Court Opinion

ID: 6498423
Source: CourtListenerOpinion
Date Created: 2022-07-07 16:02:28.812721+00
Date Added: 2024-06-11T08:51:05.324200
License: Public Domain

Filed 7/6/22 Hollander v. XL America Group CA2/1
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 ONE

 GAIL HOLLANDER,                                                      B308142

           Plaintiff and Appellant,                                   (Los Angeles County
                                                                      Super. Ct. No. BC365455)
           v.
                                                                      ORDER FURTHER
 XL AMERICA GROUP et al.,                                             MODIFYING
                                                                      OPINION AND DENYING
           Defendants and Respondents.
                                                                      RESPONDENTS’
                                                                      PETITION FOR
                                                                      REHEARING

THE COURT:

      It is ordered that the opinion that was filed on
June 16, 2022, and which was modified on June 28, 2022, is
further modified as follows:

    1.          On page 25, the first paragraph of footnote 19 is
                modified to read as follows: “In their respondents’ brief,
                defendants do not argue expressly that Gail waived or
     forfeited her claim of instructional error by failing
     specifically to request an instruction that the Hollanders
     were not obligated to negotiate with XL Specialty
     reasonably and in good faith. Rather, in a section of
     their respondents’ brief that appears under the main
     heading ‘Plaintiffs are Estopped by the “Invited Error”
     Doctrine from Challenging Special Instruction 1’ and the
     subheading ‘Plaintiffs should be estopped from raising
     arguments challenging Special Instruction 1 not raised
     below’ (boldface omitted), defendants maintain that Gail
     ‘should be barred from challenging Special Instruction 1’
     because she ‘never submitted an “unfettered right”
     instruction . . . to the court.’ Insofar as defendants seek
     to invoke the forfeiture and/or waiver doctrines, they fail
     to do so properly. (See Pizarro v. Reynoso (2017)
     10 Cal.App.5th 172, 179 [‘Failure to provide proper
     headings forfeits issues that may be discussed in the
     brief but are not clearly identified by a heading.’].) To
     the extent defendants contend the invited error doctrine
     estops Gail from arguing the Hollanders were not
     obligated to negotiate with XL Specialty reasonably and
     in good faith, we reject that contention for the reasons
     discussed in the textual paragraph accompanying this
     footnote.”

2.   On page 31, a new footnote (i.e., fn. 22) is appended to
     the sentence that currently reads: “As set forth in
     Kransco and the other authorities cited above, the trial
     court erred in wielding the implied covenant to defeat
     the purpose of the parties’ bargain.” The text of new

                                2
footnote 22 is as follows: “In their petition for rehearing,
defendants complain that neither side argued that
requiring the Hollanders to negotiate loss in value in
good faith would frustrate the purpose of paragraph 8 to
expeditiously determine the loss in value and ensure
prompt payment of the claim. We decline to order
rehearing because this issue was fairly included within
an argument raised on page 41 of Gail’s opening brief—
i.e., ‘Th[e] objective approach to valuation [found in
paragraph 8] prevents both XL [Specialty] and the
policyholder from attacking the outcome produced by the
agreed-upon formula as representing something other
than the value that the restored artwork has lost.’ (See
Save Laurel Way v. City of Redwood City (2017)
14 Cal.App.5th 1005, 1015–1016, fn. 9 [‘ “[T]he parties
need only have been given an opportunity to brief the
issue decided by the court, and the fact that a party does
not address an issue, mode of analysis or authority that
is raised or fairly included within the issues raised does
not implicate the protections of [Government Code]
section 68081[,]” ’ italics added]; Gov. Code, § 68081
[‘Before . . . a court of appeal . . . renders a decision . . .
based upon an issue which was not proposed or briefed
by any party to the proceeding, the court shall afford the
parties an opportunity to present their views on the
matter through supplemental briefing. If the court fails
to afford that opportunity, a rehearing shall be ordered
upon timely petition of any party.’].)” All subsequent
footnote call numbers are renumbered accordingly.

                             3
3.     The sentence on page 34 that currently reads: “As
       defendants conceded at oral argument, Brehm is of
       limited relevance to this case” is deleted. Footnote 24 is
       also deleted from page 34, and all subsequent footnote
       call numbers are renumbered accordingly.

4.     The sentence on page 38 that currently reads: “At oral
       argument, defense counsel conceded that if Special
       Instruction No. 1 were erroneous, then the jury could
       award only $181,850 on the contract claim and not the
       $19,500 that it did award” is modified to read as follows:
       “At oral argument, defense counsel conceded that if
       Special Instruction No. 1 were erroneous, then the
       instructional error was prejudicial because, in that case,
       the postrestoration partial loss in value would be the
       $181,850 auction formula benefit.”

5.     The short citation at the bottom of page 38 and at the
       top of page 39 is changed to the following full citation:
       “(See Consumer Cause, Inc. v. SmileCare (2001)
       91 Cal.App.4th 454, 475 [‘counsel’s concessions and
       admissions at oral argument are binding.’].)”

     There is no change in the judgment.

                                  4
      Respondents’ petition for rehearing is denied.

___________________________________________________________
ROTHSCHILD, P. J.           BENDIX, J.            MORI, J.*

      * Judge of the Los Angeles County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.

                                    5
Filed 6/28/22 Hollander v. XL America Group CA2/1
   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 ONE

 GAIL HOLLANDER,                                                      B308142

           Plaintiff and Appellant,                                   (Los Angeles County
                                                                      Super. Ct. No. BC365455)
           v.
                                                                      ORDER MODIFYING
 XL AMERICA GROUP et al.,                                             OPINION AND DENYING
                                                                      PETITION FOR
           Defendants and Respondents.
                                                                      REHEARING

THE COURT:

      It is ordered that the opinion filed on June 16, 2022 is
modified as follows:

    6.          The sentence on page 47 that currently reads: “She,
                however, provides no analysis in support of her
                entitlement to an order instructing the trial court to
                enter judgment for her on the breach of contract claim”
                is modified to read as follows: “In her appellate briefing,
     however, she provides no analysis in support of her
     entitlement to an order instructing the trial court to
     enter judgment for her on the breach of contract claim.”

7.   On page 47, a new footnote (i.e., fn. 35) is appended to
     the sentence that currently reads: “For that reason
     alone, we need not address further Gail’s request for a
     judgment awarding her $181,850 on her breach of
     contract claim.” The text of new footnote 35 is as
     follows: “In Gail’s petition for rehearing, she argues, for
     the first time, that we should instruct the trial court to
     enter judgment for her on the breach of contract claim in
     the amount of $181,850 ‘at such time as it is appropriate
     for the court to enter judgment.’ She also argues for the
     first time in her petition that she is entitled to this
     instruction because the trial court’s instructional error
     ‘affected only an issue separate and distinct from the
     remainder of the appealed judgment or order’ and
     defendants have not appealed from the judgment.
     We do not address these arguments because Gail did not
     timely raise them. (See Alameda County Management
     Employees Assn. v. Superior Court (2011)
     195 Cal.App.4th 325, 338, fn. 10 [‘arguments first raised
     on rehearing are usually forfeited’].) We thus do not
     address whether or not the breach of contract claim
     should be retried upon remand.”

8.   On page 48, the following text is deleted: “This is not
     just a procedural concern. Although upon a retrial, the
     trial court’s instructions must conform to our

                                2
            interpretation of paragraph 8 herein, there may be other
            issues relating to the breach of contract claim not raised
            in the first trial or considered in this appeal.
            Accordingly, we are in no position to enter judgment in
            Gail’s favor, and leave the scope of the retrial of Gail’s
            claims to the sound discretion of the trial court.”

   9.       On page 49, the call number for footnote 35 is changed
            to 36.

        There is no change in the judgment.
        Appellant Gail Hollander’s petition for rehearing is denied.

___________________________________________________________
ROTHSCHILD, P. J.           BENDIX, J.            MORI, J.*

        *
        Judge of the Los Angeles County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.

                                       3
Filed 6/16/22 Hollander v. XL America Group CA2/1 (unmodified opinion)
   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 ONE

 GAIL HOLLANDER,                                                      B308142

           Plaintiff and Appellant,                                   (Los Angeles County
                                                                      Super. Ct. No. BC365455)
           v.

 XL AMERICA GROUP et al.,

           Defendants and Respondents.

     APPEAL from a judgment of the Superior Court of
Los Angeles County, Randolph M. Hammock, Judge. Reversed.
     A. Tod Hindin, Karen L. Hindin; The Ehrlich Law Firm
and Jeffrey I. Ehrlich for Plaintiff and Appellant.
     Hymes, Schreiber & Walden, Richard E. Walden;
McCullough, Stephen O’Donnell and Elissa L. Isaacs for
Defendants and Respondents.
                  ____________________________
      Although this litigation spans nearly 15 years and fills
several bookcases, the key issue before us is relatively discrete:
Did the trial court prejudicially err in instructing the jury to
decide whether the insureds’ failure to agree with the insurer on
the partial loss of value of insured fine artwork damaged by a
third party breached the implied covenant of good faith and fair
dealing as to a “valued” policy,1 which provides that if the
insureds and insurer could not agree on partial loss in value, the
insurer had to pay the difference between the scheduled value of
the artwork and the net proceeds of the sale of the artwork at
public auction? We conclude the court erred in issuing that
instruction, and we reverse the judgment because there is a
reasonable chance that error affected the jury’s verdict on the
insureds’ breach of contract and bad faith claims.
      It is uncontested that the parties corresponded over a
four-month period about the partial loss of value of the artwork,
although the parties asserted widely different partial-loss
valuations. Ultimately, the insurer refused the insureds’
valuation and told the insureds they had to obtain an appraisal
before they could invoke the policy’s auction remedy. The
insureds disagreed with the insurer’s assertion that the policy
conditioned its auction remedy on the insureds’ first obtaining an
appraisal. The insureds then sold the paintings at public
auction, which resulted in a shortfall of $181,850 between the
scheduled value of the artwork ($399,000) and the net proceeds
from the auction ($217,150).

      1 “A valued policy is one which expresses on its face an
agreement that the thing insured shall be valued at a specified
sum.” (Ins. Code, § 412.)

                                   2
       At some point prior to the sale, the insurer obtained an
appraisal valuing the loss in value at up to 2.5 percent of the
artwork’s scheduled value, to wit, $9,975. The insureds
demanded the insurer pay them the aforesaid $181,850 shortfall.
It appears that the insurer made its first monetary offer to the
insureds only after the auction and in response to this demand
from the insureds. The offer was only $19,950. The insureds
thereafter brought the instant action against, among others, the
insurer for breach of contract and bad faith.
       The trial court agreed with the insureds that the policy
did not condition the auction valuation remedy on the insureds’
obtaining an appraisal of the partial loss. The trial court
nonetheless concluded that the implied covenant of good faith
and fair dealing applied to the parties’ negotiations over the
partial loss in value to the artwork. It then instructed the jury
that it could award less than the difference between the
scheduled value and the net auction proceeds if the insureds
did not discharge this duty imposed by the implied covenant and
the insurer satisfied its reciprocal obligation to negotiate in good
faith. In effect, the court instructed the jury that even if it found
the insurer breached the insurance policy, the jury could award
less than the amount calculated in accordance with the aforesaid
public auction formula based on the jury’s assessment of the
sincerity and reasonableness of the insureds’ negotiations with
the insurer.
       And that is what the jury did. The jury found in favor of
the surviving insured on her breach of contract claim,2 but

      2One of the two insureds died prior to trial. The
remaining insured, appellant Gail Hollander, prosecutes this

                                     3
awarded only $19,500, even though the uncontested difference
between the scheduled value of the artwork and the net proceeds
from the auction was $181,850. The jury then returned a special
finding that the insurer did not act unreasonably or without
proper cause in handling the insureds’ claim under the policy,
thereby negating the insurer’s liability on the bad faith cause of
action.
       We conclude that the trial court’s instruction constituted
prejudicial error as to both causes of action, and we reject the
insurer’s claim that its insureds invited this instructional error.
       As explained in greater detail in our Discussion, the policy
set forth expeditious procedures for determining partial loss of
value to damaged fine artwork. There were two components to
these procedures: (1) The opportunity first to negotiate that
value, and, if the parties could not agree, then (2) the artwork
would be sold at public auction with the insurer paying the
difference between the scheduled value of the artwork and the
net proceeds from the public auction. This bargain benefited both
the insureds and the insurer in avoiding protracted and costly
litigation concerning the partial loss in value to the artwork. The
trial court’s erroneous instruction derailed that bargain under
the guise of enforcing the covenant of good faith and fair dealing.
       The trial court also awarded over $660,000 in costs in favor
of the insurer and the other defendants. Because we reverse the
judgment, including the costs award, we need not further address
the surviving insured’s challenges to that award.

appeal in her individual capacity, as the executor of her late
husband’s estate, and as the trustee of the Hollander living trust.

                                    4
      FACTUAL AND PROCEDURAL BACKGROUND3
      We summarize only those facts that are relevant to our
disposition of this appeal.

1.    The Hollanders Insured Their Art Collection
      with XL Specialty
      Gail and Stanley Hollander (collectively, the Hollanders),4
a married couple, acquired an art collection over a period of time.
(See Hollander v. XL Capital Ltd. (May 1, 2018, B276621)
[nonpub. opn.] (Hollander VII) [indicating Gail and Stanley were
married].)5 In exchange for a premium of $24,966, XL Specialty
Insurance Company (XL Specialty) issued the Hollanders an
insurance policy, effective from March 2, 2005 to March 2, 2006,
that covered their fine art. In the event the fine art were
destroyed, the Hollanders would be entitled to collect the
“scheduled value” of the property—i.e., the amount assigned to
the artwork in a schedule to the policy.

      3  We derive our Factual and Procedural Background in
part from undisputed portions of the parties’ filings. (See Artal v.
Allen (2003) 111 Cal.App.4th 273, 275, fn. 2 (Artal) [“ ‘[B]riefs
and argument . . . are reliable indications of a party’s position on
the facts as well as the law, and a reviewing court may make use
of statements therein as admissions against the party.
[Citations.]’ [Citations.]”].)
      4 For the sake of clarity, and meaning no disrespect, when
we refer to Gail and Stanley Hollander individually, we use their
first names.
      5We, sua sponte, take judicial notice of our prior opinion
from Hollander VII. (Evid. Code, §§ 452, subd. (d), 459.)

                                    5
      Paragraph 8 of the policy provides a different method of
valuation in the case of a “partial loss” to the fine art.6 That
portion of the policy provides in full:
      “PARTIAL LOSS AGREEMENT[ ](As Respects Fine Arts
Only)
      “In case of Partial Loss to Perils insured against, the
adjusted amount of Loss shall be the cost and expense of
Restoration, to include additional and reasonable charges
incurred in that Restoration.
      “Loss in value, if any, after Restoration, to be agreed upon
between the Insured and the Company.
      “In the event the Insured and the Company cannot agree
on the amount of loss in value, the Property will be sold at public
auction and the net proceeds shall inure to the Insured. The
Company will pay the Insured the difference between the amount
so realized and the insured value of the Property.[7]
      “In no event shall the Company be liable for more than the
insured value of the Property.”
      We observe that this insurance contract between
XL Specialty and the Hollanders is “[a] valued policy”—i.e., “one
which expresses on its face an agreement that the thing insured
shall be valued at a specified sum.” (See Ins. Code, § 412.) This
type of contract differs from an “open policy” “in which the value

      6Neither party contests the trial court’s ruling that
paragraph 8 applies to this case.
      7  The parties do not dispute that the “insured value of the
Property” for the purposes of paragraph 8 is its scheduled value.
Additionally, as a shorthand, we refer to the difference between
the “net proceeds” of the public auction and the scheduled value
of the property as the “auction formula benefit.”

                                    6
of the subject matter is not agreed upon, but is left to be
ascertained in case of loss.” (See id., § 411 [defining “open
policy”]; see also id., § 410 [“A policy is either open or valued.”].)
“ ‘A valued policy is “seldom if ever written in this state” since it
is subject “to the moral hazard of over evaluation.” ’ ” (George v.
Automobile Club of Southern California (2011) 201 Cal.App.4th
1112, 1129.)

2.    After Three of the Hollanders’ Paintings Were
      Damaged, the Hollanders Submitted a Claim to
      XL Specialty, and the Paintings Were Sent to
      Germany for Restoration
      On January 9, 2006, an employee from L.A. Packing,
Crating, and Transport, Inc. (L.A. Packing) damaged three
paintings from the Hollanders’ collection. The paintings were
created by a deceased German painter named Martin
Kippenberger8 (Kippenberger paintings), and had a total
scheduled value of $399,000, or $133,000 each. The L.A. Packing
employee damaged the artwork by detaching the cardboard
frames from each of the three paintings.
      Within the next two days, the Hollanders submitted a
claim for the loss to XL Specialty. An XL Specialty employee
named Natasha Fekula thereafter handled the Hollanders’
claim.9
      In or about early March 2006, the Kippenberger paintings
were shipped to the Estate of Martin Kippenberger in Germany

      8   Kippenberger died in 1997.
      9 Gail alleges Fekula was XL Specialty’s “claims manager,”
whereas defendants claim she was “XL Specialty’s claim
adjuster.” This discrepancy has no impact on the instant appeal.

                                       7
for restoration. The Estate affixed new cardboard frames to the
paintings, and sent the restored paintings back to the Hollanders
in June 2006. Gail does not dispute, and thus tacitly agrees with,
defendants’ assertion that “XL Specialty paid for the restoration
and shipping, as required by the Policy.”10

3.    The Hollanders and XL Specialty Failed to
      Agree on the Loss in Value to the Paintings
       On July 7, 2006, Stanley sent a letter to Fekula.11 In the
letter, Stanley stated he and his wife “believe[d] that the
paintings . . . declined substantially in value” because “the
damaged painted frames” and “the restored painted frames . . .
[we]re very dissimilar.” Stanley stated he and Gail were “willing
to accept a valuation for the three paintings in their damaged
(‘restored’) condition of 70,000 pounds ($129,500 at the exchange
rate of $1.85 to the pound).” Stanley said that because “[t]he
paintings were insured for $399,000[,] . . . the amount of the loss
[was] $269,500 . . . .” Stanley also stated that if XL Specialty
did not agree that the Hollanders were entitled to $269,500, then
they “intend[ed] to sell the paintings at public auction at
[Sotheby’s auction house in London] on October 3, 2006 and
expect[ed XL Specialty] to reimburse [them] for the difference
between the net sum [the Hollanders would] receive from the sale

      10 (See Rudick v. State Bd. of Optometry (2019)
41 Cal.App.5th 77, 89–90 [concluding that the appellants made
an implicit concession by “failing to respond in their reply brief to
the [respondent’s] argument on th[at] point”].)
      11  Although the letter employs the plural first-person
pronoun “[w]e,” it is signed by only Stanley, and Gail’s signature
line is blank.

                                     8
(the commission charged by Sotheby[’s] [they] expect[ed] to be
7 ½ %) and the $399,000 insured value.”12
        On September 15, 2006, Fekula sent an e-mail to Stanley,
wherein which she stated “XL [Specialty] w[ould] not guarantee
the sale of the works at auction at th[at] time.” She stated that,
“[p]ursuant to [the] policy, loss in value, if any, will be
determined by competent and disinterested appraisers,” and,
“[i]f, after the appraisals, we cannot agree on a loss in value, then
the property will be sold at public auction.”
        Similarly, Fekula sent a letter to the Hollanders on or
about October 2, 2006, stating that “the Policy provides for a
process that includes restoration of the Work, a good faith
appraisal of the loss in value (if any) following the restoration
and then—and only then—an auction if [the Hollanders] and
[XL Specialty] cannot agree on the amount of the loss.” Fekula
further asserted that “[t]he Policy requires that [the Hollanders]
participate in that process and attempt to reach agreement on
the loss in value,” and that “the qualified opinion of an
appropriate expert or appraiser” would constitute “acceptable
proof of loss . . . .” She claimed that the Hollanders had “refused
to permit an appraiser designated by [XL Specialty] to examine
the paintings,” which she asserted had “thwarted [XL Specialty’s]
ability to even make a proposal to [the Hollanders] to see if
[XL Specialty and the Hollanders] can reach agreement as, again,
is required by the Policy.” Fekula stated that her company

      12 Gail asserts in her opening brief that Fekula did not
respond to the July 7, 2006 letter. Defendants do not address
that contention in their respondents’ brief. In any event, this
disparity has no impact on our disposition of the instant appeal.

                                     9
would “not pay the difference (if any) between the auction
proceeds and the insured value.”
       On or about October 3, 2006, the Hollanders sent Fekula a
letter, wherein they stated that “if [XL Specialty] wish[ed] to
employ an appraiser as a consultant to assist [it] in arriving at
[its] opinion of the amount of loss, [the Hollanders] ha[d] no
objection.” The Hollanders did object, however, to XL Specialty’s
assertion that the “policy require[d them] to participate in an
appraisal proceeding before establishing the partial loss through
public auction.” They claimed that their opinion on the artwork’s
loss in value provided in the July 7, 2006 letter was “[b]ased upon
Sotheby’s advice as well as [the Hollanders’] own knowledge as
experienced fine arts’ collectors . . . .” The Hollanders stated that
if XL Specialty did not agree with the Hollanders’ “opinion of
loss” after inspecting the paintings, “then the artworks w[ould] be
sold on October 14, 2006 at public auction [at Sotheby’s London]
and [XL Specialty] w[ould] be required under the terms [of]
paragraph 8 of the policy . . . to compensate [the Hollanders] for
the difference between the sale price at public auction and the
insured value.” Gail claims Fekula did not respond to this letter.
       The parties do not dispute that after the Kippenberger
paintings were restored but before they were sold at auction, an
appraiser retained by XL Specialty examined the artwork and
concluded it had lost up to 2.5 percent of its scheduled value, to
wit, $9,975.

                                    10
4.    The Kippenberger Paintings Were Sold at Public
      Auction, and XL Specialty Refused the
      Hollanders’ Request for the Auction Formula
      Benefit
       On October 14, 2006, the three Kippenberger paintings
were sold at public auction at Sotheby’s auction house in London.
       In a letter dated October 16, 2006, the Hollanders informed
Fekula of the transaction, and stated that the sale price was
“125,000 pounds sterling or $233,500.00 at an exchange rate of
$1.87 per pound sterling.” The Hollanders claimed that “[t]he
insured value of the artworks was $399,000,” “[t]he seller’s
commission . . . was seven percent (7%) or $16,345,” and the
Hollanders’ “net proceeds from the sale exclusive of the freight
costs in transporting the artworks to the auction site and the
incidental charges imposed by Sotheby’s w[ould] be
approximately $217,150.” The Hollanders requested that
XL Specialty send them a “check for the sum of $181,850” and a
proof of loss form for that amount.
       In a letter dated October 31, 2006, XL Specialty’s attorney
told the Hollanders that he could not “advise XL [Specialty] to
pay the amount of [their] claims or to certify the amount of the
loss.” Counsel stated he “would suggest that XL [Specialty] pay
[the Hollanders] up to five percent of the insured value [(i.e.,
$19,950)] which, under the circumstances, would be generous.”
The attorney further claimed that XL Specialty’s retained
appraiser opined that the paintings had “a loss in value of just
two-and-one-half percent.” Counsel stated he “hope[d] that [the
Hollanders would] seriously consider XL[ Specialty’s] offer.” It
appears that this is the first occasion on which XL Specialty

                                   11
made a specific monetary offer to compensate the Hollanders for
the partial loss in value to the artwork.

5.   The Hollanders Brought Suit Against
     Defendants, and the Parties Engaged in
     Protracted Pretrial Proceedings
       On January 29, 2007, the Hollanders filed a verified
complaint against L.A. Packing, defendants,13 and several other
entities for breach of contract, insurance bad faith, promissory
fraud, violation of Insurance Code section 785 et seq., and
negligence.
       On December 9, 2008, XL Specialty filed a cross-complaint
against the Hollanders, seeking, inter alia, rescission of the
insurance policy.
       In July 2009, the Hollanders settled their claims against
L.A. Packing for $250,000.
       Prior to the commencement of the trial in spring 2019
(Factual and Procedural Background, part 6, post [noting that the
trial was held in April and May 2019]), the parties litigated a
plethora of pretrial matters, several of which were reviewed by
this court; none of them is relevant to the instant appeal.
Additionally, Stanley was unable to participate in the trial
because he died in 2016. (Hollander VII, supra, B276621.)

     13    We use the designation “defendants” to refer to the
following nine entities that are respondents to this appeal:
(1) XL Specialty; (2) XL Select Insurance Company;
(3) Greenwich Insurance Company; (4) XL Insurance America,
Inc.; (5) XL Insurance Company of New York, Inc.; (6) XL Re, Ltd;
(7) XL Reinsurance America, Inc.; (8) Indian Harbor Insurance
Company; and (9) XL America Group.

                                  12
6.    Phases I and II of the Trial
       The lower court bifurcated the trial into two phases:
Phase I concerned XL Specialty’s rescission cross-claim, and
during phase II, the jury would decide Gail’s claims for breach of
contract and bad faith against XL Specialty. The court ruled
that, if necessary, the trial would thereafter proceed to a third
phase to determine whether defendants other than XL Specialty
were liable for its alleged misconduct.
       The trial commenced on April 15, 2019. Gail prevailed
against XL Specialty at the conclusion of phase I.
       Before submitting the matter to the jury in phase II, the
trial court issued Special Instruction No. 1. Special Instruction
No. 1 provides in full:
       “It is the duty and responsibility of this Court to interpret
the provisions of the contract between the parties under
established legal principles of contract construction and
interpretation. Under the law, it is your responsibility to accept
and follow my interpretation of the meaning of the terms of the
contract, whether you agree with this interpretation or not.
       “There is a mutual obligation of good faith and fair dealing
implied in every contract, including the insurance policy at issue
in this case. With respect to Paragraph 8 of the insurance policy
between XL Specialty and the Hollanders, this obligation
required both parties to try to reach agreement in good faith on
‘loss in value,’ if any, to the Kippenberger paintings following
restoration of the damage to the cardboard frames.
       “Under Paragraph 8, the Hollanders were only entitled to
sell the paintings at auction if: (a) they made reasonable and
good faith efforts to reach agreement as to ‘loss in value,’ if any,
to the paintings following the restoration, or (b) if XL [Specialty]

                                    13
failed to make reasonable and good faith efforts to reach
agreement on the ‘loss in value,’ if any, to the paintings following
the restoration.
       “Accordingly, if you find that the Hollanders attempted, in
good faith, to reach an agreement on ‘loss in value,’ if any,
following the restoration, then the Hollanders are entitled to
collect from XL Specialty the $181,850 difference between the
scheduled value of the paintings under the policy and the auction
proceeds received by the Hollanders.[14]
       If, on the other hand, you find that the Hollanders did not
try in good faith to reach an agreement with XL Specialty on ‘loss
in value,’ if any, following the restoration, then the Hollanders
are not entitled to collect from XL Specialty the $181,850
difference between the scheduled value of the paintings under the
policy and the auction proceeds received by the Hollanders. In
such event, the Hollanders are only entitled to collect whatever
amount you find to be the reasonable ‘loss in value,’ if any, to the
paintings following the restoration.
       “Alternatively, if you find that XL Specialty did not
attempt, in good faith, to reach an agreement on ‘loss in value,’ if
any, following the restoration, then the Hollanders are entitled to
collect from XL Specialty the $181,850 difference between the

      14  The parties do not dispute that, although this
instruction indicates that $181,850 is the “difference between the
scheduled value of the paintings under the policy and the auction
proceeds received by the Hollanders,” this figure actually
corresponds to “the difference between the scheduled value of
$399,000 and the net auction proceeds of $217,150,” (italics
added), i.e., the auction formula benefit. This potential
ambiguity has no ultimate bearing on our resolution of this
appeal.

                                   14
scheduled value of the paintings under the policy and the auction
proceeds received by the Hollanders.
        “You have also heard or seen reference during trial to
Paragraph 25 of the insurance policy, which is titled
‘APPRAISAL.’ Paragraph 25 does not directly apply to any
‘partial loss’ of ‘fine arts’ and therefore does not directly apply to
the Hollanders’ claim.[15]
        “In any case, the insurance policy did not require the
Hollanders to procure an appraisal of their paintings before
exercising their rights under paragraph 8 of the insurance policy,
as described above.”
        On May 10, 2019, the jury rendered a general verdict with
special findings for phase II. In pertinent part, this verdict form
provides: “AS TO THE BREACH OF CONTRACT CLAIM . . . [¶]
. . . [w]e, the jury, find in favor of Plaintiff and per the Special

      15   Paragraph 25 of the policy provides:
      “APPRAISAL
      “If the Insured and the company fail to agree as to the
amount of loss, each shall, on the written demand of either, made
within sixty (60) days after receipt of proof of loss by the
company, select a competent and disinterested appraiser, and the
appraisal shall be made at a reasonable time and place. The
appraisers shall first select a competent and disinterested
umpire, and failing for fifteen days to agree upon such umpire,
then, on the request of the Insured or the Company, such umpire
shall be selected by a judge of a court of record in the State in
which such appraisal is pending. The appraisers shall then
appraise the loss, stating separately the actual cash value at the
time of loss and the amount of loss, and failing to agree shall
submit their differences to the umpire. An award in writing of
any two shall determine the amount of loss.”

                                     15
Instruction No. 1 we award her the total sum of $19,500.” Nine
jurors voted in favor of that verdict, and three voted against it.
       The verdict form further indicates that 11 jurors answered
“[n]o” and one juror answered “[y]es” to the following “Special
Question”: “Did XL SPECIALTY INSURANCE COMPANY
unreasonably or without proper cause breach the covenant of
good faith and fair dealing that it owed to the HOLLANDERS in
the handling of the Kippenberger claim?” (Underscoring
omitted.) Because the form instructed the jury not to answer any
further questions thereon if its answer to this Special Question
was “[n]o,” the remainder of the form does not include any further
responses from the jury. After the jury rendered its verdict for
phase II, the trial court dismissed the jurors.

7.    The Initial and Corrected Judgments
        On July 16, 2020, the trial court entered a judgment on the
jury verdict (initial judgment). The initial judgment recited,
“Following the hearing of post-trial motions, on June 24, 2020,
XL Specialty was awarded its post-statutory offer to compromise
costs, in the amount of $366,332.00, less the jury verdict of
$19,500.00, for a total of $346,832.00 in total post-statutory offer
to compromise costs.” It further provided that judgment was
“entered in favor of XL Specialty, and against [Gail] and the
Estate[ of Stanley], jointly and severally, in the amount of
$346,832.00.” The initial judgment also allowed “XL Specialty
[to] file a Memorandum of Costs to recover its pre-statutory offer
to compromise costs from Plaintiff . . . .”
        On October 2, 2020, the trial court issued a corrected
judgment on the jury verdict (corrected judgment). The corrected
judgment recites: “Following the hearing of Post-Trial motions,
including the parties’ motions to be deemed prevailing parties, on

                                    16
June 24, 2020, the Court ruled that [defendants] . . . were the
prevailing parties. The Court awarded . . . [d]efendants their
post-statutory offer to compromise costs in the amount of
$366,332.00, less the jury verdict of $19,500.00, for a total of
$346,832.00.” The corrected judgment also states: “Following the
hearing of additional Post-Trial motions, on September 9, 2020,
the Court awarded . . . [d]efendants their pre-statutory offer to
compromise costs, in the amount of $318,030.61. [¶] Thus, the
Court awarded . . . [d]efendants a total of $664,862.61 in costs
incurred before and after their April 5, 2019, offer to
compromise.” It further provided that judgment was entered in
favor of defendants and against Gail, “individually and as
Executor of the Estate of Stanley Hollander, jointly and severally,
in the amount of $664,862.61.”
      On October 2, 2020, Gail, individually, as executor of
Stanley’s estate, and as trustee of the Hollander living trust
dated March 13, 1995, appealed the initial and corrected
judgments.16

      16  Defendants do not challenge the timeliness of Gail’s
October 2, 2020 notice of appeal. In any event, we observe that
even if the date of entry of the initial judgment were the starting
point for calculating the deadline by which Gail was required to
seek review of any of the rulings challenged on appeal (e.g., the
trial court’s issuance of Special Instruction No. 1 to the jury), her
appeal would still be timely. This is because Gail filed and
served a notice of intention to move for a new trial on
July 29, 2020, and the trial court denied her new trial motion on
September 9, 2020, thus permitting Gail to appeal the initial
judgment within 30 days of service of the order denying her new
trial motion. (See Cal. Rules of Court, rule 8.108(b) [“If any party
serves and files a valid notice of intention to move for a new trial,
the following extensions of time apply: [¶] (1) If the motion for a

                                    17
                    STANDARD OF REVIEW
       “ ‘The interpretation of a written instrument, even though
it involves what might properly be called questions of fact
[citation], is essentially a judicial function to be exercised
according to the generally accepted canons of interpretation so
that the purposes of the instrument may be given effect.’
[Citation.] ‘Accordingly, “[a]n appellate court is not bound by a
construction of the contract based solely upon the terms of the
written instrument without the aid of evidence [citations], where
there is no conflict in the evidence [citations], or a determination
has been made upon incompetent evidence [citation].” ’
[Citation.]” (Holguin v. Dish Network LLC (2014)
229 Cal.App.4th 1310, 1323.) Insofar as a trial court construes a
contract based solely on its terms and issues an instruction to the
jury based on that construction, an appellate challenge to that
instruction “present[s] legal questions that are properly reviewed
de novo.” (See id. at p. 1326.)
       We apply the de novo standard to review Gail’s claim of
instructional error because the trial court did not rely upon
extrinsic evidence in construing paragraph 8 of the policy (see
Discussion, part A, post [indicating the trial court’s interpretation
was based on its conception of the implied covenant of good faith
and fair dealing]), and the parties agree that this is the proper
standard.

new trial is denied, the time to appeal from the judgment is
extended for all parties until the earliest of: [¶] (A) 30 days after
the superior court clerk or a party serves an order denying the
motion or a notice of entry of that order; [¶] (B) 30 days after
denial of the motion by operation of law; or [¶] (C) 180 days after
entry of judgment.”].)

                                     18
                          DISCUSSION

A.    The Invited Error Doctrine Does Not Bar Gail from
      Challenging Special Instruction No. 1
       “ ‘Under the doctrine of invited error, where a party, by his
[or her] conduct, induces the commission of an error, he [or she] is
estopped from asserting it as grounds for reversal.
[Citations.] . . .’ [Citations.] The purpose of the invited error
doctrine is to ‘prevent a party from misleading the trial court and
then profiting therefrom in the appellate court.’ [Citation.]”
(Hood v. Gonzales (2019) 43 Cal.App.5th 57, 70 (Hood).)
       Defendants argue that Gail is “estopped by the ‘invited
error’ doctrine from challenging Special Instruction 1.” (Boldface
& some capitalization omitted.) First, defendants contend the
invited error doctrine applies because Gail “never objected to the
language in Special Instruction 1” and “drafted the very
instructional language [she] now claim[s] was erroneous.”
Second, defendants complain that during the trial court
proceedings, Gail did not argue, or request jury instructions to
the effect that, (a) she and Stanley “had an unfettered right to
sell the paintings at auction and collect the auction [formula]
benefit” and (b) “their failure to negotiate loss in value in good
faith was, at most, a breach of the duty to cooperate, which
requires the insurer to show prejudice.” For the reasons
discussed below, we conclude the invited error doctrine does not
preclude Gail from contesting Special Instruction No. 1.
       Concerning their first contention, defendants seem to argue
that by submitting two proposed jury instructions that the trial
court rejected—to wit, Gail’s proposed Special Instruction Nos. 25
and 25A—Gail induced the instructional error of which she
complains on appeal. Defendants point out that proposed Special

                                   19
Instruction No. 25 “did not state that [the Hollanders] had an
unfettered right to sell the paintings at auction and collect the
auction [formula] benefit,” but instead “provided that the jury
should award [Gail] the auction [formula] benefit if it found [the
Hollanders] had a ‘genuine’ dispute with XL Specialty over loss-
in-value . . . .” They also correctly observe that Gail later
submitted her proposed Special Instruction No. 25A, which
“provided, among other things, that the jury should award [Gail]
the auction [formula] benefit if it found [the Hollanders] made a
‘reasonable good faith effort[ ]’ to agree with XL Specialty on loss-
in-value.” Defendants observe that Special Instruction No. 1
included language similar to that proposed in Gail’s Special
Instruction No. 25A—i.e., that the Hollanders were “entitled to
sell the paintings at auction if . . . they made reasonable and good
faith efforts to reach agreement as to ‘loss in value[.]’ ” They
argue that Gail’s “submission of [her] proposed Special
Instructions 25 and 25A was . . . part of [her] tactical effort to
persuade the trial court to instruct the jury that [the Hollanders]
had no obligation to obtain a lost value appraisal,” and that
“[t]his tactic was successful” because Special Instruction No. 1
told the jury the “policy did not require the Hollanders to procure
an appraisal of their paintings before exercising their rights
under paragraph 8 . . . .”
       Notwithstanding defendants’ argument to the contrary, the
record shows Gail’s submission of proposed Special Instruction
Nos. 25 and 25A did not induce the trial court to commit the
instructional error of which she complains.
       During the proceedings below, Gail filed motion in limine
No. 27, which asked the court to “try the legal issue of the
interpretation of [the] insurance policy first before any other

                                    20
issues . . . .” The court heard the motion after phase I of the trial
concluded but before the commencement of phase II. At the
hearing, the court found the motion was “a little premature” yet
announced its intent to “giv[e] [the parties] some guidance.” The
court stated its “belie[f]” that “there is an implied duty of [the
Hollanders] to attempt to resolve the issue of loss of use [sic] in
good faith.” Gail’s counsel insisted that “the contract says that if
the parties aren’t able to agree, . . . the Hollanders have the right
to sell the paintings at public auction, and there is no other
conditions precedent,” but the court responded that “there is
some implied duty to do that condition in good faith” and that
counsel’s interpretation “can’t be the law” and “can’t be the
situation.”17 The court ultimately deferred ruling on motion in

      17  Defendants argue that Gail’s counsel agreed with “the
trial judge at the MIL 27 hearing that attempting to agree on loss
in value in good faith is a condition precedent to the auction
formula under the contract.” This is not a fair reading of the
reporter’s transcript. Admittedly, one of Gail’s attorneys replied,
“Right” after the trial court stated the Hollanders “had the
unilateral right to sell . . . at an auction” if they “did attempt in
good faith to negotiate or to resolve . . . the loss of value of the
paintings . . . .” Yet, Gail’s lawyers also stated that they were
“not agreeing with [defendants’] position” that the Hollanders
had to act in good faith to try to resolve the loss in value issue,
and counsel indicated they did not agree with the court’s
assertions that “the covenant of good faith and fair dealing is a
two-way street” and that the Hollanders “just can’t arbitrarily”
decide to sell the paintings at auction. Thus, the excerpt of the
transcript cited by defendants shows only that Gail’s counsel was
acknowledging the court’s interpretation of the contract, and not
that the attorney was conceding this construction was correct.

                                    21
limine No. 27, and observed that this interpretive issue could
arise again when formulating jury instructions.
      Although at one point during the motion hearing the trial
court characterized its statements concerning this implied duty of
good faith as “the legal ruling” on this point, the court later
intimated it had simply provided the parties with “tentative
thoughts to guide [them] in [their] case.” Nevertheless, the
court’s remarks indicate that before Gail submitted her proposed
Special Instruction Nos. 25 and 25A during phase II of the trial,
the court was inclined to find the Hollanders had this implied
duty of good faith.
      The trial court later made statements further
demonstrating that its interpretation of paragraph 8 was not
prompted by Gail’s submission of proposed Special Instruction
Nos. 25 and 25A. The parties began discussing the phase II jury
instructions on May 7, 2019. Prior to that first jury instruction
conference, Gail’s counsel submitted proposed Special Instruction
No. 25 to the court, and an insurance law practitioner named
Anthony Cannon testified for the defense. Defense counsel asked
Cannon, “In order to trigger the public auction, what has to
happen under this policy?” Cannon replied, “A good faith
negotiation between the Hollanders and [XL Specialty] needs to
take place, a back and forth with documented positions and
competent evidence of values needs to be undertaken. [¶] And
then[,] . . . only if they cannot agree . . . after properly
documenting their view, then public auction.” Cannon indicated
he believed this obligation stemmed from “the implied covenant
of good faith and fair dealing that each [party] will not do
anything to frustrate the other side’s reasonable expectations
under the policy.”

                                  22
       During the jury instruction conference held later that day,
the trial court stated it “completely agree[d] with Mr. Cannon’s
interpretation of that policy when it came to loss in value.”
Although the trial court at first indicated that it did not wish to
“rule on this as a matter of law,” the court later on during the
conference called this interpretation of the policy its “ruling” on
this issue. Additionally, when the trial court at one point
reiterated its conclusion that a duty of “good faith” applied to
paragraph 8, Gail’s counsel noted that his client “preserv[ed her]
objection” thereto.18 The court replied, “Of course,” and
acknowledged that the Court of Appeal may ultimately disagree
with the trial court’s interpretive ruling. At the close of the
conference on May 7, 2019, the trial court directed the parties to
submit proposed instructions that “just tell[ the jury] exactly
what [the court] just said.”
       Following the May 7, 2019 conference, Gail submitted her
proposed Special Instruction No. 25A for the court’s review. On
May 8, 2019, the trial court remarked that both sides had
provided it with proposed special instructions “trying to codify
what [the court] said,” and that the parties “captured the essence
of what [the court] decided” “as a matter of law” the previous
day—i.e., “there is an implied covenant of good faith and fair
dealing” that required “both parties . . . to attempt in good faith
to resolve the issue of loss in value, if any” after restoration.
Later that day, the trial court provided the parties with a draft

      18  This excerpt from the reporter’s transcript undercuts
defendants’ assertion that by stating during the conference that
the trial court could substitute “good faith dispute” for “genuine
dispute” in proposed Special Instruction No. 25, Gail’s counsel
was agreeing with the court’s interpretation of paragraph 8.

                                   23
version of Special Instruction No. 1 and asked Gail’s attorneys
whether they had any objection to it. One of Gail’s lawyers stated
that he objected because the draft instruction was “a rewriting of
the insurance contract which is not permitted . . . .” The court
responded that Gail’s counsel had “reserved all rights . . . ad
nauseam,” and then asked if the draft instruction was “consistent
with [the court’s] rulings . . . .” One of Gail’s other lawyers then
conceded the draft instruction was consistent with the court’s
prior rulings.
       Thus, Gail’s submission of proposed Special Instruction
Nos. 25 and 25A did not cause the trial court to issue Special
Instruction No. 1. As a matter of fact, the record reveals Gail’s
counsel repeatedly objected to the trial court’s assertion that Gail
could recover the auction formula benefit only if she and Stanley
attempted in good faith to reach an agreement with XL Specialty
on the loss in value. Accordingly, we reject defendants’ claim
that Gail triggered the invited error doctrine by “draft[ing] the
very language [she] now claim[s] was erroneous . . . .” (See Hood,
supra, 43 Cal.App.5th at p. 70 [holding the invited error doctrine
applies “where a party . . . induces the commission of an error,”
italics added]; cf. Baxter v. State Teachers’ Retirement System
(2017) 18 Cal.App.5th 340, 376–378 [concluding that the invited
error doctrine did not apply to the appellant’s legal theory
because “[t]he trial court’s comments on the record at . . . two
hearings clearly show that it ruled [the legal theory] did not
apply because of its own determination of the merits[,] . . . not
because of the argument of [appellant’s] counsel”].)
       Furthermore, the record belies defendants’ claim that Gail
did not argue during the proceedings below that she and Stanley
had an unfettered right to sell the paintings at auction and

                                   24
collect the auction formula benefit. For instance, at the hearing
on Gail’s motion in limine No. 27, her counsel explicitly told the
court: “I . . . want you to find that the contract says that if the
parties aren’t able to agree, that the Hollanders have the right to
sell the paintings at public auction, and there [are] no other
conditions precedent.” (Italics added.) And, because the record
evidence discussed above shows the trial court issued Special
Instruction No. 1 notwithstanding Gail’s recurrent objections to
the court’s interpretation of paragraph 8, Gail’s failure to request
specifically an instruction stating that she and Stanley had no
obligation to negotiate with XL Specialty reasonably and in good
faith did not induce the instructional error she raises on appeal.19
       In any event, regardless of whether the invited error
doctrine could apply to this case, we have discretion to proceed to
the merits of Gail’s challenge to Special Instruction No. 1. (See
Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs

      19  Defendants do not argue that Gail waived or forfeited
her claim of instructional error by failing specifically to request
an instruction they were not obligated to negotiate with
XL Specialty reasonably and in good faith. Instead, defendants
apparently contend the invited error doctrine estops her from
raising the contention on appeal. We reject that argument for the
reasons discussed in the textual paragraph accompanying this
footnote.
      Additionally, Gail argues that the Hollanders’ failure to
negotiate loss in value in good faith was, at most, a breach of the
duty to cooperate that is not actionable unless the insurer
demonstrates prejudice. Because we agree with Gail that the
implied covenant was inapplicable, it is unnecessary for us to
decide whether Gail is estopped from asserting her contention
regarding the duty to cooperate.

                                    25
(The Rutter Group 2021) ¶ 8:248.13, p. 8–186 [“Application of the
doctrine of invited error is not automatic; it is discretionary with
the appellate court.”]; see also People v. Ketchel (1966) 63 Cal.2d
859, 865–866, fn. 3 [“[I]t is not every case in which the doctrine of
invited error will preclude a defendant from complaining of the
error on appeal.”].) As we explained in our Standard of Review,
ante, the trial court’s interpretation of paragraph 8 presents a
purely legal question that is subject to de novo review. Even if
arguendo the invited error doctrine did apply, we would exercise
our discretion to reach this purely legal question. (Cf. In re
D’Anthony D. (2014) 230 Cal.App.4th 292, 298, fn. 2
[“[A]pplication of the forfeiture rule ‘is not automatic.’ [Citation.]
When an appellant raises a question of law, for example, the
appellate court can exercise its discretion to address the issue.’
[Citation.]”].)

B.    The Trial Court Erred in Imposing Upon the
      Hollanders the Duty to Make Reasonable and Good
      Faith Efforts to Reach Agreement on the
      Postrestoration Partial Loss in Value
      As we set forth in our Factual and Procedural Background,
paragraph 8 of the insurance policy provides: “Loss in value, if
any, after Restoration, to be agreed upon between the Insured
and the Company.” It further provides: “In the event the
Insured and the Company cannot agree on the amount of loss in
value, the Property will be sold at public auction and the net
proceeds shall inure to the Insured. The Company will pay the
Insured the difference between the amount so realized and the
insured value of the Property.” In this way, the policy expressly
cabins the value of any postrestoration partial loss at the

                                     26
difference between the scheduled value listed in an endorsement
to the policy20 and the “net proceeds” received in a public auction.
       The trial court informed the jury in Special Instruction
No. 1 that “[t]here is a mutual obligation of good faith and fair
dealing implied in every contract, including the insurance policy
at issue in this case,” and that, “[w]ith respect to Paragraph 8 of
the insurance policy between XL Specialty and the Hollanders,
this obligation required both parties to try to reach agreement in
good faith on ‘loss in value,’ if any, to the Kippenberger paintings
following restoration of the damage to the cardboard frames.”
The instruction also stated that, “[u]nder Paragraph 8, the
Hollanders were only entitled to sell the paintings at auction if:
(a) they made reasonable and good faith efforts to reach
agreement as to ‘loss in value,’ if any, to the paintings following
the restoration, or (b) if XL [Specialty] failed to make reasonable
and good faith efforts to reach agreement on the ‘loss in value,’ if
any, to the paintings following the restoration.”
       The court further instructed the jury: “If . . . you find that
the Hollanders did not try in good faith to reach an agreement
with XL Specialty on ‘loss in value,’ if any, following the
restoration, then the Hollanders are not entitled to collect from
XL Specialty the $181,850 difference between the scheduled
value of the paintings under the policy and the auction proceeds
received by the Hollanders. In such event, the Hollanders are
only entitled to collect whatever amount you find to be the

      20  Defendants concede that XL Specialty issued an
endorsement to the policy that set the scheduled value for the
paintings at $399,000. (See Artal, supra, 111 Cal.App.4th at
p. 275, fn. 2 [noting that a statement in a brief may be deemed an
admission against that party].)

                                    27
reasonable ‘loss in value,’ if any, to the paintings following the
restoration.”
       As a preliminary matter, we agree with the trial court that
“ ‘[t]here is an implied covenant of good faith and fair dealing in
every contract that neither party will do anything which will
injure the right of the other to receive the benefits of the
agreement,’ ” and that “[t]his principle applies equally to
insurance policies, which are a category of contracts.” (Kransco v.
American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390,
400 (Kransco).)
       The question presented is whether the trial court erred in
holding that the implied covenant in the instant policy required
the Hollanders to negotiate the postrestoration partial loss in
value with XL Specialty reasonably and in good faith—i.e.,
whether such an obligation falls within the scope of the implied
covenant. As explained in greater detail below, we conclude the
court’s instruction was erroneous because it ran afoul of a key
limitation on the scope of the covenant of good faith and fair
dealing, that is the covenant cannot be implied to defeat the
purpose of the contract.
       “The scope of the duty of good faith and fair dealing
depends upon the purposes of the particular contract because the
covenant ‘is aimed at making effective the agreement’s promises.’
[Citations.]” (Kransco, supra, 23 Cal.4th at p. 400.) As a
corollary to that rule, “the scope of conduct prohibited by the
covenant of good faith is circumscribed by the purposes and
express terms of the contract.” (See Carma Developers (Cal.), Inc.
v. Marathon Development California, Inc. (1992) 2 Cal.4th 342,

                                   28
373 (Carma Developers (Cal.), Inc.).)21 Put differently, “ ‘ “[t]he
precise nature and extent of the duty imposed by [the implied
covenant] will depend on the contractual purposes.” [Citation.]’ ”
(See Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917,
937; see also Grebow v. Mercury Ins. Co. (2015) 241 Cal.App.4th
564, 578–579 [“ ‘A court may find an implied contract provision
only if [(inter alia)] . . . the implication either arises from the
contract’s express language or is indispensable to effectuating the
parties’ intentions.’ ”].)
       In accordance with this principle, courts have recognized
“[t]he importance of identifying the purpose of the parties’
contract before considering the covenant as an aid in
construction” of the contract. (See Ellis v. Chevron, U. S. A., Inc.
(1988) 201 Cal.App.3d 132, 139.) “The purpose of a writing must
be ascertained solely from a common-sense meaning of it as a
whole with a view to effectuate the mutual intention of the
parties.” (Broome v. Broome (1951) 104 Cal.App.2d 148, 157.)
       Here, the purpose of paragraph 8 is clear from the policy
language itself—in the event the parties could not agree on the
postrestoration partial loss in value to the damaged artwork, the
market would determine that value through a public auction
process. Thus, paragraph 8 first provides: “Loss in value, if any,
after Restoration, to be agreed upon between the Insured and the

      21  We acknowledge that Carma Developers (Cal.), Inc.
construed a commercial lease. (See Carma Developers (Cal.), Inc.,
supra, 2 Cal.4th at p. 350.) Nevertheless, decisions interpreting
contracts other than insurance policies are instructive because
“[i]nterpretation of an insurance policy . . . follows the general
rules of contract interpretation.” (See MacKinnon v. Truck Ins.
Exchange (2003) 31 Cal.4th 635, 647.)

                                    29
Company.” Failing such agreement, or in the language of the
policy—“[i]n the event the Insured and the Company cannot
agree on the amount of loss in value”—then “the Property will be
sold at public auction and the net proceeds shall inure to the
Insured. The Company will pay the Insured the difference
between the amount so realized and the insured value of the
Property.”
       In this way, the public auction formula in paragraph 8
serves a purpose similar to that of liquidated damages. “ ‘ “The
term ‘liquidated damages’ is used to indicate an amount of
compensation to be paid in the event of a breach of contract, the
sum of which is fixed and certain by agreement, and which may
not ordinarily be modified or altered when damages actually
result from nonperformance of the contract.” [Citation.]
“Liquidated damages constitute a sum which a contracting party
agrees to pay . . . for breach of some contractual obligation.” ’
[Citation.]” (Graylee v. Castro (2020) 52 Cal.App.5th 1107, 1114.)
An enforceable liquidated damages clause allows the parties to
“avoid the cost, difficulty, and delay of proving damages”
resulting from a breach. (See 1 Witkin, Summary of Cal. Law
(11th ed. 2017) Contracts, § 537, p. 562.)
       The apparent purpose of paragraph 8’s two-part valuation
process was to create a dispute mechanism that would serve as
an alternative to litigation. Thus, it first gives the parties the
opportunity themselves to reach agreement on the loss in value to
the artwork knowing that if they could not, the market would
determine that value through a public auction process that would
set the compensation due to the Hollanders. Under either
scenario, the parties would avert the costs and delay attendant to
litigating the postrestoration loss in value of the artwork.

                                  30
       The trial court’s instructions to the jury scuttled this
alternative dispute resolution process by directing the jury to
evaluate the sincerity and reasonableness of the parties’
valuation negotiations, and by allowing the jury to utilize a new
and different measure of valuation found nowhere in the policy.
Specifically, the trial court told the jury that if it found that
XL Specialty, but not the Hollanders, had discharged the duty to
negotiate the valuation reasonably and in good faith, then the
jury needed to ascertain “the reasonable ‘loss in value,’ if any, to
the paintings following the restoration.” With this instruction,
the court thus required the parties to litigate a valuation issue
that would otherwise have been resolved by the public auction
process and formula provided in paragraph 8. In doing so, the
trial court turned a relatively expeditious and self-executing
dispute resolution process into protracted litigation and a trial on
an issue that paragraph 8 was intended to avoid. As set forth in
Kransco and the other authorities cited above, the trial court
erred in wielding the implied covenant to defeat the purpose of
the parties’ bargain.
       Defendants argue that without the implied covenant, the
first step in paragraph 8’s alternative dispute resolution process
would be superfluous. To the contrary, the first step gives the
parties the opportunity themselves to control how much is owed
under the policy and to reach whatever bargain they thought was
in their respective interests. For instance, XL Specialty could
attempt to negotiate a lower figure rather than risk paying a
potentially higher figure derived from paragraph 8’s auction
proceeds formula. Similarly, the Hollanders might have chosen
to forgo the public auction if their negotiations could yield a
higher payout than their perception of the payout under the

                                    31
auction formula. Had the parties been able to reach such a
compromise in their respective self-interest, it would have been
binding on the parties.22 In the absence of agreement, the
parties agreed to a formula for loss in value—confined to the
difference between the $399,000 scheduled value of the artwork
and the net proceeds from a public auction of the artwork.23
       Although it may be true that implying an obligation that
the parties negotiate sincerely and reasonably could enhance the
utility of the first step in paragraph 8’s alternative dispute
resolution procedure, it would undercut the very purpose of
paragraph 8, which was to provide an expeditious determination
of loss in value and prompt payment of insurance benefits to the
Hollanders as evidenced by the public auction formula in the
second clause of paragraph 8.

      22  By arguing that the portion of paragraph 8 that allows
the parties to agree on the postrestoration partial loss in value is
not superfluous, defendants impliedly concede that this part of
the policy is enforceable—i.e., that an agreement on loss in value
made pursuant to paragraph 8 would be binding on the parties.
(See Artal, supra, 111 Cal.App.4th at p. 275, fn. 2.)
      23  Although it does not appear that any invoice or other
similar documentation from Sotheby’s London is in the
voluminous record before us, there is no dispute regarding the
amount of the Hollanders’ net auction proceeds. Specifically,
Special Instruction No. 1 informed the jury that $181,850 was the
“difference between the scheduled value of the paintings under
the policy and the auction proceeds received by the Hollanders,”
and defendants apparently concede in their respondents’ brief
that “the net auction proceeds [were] $217,150” (i.e., the
difference between the scheduled value of $399,000 and
$181,850).

                                    32
       Defendants argue that Larwin-Southern California, Inc. v.
JGB Investment Co., Inc. (1979) 101 Cal.App.3d 626 (Larwin),
and Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225
(Brehm), support the trial court’s instruction implying the
covenant of good faith and fair dealing into paragraph 8.
Defendants correctly point out that Larwin “held the existence of
certain subjective ‘satisfaction clauses’ did not render a party’s
promise to purchase property illusory because that party was
impliedly obligated to determine their satisfaction or
dissatisfaction in good faith.” (Citing Larwin, at pp. 639–640.)
       Notwithstanding defendants’ accurate characterization of
Larwin, the decision provides no guidance here. Defendants do
not argue that the absence of an implied covenant of good faith
and fair dealing in paragraph 8 would render the insurance
policy illusory. In fact, the record shows consideration supported
the policy, given the policy required the Hollanders to pay a
premium of $24,966 and XL Specialty to pay “the difference
between the amount so realized [at public auction] and the
insured value of the Property” “[i]n the event the Insured and the
Company cannot agree on the amount of loss in value” after
restoration of the damaged property. Therefore, Larwin does not
support the proposition that the Hollanders had a duty to
attempt reasonably and in good faith to reach an agreement on
loss in value with XL Specialty before invoking the policy’s public
auction formula. (Cf. Third Story Music, Inc. v. Waits (1995)
41 Cal.App.4th 798, 800–801, 808–809 [holding that it was
unnecessary to “imply a covenant of good faith to protect the
enforceability” of the licensing agreement in that case because,
although the contract authorized the defendant to “ ‘refrain
from’ ” manufacturing, selling, distributing, or advertising the

                                   33
licensed music, the instrument was supported by “legally
adequate consideration”—i.e., it required the defendant to make
certain “guaranteed minimum [payments] no matter what
efforts” it undertook].)
       As defendants conceded at oral argument, Brehm is of
limited relevance to this case.24 As pertinent to this appeal, at
issue in Brehm was an uninsured/underinsured motorist policy
that provided for arbitration “ ‘[i]f we and a person insured do not
agree as to whether he or she is legally entitled to recover
damages from an Uninsured Motorist or the amount of such
damages . . . .’ ”25 (See Brehm, supra, 166 Cal.App.4th at
pp. 1230, 1241, italics omitted.) The plaintiff-insured alleged the
defendant-insurer was liable for bad faith because it made a
lowball monetary offer to settle what was an obvious case of
serious physical injury in an effort to delay payment and to force
the plaintiff-insured to accept the lowball offer. (See id. at

      24 At oral argument, defense counsel acknowledged that
Brehm is relevant only insofar as the decision involved an
insurance policy that allowed the insurer and insured to agree on
the amount due thereunder. This concession regarding the
limited relevance of Brehm is binding on defendants. (See
Consumer Cause, Inc. v. SmileCare (2001) 91 Cal.App.4th 454,
475 (Consumer Cause, Inc.) [“counsel’s concessions and
admissions at oral argument are binding”].)
      25  Although this provision referred to “ ‘damages from an
Uninsured Motorist[,]’ ” the Court of Appeal concluded that it
applied to underinsured motorist claims as well. (See Brehm,
supra, 166 Cal.App.4th at pp. 1241–1242 [stating the policy
“expressly grants the parties the right to arbitrate any dispute
regarding a[n uninsured motorist] or [underinsured motorist]
claim”].)

                                    34
pp. 1230–1232.) The trial court sustained the defendant-
insurer’s demurrer, reasoning these allegations amounted to a
“ ‘classic “genuine dispute” as to the value of a[n underinsured
motorist] claim’ ” that is “insufficient to state a cause of action”
for bad faith.26 (See Brehm, at pp. 1233, 1237.)
       In reversing the trial court’s ruling, the appellate court
rejected, among other arguments, the defendant-insurer’s
contention that because it had an express contractual right to
demand arbitration, “its decision to seek arbitration cannot
possibly constitute a breach of the implied covenant of good faith
and fair dealing.” (See Brehm, supra, 166 Cal.App.4th at pp.
1230, 1241–1242.) Citing well-established case law about an
insurer’s “duty to thoroughly investigate and fairly evaluate its
insured’s [underinsured motorist] claim” (id. at p. 1242),27 the
Court of Appeal held the covenant of good faith required the
defendant-insurer to comply with this duty before resorting to
arbitration: “[The insurer’s] express contractual right to resolve

      26   As we explain in Discussion, part C.2, post, the genuine
dispute doctrine allows an insurer to avoid liability for bad faith
if it denied or delayed the payment of policy benefits due to a
genuine dispute with its insured as to the existence of coverage
liability or the amount of the insured’s coverage claim.
      27  Brehm cited Wilson v. 21st Century Ins. Co. (2007)
42 Cal.4th 713 (Wilson), for this proposition. Wilson held that
the implied covenant of good faith and fair dealing in a first-party
insurance policy requires the insurer to “ ‘fully inquire into
possible bases that might support the insured’s claim’ before
denying it.” (See Wilson, at pp. 716, 720–721.) The Supreme
Court explained that this duty “ ‘is essential’ ” to “protect its
insured’s contractual interest in security and peace of mind . . . .”
(See id. at p. 721.)

                                    35
any remaining disputes by arbitration is not inconsistent with its
implied obligation to attempt in good faith to reach agreement
with its insured prior to arbitration.” (See Brehm, at p. 1242.)
       It is true that the purpose of the implied covenant is “to
prevent a contracting party from engaging in conduct that
frustrates the other party’s rights to the benefits of the
agreement.” (Waller v. Truck Ins. Exchange, Inc. (1995)
11 Cal.4th 1, 36.) The Brehm court held the plaintiff-insured had
alleged sufficient facts to demonstrate at the pleading stage that
the insurer had breached this covenant by “ ‘frustrat[ing] the
insured’s right to receive the benefits of the contract in “prompt
compensation for losses.” ’ [Citations.]” (See Brehm, supra,
166 Cal.App.4th at pp. 1236, 1240–1241, quoting Waller, at
p. 36.)
       Here, as detailed above, implying the covenant into
paragraph 8 would frustrate the purpose of that provision, which
is to provide a self-executing and expeditious process to
determine the compensation owed to the Hollanders under the
policy in the event of a partial loss to fine artwork. For this
reason, we do not construe paragraph 8 to provide XL Specialty
with a contractual right to require the Hollanders to negotiate
the paintings’ postrestoration partial loss in value reasonably and
in good faith before they could recover the auction formula
benefit. In fact, the trial court’s reliance on the implied covenant
to require the jury to determine the sincerity and reasonableness
of the parties’ negotiations on loss of value would produce the
very outcome Brehm’s invocation of the implied covenant sought
to avoid—i.e., the “ ‘frustrat[ion of] the insured’s right to receive
the benefits of the contract in “prompt compensation for
losses.” ’ ” (See Brehm, supra, 166 Cal.App.4th at p. 1236.)

                                    36
       In sum, the court erroneously imposed an obligation that
was not “circumscribed by the purposes” of the policy. (See
Carma Developers (Cal.), Inc., supra, 2 Cal.4th at p. 373.) In
light of this conclusion, we need not reach Gail’s arguments that,
“[e]ven if the implied covenant did impose duties on the
Hollanders with respect to paragraph 8,” (a) that implied
covenant at “most . . . required . . . that they act in ‘good faith’ ”
and did not obligate them to “act ‘reasonably’ ”; and (b) “[t]he
court erred in treating the duty to try to reach agreement as a
condition precedent.” (Boldface omitted.)

C.    The Trial Court’s Erroneous Interpretation of
      Paragraph 8 Was Prejudicial
         “California’s Constitution provides, ‘No judgment shall be
set aside, or new trial granted, in any cause, on the ground of
misdirection of the jury, . . . unless, after an examination of the
entire cause, including the evidence, the court shall be of the
opinion that the error complained of has resulted in a
miscarriage of justice.’ ” (Conservatorship of Maria B. (2013)
218 Cal.App.4th 514, 532, quoting Cal. Const., art VI, § 13.)
“ ‘ “The effect of this [constitutional] provision is to eliminate any
presumption of injury from error, and to require that the
appellate court examine the evidence to determine whether the
error did in fact prejudice the [appellant,]” ’ ” to wit, whether
“ ‘ “it is reasonably probable that a result more favorable to the
appealing party would have been reached in the absence of the
error.” [Citation.]’ ” (See Conservatorship of Maria B., at p. 532.)
“ ‘ “[A] ‘probability’ in this context does not mean more likely than
not, but merely a reasonable chance, more than an abstract
possibility.” [Citation.]’ [Citation.]” (Ibid.)

                                     37
       “Instructional error ordinarily is considered prejudicial only
when it appears probable that the improper instruction misled
the jury and affected the verdict.” (Lundquist v. Reusser (1994)
7 Cal.4th 1193, 1213 (Lundquist).) “ ‘[O]ur standard of review in
this regard is the opposite of the traditional substantial evidence
test. “ ‘[I]n assessing an instruction’s prejudicial impact, we
cannot use the view of the evidence and inferences most favorable
to the [prevailing party]. [Citations.] Instead, we must assume
the jury might have believed [appellant’s] evidence and, if
properly instructed, might have decided in [appellant’s] favor.
[Citations.]’ [Citation.] Accordingly, we state the facts most
favorably to the party appealing the instructional error alleged[.]
[Citation.]” [Citation.]’ [Citation.]” (Bowman v. Wyatt (2010)
186 Cal.App.4th 286, 304 (Bowman).)

      1.    The Erroneous Instruction Was Prejudicial as to the
            Breach of Contract Claim
      At oral argument, defense counsel conceded that if Special
Instruction No. 1 were erroneous, then the jury could award only
$181,850 on the contract claim and not the $19,500 that it did
award. In accordance with defendants’ concession on this point,
we conclude the trial court’s instructional error prejudiced Gail
vis-à-vis her breach of contract claim.28 (See Consumer Cause,

      28   We construe defendants’ concession as an abandonment
of the following argument raised in their respondents’ brief:
“[E]ven if the trial court’s reference to ‘reasonable and good faith
[efforts]’ in Special Instruction 1 could be considered error, it
would be harmless because the trial court charged the jury in the
same instruction that their task was to determine whether [the
Hollanders] acted in good faith, without mentioning
reasonableness.”

                                    38
Inc., supra, 91 Cal.App.4th at p. 475 [“counsel’s concessions and
admissions at oral argument are binding”].)

      2.     The Erroneous Instruction Was Prejudicial as to the
             Bad Faith Claim
       The trial court instructed the jury that for Gail to prevail
on her “claim that XL Specialty . . . breached the obligation of
good faith and fair dealing by failing to pay benefits due under
the insurance policy,”29 she needed to prove the following
elements: “1. That the Hollanders suffered a loss covered under
an insurance policy with XL Specialty[;] . . . [¶] 2. That XL
Specialty . . . was notified of the loss; [¶] 3. That XL Specialty . . .
unreasonably failed to pay policy benefits; [¶] 4. That the
Hollanders were harmed; and [¶] 5. That XL Specialty[’s] . . .
failure to pay the policy benefits was a substantial factor in
causing the Hollanders’ harm.” The court further instructed the
jury that “[t]o act or fail to act ‘unreasonably’ means that the
insurer had no proper cause for its conduct,” and “[i]n
determining whether XL Specialty . . . acted unreasonably, [the
jury] should consider only the information XL Specialty . . . knew
or reasonably should have known at the time when it failed to
pay policy benefits.” Neither side challenges these instructions.
       The verdict form shows that XL Specialty prevailed on this
cause of action because the jury did not find that XL Specialty
had “unreasonably or without proper cause breach[ed] the

      29 In referring to claims against insurers, cases employ the
terms “bad faith action” and “breach of the implied covenant of
good faith and fair dealing” interchangeably. (See, e.g.,
Dalrymple v. United Services Auto. Assn. (1995) 40 Cal.App.4th
497, 503.)

                                      39
covenant of good faith and fair dealing that it owed to the
Hollanders in the handling of the Kippenberger claim.”30
(Capitalization omitted.) In addition, defendants contend the
trial evidence showed “XL Specialty . . . offered [the Hollanders] a
lost value claim settlement of $19,950, which was 5% of the
insured value . . . .” (See Artal, supra, 111 Cal.App.4th at p. 275,
fn. 2.) The jury awarded Gail only $19,500 on the breach of
contract claim, and, under Special Instruction No. 1, this figure
represents the jury’s finding on “the reasonable ‘loss in
value[ ]’ . . . to the paintings following the restoration.”
       Viewing these facts in the light most favorable to Gail,
because of the instructional error, it is reasonably probable that
Special Instruction No. 1 affected the jury’s finding that
XL Specialty did not act “unreasonably or without proper cause”
in rejecting the Hollanders’ claim for $181,850—the uncontested
valuation produced by the public auction process in paragraph 8.
Specifically, it is reasonable to infer the jury absolved
XL Specialty of bad faith liability simply because XL Specialty
had offered to pay an amount ($19,950) that was in excess of the
jury’s finding of reasonable postrestoration partial loss in value of
the paintings ($19,500), which finding Special Instruction No. 1
provided was the amount due under the policy. (See

      30  Recall the verdict form asked the jurors, “Did
XL SPECIALTY INSURANCE COMPANY unreasonably or
without proper cause breach the covenant of good faith and fair
dealing that it owed to the HOLLANDERS in the handling of the
Kippenberger claim?” Eleven jurors answered “[n]o” to this
question, whereas one juror answered “[y]es” to it. Accordingly,
the jury found that Gail failed to establish an essential element of
her bad faith claim.

                                    40
Conservatorship of Maria B., supra, 218 Cal.App.4th at p. 532;
Bowman, supra, 186 Cal.App.4th at p. 304.)
       Had the trial court not told the jury that the Hollanders’
entitlement to $181,850 was contingent on their “attempt[ ], in
good faith, to reach an agreement on ‘loss in value,’ ” or on
XL Specialty’s failure to discharge its reciprocal duty to attempt
to reach an agreement in good faith, the jury would have needed
to determine whether XL Specialty acted reasonably in refusing
to pay the amount actually due under the policy—i.e., the auction
formula benefit.
       Additionally, as set forth in our Factual and Procedural
Background, it is undisputed the Hollanders and XL Specialty
were at an impasse regarding the paintings’ postrestoration
partial loss in value, and the text of paragraph 8 plainly states
that XL Specialty “will pay” the auction formula benefit “[i]n the
event the Insured and the Company cannot agree on the amount
of loss in value . . . .”
       Under these circumstances, there is a reasonable chance
that absent the trial court’s erroneous imposition of the implied
covenant as a condition on the Hollanders’ entitlement to the
auction formula benefit, the jury would have found XL Specialty
acted “unreasonably or without proper cause” in defying the
express terms of the policy by refusing pay $181,850 to the
Hollanders. (See Amadeo v. Principal Mut. Life Ins. Co. (9th Cir.
2001) 290 F.3d 1152, 1161–1162 (Amadeo) [holding, under
California law, that “ ‘the meaning a layperson would ordinarily
attach’ ” to a policy is probative of whether “the insurer’s denial
of benefits was reasonable”].)
       Turning to the other elements of Gail’s bad faith claim, the
parties do not dispute that the Hollanders had notified

                                   41
XL Specialty of the loss. Furthermore, because XL Specialty
refused to pay $181,850 to the Hollanders, they had to litigate
the breach of contract claim in order to recover the policy benefits
to which they were entitled. Under her bad faith claim, Gail may
recover her attorney fees incurred in pursuing those benefits.31
Thus, there is a reasonable chance that Gail would have satisfied
the causation and damages elements of her bad faith claim,
regardless of whether she could show that XL Specialty’s refusal
to pay the auction formula benefit proximately caused her and
Stanley to suffer any other potential type of damages.32
       Defendants resist this conclusion, insisting that “[t]he
record in this 15-year-old case, including the three-week trial,
conclusively supports the jury’s defense verdict on [Gail’s] bad
faith claim.” Defendants support this contention with the
following assertions, which are devoid of supporting record

      31  (See Howard v. American National Fire Ins. Co. (2010)
187 Cal.App.4th 498, 533 [“An insurer’s tortious breach of the
implied covenant of good faith and fair dealing makes the insurer
liable for all damages that are a proximate result of that breach.
[Citation.] Thus, ‘[w]hen an insurer’s tortious conduct reasonably
compels the insured to retain an attorney to obtain the benefits
due under a policy, it follows that the insurer should be liable in
a tort action for that expense. The attorney’s fees are an
economic loss—damages—proximately caused by the tort.
[Citation.]’ ”].)
      32  (See Archdale v. American Internat. Specialty Lines Ins.
Co. (2007) 154 Cal.App.4th 449, 467, fn. 19 [“If the insured elects
to proceed in tort [vis-à-vis a bad faith claim], recovery is possible
for not only all unpaid policy benefits and other contract
damages, but also extra-contractual damages such as those for
emotional distress, punitive damages and attorney fees.”].)

                                     42
citations: “The record shows that XL Specialty and its adjuster,
Natasha Fekula, paid two significant claims by the [Hollanders]
in full under the same Policy; fully paid to ship the Kippenberger
paintings to and from Germany for first-class restoration of the
cardboard frames and paid for that restoration in full; offered the
Hollanders $19,950 in lost value settlement notwithstanding that
multiple experts opined that the true lost value after restoration
was either non-existent or, at most, half that amount; and
refused [the Hollanders’] $181,850 lost-value demand based on an
interpretation of [paragraph] 8 of the Policy with which two of
the most experienced judges in the Superior Court of Los Angeles
County agreed.”
       Aside from defendants’ last assertion concerning two
jurists’ interpretation of paragraph 8, none of their contentions
has any apparent bearing on whether “it appears probable that
the improper instruction misled the jury and affected the verdict”
on the bad faith claim. (Lundquist, supra, 7 Cal.4th at p. 1213,
italics added.) Assuming arguendo XL Specialty paid two other
claims under the policy, acted reasonably in facilitating and
paying for the restoration of the paintings at issue here, and
offered the Hollanders double the highest estimate of
postrestoration partial loss in value provided by XL Specialty’s
experts, XL Specialty still may have acted unreasonably in
refusing to compensate the Hollanders in accordance with the
formula mandated by paragraph 8. (See Maslo v. Ameriprise
Auto & Home Ins. (2014) 227 Cal.App.4th 626, 633 [“ ‘[A]n
insurer’s obligations under the implied covenant of good faith and
fair dealing with respect to first party coverage include a duty not
to unreasonably withhold benefits due under the policy[,]’ ” italics
added].)

                                   43
       Defendants’ argument that XL Specialty relied on a policy
interpretation with which two other judges had agreed appears to
be an invocation of the genuine dispute rule. Under that rule,
“ ‘an insurer denying or delaying payment of policy benefits due
to the existence of a genuine dispute with its insured as to the
existence of coverage liability or the amount of the insured’s
coverage claim is not liable in bad faith even though it might be
liable for breach of contract.’ [Citation.]” (See Wilson, supra,
42 Cal.4th at p. 723.) “A genuine dispute exists only where the
insurer’s position is maintained in good faith and on reasonable
grounds.” (Ibid.)
       Although defendants do not identify explicitly the “two of
the most experienced judges in the Superior Court of Los Angeles
County” who “agreed” with XL Specialty’s construction of
paragraph 8, their recitation of this case’s procedural history
suggests they are referring to (1) the judge who denied Gail’s
motion for summary adjudication, and (2) the judge who issued
Special Instruction No. 1. Regarding the summary adjudication
motion, the Hollanders sought a ruling that XL Specialty had a
duty to pay them $181,850 plus statutory interest. The trial
court denied that motion in part because it found a triable
controversy regarding “whether [the Hollanders] fulfilled the
condition precedent in paragraph 8 of the XL Specialty Policy to
obtaining the net auction shortfall between the insured value and
auction price of the Paintings by making a good faith attempt to
reach agreement with XL Specialty on the loss-in-value, if any, to
the Kippenberger Paintings caused by the removal and

                                  44
restoration of the Paintings’ cardboard frames.”33 (Boldface
omitted.)
       We reject defendants’ apparent reliance on the genuine
dispute rule for two reasons. As an initial matter, it is
reasonably probable that had the trial court not erroneously
instructed the jury that paragraph 8 required the Hollanders to
“attempt[ ], in good faith, to reach an agreement on ‘loss in
value,’ ” the jury would have found that XL Specialty “refused
[the Hollanders’] $181,850 lost-value demand” based on the
insurer’s insistence that the loss in value be determined by an
appraisal, and that the Hollanders could obtain the auction
formula benefit only if they retained an appraiser who rendered
an opinion differing from that of XL Specialty’s appraiser. For
instance, the trial court admitted into evidence a
September 15, 2006 e-mail from Fekula to Stanley in which she
asserted that, “[p]ursuant to [the] policy, loss in value, if any, will
be determined by competent and disinterested appraisers,” and
that, “[i]f, after the appraisals, we cannot agree on a loss in value,
then the property will be sold at public auction.”
       Based on this evidence, the jury could have found that
XL Specialty’s denial of the Hollanders’ demand for $181,850
was not “based on” the Hollanders’ failure to negotiate in good
faith, but instead, on an appraisal condition found nowhere in
paragraph 8.34 (See Amadeo, supra, 290 F.3d at p. 1163 [holding

      33 The order on the summary adjudication motion does not
explain why the trial court found that paragraph 8 obligated the
Hollanders to make a good faith attempt to reach an agreement
with XL Specialty on the postrestoration partial loss in value.
      34 Defendants do not claim the trial court erred in
concluding, in Special Instruction No. 1, that (a) “the insurance

                                     45
that the genuine dispute rule is inapplicable if the insurer
adopted a policy interpretation “as a mere pretext for avoiding
payment of the claim”].)
      Additionally, even assuming XL Specialty’s refusal to pay
$181,850 was based on its belief the Hollanders were required to
negotiate in good faith, construing the evidence in the light most
favorable to Gail as we must, we cannot agree with defendants
that no reasonable jury would have “conclude[d that]
XL Specialty’s handling of this claim constituted bad faith.”
(See Bowman, supra, 186 Cal.App.4th at p. 304.) Because
paragraph 8 does not expressly impose a requirement to reach an
agreement in good faith, the jury could have found that XL
Specialty’s “interpretation was sufficiently arbitrary and
unreasonable” to negate the applicability of the genuine dispute
rule. (See Amadeo, supra, 290 F.3d at p. 1162.) Further, the fact
that two trial judges have disagreed with our reading of
paragraph 8 does not necessarily establish the existence of a
genuine dispute over the amount due under the policy. This is
because contract language is not “reasonably . . . susceptible” to a
party’s interpretation thereof “merely because the parties (or
judges) disagree about its meaning.” (See Abers v. Rounsavell
(2010) 189 Cal.App.4th 348, 356.) Indeed, holding that the trial
court’s prior rulings regarding paragraph 8 trigger the genuine
dispute rule “would have the practical effect of denying the

policy did not require the Hollanders to procure an appraisal of
their paintings before exercising their rights under paragraph 8,”
and (b) paragraph 25’s appraisal process did not directly apply to
the Hollanders’ partial loss claim. (See Factual and Procedural
Background, part 6, ante [providing the full text of Special
Instruction No.1].)

                                    46
insured [her] right to appeal the trial court ruling[s] because,
even if the trial court were reversed, the initial finding[s] would
preclude bad faith as a matter of law. We find that such a
conclusion in the insurance context . . . is unfounded.” (See
Filippo Industries, Inc. v. Sun Ins. Co. (1999) 74 Cal.App.4th
1429, 1441.)
      In sum, we conclude the trial court’s erroneous construction
of paragraph 8 prejudiced Gail vis-à-vis the jury’s verdict on the
breach of contract and bad faith counts. Accordingly, the trial
court’s judgment must be reversed.

D.    We Do Not Resolve the Other Issues Gail Raises
       Gail raises several other complaints on appeal. First, she
challenges the award of costs to defendants. Yet, Gail concedes,
and we agree, that we “need not reach that issue” because (a) the
trial court’s instructional error warrants reversal of the
judgment, and (b) our order reversing the judgment vacates the
costs award. (Citing Ducoing Management, Inc. v. Superior Court
(2015) 234 Cal.App.4th 306, 314 [“A disposition that reverses a
judgment automatically vacates the costs award in the
underlying judgment even without an express statement to this
effect.”].)
       Next, Gail asks us to instruct the trial court to “enter
judgment for [her] on the breach-of-contract claim for $181,850”
and “award [her] prejudgment interest on that award under Civil
Code section 3287, subdivision (a) . . . .” She, however, provides
no analysis in support of her entitlement to an order instructing
the trial court to enter judgment for her on the breach of contract
claim. For that reason alone, we need not address further Gail’s
request for a judgment awarding her $181,850 on her breach of
contract claim. (See Hernandez v. First Student, Inc. (2019)

                                   47
37 Cal.App.5th 270, 277 (Hernandez) [“We may and do ‘disregard
conclusory arguments that are not supported by pertinent legal
authority or fail to disclose the reasoning by which the appellant
reached the conclusions he wants us to adopt.’ [Citation.]”].)
This is not just a procedural concern. Although upon a retrial,
the trial court’s instructions must conform to our interpretation
of paragraph 8 herein, there may be other issues relating to the
breach of contract claim not raised in the first trial or considered
in this appeal. Accordingly, we are in no position to enter
judgment in Gail’s favor, and leave the scope of the retrial of
Gail’s claims to the sound discretion of the trial court.
       Additionally, Gail concedes that the bad faith claim must
be retried. Thus, her request for judgment on the contract claim
upon remand would appear to be premature, given that it could
result in multiple judgments relating to the same controversy.
(See City of Hanford v. Superior Court (1989) 208 Cal.App.3d
580, 588 [“As a general rule, there is only one final judgment in
an action, one which finally determines the rights of the parties
in relation to the matter in controversy.”].)
       Gail’s plea for an “award [of] prejudgment interest” is
premised on her entitlement to a judgment for $181,850 on her
contract claim. Because she has not explained why we should
direct the trial court to issue the $181,850 judgment on remand,
her request for prejudgment interest is not yet ripe. (See Wilson
& Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th
1559, 1573 [“California courts will decide only justiciable
controversies. [Citations.] . . . Justiciability thus ‘involves the
intertwined criteria of ripeness and standing. A controversy is
“ripe” when it has reached, but has not passed, the point that the

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facts have sufficiently congealed to permit an intelligent and
useful decision to be made.’ [Citation.]”].)
       Lastly, Gail asks us to instruct the trial court to conduct a
trial on whether “eight of XL Specialty’s affiliates” (i.e., all
defendants other than XL Specialty) are “jointly and severally
liable for its obligations” “on the theory that they were engaged in
a partnership with XL Specialty . . . .” Although Gail
(a) complains in the procedural summary section of her opening
brief that the court denied her “motion to set a phase 3 trial on
the partnership issue against” these defendants and (b) suggests
the court should have submitted the matter to the jury, she offers
no legal analysis on this issue. We thus do not address this issue
further.35 (See Hernandez, supra, 37 Cal.App.5th at p. 277.)

      35  We note that because our unqualified reversal of the
judgment renders the case at large for the further proceedings,
the trial court may revisit this issue upon remand. (See In re
Anna S. (2010) 180 Cal.App.4th 1489, 1499–1500 [“ ‘The effect of
an unqualified reversal (“the judgment is reversed”) is to vacate
the judgment, and to leave the case “at large” for further
proceedings.’ ”].) For that same reason, we need not specifically
instruct the trial court to retry the bad faith claim.

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                         DISPOSITION
     The judgment is reversed. Appellant Gail Hollander is
awarded her costs on appeal.
     NOT TO BE PUBLISHED.

                                           BENDIX, J.

We concur:

             ROTHSCHILD, P. J.

             MORI, J.*

      * Judge of the Los Angeles County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.

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