on the “continue in force as underlying insurance”
language that applies upon exhaustion of specifically scheduled
underlying primary policies. Truck takes this language out of
context and reads it in isolation from the rest of the policy,
however. The “continue in force” language is modified not only by
the specified underlying policies, but also by the “other
insurance” that also must be exhausted. Indeed, the key language
is the “other insurance” language of the policies, which requires
horizontal exhaustion.

                                 67
     F.    No Contribution From Excess Insurers

      To the extent Truck separately argues for contribution from
the excess insurers, we are unpersuaded.
      Insurers can obtain contribution from other insurers on the
same risk and sharing the same level of liability (North American
Capacity Ins. Co. v. Claremont Liability Ins. Co. (2009) 177
Cal.App.4th 272, 295.) Absent a specific agreement to the
contrary, there is no contribution between primary and excess
insurers. (Reliance Nat. Indemnity Co. v. General Star Indemnity
Co. (1999) 72 Cal.App.4th 1063, 1080.)
      Here, Truck’s argument necessarily assumes its own
erroneous conclusion: that the excess policies have already
dropped down and thus contribution is appropriate between
insurers because they are now on the same level. The reality is
that Truck, as a primary insurer, cannot obtain contribution from
an insurer on a different level.

                      Phase III-A, Part 2

       Truck and the excess insurers disputed the meaning and
effect of the deductible provision in the 1974 policy. The trial
court agreed with Truck that the deductible reduced the total
$500,000 limit available under the 1974 policy such that
$495,000 was recoverable. The excess insurers argued that the
$5,000 deductible reduces covered damages, and did not reduce
Truck’s $500,000 per occurrence limit because the policy
language does not contain the “difference between” language that
is the hallmark of deductibles that reduce limits. LMI and ICSOP
cross-appeal the trial court’s ruling on the deductible issue.

                               68
      A.    Factual Background

       The 1974 policy has a per occurrence limit of $500,000. The
policy states that “$5,000 shall be deducted from the total
amount to be paid for all damages which the Insured becomes
legally obligated to pay on account of each occurrence.”
       At trial, Truck asserted this language meant its policy limit
was effectively reduced to $495,000 for each occurrence.
Meanwhile the excess insurers asserted that the deductible
would first be applied to the claim, followed by Truck’s full
$500,000 limit, before the claim could be submitted to the excess
insurers. The excess insurers introduced extrinsic evidence
regarding the parties’ course of performance, citing two examples
to establish that Truck acknowledged its obligations to pay the
full $500,000: In the first, the “Kiln Brick incident” of 1983,
Truck treated Kaiser’s deductible as coming out of the “total
amount to be paid for all damages[.]” The second example arose
from the current litigation, where Kaiser acknowledged that the
$5,000 per occurrence deductible was to be deducted not from the
policy limit but from the total amount of each asbestos
settlement.
       The trial court framed the issue as “[w]hether Truck has a
contractual obligation to pay a limit of liability up to $500,000 or
$495,000 under the terms of its 1974 primary policy[.]” Relying
on an analysis of comparable policy language in the Rutter Guide
at ¶¶ 7:380 et seq., the court considered whether the deductible
language had the effect of making the insured responsible for the
first $5,000 of damages, or whether it had the effect of reducing
policy coverage. The trial court concluded the policy language
stating “the ‘total amount to be paid for all damages which [the
Insured] becomes legally obligated to pay on account of each

                                69
occurrence’ “meant the deductible of the 1974 policy was of the
type that reduced coverage. The trial court observed that “[t]o
adopt the Excess Carriers’ interpretation would, for all intents
and purposes, eliminate the deductible provision, because Truck’s
limit of liability would be increased to $505,000 (and not the
$500,000 set forth in the Truck policy).”

      B.    The $5,000 Deductible of the 1974 Policy
            Reduces Policy Limits

            1.     Standard of Review and Principles of
                   Contract Interpretation

      “The interpretation of a contract is a judicial function.
[Citation.] . . . . Ordinarily, the objective intent of the contracting
parties is a legal question determined solely by reference to the
contract’s terms. [Citations.]” (Wolf v. Walt Disney Pictures and
Television (2008) 162 Cal.App.4th 1107, 1125–1126.) While the
court generally may not consider extrinsic evidence to interpret a
contract, such evidence is admissible to interpret an agreement
when a material term is ambiguous. (Id. at p. 1126) The terms of
a writing can “be explained or supplemented by course of dealing
or usage of trade or by course of performance.” (Code Civ. Proc.,
§ 1856, subd. (c).) “Indeed, where there is a fixed and established
usage and custom of trade, the parties are presumed to contract
pursuant thereto. [Citations.] Thus, courts can rely on usage and
custom to imply a term where the contract itself is silent in that
regard.” (Southern Pacific Transportation Co. v. Santa Fe Pacific
Pipelines, Inc. (1999) 74 Cal.App.4th 1232, 1240–1241.) “An
appellate court is not bound by a trial court’s construction of a
contract where . . . there is no conflict in the properly admitted
extrinsic evidence . . . . [H]owever, where the interpretation of the

                                  70
contract turns upon the credibility of conflicting extrinsic
evidence which was properly admitted at trial, an appellate court
will uphold any reasonable construction of the contract by the
trial court. [Citation.]” (Morey v. Vannucci (1998) 64 Cal.App.4th
904, 913.) Here, the parties admitted evidence of their custom
and practice with respect to the deductible, but the trial court
ruled on the issue by solely addressing the policy language,
thereby implicitly finding the language to be unambiguous. We
make the same finding.

            2.    The Deductible Language Has the Effect of
                  Reducing Policy Limits
       “‘Liability insurance policies often contain a “deductible” or
a “self-insured retention” (SIR) requiring the insured to bear a
portion of a loss otherwise covered by the policy.’ [Citation.]”
(Forecast Homes, Inc. v. Steadfast Ins. Co. (2010) 181 Cal.App.4th
1466, 1473-1474; see also Deere & Co. v. Allstate Ins. Co. (2019)
32 Cal.App.5th 499, 505 [discussing different effect of SIRs and
deductibles on policy limits in context of whether primary policy
SIRs are incorporated into excess policies].) The amount of the
deductible is ordinarily set forth on the declarations page or in an
endorsement to the policy. (Croskey et al., Cal. Practice Guide:
Insurance Litigation, supra, ¶ 7:379.)
       In explaining the types of deductibles, the Rutter Guide
gives two examples. The first is where the deductible is “per
occurrence,” under which the insured is responsible for the first
deductible portion of damages, but the policy limits remain the
same. (Croskey et al., Cal. Practice Guide: Insurance Litigation,
supra, ¶¶ 7.380, 7.380.1.) Such language is often styled, “[t]he
$10,000 Deductible stated in the Declarations shall be applicable

                                 71
to each occurrence. [Citation.]” (Id. at ¶ 7.380.1.) In practical
effect, “[t]he insured is responsible for the first $10,000 of
damages, but the policy limits are not affected. . . . [T]he insurer
is responsible for all damages exceeding $10,000 up to the full
policy limits, as well as for defense costs.” (Id. at ¶ 7:380.2.)
       A second example involves a deductible that can effectively
reduce coverage. Such a deductible may be described as “The
$10,000 Deductible stated in the Declarations shall be applicable
to each occurrence and the Company shall be liable only for the
difference between such deductible amount and the amount of
insurance otherwise applicable to each claim.” (Croskey et al.,
Cal. Practice Guide: Insurance Litigation, supra, ¶ 7380.5,
emphasis added.) This language would result in the first $10,000
of damages being paid by the insured. (Id at. ¶ 7380.6.) “The
amount paid by [the insured] reduces the amount of coverage
otherwise available; i.e., the policy limits are reduced by
$10,000.” (Ibid.)
       Here, the trial court did not err. We need not consider the
extrinsic evidence of custom and practice because the language of
the policy is not ambiguous. Although the language does not
precisely track the Rutter Guide examples, those examples are
instructive. The deductible language here is more like the second
Rutter Guide example because it relates to the difference
between the deductible and the policy limits. It therefore has the
effect of reducing coverage because it states “$5,000 shall be
deducted from the total amount to be paid for all damages which
the Insured becomes legally obligated to pay on account of each
occurrence.” (Emphasis added.) This unambiguous language has
the net effect of reducing the policy limits by the amount of the
deductible.

                                 72
                          DISPOSITION
      The portion of the final judgment relating to Phase I is
reversed. Deductibles on claims where any indemnity payment
was made more than four years before the filing of Truck’s second
amended complaint on August 23, 2007 are time-barred and may
not be reopened. The matter is remanded to the trial court for
further proceedings consistent with our Phase I holding.
      The judgment with respect to Phase II is affirmed. The
judgment with respect to Phase III-A, Part One and Phase III-A,
Part Two, is also affirmed.
      Kaiser shall recover its costs on appeal from Truck. All
other parties shall bear their own costs.

 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

CURREY, J.

We concur:

WILLHITE, Acting P.J.

COLLINS, J.

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