Court Opinion

ID: 9376764
Source: CourtListenerOpinion
Date Created: 2023-03-03 19:02:26.507888+00
Date Added: 2024-06-11T17:17:09.073073
License: Public Domain

Filed 3/3/23 Eljac Enterprises, Inc. v. Berkshire Hathaway etc. CA2/5
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 FIVE

ELJAC ENTERPRISES, INC.,                                     B312799

         Plaintiff and Appellant,                            (Los Angeles County
                                                             Super. Ct. No.
         v.                                                  18STCV00829)

BERKSHIRE HATHAWAY
SPECIALTY INSURANCE
COMPANY,

     Defendant and
Respondent.

      APPEAL from a judgment of the Superior Court of the
County of Los Angeles, Maureen Duffy-Lewis, Judge. Affirmed.
      Thomas & Elliott, Stephen L. Thomas and Jay J. Elliott;
Benedon & Serlin, Gerald M. Serlin and Melinda W. Ebelhar, for
Plaintiff and Appellant.
      Lewis Brisbois Bisgaard & Smith, Jordan E. Harriman and
Jeffry A. Miller, for Defendant and Respondent.
                     I.    INTRODUCTION

      Plaintiff1 appeals from the trial court’s granting of a motion
for summary judgment filed by the insurance company2 on the
complaint for declaratory relief, breach of contract, and unfair
competition3. It also appeals from the court’s denial of its cross-
motion for summary adjudication on certain duty issues,
including the duty to defend. We affirm.

               II.    FACTUAL BACKGROUND

A.    The Agency Relationships

      In July 2014, Travel Leaders Collection, LLC (Tzell)—a
national travel management company with a network of travel
agencies across the United States—entered into a branch office
agreement with Carlisle (agent agreement). Pursuant to the
agent agreement, Carlisle operated a Tzell office in California
that was authorized: (1) to issue airline tickets through Tzell’s

1     The plaintiff insured is ELJAC Enterprises, Inc., dba
Carlisle Travel (Carlisle).

2     The defendant insurance company is Berkshire Hathaway
Specialty Insurance Corporation (Berkshire).

3     The third cause of action alleged violations of Business and
Profession Code section 17200 et seq. (UCL).

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account with Airline Reporting Corporation (ARC);4 and (2) to
book airline reservations, ticket exchanges, and ticket refunds
through Sabre.5
      In May 2016, Carlisle entered into an independent
contractor’s agreement (contractor agreement) with a New York
travel agency, Highview Travel (Highview). Pursuant to the
contractor agreement, Highview was authorized to exercise
Carlisle’s rights, under the agent agreement, to use “Tzell’s ARC
and Sabre privileges.”
      Commissions under the agent and contractor agreements
were paid as follows: When Highview sold a ticket for air travel
using Tzell’s ARC account, the ARC computer system would pay
on behalf of the carrier an earned commission to Tzell. Tzell
would then deduct its share of the earned commission under the
agent agreement and pay the balance to Carlisle. Carlisle, in
turn, would retain 10 percent of the commission balance under
the contractor agreement and remit the other 90 percent to
Highview.
      If Highview later cancelled the ticket through the ARC
computer system, as required, the entire commission paid by the
carrier would be deemed “unearned” and the system would

4    ARC is a central clearinghouse used by airlines and travel
agencies to process all airline ticket purchase, exchange, and
refund transactions in the United States.

5     According to Carlisle, “In addition to ARC, there are four
Global Distribution Systems (GDS), one of which is . . . Sabre.
Sabre is a software company that allows . . . travel agents to book
airline reservations, exchange airline tickets, and refund airline
tickets. Sabre . . . also allow[s] travel agents to book hotels and
car rentals.”

                                 3
automatically deduct the amount of the unearned commission
from new commissions owed by the carrier to Tzell for unrelated
ticket sales.

B.   The Disputed Commissions

      During 2017, Highview—using Tzell’s ARC account and the
Sabre system—issued a large volume of tickets for air travel on
United Airlines (United) and was paid commissions for those
sales as described above. According to Carlisle, each of those
United transactions followed the same pattern: “Someone at
Highview made a reservation on United . . . using Sabre. As far
as United and Sabre [could] see, Tzell [was] making th[e]
reservation. Making a reservation in Tzell’s name [was] possible
because: (1) Carlisle use[d] an ARC branch number belonging to
Tzell under the [agent] agreement, (2) Highview use[d] Carlisle’s
Sabre identification number under the [contractor] agreement,
and (3) Sabre [was] programmed by the system vendor to make it
appear [that] the reservation [was] made by Tzell. . . . [At the
time of the reservation] or shortly thereafter, someone at
Highview caused a ticket to be issued covering the reservation,
also using Sabre. The price was paid for using an American
Express card. During the ticketing steps, Highview input the
commission at 20 [percent] of the ticket price, which [was] the
Tzell commission rate and which Highview was authorized by
Carlisle to do.” Within a week, ARC deposited the 20 percent
commission into Tzell’s bank account. “Within a day or so,” Tzell
forwarded the commission to Carlisle, and Carlisle then paid
Highview’s share of the commission “[w]ithin 15 days after the
end of the month during which the ticket was issued.”

                                4
         “Carlisle believe[d] that some time after the ticket was
issued, someone at Highview avoided using ARC or Sabre, [and]
instead went to United.com and requested a refund for the ticket,
which United allowed.” “Carlisle [also] believe[d] that the only
conceivable reason for not processing the refund in the usual way
was to deceive Carlisle into paying the 90 [percent commission]
. . . .” By obtaining commissions and refunds in this manner,
Highview was able to accumulate approximately $300,000 in
unearned commissions. Shortly after discovering the issue,
Carlisle “ceased doing business with [Highview].”
         According to Carlisle, when it discovered “the computer
glitch and the nearly $300,000 in ‘unearned’ commissions that
had not been charged back,” it disclosed the issue to United,
Tzell, and Highview. Following its own audit, United asked Tzell
to pay back the entire amount of the unearned commissions.

C.   The Claims Against Carlisle

      On November 8, 2017, United made a demand on Carlisle
to repay $265,612 in unearned commissions (United claim).
Carlisle calculated that Highview’s share of this claim was
$240,000, which Highview refused to return to United
voluntarily.
      On March 14, 2018, Tzell sent a letter to Carlisle
demanding a payment of $265,412 (the Tzell claim), the amount
United had charged Tzell to recover commissions paid to Carlisle.
According to Tzell, its “liability for [that] sum [was] due to
negligent acts and omissions by [Carlisle] in supervising its
agent(s) [Highview] who repeatedly and continuously misused
the system and the process to [its] own advantage and to the

                                5
disadvantage of Carlisle and Tzell.” Tzell criticized Carlisle for
hiring Highview and for its failure to monitor that agent and
have “systems or processes in place that would have prevented
this type of agent abuse.”’

D.    Professional Liability Policy

      Berkshire issued a professional liability policy to Carlisle
for the period October 4, 2016, through October 4, 2017 (the
policy). The coverage clause provided: “[Berkshire] will pay on
behalf of [Carlisle] those sums that [Carlisle] becomes legally
obligated to pay as [d]amages to which this insurance applies by
reason of an act or omission committed anywhere in the world by
[Carlisle], or any person for whom [Carlisle] is legally liable, in
the performance of [t]ravel [a]gency [o]perations by [Carlisle]
provided such act or omission occurs during the [p]olicy [p]eriod.
[¶] The [c]ompany shall also pay [c]laim [e]xpenses in
connection with covered [c]laims. Claim [e]xpenses are in
addition to the [l]imits of [l]iability shown in the [d]eclarations.”
      The policy set forth certain exclusions from coverage,
including paragraph O, which provided: “This policy does not
apply to any [c]laim: [¶] . . . [¶] O. Based upon or arising out
of any . . . act or omission . . . which is . . . dishonest, fraudulent,
malicious, or criminal.”
      The policy also included a defense provision which stated,
in pertinent part: “[Berkshire] shall have the right and duty to
defend any [c]laim against [Carlisle] seeking [d]amages on
account of . . ., an act or omission, . . . to which this insurance
applies, even if any of the allegations of the [c]laim are
groundless, false or fraudulent. [Berkshire] shall have the right

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to appoint counsel and to conduct such investigation and
settlement of any [c]laim as it deems appropriate. . . .”
      Under the “Supplementary Payments” provision, Berkshire
agreed to pay “with respect to any [c]laim to which this insurance
applies: [¶] . . . [¶] All reasonable expenses incurred by
[Carlisle] at [Berkshire’s] request to assist [Berkshire] in the
investigation or defense of the [c]laim, including actual loss of
earnings up to $250 a day because of time off from work . . . .”

E.    Carlisle’s Tender of the Claims to Berkshire

       On December 12, 2017, Carlisle tendered the United claim
to Berkshire, demanding a defense and indemnity against the
amount of that claim.
       On January 26, 2018, Berkshire denied coverage.
Berkshire explained, among other things, that “[t]he policy
extends coverage for ‘damages’ caused by an act or omissions
committed by [Carlisle] and does not provide coverage for
dishonest, fraudulent, malicious, or criminal acts.”
       On March 14, 2018, Tzell made a claim against Carlisle “to
recover commissions United paid on behalf of Carlisle in the
amount of $265,412.” Two days later, Carlisle’s vice president,
Jerry Saxe, forwarded the Tzell claim to Berkshire. On
April 23, 2018, a Berkshire claims adjustor sent an e-mail to Saxe
requesting additional information. On April 24, 2018, Saxe
responded to Berkshire’s request and explained that the
“commissions were paid to Highview . . . , an agency in New York
[that] was performing travel booking services for and on behalf of
Carlisle. [Tzell] claims that the commissions paid were based on
improper bookings of airline tickets by Highview . . . which were

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later cancelled without Highview . . . returning the commissions
it was paid. [Tzell] claims that it has been damaged because it is
obligated to reimburse the airline for the commissions that were
paid to Highview . . . and [Tzell] alleges that Carlisle’s failure to
properly manage and supervise Highview . . . [was] the cause of
its damage.”’ Saxe concluded by requesting coverage for and a
defense of the Tzell claim.
       On May 8, 2018, Berkshire denied Carlisle’s request for
coverage of the Tzell claim and refused to provide a defense.
Berkshire explained: “Although the allegations by [Tzell] state
there were ‘negligent acts and omissions’ by Carlisle, your . . .
policy specifically excludes the allegations being claimed. As
such, there is no coverage for the request for reimbursement.
The policy affords coverage for ‘damages’ caused by an act or
omission[] committed by [Carlisle] during the policy period and
does not provide coverage for dishonest, fraudulent, malicious, or
criminal acts.”
       On May 10, 2018, Saxe sent Berkshire a letter contesting
its coverage and defense decisions and requesting a detailed
explanation of the investigation Berkshire had conducted prior to
making those decisions. In a May 11, 2018, e-mail, Berkshire
informed Carlisle that it had referred Carlisle’s request to
coverage counsel.
       On June 14, 2018, coverage counsel for Berkshire sent
Carlisle’s attorney a letter asking multiple questions about the
underlying claims and requesting copies of various documents.
       On June 22, 2018, coverage counsel sent an e-mail to
Carlisle’s attorney advising that Berkshire had “agreed, subject
to a full and complete reservation of rights, to your request for
payment to Carlisle pursuant to the policy’s Supplemental

                                  8
Payments provision of up to $250 per day to cover reasonable
costs incurred in responding to our information request. Please
provide an estimate or budget for such costs.”
       On June 24, 2018, Carlisle’s attorney sent Berkshire’s
coverage counsel an e-mail enclosing an invoice for
“Supplementary Pay at $70 per hour” detailing the time Saxe had
spent on the matter from March 13, 2018, through June 22, 2018,
and requesting a total payment of $4,810. The invoice included
seven entries for the time expended from June 14, 2018, to
June 22, 2018, the total amount of which was $1,750.
       On July 9, 2018, Saxe e-mailed Berkshire’s coverage
counsel answering Berkshire’s questions.6 And, on July 11, 2018,
Berkshire’s coverage counsel responded to Carlisle’s attorney by
reaffirming its decision to deny coverage. Among other facts,
Berkshire’s letter noted that most, if not all, of the United ticket
purchases were charged to two American Express credit cards
issued to Highview personnel and that, when United issued a
refund, it would be credited to a different card than the one used
to purchase the ticket. According to the letter, United had issued
approximately $1.4 million in refunds to Highview, and Carlisle
had asked the U.S. Attorney’s office to bring criminal charges
against the two Highview employees involved, both of whom had
been terminated. Citing, among other policy provisions, the
exclusion in paragraph O, Berkshire concluded that it would
“neither defend nor indemnify Carlisle against the [Tzell] claim[],
nor [would it] solicit or accept an offer to settle that claim against

6      In their joint stipulation of facts, the parties agreed that
the information provided in Saxe’s July 9, 2018, letter “accurately
reflect[ed] Carlisle’s understanding of the relevant facts of the
claims as conveyed to [Berkshire].” (Emphasis omitted.)

                                  9
Carlisle. Therefore, Berkshire [would not] pay the defense
invoices submitted by . . . Carlisle. Berkshire had offered to pay
up to $250 per day to cover the reasonable costs incurred by
Carlisle in responding to [Berkshire’s] June 14, 2018[,]
information requests. [Berkshire] asked for an estimate [of] or
budget for those costs. No estimate or budget was received and
[Berkshire had] not been provided invoices specific to costs
incurred by Carlisle in responding to those requests.
Consequently, no reimbursement [would] be made at this time.”
       In a July 18, 2018, e-mail to Berkshire’s coverage counsel,
Saxe attached a demand letter Carlisle received from Tzell’s
attorney and requested that Berkshire reconsider its position on
coverage and a defense.
       On July 20, 2018, Berkshire’s coverage counsel responded
to Saxe’s request for reconsideration, explaining that nothing in
Tzell’s demand letter warranted a change in Berkshire’s position
on the coverage and defense issues.
       According to Carlisle, without any contribution from
Berkshire, it negotiated a partial settlement with Tzell under
which it returned $26,561, representing the 10 percent it
withheld from the unearned commission it paid to Highview, and
agreed to pay an additional ten monthly payments of $24,000,
representing the $240,000 balance of the amount Tzell paid to
United.
       In July and August 2019, Berkshire issued two checks to
Carlisle, in the amounts of $1,928.84 and $4.79, in
reimbursement for Carlisle’s costs in responding to Berkshire’s

                                10
requests for information from June 22, 2018, through
July 10, 2019.7

            III.   PROCEDURAL BACKGROUND

       In October 2018, Carlisle filed a complaint against
Berkshire asserting three causes of action for: (1) breach of
contract based on Berkshire’s alleged breach of its promise to pay
Carlisle for the “‘reasonable costs incurred in responding to
[Berkshire’s] information request’” and its failure “to provide the
policy benefits described in the [policy];” (2) declaratory relief
regarding the “nature and scope of Berkshire[’s] . . . duties to
Carlisle in Tzell’s lawsuit pursuant to the [policy],” including
whether Berkshire’s “reservation of rights create[d] a duty on the
part of Berkshire . . . to provide independent counsel to Carlisle
in Tzell’s lawsuit;” and (3) violation of the the UCL based on
Berkshire’s alleged breach of: (a) its duty to adopt written
standards for the prompt investigation and processing of claims
and (b) its duty to “attempt in good faith to effectuate prompt,
fair, and equitable settlement” of first and third party claims.
       The parties filed an initial set of cross-motions for
summary adjudication or, in the alternative, summary judgment.
The trial court denied Carlisle’s motion in its entirety and denied
Berkshire’s motion on the first cause of action, but granted

7     As noted above, the June 24, 2018, invoice included a
request for $1,750 for the work Saxe conducted beginning on
June 14, 2018. Carlisle does not dispute that it was compensated
for Saxe’s time from June 14, 2018. Instead, it contends that it
was entitled to receive the entire amount of its June 22, 2018,
invoice, which included a request for payment for work beginning
on March 13, 2018.

                                11
judgment on the pleadings in favor of Berkshire on the second
and third causes of action.8 As to the third cause of action, the
UCL claim, the court granted judgment on the pleadings, finding
that “[i]n a coverage matter, there is no [UCL] claim available to
[Carlisle], [Moradi-Shalal v. Fireman’s Fund Insurance
Companies] (1988) 46 [Cal.]3d 287 [(Moradi-Shalal)]. Therefore,
the allegations are not sufficient and judgment on the pleadings
is granted without leave.” (Emphasis omitted.)
       Carlisle then filed a petition for writ of mandate in this
court and, on October 5, 2020, we issued an alternative writ
requiring the trial court to vacate and reconsider its ruling on the
second and third causes of action or, in the alternative, to appear
and show cause why Carlisle’s petition should not be granted as
to those to two claims. On the third cause of action for violation
of the UCL, we explained that “the insured may assert [UCL
claims] against insurers in coverage actions. (See e.g. Zhang v.
Superior Court (2013) 57 Cal.4th 364, 369 [(Zhang)].)”
       In response to the alternative writ, the trial court vacated
its prior order on the cross-motions and ordered the parties to
refile their motions. The parties complied on November 2, 2020,
by filing the motions that are the subject of this appeal.
       Berkshire filed a motion for summary judgment or, in the
alternative, summary adjudication of issues, arguing it was
entitled to summary adjudication of: (1) the second cause of
action for declaratory relief because it owed no duty under the
policy to defend or indemnify Carlisle for either the United or
Tzell claims; (2) the first cause of action because (a) Berkshire did

8      On our own motion, we take judicial notice of Carlisle’s writ
petition, ELJAC Enterprises v. Superior Court, B307483 and
exhibits in support.

                                 12
not breach any duty to defend or indemnify Carlisle for the
United and Tzell claims and (b) Berkshire did not breach the
supplementary payment provision or any other agreement to pay
Carlisle’s investigation expenses; and (3) the third cause of action
for violation of the UCL because (a) Carlisle had suffered no
actual injury and therefore had no standing to bring the claim
and (b) awarding equitable relief under the statute was
unnecessary or inappropriate because Carlisle had an adequate
remedy at law.
       Carlisle filed a motion for summary adjudication of duty
issues, seeking an adjudication of five issues (but no causes of
action).
       After conducting a hearing, the trial court issued a minute
order granting Berkshire’s motion for summary judgment and
denying Carlisle’s motion for summary adjudication. The court
concluded that: there was no coverage for the United and Tzell
claims because, among other things, the exclusion in paragraph
O for claims arising from dishonest acts barred coverage; and
because there was no coverage under the damages clause and the
two exclusions,9 there was no duty to defend.
      The trial court then granted Berkshire’s motion as to the
breach of contract claim, finding “[a]s [Berkshire] did not have a
duty to defend, there can be no breach.”

9      The court also concluded that there was no coverage for the
claims because United and Tzell sought restitution and
disgorgement, not damages, and the claims were excluded by
paragraph HH of the policy as a claim arising from the failure to
collect or pay money.

                                13
       The trial court also granted Berkshire’s motion as to the
claim for declaratory relief finding that “the court can’t declare
that [Berkshire] had a duty to defend.”
       As to the UCL claim, the trial court found, “[a]s [Berkshire]
had no duty to defend, this cannot be the basis for any claim of
improper, illegal nor unfair business practice. There is
insufficient evidence provided for any other claim of improper,
illegal or unfair business practice.”
       Finally, the trial court denied Carlisle’s motion for
summary adjudication.
       On May 7, 2021, Carlisle filed a notice of appeal from the
trial court’s orders. On April 6, 2022, the court entered judgment
in favor of Berkshire and, at Carlisle’s request, we deemed its
notice of appeal as taken from that judgment.

                       IV.    DISCUSSION

      Carlisle appeals from the trial court’s orders (1) granting
Berkshire’s motion for summary adjudication/judgment and
(2) denying Carlisle’s motion for summary adjudication.

A.    Standard of Review

      “‘“A trial court properly grants a motion for summary
judgment only if no issues of triable fact appear and the moving
party is entitled to judgment as a matter of law. (Code Civ. Proc.,
§ 437c, subd. (c); see also id., § 437c, subd. (f) [summary
adjudication of issues].)”’” (State of California v. Allstate Ins. Co.
(2009) 45 Cal.4th 1008, 1017.) “We review the trial court’s
decision [on a summary judgment motion] de novo, considering

                                 14
all of the evidence the parties offered in connection with the
motion (except that which the court properly excluded) and the
uncontradicted inferences the evidence reasonably supports.
[Citation.]” (Merrill v. Navegar, Inc.(2001) 26 Cal.4th 465, 476.)
        “[I]n moving for summary judgment, a ‘defendant . . . has
met’ his ‘burden of showing that a cause of action has no merit if’
he ‘has shown that one or more elements of the cause of action
. . . cannot be established, or that there is a complete defense to
that cause of action. Once the defendant . . . has met that
burden, the burden shifts to the plaintiff . . . to show that a
triable issue of one or more material facts exists as to that cause
of action or a defense thereto. The plaintiff . . . may not rely upon
the mere allegations or denials’ of his ‘pleadings to show that a
triable issue of material fact exists but, instead,’ must ‘set forth
the specific facts showing that a triable issue of material fact
exists as to that cause of action or a defense thereto.’ (Code Civ.
Proc., § 437c, subd. (o)(2).)” (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 849 (Aguilar).)
        In making a motion for summary judgment, a defendant
may rely on the complaint in framing the issues upon which it
seeks adjudication. “The pleadings play a key role in a summary
judgment motion. ‘“The function of the pleadings in a motion for
summary judgment is to delimit the scope of the issues . . .”’ and
to frame ‘the outer measure of materiality in a summary
judgment proceeding.’ [Citation.] . . . ‘The materiality of a
disputed fact is measured by the pleadings [citations], which “set
the boundaries of the issues to be resolved at summary
judgment.” [Citations.]’ [Citation.] Accordingly, the burden of a
defendant moving for summary judgment only requires that he or
she negate plaintiff’s theories of liability as alleged in the

                                 15
complaint; that is, a moving party need not refute liability on
some theoretical possibility not included in the pleadings.
[Citations.]” (Hutton v. Fidelity National Title Co. (2013) 213
Cal.App.4th 486, 493.)

B.    Second Cause of Action: Declaratory Relief10

      The second cause of action alleged generally that there was
an actual controversy between the parties “regarding the nature
and scope of Berkshire[’s] . . . duties to Carlisle in Tzell’s lawsuit
pursuant to the [policy]” and sought declarations that “the rights
and duties of the parties be adjudged” in its favor. The only
specific declaration it sought, however, was “that [Berkshire’s]
reservation of rights creates a duty on the part of [Berkshire] to
provide independent counsel to Carlisle in Tzell’s lawsuit.”
      In its motion, Berkshire framed the issues to be
adjudicated on that claim as whether it owed Carlisle a duty to
defend and indemnify against the United and Tzell claims.
Because Carlisle concedes that it is only seeking “recovery from
Berkshire of its reasonable and necessary costs of defense,” the
issue on appeal concerning the second cause of action is limited to
whether Berkshire had a duty to defend, that is, whether the
undisputed facts showed that there was a potential for coverage

10    “‘To qualify for declaratory relief, [a party] would have to
demonstrate its action presented two essential elements: “(1) a
proper subject of declaratory relief, and (2) an actual controversy
involving justiciable questions relating to [the party’s] rights or
obligations . . . .”’ [Citation.]” (Jolley v. Chase Home Finance,
LLC (2013) 213 Cal.App.4th 872, 909 (Jolley).)

                                 16
under the express terms of the policy for the United and Tzell
claims.11

      1.    Legal Principles

      “The duty to defend is broader than the duty to indemnify.
[Citation.] ‘Unlike the obligation to indemnify, which is only
determined when the insured’s underlying liability is established,
the duty to defend must be assessed at the very outset of a case.
An insurer may have a duty to defend even when it ultimately
has no obligation to indemnify, either because no damages are
awarded in the underlying action against the insured, or because
the actual judgment is for damages not covered under the policy.’
[Citation.]
      “The duty to defend is guided by several well-established
principles. An insurer owes a broad duty to defend against
claims that create a potential for indemnity under the insurance
policy. [Citation.] An insurer must defend against a suit even
‘“where the evidence suggests, but does not conclusively
establish, that the loss is not covered.”’ [Citation.]
      “‘Determination of the duty to defend depends, in the first
instance, on a comparison between the allegations of the
complaint and the terms of the policy. [Citation.] But the duty
also exists where extrinsic facts known to the insurer suggest

11     At the end of its opening and reply briefs, Carlisle discusses
the duty to investigate, without linking that discussion to a
specific cause of action. Because Carlisle does not expressly
contend that it was entitled to declaratory relief on the duty of
investigation, we do not consider that issue in connection with
the trial court’s ruling in Berkshire’s favor on the second cause of
action.

                                 17
that the claim may be covered.’ [Citation.] This includes all
facts, both disputed and undisputed, that the insurer knows or
‘“becomes aware of”’ from any source [citation], ‘if not “at the
inception of the third party lawsuit,” then “at the time of tender”’
[citation]. ‘Moreover, that the precise causes of action pled by the
third party complaint may fall outside policy coverage does not
excuse the duty to defend where, under the facts alleged,
reasonably inferable, or otherwise known, the complaint could
fairly be amended to state a covered liability.’ [Citation.] Thus,
‘[i]f any facts stated or fairly inferable in the complaint, or
otherwise known or discovered by the insurer, suggest a claim
potentially covered by the policy, the insurer’s duty to defend
arises and is not extinguished until the insurer negates all facts
suggesting potential coverage.’ [Citation.] In general, doubt as to
whether an insurer owes a duty to defend ‘must be resolved in
favor of the insured.’ [Citation.]
        “While the duty to defend is broad, it is ‘not unlimited; it is
measured by the nature and kinds of risks covered by the policy.’
[Citation.] In an action seeking declaratory relief concerning a
duty to defend, ‘the insured must prove the existence of a
potential for coverage, while the insurer must establish the
absence of any such potential. In other words, the insured need
only show that the underlying claim may fall within policy
coverage; the insurer must prove it cannot.’ [Citation.] Thus, an
insurer may be excused from a duty to defend only when ‘“the
third party complaint can by no conceivable theory raise a single
issue which could bring it within the policy coverage.”’ [Citation.]
. . . [¶]
        “In determining whether a claim creates the potential for
coverage under an insurance policy, ‘we are guided by the

                                  18
principle that interpretation of an insurance policy is a question
of law.’ [Citation.]” (Hartford Casualty Ins. Co. v. Swift
Distribution, Inc. (2014) 59 Cal.4th 277, 287–288.)

      2.    Analysis

      Berkshire advanced three reasons in support of its
contention that there was no potential coverage for the United
and Tzell claims—the definition of damages that expressly
excluded coverage for restitution and disgorgement and the
exclusions in paragraphs O and HH. We conclude that the
paragraph O exclusion of claims arising out of the dishonest acts
of Carlisle or persons for whom it was liable12 eliminated any
reasonable potential for coverage in this case.
      In his April 24, 2018, letter to Berkshire, Saxe explained
that the commissions at the core of the dispute with Tzell “were
based on improper bookings of airline tickets by Highview” which
were later canceled without returning the commissions. In his
subsequent July 9, 2018, e-mail to Berkshire’s coverage counsel
setting forth in detail the facts underlying the claims, Saxe
described a scheme developed by Highview to circumvent the
ARC and Sabre systems that resulted in the unearned
commissions retained by Highview. He conceded that the “only
conceivable” reason for avoiding those systems and instead using
United.com for the cancellation and refund transactions was “to

12    The policy covered independent contractors working under
contract with Carlisle if they were conducting Carlisle’s travel
agency operations. It is undisputed that Highview was engaged
in the conduct of Carlisle’s travel agency operations when it sold
and issued the United tickets at issue.

                                19
deceive” the parties responsible for making the commission
payments to Highview. According to Carlisle, when confronted
with the scheme, Highview refused to voluntarily return the
commissions to United, and shortly thereafter Carlisle ceased
doing business with Highview.
      In addition, Carlisle’s attorney informed Berkshire that two
Highview employees used one of two American Express cards
issued by Highview to charge the cost of the United tickets and
then arranged for a refund credited to a different card. The
employees were subsequently terminated by Highview, and
Carlisle referred them to the U.S. Attorney’s office for potential
criminal prosecution.
      Taken together, these facts showed that the claims were
based on the actions of Carlisle’s contractor, Highview, and that
the actions were undertaken to deceive the parties responsible for
paying the unearned commissions. Under paragraph O, the risk
of loss arising from13 such dishonest acts14 had been expressly

13      “California courts have interpreted the terms ‘arising out
of’ or ‘arising from’ broadly: ‘It is settled that this language does
not import any particular standard of causation or theory of
liability into an insurance policy. Rather, it broadly links a
factual situation with the event creating liability, and connotes
only a minimal causal connection or incidental relationship.’
[Citation.] . . . [¶] This broad interpretation of ‘arising out of’
applies to both coverage provisions and exclusions.” (The
Travelers Property Casualty Co. of America v. Actavis, Inc. (2017)
16 Cal.App.5th 1026, 1045.)

14    “California courts have considered the term dishonesty
within various statutory schemes and have relied on the common
understanding as described in Hogg v. Real Estate Commissioner
(1942) 54 Cal.App.2d 712, 717 . . . , involving fraud, deception,

                                 20
excluded from coverage. Thus, there was no potential that claims
based on such conduct were covered under the policy.
      The undisputed evidence before the trial court
demonstrated that Highview’s conduct was dishonest. There was
no evidence that Highview’s use of the United.com site for the
cancellation and refund was the result of an innocent mistake or
a misunderstanding of the cancellation and refund process. And,
although Carlisle speculated that the unearned commissions
were the result of a computer “glitch,” it failed to cite any
evidence showing that the ARC, Sabre, or United.com systems
malfunctioned or broke down. Instead, the evidence showed that
those systems were purposely misused or manipulated by
Highview to generate the unearned commissions.
      In its correspondence with Berkshire, Carlisle claimed that
Tzell was seeking to hold Carlisle liable for negligent supervision
of Highview. But even a claim based on Carlisle’s negligence
would have “arisen from” the dishonest conduct of Highview,
without which there would have been no claim against Carlisle.
(See Century Transit Systems, Inc. v. American Empire Surplus
Lines Ins. Co. (1996) 42 Cal.App.4th 121, 128.) Thus, any such
negligence claim would also be excluded under paragraph O.
      In its reply brief, Carlisle argues that Berkshire was
required, but failed, to show that either Carlisle or Highview
were “charged with, pled guilty to, pled nolo contendere to, or
admitted to any dishonest, fraudulent, malicious, or criminal
conduct.” But the exclusion in paragraph O makes no reference
to requiring any such plea or admission. Further, all of the

betrayal, faithlessness; absence of integrity; a disposition to
cheat, deceive, or defraud. [Citations.]” (Chodur v. Edmonds
(1985) 174 Cal.App.3d 565, 570.)

                                21
reasonably inferable facts upon which Berkshire based its denial
of a defense demonstrated that Highview’s receipt and retention
of the unearned commissions were dishonest acts, regardless of
whether they were also the basis for a criminal prosecution.

C.    First Cause of Action: Breach of Contract

     The breach of contract cause of action was based on alleged
breaches of two policy provisions, the defense provision and the
supplementary payments provision.15 Because we have
concluded that Berkshire was not required to provide a defense
under the terms of the policy, we discuss here only whether
Berkshire was entitled to summary adjudication on the breach of
contract claim based on the supplementary payment provision.
      On that provision, Carlisle contends that the trial court
erred by concluding the issue was moot in light of its ruling that
Berkshire had no duty to defend. Berkshire counters that
because its duty to make supplementary payments was limited to
claims “‘to which this insurance applies,’” there was no breach, as
the policy did not apply to the United and Tzell claims. In the
alternative, Berkshire contends that its offer to pay for Carlisle’s

15     As noted, Carlisle argues that Berkshire had a duty of
investigation, but does not link that duty to any specific cause of
action. As Carlisle concedes, in the contract context, the duty
arises, if at all, from the implied covenant of good faith and fair
dealing. But Carlisle did not allege in its contract claim a breach
of the implied covenant of good faith and fair dealing based on
that duty; it alleged that Berkshire breached the express terms of
the policy. We therefore do not consider the duty to investigate
issue in reviewing the trial court’s ruling summarily adjudicating
the contract claim in Berkshire’s favor.

                                22
time under the provision was limited to the time it spent
responding to specific requests for information, not the entire
time Saxe spent on the claims. Because Berkshire paid the hours
Saxe invoiced for time spent in responding to Berkshire’s
questions, Berkshire maintains that it did not breach the
supplementary payments provision.
       We agree with Berkshire that there is no factual dispute as
to whether it breached the supplementary payments provision.
The provision itself limited Berkshire’s responsibility to make
supplementary payments “with respect to any [c]laim to which
this insurance applies.” Having concluded that the policy did not
apply to the Tzell and United claims, we also conclude that
Berkshire, by refusing to pay the entirety of the invoice sought by
Carlisle, did not breach the supplementary payments provision.

D.    Third Cause of Action: UCL Violations

      1.    Background

       Carlisle specified only two unlawful business practices in
support of its UCL claim, namely, Berkshire’s failure to adopt
written standards for the prompt investigation and processing of
claims and its failure to attempt in good faith to settle the United
and Tzell claims.
       In its motion, Berkshire argued that because it had no duty
to defend the claims, Carlisle could not have suffered actual harm
from the alleged unlawful practices. Berkshire thus maintained
that, even if Carlisle incurred attorney fees defending the claims,
any such harm was not the result of the alleged unlawful
practices. Because such actual harm or injury is a prerequisite to

                                23
standing under the UCL,16 Berkshire argued that Carlisle could
not pursue a claim under that statute. In the alternative,
Berkshire argued that Carlisle was not entitled to an injunction
because the alleged violations had no impact on the general
public and Berkshire had an adequate remedy at law.
      In its motion for summary adjudication, Carlisle argued
that Berkshire had a duty under common law and the Insurance
Code to deny coverage within 40 days and cited California Code
of Regulations, title 10, section 2695.7, subdivision (b)(1) in
support.17 And, in its opposition to Berkshire’s motion, Carlisle
argued that its UCL claim sought an injunction to prevent
Berkshire’s “systemic disregard of California common law,
statutory, and regulatory obligations.” According to Carlisle, it
suffered the actual harm necessary to establish standing to
obtain an injunction because it was required to retain counsel
and incur unnecessary attorney fees.

16      To establish standing to bring a claim under the UCL, a
party must “(1) establish a loss or deprivation of money or
property sufficient to qualify as injury in fact, i.e., economic
injury, and (2) show that that economic injury was the result of,
i.e., caused by, the unfair business practice or false advertising
that is the gravamen of the claim.” (Kwikset Corp. v. Superior
Court (2011) 51 Cal.4th 310, 322.)

17     California Code of Regulations, title 10, section 2695.7,
subdivision (b) provides: “Upon receiving proof of claim, every
insurer . . . shall immediately, but in no event more than forty
(40) calendar days later, accept or deny the claim, in whole or in
part. The amounts accepted or denied shall be clearly
documented in the claim file unless the claim has been denied in
its entirety.”

                                24
      2.    Analysis

       In its opening brief, Carlisle does not directly address
whether it had standing to pursue its UCL claim and instead
raises only one argument, namely, that reversal is required by
the law of the case doctrine. According to Carlisle, the trial
court’s ruling on the UCL claim violated that doctrine because it
was contrary to the “previous direction” in our order on Carlisle’s
petition for writ of mandate. We disagree.
       The law of the case doctrine provides that a “‘decision of an
appellate court, stating a rule of law necessary to the decision of
the case, conclusively establishes that rule and makes it
determinative of the rights of the same parties in any subsequent
retrial or appeal in the same case.’ [Citation.] . . . [T]he doctrine
does not apply to points of law that might have been, but were
not determined on the prior appeal. [Citations.]” (Nally v. Grace
Community Church (1988) 47 Cal.3d 278, 301–302.)
       In its initial ruling granting judgment on the pleadings, the
trial court ruled, as a matter of law, that “[i]n a coverage matter
there is no [UCL] claim available to the insured, . . .” citing
Moradi-Shalal, supra, 46 Cal.3d 287. In our order on the writ
petition, we concluded that, as a matter of law, an insured could
bring a UCL claim as part of a coverage action, citing Zhang,
supra, 57 Cal.4th at page 369.
       In its subsequent ruling adjudicating the UCL claim, the
trial court, citing its legal conclusion that Berkshire had no duty
to defend, explained that because there was no such duty in this
case, Carlisle could not base its unlawful practices claim on
conduct that constituted a breach of that duty and there was
insufficient evidence for any other claim of an unlawful business

                                 25
practice. That determination resolved an issue that was not
before us on the writ petition. At the time we issued our order on
Carlisle’s writ, the trial court had not concluded that Berkshire
had no duty to defend; it had instead incorrectly ruled, as a
matter of law, that an insured like Carlisle could not base a UCL
claim on conduct that violated Insurance Code section 790.03,
regardless of whether that conduct also violated other laws or
policies. Thus, the court’s subsequent ruling summarily
adjudicating the UCL claim did not violate the law of the case
doctrine. We therefore affirm that ruling as Carlisle has failed to
affirmatively demonstrate in its opening brief that it was
erroneous.
       In its reply brief, Carlisle additionally asserts that it had
standing to assert a UCL claim because it suffered economic loss
in the form of premium payments and attorney fees incurred in
defending the claims, presumably due to Berkshire’s failure to
timely and thoroughly investigate the claims. Generally, we do
not consider arguments raised for the first time in reply. (United
Grand Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th
142, 158.) But even if we were to address Carlisle’s argument, we
would reject it because Carlisle failed to show that the premiums
and attorney fees it paid were the result of Berkshire’s failure to
promptly and thoroughly investigate the claims.
       In its motion for summary adjudication, Carlisle argued
that Berkshire had a statutory duty to promptly investigate and
respond to claims within 40 days and that it breached that duty
when it denied the claims more than 40 days after tender.
Assuming for the sake of argument that it was an unlawful
business practice under the UCL for Berkshire to take longer
than 40 days to deny the claims, Carlisle failed to show any

                                26
premiums or fees that it incurred as a result of that practice. Its
evidence of premium payments consisted of a declarations page
from the policy with the annual premium amounts blacked out,
with no explanation how any portion of the annual premium for
the policy period was attributable to the alleged delay in denying
the claims. Similarly, its attorney fees evidence consisted of
Saxe’s statement that, due to Berkshire’s failure to defend, he
was forced to hire counsel to defend the claims, again with no
explanation of the fees, if any, that were the result of the delayed
response.

E.    Carlisle’s Motion

      Because we affirm the trial court’s granting of summary
judgment on all of the claims in Carlisle’s complaint, its challenge
to the court’s denial of its motion for summary adjudication of
certain duty issues is moot. (See Lockaway Storage v. County of
Alameda (2013) 216 Cal.App.4th 161, 174–175.)

                                 27
                      V.    DISPOSITION

     The judgment is affirmed. Berkshire is awarded costs on
appeal.

     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                       KIM, J.

We concur:

             RUBIN, P. J.

             MOOR, J.

                              28