Court Opinion

ID: 9955642
Source: CourtListenerOpinion
Date Created: 2024-03-28 21:02:33.394772+00
Date Added: 2024-06-11T08:15:09.219457
License: Public Domain

Filed 3/28/24

                      CERTIFIED FOR PUBLICATION

       IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        FIRST APPELLATE DISTRICT

                                  DIVISION FOUR

 APEX SOLUTIONS, INC.,
       Plaintiff and Appellant,             A167491
                 v.                         (Alameda County Super. Ct.
 FALLS LAKE INSURANCE                       No. RG21099709)
 MANAGEMENT COMPANY, INC.,
       Defendant and Respondent.

       In this insurance coverage case, we are called upon to review a
judgment entered for the insurer, Falls Lake National Insurance Company
(Falls Lake), following a ruling on cross-motions under Code of Civil
Procedure section 437c.1
       The appellant, Apex Solutions, Inc. (Apex), runs a cannabis business in
Oakland. Apex sustained property and business income losses when
unknown burglars broke into its facility in June 2020 and emptied the
contents of two vaults containing cannabis inventory. It presented claims for
loss of over $2.5 million to Falls Lake, and this litigation ensued when the
parties could not agree on the amount of loss owing under Falls Lake’s policy.
       The principal issue for decision is whether Apex’s property insurance
claim for stolen inventory is subject to a single per occurrence limit of

       1 All undesignated statutory references are to the Code of Civil

Procedure.

                                        1
$600,000, as Falls Lake contends, or two per occurrence limits totaling $1.2
million, as Apex contends. We must also address whether Falls Lake owes
some $154,000 in additional payments and reimbursements on Apex’s
business interruption claim.
      On the first issue, we conclude the trial court correctly ruled that a
single per occurrence limit applies. On the second, we conclude that, in
granting summary judgment for Falls Lake, the court overlooked a disputed
issue of material fact concerning proper calculation of Apex’s claim of lost
business income.
      We will reverse the judgment in part, remand on one narrow aspect of
the claim for lost business income, and otherwise affirm.
                               I. BACKGROUND
      In the early summer of 2020, the mayor of Oakland declared a
municipal state of emergency, citing conditions of extreme peril to the safety
of persons and property within the city. The declaration came in the wake of
“unrest and violence . . . in Oakland and other cities in the Bay Area and
around the country” following the murder of George Floyd. Among these
emergency conditions was the looting of businesses.
      Apex, which describes itself as the owner of a business that
“manufactures, stores and distributes cannabis and cannabis related
products and merchandise,” operates out of a facility at 8435 Baldwin Street
in Oakland. In the early morning hours of June 1, 2020, a group of
unidentified burglars broke into Apex’s facility and stole a large portion of its
cannabis inventory. The thieves raided two separate inventory vaults on
Apex’s premises, one called the Distro Vault, and one called Kate’s Vault.
      The following day, Apex submitted a police report. In its report, Apex
described a break-in at its facility and theft of inventory in the middle of the

                                        2
night. Apex stated the incident started on “06/01/2020 01:30 AM” and ended
on “06/01/2020 5:00 AM”. On Apex’s security surveillance video recording,
the perpetrators’ activities can be clearly seen, but they wore masks and
could not be identified. No one was ever apprehended or charged in
connection with the burglary.
      The narrative in Apex’s police report reads as follows: “On 6/1/20 at
around 1:30am, our business at 8435 Baldwin St in Oakland was broken into
and burglarized. There was a large group that congregated in front of our
building, and through the audio of the surveillance footage, you can hear one
male directing the rest of the group to grab crowbars to pry open the front
door as well as giving them direction on how to. The group then proceeded to
storm the building and dispersed into separate rooms to each steal from one
part of the building. This seemed like a coordinated attack from a gang, as
everyone was on the same page and cooperating with each other.”
      Several months later, on October 27, 2020, Apex submitted a
supplemental police report updating its original narrative of the June 1
break-in and theft of its inventory. In the October 27 supplemental police
report, Apex claimed the time-stamps showed two different groups of
burglars entering and leaving independently of one another, and two
separate and sequential breaches, first of the Distro Vault, and then, after a
break in time of nearly an hour, of Kate’s Vault. According to Apex, these
two groups of burglars entered its premises, respectively, at 1:45 a.m. and
2:57 a.m.
      Apex was insured against this kind of loss. Falls Lake issued a
commercial package policy to Apex, effective from March 26, 2020 to March
26, 2021 (the Policy). Apex is the named insured and the insured premises is
Apex’s Baldwin Street location. The Policy includes a series of Special Forms

                                       3
providing various types of coverage, including Commercial General Liability
Coverage (CGL Coverage); Commercial Property Coverage (Property
Coverage); and Business Income (and Extra Expense) Coverage (Lost
Business Income Coverage).2 The Property Coverage affords coverage for any
loss of “Cannabis Inventory” up to a $600,000 per occurrence” limit, and the
Lost Business Income Coverage affords coverage for lost income due to
business interruption up to a $2 million limit.3
      On June 2, 2020, the same day Apex initially reported the night raid
and theft of its inventory to the police, Apex submitted a claim to Falls Lake
reporting a covered loss under the Property Coverage and the Lost Business
Income Coverage. The preliminary proof of loss, submitted by Apex’s
adjuster a few weeks later, stated, “we have prepared a preliminary loss
measure which reflects the cumulative total of each of the burglary
occurrences. Given a cannabis inventory value in the amount of $2,535,278
against an occurrence policy limit of $600,000, [we] see no reason why the
total occurrence limit cannot be paid.”
      Falls Lake reserved its rights on the per occurrence limit issue, while
taking the position that only a single limit applied. On August 4, 2020, it
paid $600,000 for the claimed cannabis inventory loss. Its adjuster
explained, “we have conducted a preliminary evaluation and reviewed the
police report and records you have provided us. . . . Based on our preliminary

      2 These Special Forms fall into two groups, the CGL Part and the

Property Part. Premiums were calculated separately for the CGL Part and
the Property Part.
      3 A “coinsurance” provision in Section D of the Lost Business Income

Coverage reduced Apex’s loss recovery as a penalty for failing to purchase
insurance with limits equivalent to at least 80 percent of the value of the
covered property.

                                          4
evaluation, it appears only one occurrence applies to this loss.” Eventually,
Falls Lake paid another $673,477 of Apex’s claimed loss under the Lost
Business Income Coverage. Apex took the position it was owed an additional
$64,138 under the Lost Business Income Coverage based on projected future
customer sales, as well as reimbursement for an additional $89,700 in extra
expenses incurred to avoid future losses.
      When the parties were unable to resolve their differences in the
adjustment process, Apex filed a complaint in Alameda County Superior
Court against Falls Lake (erroneously sued as Falls Lake Insurance
Management Company Inc.); CannGen Insurance Services, LLC; and Fidens
International LLC dba Fidens Insurance Brokerage, LLC.4 Against Falls
Lake, the complaint alleged causes of action for breach of contract and for
breach of the implied covenant.
      The parties brought cross-motions under section 437c directed to both
causes of action, with Falls Lake seeking summary judgment or in the
alternative summary adjudication, and Apex seeking only summary
adjudication. On December 2, 2022, the court issued an order granting Falls
Lake’s motion and denying Apex’s motion. The court later entered judgment
for Falls Lake pursuant to the order disposing of these motions. This timely
appeal from the judgment followed.
                              II. DISCUSSION
      We address two issues in this appeal, both of them claims of error in
the trial court’s section 437c ruling for Falls Lake on the first cause of action

      4 Fidens is no longer party to this litigation, having settled the claims

against it separately.

                                        5
for breach of contract.5 Specifically, those issues are: (1) Does Apex’s claim of
loss for the theft of its cannabis inventory involve one occurrence, or two
occurrences, for purposes of the per occurrence limit in the Property
Coverage? And (2) is Apex entitled to additional payment for lost business
income or for extra expense reimbursement on its claim of loss under the Lost
Business Income Coverage?
      On the first issue, the parties agree the facts are undisputed, but draw
different legal conclusions from those facts, with Apex taking the position we
should not only reverse but instruct that summary adjudication be rendered
in its favor. On the second issue, Apex claims there is a material dispute of
fact that must be tried.
      Our analysis is governed by familiar principles. If, on a motion for
summary judgment or summary adjudication, “all the papers submitted show
that there is no triable issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law,” then a grant of the motion
is warranted. (§ 437c, subd. (c); see Aguilar v. Atlantic Richfield Co. (2001)

      5 Nothing in Apex’s opening brief addresses whether the trial court’s

ruling on the second cause of action for breach of the implied covenant of good
faith and fair dealing. Having failed to address that aspect of the court’s
ruling in its opening brief, Apex has forfeited any such claim of error.
(Katelaris v. County of Orange (2001) 92 Cal.App.4th 1211, 1216, fn. 4.) In its
reply brief, Apex contends the court’s adverse ruling on its second cause of
action remains a live issue because its notice of appeal embraces the entire
judgment and all rulings preceding entry of judgment, and for the first time
offers argument going to the implied covenant cause of action. It misses the
point. Appeals, once noticed, do not brief themselves. And in the briefing
process, all issues for decision must be properly addressed in the opening
brief. (Cal. Rules of Court, rule 8.204(a)(1)(B).) Argument presented for the
first time in reply will generally “not be entertained because of the unfairness
to the other party.” (People v. Tully (2012) 54 Cal.4th 952, 1075.) We see no
reason to depart from the general rule here.

                                        6
25 Cal.4th 826 (Aguilar).) “We independently review the parties’ papers
supporting and opposing the motion, using the same method of analysis as
the trial court. Essentially, we assume the role of the trial court and apply
the same rules and standards.” (Kline v. Turner (2001) 87 Cal.App.4th 1369,
1373.)
      Under Aguilar, the movant initially carries the burden of making a
prima facie showing in its favor. (§ 437c, subd. (p)(1); see Aguilar, supra,
25 Cal.4th at p. 849.) “The prima facie showing by the moving party must be
such that it would, if uncontradicted, entitle the moving party to judgment as
a matter of law. [Citation.] That is, ‘a moving defendant must present
evidence which, if uncontradicted, would constitute a preponderance of
evidence [i.e., show it is more likely than not] that an essential element of the
plaintiff’s case cannot be established.’ ” (Leyva v. Garcia (2018)
20 Cal.App.5th 1095, 1101 (Leyva).) Upon an adequate prima facie showing
by the movant, “the opposing party is then subjected to a burden of
production of his own to make a prima facie showing of the existence of a
triable issue of material fact.” (Ibid.)
      Upon a showing that “one or more elements of the cause of action
cannot be established,” the burden shifts to the non-movant to “demonstrate
a triable issue of material fact exists.” (We Do Graphics, Inc. v. Mercury
Casualty Co. (2004) 124 Cal.App.4th 131, 135; § 437c, subd. (p)(2).) “In
evaluating whether there is a triable issue of material fact, we must view the
evidence in the light most favorable to the opposing party by ‘strictly
constru[ing]’ the evidence of the moving party, ‘liberally constru[ing]’ that of
the opposing party, and resolving any doubts against summary judgment.”
(McHenry v. Asylum Entertainment Delaware, LLC (2020) 46 Cal.App.5th
469, 479.) But because speculation is not evidence (Aguilar, supra,

                                           7
25 Cal.4th at p. 864), “speculation cannot create a triable issue of material
fact.” (McHenry, at p. 479; accord, Pipitone v. Williams (2016)
244 Cal.App.4th 1437, 1453 [“A triable issue of fact can only be created by a
conflict of evidence, not speculation or conjecture.”].)
      Should we be satisfied that the facts are undisputed, our review of the
trial court’s application of substantive law proceeds without deference.
(Terrell v. State Farm General Ins. Co. (2019) 40 Cal.App.5th 497, 502;
Mercury Casualty Co. v. Chu (2014) 229 Cal.App.4th 1432, 1443.) We review
the result the trial court reached, not its legal reasoning, and we may affirm
on any ground supported by the record, unconstrained by the route the trial
court took in getting there. (The Pep Boys Manny Moe & Jack of California v.
Old Republic Insurance Company (2023) 98 Cal.App.5th 329, 334 (Pep Boys).)
      We undertake our review in this case against the backdrop of a set of
well-known principles governing interpretation of insurance contracts. While
these contracts “ ‘ “ ‘have special features, they are still contracts to which the
ordinary rules of contractual interpretation apply.’ [Citations.] ‘The
fundamental goal of contractual interpretation is to give effect to the mutual
intention of the parties.’ ” ’ ” (Pep Boys, supra, 98 Cal.App.5th at p. 335.)
Contracting intent “ ‘ “ ‘is to be inferred, if possible, solely from the written
provisions of the contract.’ [Citation.] ‘If contractual language is clear and
explicit, it governs.’ [Citation.]” ’ ” (Ibid.)
      “[S]tandard form policy provisions are interpreted under the same rules
of construction. ‘ “[W]hen they are examined solely on a form, i.e., apart from
any actual agreement between a given insurer and a given insured, the rules
stated above apply mutatis mutandis. That is to say, where it is clear, the
language must be read accordingly, and where it is not, in the sense that
satisfies the hypothetical insured’s objectively reasonable expectations.” ’ ”

                                           8
(Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 391 (Powerine
Oil), quoting Buss v. Superior Court (1997) 16 Cal.4th 35, 45.)
   A. The Single Occurrence Versus Multiple Occurrences Issue
      1. The Absence of a Special Definition in the Property
         Coverage for the Term “Occurrence”
      Turning to the first issue presented, we begin with the text of the
Policy. The first-party Property Coverage, Section A, states that “We will pay
for direct physical loss of or damage to Covered Property at the premises
described in the Declarations”—a metal building at 8435 Baldwin Street,
Oakland—“caused by or resulting from any covered cause of loss.” It is
undisputed that “direct physical loss” encompasses physical displacement or
loss of physical possession,” including loss by theft. (See EOTT Energy Corp.
v. Storebrand International Insurance Co. (1996) 45 Cal.App.4th 565, 569
(EOTT) [coverage against “ ‘all risks of direct physical loss or damage’ ”
includes theft losses].)
      “Covered Property” includes “Business Personal Property,” which in
turn includes “Stock,” a term defined to mean “merchandise held in storage
or for sale.” At issue in this case is the policy limit applicable to claims for
loss of “Cannabis Inventory,” a specific kind of Stock under one of the Special
Forms that comprise the Property Coverage.6 “The most we will pay for loss

      6 In the Additional Exclusions & Endorsements Cannabis and Hemp

Business Property Form, there is a warranty clause in which Apex warrants
that “all inventory and/or stock of marijuana and marijuana containing items
is kept locked in a safe or a vault room at all times during business and non-
business hours.” Under this clause, Apex “further warrant[s] that any safe”
weighing between “800 and 2,000 pounds” that is “used to house all
marijuana stock and/or inventory will be bolted to the ground.” Only safes
weighing above 2,000 pounds are exempt from this requirement. The Policy
also includes a Special Form defining and establishing conditions for a
“Vault,” including that each vault must be a “Steel container [that] is 100%

                                         9
or damage in any one occurrence,” the Policy provides, “is the applicable
Limit Of Insurance.” The Declarations page, which lists the applicable
“Limit of Insurance” for each “Covered Cause of Loss” under the Special
Forms, shows a per occurrence limit of $600,000 for “Cannabis Inventory
Coverage.”
      “A ‘policy limit’ (or ‘limit of liability’) is the maximum amount the
insurer is obligated to pay in contract benefits on a covered loss.” (Croskey et
al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2023) ¶ 3.64)
(Croskey et al. Insurance Litigation); see George v. Automobile Club of
Southern California (2011) 201 Cal.App.4th 1112, 1128–1129.) The question
we address here focuses on the meaning of the term “occurrence” for purposes
of the policy limit in the Property Coverage. As briefed by the parties, a
central issue in this appeal is that the Property Coverage section of the
Policy, which is set forth in one of the first-party Special Forms, does not
define the term “occurrence.”
      Apex argues that, according to the dictionary, the word “occurrence,”
when used “in the singular,” means “something that happens[,] event [or]
incident.” Applying that plain English meaning to the facts presented, Apex
contends there were two separate “occurrences” because the surveillance
video and time-stamps show breaches of the Distro Vault and Kate’s Vault by
different people at different points in time, separated by nearly an hour.
Because each breach could have been charged and punished as a separate
crime, Apex contends, it is entitled to payment capped by the combination of
two separate $600,000 per occurrence limits.

enclosed,” must have walls made of “a minimum of 14-gauge steel,” must be
in a locked room monitored by “[v]ideo surveillance with continuous 24-hour
recording,” and must be “in a building equipped with . . . central station
burglar alarm.”

                                       10
      In making this argument, Apex leans heavily on the fact that, in the
third-party CGL Coverage Form, Falls Lake included a special definition of
the term “Occurrence.” In the CGL Coverage, Apex points out, that defined
term—spelled with an initial capital letter “O”—means “an accident,
including continuous or repeated exposure to substantially the same general
harmful conditions.” Without this special definition, Apex contends Falls
Lake must have known the term would naturally be understood by a
reasonable insured to mean a single event, in the plain English sense. (See
AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822 [“If there is
ambiguity [in an insurance contract] . . . it is resolved by interpreting the
ambiguous provisions in the sense the promisor (i.e., the insurer) believed the
promisee understood them at the time of formation.”].)
      It is not necessary to resort to the dictionary to understand what the
word “occurrence” means for purposes of the Property Coverage policy limit.
In the field of insurance, “occurrence” is generally defined to mean an
“accident” (Safeco Ins. Co. of America v. Fireman’s Fund Ins. Co. (2007)
148 Cal.App.4th 620, 632 (Safeco)), which connotes the element of fortuity
that is essential to all insurance (Chu v. Canadian Indemnity Co. (1990)
224 Cal.App.3d 86, 95). Understood in that sense, the word can give rise to
timing questions about whether coverage is “triggered” during a policy term.
(See e.g., Whittaker Corp. v. Allianz Underwriters, Inc. (1992) 11 Cal.App.4th
1236, 1243.) Since some accidents happen all at once, and some happen
incrementally over time, pinpointing an “occurrence” in time can be critical to
whether there is coverage at all.
      To address these often difficult questions of timing, it is not uncommon
to see special definitions of “occurrence” in insurance policies, especially

                                       11
third-party liability policies.7 The special definition in the Liability Coverage
Form—which defines an “Occurrence” to mean “an accident, including
continuous or repeated exposure to the substantially the same general
harmful conditions”—is typical. In the trial court, the parties debated
extensively whether this special definition sheds any light on the meaning of
the undefined term “occurrence” in the Property Coverage, and they continue
that debate here on appeal. We do not think it does.
      The term “occurrence” in the Property Coverage addresses “the amount
of coverage,” not whether there is coverage at all. (See Safeco, supra,
148 Cal.App.4th at p. 632.) We are not persuaded that the absence of a
special definition creates ambiguity (Powerine Oil, supra, 37 Cal.4th at
p. 390; see Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co.
(1993) 5 Cal.4th 854, 866–867), and without an ambiguity, it is unnecessary
to resort to tiebreaking rules calling for broad reading of insurance contract
language to favor the reasonable expectations of the insured (Minkler v.
Safeco Ins. Co. of America (2010) 49 Cal.4th 315, 321); see Yahoo Inc. v.
National Union Fire Ins. Co. etc. (2022) 14 Cal.5th 58, 67).
      The trial court correctly observed that when words in an insurance
contract have been given a technical or special meaning, they must be
understood against the backdrop of that established meaning. (Hartford
Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 288; see
Civ. Code § 1645.) But our analysis turns on a more specific version of this

      7 See e.g. Safeco, supra,148 Cal.App.4th at pp. 630–631; American

Internat. Bank v. Fidelity & Deposit Co. (1996) 49 Cal.App.4th 1558, 1565;
Century Indem. Co. v. Hearrean (2002) 98 Cal.App.4th 734, 738; Tidwell
Enterprises, Inc. v. Financial Pacific Ins. Co., Inc. (2016) 6 Cal.App.5th 100,
103; Standard Fire Ins. Co. v. Spectrum Community Assn. (2006)
141 Cal.App.4th 1117, 1124–1125; State Farm General Ins. Co. v. JT’s
Frames, Inc. (2010) 181 Cal.App.4th 429, 449–450.

                                       12
principle. Where an undefined “policy term has been judicially construed, it
is not ambiguous. [Citation.] ‘[T]he judicial construction of the term should
be read into the policy unless the parties express a contrary intent.’
[Citations].” (McMillin Homes Construction, Inc. v. National Fire & Marine
Ins. Co. (2019) 35 Cal.App.5th 1042, 1052–1053; see Norris v. Pacific
Indemnity Co. (1952) 39 Cal.2d 420, 424 [provisions “should be given a
meaning settled by judicial decision”].) Although “[t]his rule is applied ‘ “with
caution, first determining whether the context in which the construed term is
analogous” ’ ” (McMillin Homes, at pp. 1052–1053), we think it naturally
applies here.
      Contextually, the key to interpreting the per occurrence clauses at
issue here is their “intended function in the policy.” (Bank of the West v.
Superior Court (1992) 2 Cal.4th 1254, 1265.) When used to establish policy
limits and policy deductibles, the term “occurrence” has long had a settled
meaning. (See EOTT, supra, 45 Cal.App.4th 565; B.H.D., Inc. v. Nippon Ins.
Co. (1996) 46 Cal.App.4th 1137 (B.H.D.); Lexington Ins. Co. v. Travelers
Indem. Co. of Ill. (9th Cir. 2001) 21 Fed.Appx. 585 (Lexington); Patterson v.
American Economy Ins. Co. (9th Cir. 2018) 710 Fed.Appx.762; see also
Croskey et al. Insurance Litigation, supra, ¶ 7.369.) In this specific context,
courts generally hold that the term “ ‘occurrence . . . mean[s] the underlying
cause of the injury, rather than the injury or claim itself.’ ” (Safeco, supra,
148 Cal.App.4th at p. 633 [third-party insurance], italics omitted; EOTT,
supra, 45 Cal.App.4th at p. 576 [first-party insurance].).
      In California law, the leading first-party insurance case in this line of
precedent is EOTT, a case involving a deductible dispute. At issue there was
a $100,000 per occurrence deductible as it applied to a claimed loss of $1.5
million under an all-risk property insurance policy covering theft. (EOTT,

                                       13
supra, 45 Cal.App.4th at p. 568.) The insured suffered the loss from the theft
of diesel fuel by truckers who filled their tanks at a storage depot free of
charge by overriding the depot’s debiting system. (Id. at pp. 569–570.) Over
the course of an 11-month period, there were 653 such pumping incidents.
(Id. at p. 570.) The insured claimed that the multiple thefts were “in reality
an integral part of a longstanding, organized conspiracy which resulted in a
systematic theft of its oil products and thus amounted to only one occurrence
to which a single deductible should be applied.” (Id. at p. 568.) The insurer,
on the other hand, claimed “each of the 653 thefts should be regarded as
separately subject to the policy’s $100,000 deductible.” (Id. at p. 571.) On
cross-motions for summary judgment, the trial court ruled for the insurer.
(Ibid.).
         The appellate panel reversed and remanded for trial, determining that
the insured presented enough evidence of coordinated activity to justify a
trial on the insured’s theory that the cause of its loss was a single conspiracy.
(EOTT, supra, 45 Cal.App.4th at p. 578 [“this record discloses that evidence
was presented by EOTT which demonstrates that material issues of fact exist
on that point”].) The EOTT court adopted a causation-based interpretation of
“occurrence.” After surveying precedent nationwide, Justice Croskey, writing
for the panel, found that “[a] number of cases which have considered the
question of whether a series of acts constituted a single occurrence or
multiple occurrences have looked to the cause of the loss.” (Id. at pp. 575–
576.)8

         8 This remains the generally accepted view across the country today.

(See 10A Couch on Insurance (3d. ed. 2023) § 148:57 [“Generally, absent a
policy provision to the contrary, it is required that a loss be proximately
caused by an insured risk or cause.”]; Windt, Insurance Claims and Disputes

                                        14
      Applying the causation-of-loss approach, The EOTT court interpreted
the undefined “term ‘occurrence’ ‘in context, with regard to its intended
function in the policy. [Citation.]’ [Citation.] As used in the policy, the term
‘occurrence’ reasonably contemplates that multiple claims could, in at least
some circumstances, be treated as a single occurrence or loss.” (EOTT, supra,
45 Cal.App.4th at p. 575.) “In our view,” the court concluded, “EOTT’s
objectively reasonable expectation would embrace the conclusion that
multiple claims, all due to the same cause or a related cause, would be
considered a single loss to which a single deductible would apply.” (Ibid.)
      A series of cases decided under California law in the years since EOTT
applies the same analysis. Of these cases, two—B.H.D., supra,
46 Cal.App.4th 1137, and Lexington, supra, 21 Fed.Appx. 585—garner the
most attention in the parties’ briefs. In B.H.D., “[a] person posing as a
customer stole items of jewelry from the insured” (B.H.D., at p. 1139), a
jewelry store, “during each of many visits over a three-month period” (ibid.),
and the insured then made a claim under a casualty policy covering losses for
theft. “The aggregate amount of the [claimed] thefts exceeded the $10,000
deductible limit, but that limit was not exceeded by the theft on any one
occasion. There was no extrinsic evidence with respect to the meaning of the
policy terms. The trial court held that the deductible was not exceeded and,
therefore, the insurer was not liable to the insured.” (Ibid.)
      The appellate court affirmed. It pointed out that the insured conceded
the serial thefts involved were carried out by a single person on separate
occasions, each of which was a “completed crime that would have supported a

(6th ed. 2024) § 11:24 [“The vast majority of courts have held, in the absence
of policy language to the contrary, that the number of occurrences is
determined by referring to the cause or causes of damage, rather than to the
number of individual claims or injuries.”].)

                                       15
separate count in a criminal proceeding.” (B.H.D., supra, 46 Cal.App.4th at
p. 1142.) But ultimately the “central distinction . . . [wa]s the difference in
the policy language. Rather than a provision that suggests aggregation of all
thefts into a single claim (‘all claims . . . arising out of any one occurrence . . .
shall be adjusted as one claim’), the policy in this case specifically applied the
deductible to each loss ‘separately occurring.’ There was no comparable
provision in EOTT.” (Id. at p. 1143.)
      Lexington involved a dispute between an excess insurer, Lexington, and
a group of primary insurers over a claim for loss incurred by the insured, the
County of Contra Costa, for multiple fires set by an arsonist at multiple
courthouses. “The first fire occurred on August 28, 1995 at the Walnut Creek
Municipal Court in Walnut Creek. The other three fires occurred seventeen
days later on September 14, 1995. The first of the September 14th fires
occurred at the Traffic and Small Claims Court in Concord. The second fire
occurred six minutes later at the nearby Mount Diablo Municipal Court in
Concord. The final fire was ignited less than one hour later at the Contra
Costa Superior Court located in Martinez. The fires were individually
started by Richard Dudley Stevens, who had apparently suffered several
adverse rulings in all of the courthouses involved. Stevens was charged and
convicted on separate counts of arson.” (Lexington, supra, 21 Fed.Appx. at
p. 587.)
      Collectively, the courthouse fires in Lexington caused $14 million in
damage, but the damage resulting from only one of the fires exceeded the $5
million per occurrence limit in the primary insurers’ policies. (Lexington,
supra, 21 Fed.Appx. at p. 587.) If, as the primary insurers contended, the
fires constituted a single “occurrence” under their policies, then Lexington
would be liable under its excess policy for $7.5 million of the total loss. If, on

                                         16
the other hand, as Lexington contended, each of the fires constituted a single
“occurrence,” then the primary insurers were liable for the entire loss in the
form of multiple claims subject to multiple per occurrence limits. The trial
court ruled for Lexington, and a Ninth Circuit panel affirmed, explaining,
“We agree with the district court that four separate fires in four separate
buildings at four separate locations constitute four separate occurrences for
purposes of plaintiffs’ liability and the policy deductible.” (Id. at p. 590.)
      There was no evidence of a common plan or conspiracy in Lexington
and, as in B.H.D, the Ninth Circuit panel emphasized policy language
distinguishing the case before it from EOTT. As the panel explained, “[t]he
deductible provision in this case . . . contained an additional qualification not
found in EOTT. The deductible provision stated that a single deductible
applied to claims resulting from a single occurrence, with the reinstatement
clause creating an exception only for earthquake and flood: According to the
‘72-hour provision,’ in the event of damages from either earthquake or flood,
plaintiffs were allowed to aggregate losses within a 72-hour period as one
occurrence. [¶] . . . Plaintiffs’ argument that they should be allowed to
aggregate the arson fires as is possible with earthquake and flood would
render the 72-hour provision superfluous.” (Lexington, supra, 21 Fed.Appx.
at pp. 590–591.)
      2. Application of the Causation of Loss Test
      How, exactly, the above-described cases apply on this record presents a
more difficult question than one might expect at first blush. Apex relies
primarily on B.H.D. and Lexington, while Falls Lake distinguishes those
cases. Falls Lake relies primarily on EOTT, while Apex distinguishes it.
After considering the parties’ competing views of these three cases, we
conclude Falls Lake has the better of the argument. Without embracing the

                                        17
entirety of its reading of the law, we agree that EOTT dictates affirmance of
the trial court’s per occurrence ruling.
      To begin with, the particular language of the Policy—a point of
emphasis in both B.H.D. and Lexington—tends to bring this case within the
holding in EOTT, rather than distinguish our facts from it. The insuring
agreement, set forth in Section A of the Property Coverage, states, “We will
pay for direct physical loss of or damage to Covered Property . . . resulting
from any Covered Cause of Loss.” And on the Declarations page, the phrase
“Covered Causes of Loss” appears on a chart listing each applicable coverage
limit under all Special Forms that are included in the Property Coverage
Part of Falls Lake’s total package of insurance. This causation language,
which was not present in either B.H.D. or Lexington, suggests the parties
recognized the per occurrence limits in the Property Coverage would apply to
occurrences identified by causes of loss, consistent with established law as
enunciated in EOTT.
      Unlike B.H.D. and Lexington, moreover, the record does not support a
determination that there were separate occurrences at Apex’s business
premises on June 1, 2020. Here, however, Falls Lake goes too far. It places
great emphasis on the state-of-emergency at the time of the loss. In its
telling, the loss Apex suffered is attributable to a breakdown in civil order
during an unprecedented period of public unrest, a single occurrence.
Predictably, that analysis draws withering criticism from Apex. “To carry
Falls Lake’s argument to its extreme,” Apex argues, “consider a hypothetical
college campus insured under the Falls Lake Policy. One day arsonists burn
a building, then weeks or days (or even an hour) later different people br[eak]
into another building on campus and st[eal] property, and then later yet
another group vandalize[s] a third building. . . . Falls Lake’s interpretation of

                                       18
EOTT would allow Falls Lake to call the events ‘rampant crime’ and thereby
reduce them to a single occurrence subject to one Policy limit.”
      We see no need to analyze what happened here at such a high level of
generality. “A difficult question, rarely expressly addressed” in the extant
case law “outside of the context of coverage for third party claims, is whether
the ‘cause’ of a loss for the purpose of determining the number of occurrences
is the general overarching cause or the more immediate cause.” (Windt,
Insurance Claims and Disputes, supra, § 11:24.) To avoid “what would
otherwise potentially be a limitless bundling of injuries into a single
occurrence” (Addison Ins. Co. v. Fay (2009) 232 Ill.2d 446, 461 [905 N.E.2d
747, 756]), we hold that, to be a single occurrence, the cause of loss must “be
so closely linked in time and space as to be deemed by the average person as
a single event.” (Doria v. Insurance Co. of North America
(N.J.Super.Ct.App.Div. 1986) 210 N.J.Super. 67, 69 [509 A.2d 220, 221].)
This analysis must be undertaken on a case-by-case basis (Addison, supra,
905 N.E.2d at p. 756; Doria, supra, 509 A.2d at p. 224), but we are satisfied
that what happened in this case meets the test, given the close temporal and
spatial proximity of the events in question.
      The middle-of-the-night setting suggests only one plausible scenario:
Based on the narrative in the police report—which describes a group of
people being directed by a leader, responding to directions, and working
together—this was a coordinated raid by a group of unknown persons,
working on a single heist, which is what Apex initially reported to the police.
Given the fortified nature of the vaults involved and their secured locations
(see ante, fn. 6.), the idea that there were two separate opportunistic, spur-of-
the-moment vault breaches is implausible. What happened here was hardly
a smash-and-grab operation. According to photo stills and an unrebutted

                                       19
declaration submitted by Falls Lake below, the surveillance video showed
that the facility was continuously occupied—if not by exactly the same
people, at least by people working in coordinated fashion. Whoever breached
the second vault had to come prepared, with tools and a plan for breaking
into a locked vault room as well as a vault with walls of at least 14-gauge
steel. (See ante, fn. 6.) The suspects most likely to have that capability, it
seems to us, would be people working in concert with the same group that
had successfully breached the first vault less than an hour earlier.
      Apex’s multiple occurrences interpretation of the facts turns on its view
that different people can be identified breaking into Kate’s Vault. According
to Apex, the security video footage shows a number of unidentified people
breaking into multiple rooms, stealing inventory from the Distro Vault, and
departing that area of the facility, all between 1:45 a.m. and 2:17 a.m. Then,
approximately 40 minutes later, starting at 2:57 a.m., security footage shows
different people near Kate’s Vault, in a different area of Apex’s facility. In
support of the separate occurrences inference it asks us to draw from these
facts, Apex elected not to proffer the video itself, which would have showed
the full sequence of events while these anonymous intruders were doing their
work. Instead, it proffered selected still images that do not reveal how
exactly the vaults were breached or how events unfolded over time. Based on
the still images alone, what happened in the critical 40-minute hiatus
between the break-ins is a matter of speculation. It is certainly possible that
that was simply the time it took the thieves to stow the contraband from the
Distro Vault into a getaway vehicle or vehicles before they turned their
attention to Kate’s Vault. But because the objective circumstances
reasonably suggest some degree of coordination, we need not engage in that
kind of speculation about what happened between 2:17 a.m. and 2:57 a.m.

                                       20
      The problem for Apex is that, lacking any evidence of an independent
burglary crew—either by direct or circumstantial proof—it has no choice but
to speculate about the crucial 40-minute gap in time. In the face of a
declaration from Kenneth Harris, a member of Falls Lake’s adjuster team
who stated that “[t]he video footage provided to me by Apex shows continuous
activity in and at the Apex facility including near or at the Apex vaults
during the period of 1:45 a.m. through 3:30 a.m.,” Apex offered nothing to
refute his view that there was unbroken activity in the building.9 Its
contention, as noted, was that a wholly different group of people arrived and
carried out the second break-in. Granted, it seems possible that during the
40-minute hiatus between the two break-ins a distinct group of people
happened to be loitering in the vicinity shortly after 2:00 a.m., saw an
opportunity to rush into the facility immediately—which, presumably, would
account for the fact that activity was continuous—and that this second group
also happened to have the wherewithal to figure out exactly where Kate’s
Vault was, breach two layers of steel-clad protection (the vault room door and
the vault itself), and either disable the burglar alarm or finish the job quickly
enough to evade any law enforcement response. But looters are not known
for organized behavior. The prospect of all of this happening by chance,
without some kind of advance planning or preparation, seems highly
improbable, especially during a period of urban unrest.
      Under Aguilar, there is a triable issue only “if . . . the evidence would
allow a reasonable trier of fact to find the underlying fact in favor of the party
opposing the motion in accordance with the applicable standard of proof.”

      9 Apex objected to Harris’s declaration on multiple grounds, but the

trial court did not rule on those objections, which leave the objections
implicitly overruled. (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 534.)

                                       21
Aguilar, supra, 25 Cal.4th at p. 845, italics added; see e.g., Leyva, supra,
20 Cal.App.5th at pp. 1102–1105 [summary judgment properly granted for
defense in negligence action involving injuries due to fire, where plaintiffs’
evidence narrowing source of ignition to one of two possible causes, only one
of which put the defendant at fault, was insufficient to meet plaintiffs’ prima
facie burden].) In section 437c procedure, both the movant, initially, and
then the non-moving party, once the burden shifts, must meet this prima
facie burden. The burden is not a demanding one—here it is prima facie
proof that, if unrebutted, would justify a favorable finding by a
preponderance of the evidence—but it is not toothless either. Phrased in
terms of the Aguilar burden-shifting framework, we conclude that Falls Lake
met its initial burden of production and presented sufficient prima facie proof
to support a single occurrence finding in its favor, while Apex not only failed
to rebut that showing but on the same factual record failed to bear its initial
burden as a cross-movant seeking a multiple occurrence finding.
      Apparently, who planned the burglary at Apex’s facility and carried it
out in the early morning hours of June 1, 2020, will never be known. The fact
that no one has been apprehended or criminally charged seems to have led to
speculation and conjecture about what really happened, which is not
uncommon with unsolved crimes where very little is known. But speculation
and conjecture cannot drive the insurance coverage analysis here. What the
single “occurrence” versus multiple “occurrences” issue comes down to on this
record is which party, Apex or Falls Lake, must bear the risk of uncertainty
about what happened, how it happened, and the identity of the perpetrators.
That is why we view the crux of the section 437c analysis as a burden of proof
question. Falls Lake’s “coordinated activity” version of events is far from
overwhelming, but at least it rests on substantial evidence. In the face of

                                       22
undisputed circumstances reasonably suggesting that this was a single,
targeted raid, Apex failed to carry its own prima facie burden, even when we
read the record generously in its favor.
      Insisting to the contrary, Apex points to the “completed crime” analysis
in the B.H.D. case. It argues that “the people who broke into the seven rooms
and Distro Vault at 1:45 a.m., and stole more than $1.2 million of Apex’s
cannabis inventory, committed a crime. Just as clearly, the people who broke
into Kate’s Vault, at 2:57 a.m., also committed a crime. Even if the same
people burgled the seven rooms and Distro Vault and then came back later to
break into Kate’s Vault (which is clearly not the case from the video/pictorial
evidence here), they were separate crimes and, therefore, separate
occurrences.” We are not persuaded. Whether the individuals involved were
the same or different makes no difference; what is important is whether they
were working together or separately. As we have explained, on the limited
record before us—notably, given the cross-motions on undisputed facts, the
parties implicitly recognize that that record will not improve at trial—the
only available inference supported by adequate prima facie proof under
Aguilar is that the burglars were working together.
      In relying on the notion of a “completed crime,” we also think Apex
overreads B.H.D. Based on the cases cited in the B.H.D. opinion for this
point (see B.H.D., supra, 46 Cal.App.4th at p. 1142, citing People v. Stanford
(1940) 16 Cal.2d 247, 251 (Stanford) and People v. Slocum (1975)
52 Cal.App.3d 867, 889 (Slocum)), the passage Apex relies upon appears to
reference what is known in the law of theft as the “Bailey rule.” (See People
v. Bailey (1961) 55 Cal.2d 514 (Bailey).) Under the Bailey rule as it stood
when B.H.D. was decided in 1992, a defendant could be convicted on separate
counts of petty theft carried out “by distinct appropriations of different sums

                                      23
of money on separate occasions” (Stanford, at p. 251, cited by B.H.D., at
p. 1142), unless there was enough evidence of a “general intent or overall
plan” to send the case to a jury on the theory that offenses should be
aggregated into a single offense (Slocum, at p. 889, cited by B.H.D., at
p. 1142). “The Bailey doctrine was developed for the crime of theft to allow,
where there is a general plan, the accumulation of receipts from takings, each
less than $200, so that the thief may be prosecuted for grand theft as opposed
to several petty thefts.” (Slocum, at p. 889.)10
      The 1992 version of the Bailey rule was broadly analogous to the
causation rule laid down in EOTT, a case where there were hundreds of
separate thefts but a trial was necessary to address the insured’s evidence
that the thefts were part of a common plan and thus should be treated as a
single occurrence. In drawing an analogy to the Bailey rule, we do not read
B.H.D. opinion as having announced a new, “completed crime” mode of
analyzing the issue of whether a claimed loss constitutes a single occurrence
or multiple occurrences, borrowing from criminal law. The court was simply
emphasizing that “[t]his is not a case in which the thief had a general overall
plan to steal a particular item or amount, or where he or she took advantage
of a position of trust to embezzle an aggregate amount over an extended
period.” (B.H.D., supra, 46 Cal.App.4th at p. 1142.) In short, unlike EOTT,
there was no evidence of a common plan or conspiracy on that record.

      10 Since then, the Bailey rule has been given a narrow reading, limited

to its particular facts. (See People v. Whitmer (2014) 59 Cal.4th 733, 741 [“[A]
defendant may be convicted of multiple counts of grand theft based on
separate and distinct acts of theft, even if committed pursuant to a single
overarching scheme. Without deciding whether any particular post-Bailey
Court of Appeal opinion was incorrect under its facts, we disapprove of any
interpretation of Bailey that is inconsistent with this conclusion.” (Italics
added.)].)

                                       24
      This case is the polar opposite. We are not dealing with a series of
offenses by a single perpetrator, as in B.H.D. and Lexington. Falls Lake
presented evidence that, in close sequence, a large amount of cannabis
inventory was stolen by an unknown group of perpetrators from two different
heavily fortified vaults in different locations inside Apex’s business premises,
in the dead of night. It produced enough evidence to justify a prima facie
inference that the perpetrators were working together. Apex, for its part,
failed to come forward with anything more than speculation that the
breaches of its vaults were somehow attributable to two independent groups
of people. Had Apex presented even a modicum of evidence to suggest that
different burglary crews broke into the vaults, operating separately, there
might have been an issue to try, as in EOTT. But not even Apex takes the
position there must be a trial. It simply tries to declare victory on the record
as it stands—asking that we not only reverse but direct entry of judgment in
its favor—based on little more than some hand-waving about the absence of a
special definition of the term “occurrence” in the Property Coverage. We
reject that position, just as the trial court did.
   B. The Business Income and Extra Expense Issues
      Turning to the trial court’s ruling that Apex is not entitled to additional
payments under Falls Lake’s Lost Business Income Coverage, that issue may
be readily dispatched. Here, we conclude that Apex has raised a narrow but
triable issue of material fact. We will vacate the judgment in part and
remand for further proceedings to resolve that single issue. Falls Lake
carried its initial burden of demonstrating that, by paying $673,477 on Apex’s
Lost Business Income Coverage claim, it fully discharged its contractual
obligations to Apex. It did so by proffering a series of emails written by its
adjuster, Brenda Wahl, to Apex’s team of adjusters, explaining the basis for
Falls Lake’s rejection of Apex’s demand for additional lost business income

                                         25
payment and extra expense reimbursement. In response, Apex presented a
declaration from an accountant on its adjustment team, William
Funderburke, who disagreed with Wahl.
      This battle of the adjusters framed two issues for decision, both of
which are material to the breach element of Apex’s breach of contract cause of
action. First, Falls Lake calculated Apex’s pre-loss net income by averaging
its financial performance over the course of five months. Apex, on the other
hand, proposed a three-month period, which Falls Lake pointed out was
distorted by the inclusion of April 2020, Apex’s “second best month ever.”
Second, Apex took the position that, post-loss, it would be “inequitable” for
Falls Lake not to reimburse expenses Apex incurred to avoid prolonged
business interruption caused by the loss. In response, Falls Lake argued that
equitable considerations do not govern the analysis of benefits payable under
the Policy. Pointing to the language of the Policy, Falls Lake argued that
Apex had a duty to mitigate its losses, which meant it was contractually
required to incur expense so as not to sustain avoidable further lost business
income.
      Faced with these diametrically opposed positions, the trial court erred
by fully resolving them on this record. Falls Lake objected in writing to
Funderburke’s declaration on hearsay and lack-of-foundation grounds, but
the court never ruled on those objections.11 The court might have correctly
chosen between the parties’ contending positions had it sustained Falls

      11 Falls Lake submitted 15 written objections to Apex’s evidence.   The
court’s order granting Falls Lake’s section 437c motion and denying Apex’s
cross-motion overruled three of Falls Lake’s objections, each directed to
evidence concerning the single occurrence versus multiple occurrence issue.
The court did not address any of the remaining 12 objections, including an
objection specifically directed to the Funderburke declaration.

                                       26
Lake’s objections to Funderburke’s declaration, leaving Apex with nothing to
contest Wahl’s unrebutted opinion, and perhaps that is it what it meant to
do. The gist of the court’s reasons for rejecting Funderburke’s view suggests
it questioned the evidentiary value of what he had to say, either because he
was not appropriately credentialed to offer an opinion or because his opinion
lacked foundation. But inadmissibility was not the basis of the trial court’s
ruling.
      A trial court is duty bound to rule on objections attacking evidence
material to its disposition of a motion for summary judgment or summary
adjudication. (Vineyard Springs Estates v. Superior Court (2004)
120 Cal.App.4th 633, 642–643; § 437c, subd. (q).) On appeal, we will not
presume from a silent record that a trial court meant to sustain evidentiary
objections when it did not expressly so rule. Nor will we undertake the duty
to rule on evidentiary objections in the first instance on appeal. Since
objections not expressly ruled upon are deemed overruled where they go to
material issues of fact (see Reid v. Google, Inc., supra, 50 Cal.4th at p. 534),
there remains an unresolved factual contest on the record before us, which
leaves us no choice but to reverse the judgment in part.
      We emphasize, however, that the scope of our remand is narrow. Only
one of the two areas of disagreement between Wahl and Funderburke raises
a genuine dispute of fact. Ultimately, the meaning of the phrases “Net
Income of the business before the direct physical loss or damage occurred”
and “likely Net Income of the business if no physical loss or damage had
occurred”—which are the two key metrics in the formula for “Loss
Determination” under Section C.3. of the Lost Business Income Coverage—
will present questions of law for the court to decide. (Winet v. Price (1992)
4 Cal.App.4th 1159, 1165 (Winet).) But the conflict in the competing

                                        27
adjusters’ opinions must be considered as a preliminary matter, and resolved,
before the legal issue of contract meaning can be decided.
      That is because “[t]he decision whether to admit parol evidence
involves a two-step process. First, the court provisionally receives (without
actually admitting) all credible evidence concerning the parties’ intentions to
determine ‘ambiguity,’ i.e., whether the language is ‘reasonably susceptible’
to the interpretation urged by a party. If in light of the extrinsic evidence the
court decides the language is ‘reasonably susceptible’ to the interpretation
urged, the extrinsic evidence is then admitted to aid in the second step—
interpreting the contract.” (Winet, supra, 4 Cal.App.4th at p. 1165.) For
example, where the court declines to consider parol—which it certainly may
do here in the case of adjuster testimony that is inadmissible or simply not
credible—leaving only one side’s proffered testimony to be admitted, the court
may conclude the contract is reasonably susceptible of only one
interpretation. (See George v. Automobile Club of Southern California, supra,
201 Cal.App.4th at p. 1122.)
      While at this stage, on appeal, we cannot predict how this interpretive
process will play out on the pre-loss net income issue, we see the extra
expense issue differently. Funderburke hypothetically projected a 12-month
business shutdown, assuming no effort to reopen the business; calculated the
lost income over this period of closure; and then claimed the variable cost to
earn that income as “extra expense” under the Lost Business Income
Coverage. A premise of this theory was that, in Funderburke’s view, the “co-
insurance” clause unfairly “penalized” Apex for “earning revenue during the

                                       28
loss period.”12 The position Wahl took, based purely on a reading of the
Policy wording, is that Funderburke’s hypothetical was inconsistent with the
Policy because Apex had a duty to “resume all or part of your ‘operations’ as
quickly as possible.” She anchored her opinion on unambiguous Policy
language in the Policy, while Funderburke anchored his in a hypothetical
scenario that assumed away Apex’s obligation to resume operations as
quickly as possible. On this issue, we conclude that Apex failed to advance
an interpretation of “extra expense” to which the Policy’s language is
reasonably susceptible. Thus, as to the matter of “extra expense”
reimbursement, there is nothing left to resolve.
                           III. DISPOSITION
      The judgment is reversed in part. The cause is remanded for further
proceedings on the first cause of action to resolve the amount payable on
Apex’s claim under the Lost Business Income Coverage, and specifically its
allegation that Falls Lake calculated the pre-loss net income incorrectly. In
all other respects, the judgment is affirmed. Costs on appeal shall be
awarded to Falls Lake.

                                                   STREETER, J.

WE CONCUR:

BROWN, P. J.
GOLDMAN, J.

      12 Apex initially pleaded that Falls Lake improperly calculated the

coinsurance penalty, but ultimately abandoned that allegation as a basis for
its breach of contract claim.

                                      29
Trial Court: Superior Court of California, County of Alameda

Trial Judge: Hon. Tara Desautels

Counsel:        Williams & Gumbiner, Joel P. Gumbiner and Bartlett H.
                  Williams for Plaintiff and Appellant.

                 Hinshaw & Culbertson, Maria S. Quintero for Defendant and
                   Respondent.

Apex Solutions, Inc. v. Falls Lake Insurance Management Co., Inc. – A167491