NOT TO BE PUBLISHED IN OFFICIAL REPORTS

OPINION

RYLAARSDAM, ACTING P. J.

OVERVIEW

This is a large case. A very large case. The clerk's transcript, which is just the record of the trial court proceedings, consists of no less than 222 volumes in excess of 65,000 pages. Then there is a supplemental clerk's transcript, consisting of another 46 volumes in excess of 13,000 pages. The reporter's transcript, which is the record of oral trial court proceedings, consists of 104 volumes and reaches almost 19,000 pages. And then there are the trial court exhibits. There were over 2,100. The briefs (just the normal appellant's opening brief, respondents' brief and reply brief) are, respectively 120 pages, 159 pages, and 180 pages. (And those aren't even all the briefs in this appeal.) The case would be literally and physically unmanageable but for the thoughtfulness of the appellate counsel who arranged to have the record, including the briefs, put on a single computer disk, including helpful internal links. So, for example, an important record reference on page 95 of the opening brief to "58 CT 16,831-16,835" is, happily, linked to that set of pages in the clerk's transcript.

As befits its size, the case has also occupied a long — a very long — span of time. It is easily the 14 Years War of civil litigation in Orange County.

The event on which the complaint is based was the Northridge earthquake of January 1994. The complaint was not filed until October 1997. The pretrial and discovery period took about five years: from 1997 to late 2002. It then took another four years, until November 2006, for judgment to be entered. And even then judgment was only entered after two separate trials held pursuant to a bifurcation order. And even after the judgment, with various posttrial matters and matters preparatory to this appeal, the last entry in the chronological index of the clerk's transcript — in April 2007 — was almost ten years after the complaint and more than 13 years after the earthquake that gave rise to the claims for property damage that engendered the complaint.

This appeal raises four issues, one extremely record-intensive. Here is background to understand those four issues:

This is a case brought by the County of Los Angeles ("LA County") against a group of insurers. The insurers jointly provided a specially negotiated property insurance plan, called the "PPP" in the briefs for "Public Properties Insurance Policy," which we will call simply the "insurance plan." The insurance plan provided first party property insurance for 27 separate properties belonging to LA County, including the Los Angeles County Central Courthouse in downtown Los Angeles, and outlying courthouses in Beverly Hills and Pasadena. Indeed, the fact that the case might have been tried by judges working in some of the very buildings at issue in the litigation is the reason the case has landed here in Orange County. (LA County, of course, when one considers all of its firehouses, libraries and other structures, owns many more than a mere 27 buildings; at one point in the record it was revealed that LA County owns at least another 225 properties.)

After the January 1994 Northridge earthquake, the primary layer insurers participating in the insurance plan quickly advanced $10 million to LA County for the repair of properties covered by the insurance plan. Between 1994 and 1997, however, LA County and the insurers developed disagreements as to just how much in the way of repairs were needed, and in particular disagreed over the degree to which the insurers were obligated to pay for damage or wear and tear arguably preexisting the 1994 earthquake.

Like garden-variety earthquake insurance policies available to ordinary homeowners, the insurance plan here carried a relatively large deductible — 5 percent of the value of any particular building among the 27 insured properties. There was also an aggregate maximum deductible of $20 million. That is, if total damage to all 27 buildings exceeded $20 million, the insurance plan would be obligated to pay something, even if many of the 27 properties sustained damage of less than 5 percent of their value and hence did not individually trigger any obligation to pay.

On the opposite end from the deductibles, there was a total limit on payouts of $125 million.

LA County began the litigation optimistically, thinking that its claim on just one county building alone — the county's Hall of Administration — would exceed the insurance plan limits of $125 million and it would have a viable bad faith claim so as to be able to collect more than that. Indeed, in exhibit 54, in which LA County acknowledged the receipt of $10 million, LA County recited that its proof of loss exceeded $201 million.

And so perhaps it is not wholly surprising that the complaint, filed in October 1997, was restricted to only three of the 27 properties covered by the plan (the Hall of Administration, the Los Angeles County Central Courthouse, and an underground parking lot). Ironically, it was only because the insurers, in cross-complaints, sought declaratory relief as to three more properties that the case expanded to encompass a total of six separate county-owned properties. It should be noted here that LA County never did amend its complaint.

The pleading, discovery and pretrial motion period took place from 1997 until late 2002, when the five-year deadline loomed. The parties solved that problem by stipulating to a putative beginning of trial in November 2002, albeit no real trial would begin until February 2003.

In late December 2002, LA County brought what might have been — at least in retrospect and for purposes of this appeal — the most important pretrial motion in this case: A request to bifurcate trial so that four of the six properties at issue (the three in the complaint, plus another parking structure) would be tried in a "Phase I" jury trial with the remaining two properties to be tried in a "Phase II" jury trial. LA County's hope was that it would do so well in Phase I that the case would soon settle, with the insurers paying their policy limits.

It didn't happen that way. After a jury trial that lasted over six months and spanned the better part of 2003 (from February 2003 to September 2003), the jury returned a verdict to the effect that the none of the four properties at issue in Phase I sustained damage that exceeded the respective five-percent deductibles. LA County thus recovered nothing in Phase I. The bad faith claims were rejected by the jury as well.

Then came Phase II. LA County waived its request for a jury trial, and Phase II was tried to the court in late 2004. Of the two properties remaining at issue for Phase II (the outlying courthouses in Beverly Hills and Pasadena), damage from one did not exceed the deductible, but damage from the other (Beverly Hills) did exceed the deductible — by about $400,000. However, the trial court ruled that before any obligation on that $400,000 was payable, LA County had to actually complete the repairs, and as of the time of trial, none of its repair expenses had exceeded the deductible. Moreover, any obligation by the insurers was readily subsumed within the $10 million already advanced by the primary layer insurers. We should note here: There is no argument on appeal that the trial court erred, in taking into account the absence of completion of repairs to the Beverly Hills courthouse or the $10 million advance, in calculating the judgment to require no payment of money from the insurers.

As far as the trial court was concerned, the completion of Phase II was the completion of the issues to be tried from the complaint. LA County had gained nothing from the litigation. The insurers were the prevailing parties and entitled to costs.

On top of their entitlement to costs as prevailing parties, the insurers also claimed expert costs pursuant to section 998 of the Code of Civil Procedure. (All references to "998" or "section 998" in this opinion will be to section 998 of the Code of Civil Procedure.) (Technically, the attack on the order dealing with costs is its own appeal, consolidated with the main appeal challenging the judgment.)

It seems that back in 2001 each of the insurers — including excess layer insurers who had not participated in the advancement of the $10 million — made formal "998" offers to settle for various amounts which, collectively, added up to about $4.8 million. But, as noted, LA County recovered nothing from either the Phase I trial or the Phase II trial, so the trial court, in its judgment, also awarded the insurers $5.9 million in costs, of which about $3.9 million consisted of expert and witness fees under Code of Civil Procedure section 998. We should pause to note here that there is no issue on appeal as to the reasonableness of the amount of the expert witness fees and costs.

And so, what had begun with great expectations of exhausting policy limits and recovering bad faith damages on top of those limits had turned, like Napoleon's invasion of Russia, into a rout. Instead of LA County recovering money from the insurers, it now had to pay about $5.9 million to the insurers.

We now return to the four great issues in the opening brief, as framed by LA County's opening brief:

Here is a summary of our conclusions:

THE "UNTRIED ISSUES" ISSUE: THE RECORD

1. Introduction

By far the great bulk of the opening brief is devoted to the argument that the trial court failed to "try" — and that is the key word in the main headings and most of the subheadings — "key issues" of "policy interpretation." (In one of the subheadings under this argument the key verb is "adjudicate" and another the verb is "construe.")

Preliminarily, one must step back and recognize that this basic argument is unusual, to say the least, and, to be plain, a little nebulous. What does it mean, after all, for a trial court to "fail" to "try issues" in a case where an insured is seeking money from an insurance company, or, as in this case, a whole group of insurance companies?

In this appeal LA County appears to be using the word "issue" in its briefing to insinuate, almost at a subliminal level, certain assumptions about the course of the litigation. These assumptions are that the complaint contained claims based on a series of provisions in the insurance plan that we will call the "auxiliary benefit provisions." The auxiliary benefit provisions are things like loss adjustment expense and debris removal, as distinct from the repair of damaged property as such. The complaint, as we will soon show in great detail, contained no reference to such auxiliary benefit provisions and no claims based upon them at all.

Indeed, if one substitutes the word "claims" for "issues" when one reads LA County's briefs, a much clearer picture emerges. The theories of recovery that LA County now wants us to assume were somehow reserved for some future adjudication after two trials were, in fact, never put forward at all by the complaint. But by using the word "issues" instead of "claims," the opening brief suggests that LA County sought recovery from the insurers under certain theories and the trial court arbitrarily just decided not to allow those theories to go to the triers of fact.

Not so. LA County limited its claims against the insurers in its complaint to just three properties, and then based its claims on the straight-up damage to those properties sustained in the Northridge earthquake, as distinct from any claims based on the auxiliary benefit provisions of the insurance plan.

Moreover, in critical "housekeeping" hearings involving the way the trial would be organized, LA County either gave up its attempt to force the trial court to make rulings on policy "issues" in the abstract (which is what happened on November 4, 2002) or completely omitted those "issues" as any basis for recovery (which is what happened in regard to LA County's own bifurcation motion and the February 2003 hearing on that motion).

But then, in Phase I — that is, after the bifurcation motion that was to determine how trial would proceed — things went south for LA County. The jury precluded any recovery after the Phase I trial. And the trial court did not find enough damage to require payment in Phase II.

All of a sudden, LA County found itself scrambling to find some policy payouts that would put it over the $20 million aggregate deductible, so it could say it won and would not suffer the ignominy of having to pay its insurers money in litigation costs.

And yet, when, in post-Phase II hearings, the trial court practically invited LA County to make a motion to "reopen" the case so that it could yet present the claims against the insurers based on theories of recovery (i.e., these supposedly untried "issues"), LA County declined the opportunity. It told the trial judge that it had already reserved its auxiliary benefit claims for a future "Phase III" trial. Only in postjudgment motions for new trial and jnov did LA County announce an intention to bring a motion to reopen.

At this point we segue to the opening line of the respondent's brief: "The County of Los Angeles' appeal seeks to undo the consequences of its own litigation strategy."

On first reading the line (and particularly after plowing through the opening brief), one is inclined to be highly skeptical. Surely in this insurance case LA County's lawyers didn't have a "litigation strategy" that precluded the trial court's "trial" of various "policy issues"?

But on reflection, and digging what one can into the record, one is forced to conclude that the opening line of the respondent's brief is accurate, and LA County's "litigation strategy" was the result of thoughtful, tactical, judgmental decisions. (That those decisions did not, in hindsight, work out, is another matter. Neither did Napoleon's invasion of Russia.)

One should remember as one reads this opinion: As it has arrived at the doorstep of the Court of Appeal, this appeal (with the one distinct issue involving burdens of proof) is not, fundamentally, an insurance case at all. It is a story of the difficult job which counsel for both sides and the trial judge faced in managing incredibly complex civil litigation of titanic proportions.

Consider the sheer elephantine girth of the case. Wise trial attorneys would no doubt have recognized that it would have tested the patience of even the most dedicated and otherwise nondistracted jury for LA County to have presented claims for each of the 27 properties covered by the insurance plan. Thus it is understandable that the complaint limited itself to just the big three properties damaged in the earthquake. After all, LA County had substantial evidence which, if believed by the jury, would have readily maxed out the limits of the insurance plan and presumably brought the insurers to heel as regards LA County's bad faith claims.

Next, after the insurers put three more properties in issue, LA County, still recognizing the need to narrow the focus of the case, sought to bifurcate the trial so that only three of the total six properties at issue would be tried initially (as it turned out, the phase one trial encompassed four of the six). Readers should consider this irony: We have 104 volumes of reporter's transcript largely out of the decision to limit LA County's claims to just six properties. It does not bear thinking what this case might have turned into had LA County decided to present claims based on all 27 properties.

And then came yet another tactical choice. With a no-recovery judgment staring them in the face, LA County had to decide whether or not to present a motion to "reopen" to the trial court. To make such a motion might be to admit that it had never really pressed its auxiliary benefit theories until then, and invite a response by the insurers that would have reminded the court that these were claims not pressed in discovery, or presented in two previous phases of trial. After all, at that point, after eight years of discovery and litigation, the insurers would have a very good argument that any reopening would have been highly prejudicial to them.

So, LA County deliberately chose not to make a motion to reopen, though it had a period of more than five months to do so. (The five months extended from June 2006 (when the trial court issued the possible invite) to mid-November, 2006 (when the judgment was ultimately entered).) During that period LA County's position was: We never restricted the case to just six properties; we have "coverage issues" we are still entitled to still try. As the trial judge summed up LA County's position: "If I can interpret what I've just heard from Mr. Mason [one of LA County's attorneys], it's not necessary to move to reopen something that's never been closed." Only after it became clear that the trial judge was not going to order — and never had contemplated — a "Phase III," did LA County claim that it even wanted to make a motion to reopen. And by then, of course, it was too late.

One more thought: We apologize for the size of this opinion. But its bulk is necessary precisely because this is a study of complex civil litigation, in which the very facts and events salient to this appeal are papers and oral proceedings at the trial level. Most of LA County's argument is predicated on its own paraphrases of what happened at various status conferences and hearings, instead of the actual words recorded by the reporter. Only by quoting — including quoting at length so as to show the surrounding context — from the motions of the parties and the transcript of the various hearings does a true picture emerge.

2. The Complaint

While the original (and only) complaint in this case is, at first blush, quite long — it takes up the better part of no less than three volumes of clerk's transcript — that length is a little deceptive. Almost all of the size of the complaint is attributable to exhibits and attachments, not the least are the various policies that make up the composite 21-insurer "insurance plan." (We will explain the nature of the insurance plan where it is most relevant to the issues raised in this appeal, which is in the next section where we address the question of whether plaintiff LA County had the burden of showing earthquake-related damage.) The actual, lawyer-drafted pleading, the complaint "proper" as it were, is relatively short, extending less than 13 pages, from page 146 of the clerk's transcript (which begins simply identifying the insurers in the plan) to the middle of page 158 (which is mostly the prayer for relief on the second cause of action listed).

The complaint lists only two causes of action: declaratory relief and bad faith. The complaint sorts itself into nine separate sections. We now detail each of those nine sections:

Then comes the prayer, divided into two sections for each cause of action. As to the first cause of action for declaratory relief, the focus is exclusively on the three buildings: "For a declaration that: [¶] a. County's assessments of the damage at the Hall of Administration, Civic Center Courthouse and Auto Park 18, as documented in the A&E [architectural and engineering] Reports, are correct; [¶] b. That the earthquake-related damages to the Hall of Administration, Civic Center Courthouse, and Auto Park 18 are covered by the policies issued by defendants, and each of them; [¶] c. That the proposed repairs are reasonable, can be undertaken, and that the cost of the repairs is covered by the policies issued by defendants, and each of them; and that defendants, and each of them, must pay for the actual costs incurred; [¶] d. For costs of suit incurred herein; and [¶] e. For such other and further relief as the Court deems just and proper."

As to the second cause of action for bad faith, the complaint sought punitive damages, "attorneys' fees and costs pursuant to Brandt v. Superior Court, 37 Cal.3d 813, 210 Cal.Rptr. 211" and costs of suit and further relief as the court would deem just and proper.

And that's it. Let us now note what is conspicuously not in the complaint: (1) any allegations that the total damages to all 27 of the buildings covered under the insurance plan exceeded the $20 million aggregate deductible; and (2) any allegation that, when various auxiliary benefit provisions of the policy (such as loss adjustment or relocation expenses) were added in, the $20 million aggregate deductible was exceeded. Rather, LA County had put all its chips on two squares of the roulette table: Repair costs and rental losses for three — and only three — properties.

3. Summer-Fall 2002: The Raising of "Policy Interpretation" Issues

By August 19, 2002, the five-year deadline to bring the case to trial was looming. That day, in a status conference, the trial court entertained a motion from LA County to exclude "everything about FEMA" in the case (referring to the federal emergency management agency). The motion was denied as way too broad.

At the same hearing, the trial judge raised the problem of the trial schedule. Trial was, at that point, scheduled for November 4, and counsel for LA County clearly saw the five-year problem. The five-year deadline was, however, readily solved when counsel for the insurers stipulated that November 4 would be the "start of the trial for purposes of the five-year statute" even though it was obvious no real "trial" would begin that day.

Soon, however, an attorney for LA County rose to say that "five issues" had been "identified" for trial to the court. (As will be the case throughout this opinion, material in all caps has been lifted — virtually cut and virtually pasted — from the actual reporter's transcript. When such material is italicized, it is our own italics.) Here are his remarks:

Defense counsel, however, was bothered by the nebulousness of the "interpretation of policy provisions" comment, and when his turn came, indicated that there was still basic work to be done:

4. The Briefing and Hearings of October through December, 2002

While a good portion of the opening brief in the case before us is devoted to asserting that "throughout the case" LA County had brought "policy-interpretation issues" to the trial court's attention, the opening brief points to just three discrete instances where these "issues" were brought to the trial court's attention before Phase I, and that was in (1) a pretrial brief filed October 18; (2) another brief filed on October 28; and (3) a third brief filed on January 13, 2003.

The first two briefs were addressed by the trial court in a hearing on November 4, 2002. The last addressed in a hearing on January 31, 2003. We will now detail these briefs and the hearings on them as the trial court experienced them, in chronological order:

a. LA County's October 18 Pretrial Brief

When the first of the pretrial briefs was filed October 18, 2002, the putative trial date was set for less than three weeks away, i.e., November 4, 2002.

While the document was denominated a "brief," the caption also put it under the heading "legal motion no. 6 of 6." The declared purpose of the document was to "determine the effect of the endorsements to the County's manuscript policy form and to interpret same."

Here is how the brief explained itself — basically asserting that the insurers needed to be pinned down on what policy provisions the insurers were relying on:

"The policy for which the County sought subscribers consisted of a manuscripted (i.e., written specifically for the insured) primary layer and a four manuscripted excess layers. But when the Defendants agreed to subscribe, they also attempted to modify the terms of the manuscript form by issuing printed and/or manuscripted endorsements. Some of these endorsements were even dated after the January 17, 1994 Northridge Earthquake. The result of these varying changes is that the County's coverage is not uniformly consistent regarding the scope of the coverage provided and the applicable exclusions. But throughout the course of the County's loss, each defendant has failed, in violation of California law, to advise the County as to what parts of each defendant's policy applies to the County's loss. Instead, defendants have chosen to rely upon generic letters written by their adjuster, letters that failed to identify the specific per policy terms that were applicable. [¶] It is therefore incumbent upon this Court to determine, as a matter of law, what endorsements were properly executed, countersigned, and delivered to the County prior to the January 17,1994 Northridge Earthquake. Once this determination is complete, the rights of the County and the duties of each Defendant can be completely identified."

Thereafter, the motion set forth a "series of rulings sought by the County." The rulings that are relevant to this appeal were that the court "interpret" the insurance plan in a myriad of ways. We will quote the entire section here. Preliminarily, we should note that it is reasonably clear that the requests are, optimistically, geared to questions that would arise if LA County was successful and maxed out the policy limits, hence the continued seeking of a determination that certain kinds of coverages had "no dollar limits." However, to be fair to LA County, a number of its requests could also be interpreted as seeking a determination that LA County was entitled to reimbursement for any amounts spent on certain categories of expenses, because the deductible provisions of the insurance plan did not apply to those categories. Here are the requests:

Another aspect of the October 18 "brief" was an orientation to a bad faith recovery and apparently outstanding discovery issues. Hence, later on, the brief asserted that it hadn't received satisfactory answers from the insurers as to precisely what policies in the plan were at issue: "The parties and the Court need to identify the pertinent policies so that the trial may proceed in an orderly, efficient, and reasoned manner. The Defendants in this action are all subject to the Unfair Claims Settlement Practices Regulations (10 Cal. Code Reg., § 2695.1, et seq.)."

Under the heading "this court has the duty to interpret the policies as a matter of law," the brief finished up with a section on how policy interpretation issues are (usually) legal issues (hence the citation to Waller v. Truck Ins. Exch., Inc. (1995) 11 Cal.4th 1,18) and, though the document was denominated a "brief" and had no hearing date set, finished with the line, "the County's motion should be granted."

b. the insurers' own October 18, 2002 "legal brief re policy interpretation issues"

The insurers also filed a "brief" on October 18, 2002. But they had a different take on these "issues." The insurers' theme was that the "issues" which LA County now wanted adjudicated were too nebulous to intelligently discuss in a vacuum, pretrial, and without established facts. The insurers argued that these issues had not been developed in discovery.

The insurers' brief referenced an October 4, 2002 letter sent by LA County's attorneys setting forth the "issues" which had only been obliquely alluded to at the August 28, 2002 status conference: After mentioning the status conference, the insurers brought the court up to date: "Thereafter, on October 4, 2002, the County sent a letter to defendants purportedly `clarifying' these issues and adding other legal issues to be briefed to the Court. However, the October 4, 2002 letter raises more questions than it answers. Among other things, the letter fails to set forth the County's position, fails to explain why the County believes certain policy provisions need to be interpreted, and fails to identify the facts and/or aspects of the County's claim which the County deems applicable to the policy provisions."

The next paragraph made the point that LA County was essentially asking for relief in a vacuum: "Policy provisions cannot be analyzed in a vacuum. To the contrary, any particular policy language must be examined in context with regard to its intended function in the policy, which requires a consideration of the policy as a whole, the circumstances of the case in which the claim arises and `common sense.' (Bank of the West v. Sup. Ct. (1992) 2 Cal.4th 1254, 1265, 1276.) Since the County has failed to state how the various identified policy provisions are construed by the County, and under what factual context, defendants cannot prepare a brief in the abstract which purports to analyze the provisions identified by the County's October 4, 2002 letter." (Italics added.)

c. LA County's October 28 response to the insurers' brief

LA County did not waste the opportunity to respond to the insurer's brief. While the insurers had claimed that LA County's October 4, 2002 letter was nebulous, LA County came back with the same theme as its earlier, October 18 brief: The insurers themselves had been playing hide-the-ball. Hence, the response opened with this paragraph: "In its opening brief, the County documented that policy interpretation is a matter of law for the Court to determine and set forth the three rules of written contract interpretation. The County also highlighted the difficulty the County has had in discerning what are the Defendants' positions regarding their applicable policy provisions in view of the Defendants' failure to set forth their individual coverage positions as required by California law. This failure has gone on for eight years and has now been carried over into Defendants' Opening Brief on policy interpretation. While they claim that each defendant has made individual modifications to the County's bargained-for coverage, Defendants persist in not advising the County and the Court of those changes and how they impact their individual position vis-a-vis the County on its Northridge earthquake insurance claim."

LA County's brief in some ways reciprocated the insurers' brief on the subject of the adversary's failures in discovery. That is, LA County's brief accused the insurers of various omissions that presumably should have been thrashed out in discovery: "Having elected to not set forth a legal position for the Court regarding (1) what are the applicable and enforceable endorsements to the County's manuscript form; (2) what are the applicable indemnity limits; and (3) are there any deductibles or caps on loss adjustment expenses, debris removal, consequential loss, or expenses incurred pursuant to the assistance and cooperation clause, the Defendants should not be able to set forth their position in their response as it would afford the County no opportunity to respond in writing to Defendants' position." (Italics added.)

Beyond that, the opposition continued with themes that the insurers were about to make arguments that had yet to be pinned down. The insurers, said the brief, had "failed to identify which of the ninety-seven printed and manuscript policy forms are effective to modify the terms of the manuscript policy form" and also that the insurers were asserting that certain "full waiver" and "attachment" clauses to endorsements to their policies controlled over terms in their policies. Next, LA County claimed that the insurers' position that, because the insurance plan was a "manuscript" policy the parties had "equal bargaining power," was "not supported by the facts." And, finally, LA County took the position that given the insurers'"failure to set forth their positions regarding coverage," the "order" that had been requested in the October 18, 2002 brief should be issued.

The next section of the October 28, 2002 brief was rhetorical, making the point that the insurers'"feigned inability" to "address all of the issues regarding policy interpretation" that LA County had previously identified (in the letter dated October 4, 2002) was "disingenuous." In this section, LA County grouped its policy interpretation issues into four major categories. Readers will again notice the emphasis on identifying endorsements, then limits and caps: (1) "What are the applicable and enforceable endorsements to the manuscript policy form"; (2) "What are the applicable indemnity limits;" (3) "Are there any deductibles or caps on loss adjustments expenses, debris removal, consequential loss, expediting expense;" and (4) "Are all costs incurred by the County at Defendants' request recoverable under the assistance and cooperation clause."

The context of these complaints was LA County's attempt to establish liability of the various individual insurers in the plan. Hence the next line, after the four categories, was: "As they have done throughout the claims adjustment process, Defendants steadfastly refuse to take a position concerning their individual obligations owed to the County and what the applicable policy provisions might be under said policies." (Italics added.) That point was backed up by the assertion that "as far back" as October 1996, LA County had sought from the insurers a written statement as to "what part of the damages that the County has identified that the insurers will pay" plus a statement from the insurers identifying from them "all disputed coverage issues, repair issues, and scope issues," with a "detailed explanation to support each of the insurers' positions." (Original italics omitted.)

The remainder of the response brief asserted that the insurers were (1) incorrect in their positions as regards the "full waiver" and "attachment" clauses; and (2) had asserted rules of construction that did not correspond to the "full factual record" before the court.

d. the November 4 hearing, aka "trial"

"Trial," as it were, began November 4, but it was basically a combination status conference and hearing on the briefs filed on October 18 and 28. The proceedings of that date divide themselves into three broad segments: (1) some preliminary housekeeping matters, including consideration of more depositions to be taken, and reiteration that the five-year deadline had been successfully overcome by the device of saying "trial" had begun that date; (2) a discussion of the issue of the burden of proof in the context of earthquake insurance coverage, including the effect of Insurance Code section 10088; and (3) consideration of "coverage" issues raised in the briefs. It is the latter category that concerns this appeal.

The trial judge began by noting some of these coverage "issues" had not exactly been joined by the parties:

At this point the trial judge invited a response from LA County:

The trial judge was helpful. He pointed out that they were discussing matters that might be better covered in jury instructions:

At this point, LA County's trial attorney asked whether the judge planned to "preinstruct the jury." The trial judge's response was basically positive, essentially encouraging counsel to develop a "little packet of instructions" for the jury at the beginning. ("I think it's a great idea. And I rarely do it.") The trial judge then proffered the ideas of giving the jury a group of stipulated written instructions or a notebook at the beginning of the case.

After a recess, the court took up the "six motions" (we have only discussed the one, number 6 of 6, on "policy interpretation issues" generally) filed by LA County. Much of the next round of discussion focused on repair of earthquake damage in the context of local code compliance.

Finally, after one more recess, the judge turned to the "sixth" motion, the one which LA County now features in its argument on appeal. (See App. Opn. Br. at p. 25.) The judge took number six out of order because he was worried that it might not be considered if he didn't:

The trial judge began noting the practical difficulty which the motion, as presented by LA County, posed to him. Essentially, he didn't have all the relevant documents to make an informed decision:

After wondering out loud about the insurers' point that one could, after all, simply ascertain the relevant documents from the complaint filed by LA County, the trial judge asked one of the defense attorneys what he thought. This attorney made the point that the insurers were essentially being blindsided by LA County's motion, bringing up various policy provisions that were not in the complaint or the subject of discovery.

Said the insurers' attorney:

After a few words on "construing policy provisions in the abstract and for no reason," this defense attorney returned to the theme that LA County was raising issues not in the complaint, and finished his remarks with what appears to be perhaps just a tad bit of irritation that new matters were being raised so late:

When it was one of LA County's attorneys turn, his tack was not offensive — pressing new issues to be litigated — but defensive: Again returning to the themes of the October 18 and October 28 briefs, his point was that the insurers asserting various policy defenses to LA County's claims and LA County was simply using the motion to get a better grip on those defenses, particularly in the context of the fact that each of the 21 defendant insurers had its own forms:

The trial judge still seemed concerned that his task, as formulated by LA County's sixth motion was simply too nebulous to get a hold of. He turned to LA County's attorney:

And any doubt that LA County was now executing a graceful withdrawal was belied by the same attorney's comments a few seconds later, which acknowledged that these policy "issues" (e.g., whether debris removal was subject to a deductible) were small potatoes in the grand scheme of the plaintiff's case:

With that, LA County's lawyer wondered if his adversary wanted to "add something," and, not hearing a response, ended his comments with:

Those comments then allowed the trial court to declare "closure" and move on to discussing the next meeting: THE COURT: THOSE ARE ACTUALLY VERY HELPFUL COMMENTS, MR. BERGMAN, BECAUSE I'M GOING TO USE THEM TO A CLOSURE TODAY.

e. the November 22 hearing

In a status hearing held November 22, the trial judge revisited (along with numbers 4 and 5) the sixth motion from October 18. After a lengthy discussion of how the architectural requirements of the Americans With Disabilities Act might affect repair costs (number 4) followed by a shorter discussion of the insurers reliance on advice of counsel as a defense to the bad faith claims against them, the trial judge turned to the "policy interpretation" issues he had found so amorphous on November 4.

Counsel for LA County immediately perceived that the judge needed the matters framed in a more "manageable" format:

With that, another LA County counsel put out an idea. LA County would compile a "tome" of individual policies, and the insurers would have a certain amount of time to say whether there was a "cap" on a given provision, and whether a given endorsement does, or does not, apply.

Soon, the conversation revealed that LA County's quest was to establish that these various policy provisions (debris removal was the example) allowed recovery without limit. The court began:

The answer surprised the judge:

The judge was polite, but incredulous at the idea LA County was seriously contending for a beyond-policy limits recovery:

Then, the trial judge made a comment which, in retrospect, may have influenced LA County's future litigation strategy. Essentially, the trial judge said: the $125 million limit was it — LA County was not going to collect more than that as a matter of contract. The policy limits on the various policies were real limits, and those caps would be respected:

When the insurers' counsel got his chance, he reiterated one of his main themes of November 4: LA County was making claims that had not been previously presented:

In a few moments, defense counsel returned to the theme that the insurers were being blindsided by matters and claims that were not in the complaint:

For its part, the trial judge was dumbfounded that LA County was presenting issues or claims that had not been the subject of discovery:

Even so, the trial judge held the door open. He turned to LA County's attorney and asked:

However, the trial judge cautioned LA County's attorneys that he wanted to see actual claims with dollar figures: THE COURT: I WOULD ENCOURAGE YOU TO INCLUDE WITHIN IT DOLLAR FIGURES, SUMS CLAIMED IN THESE CATEGORIES.

With LA County's attorneys promise to "do that," the judge turned to other matters.

f. the written bifurcation motion and opposition to it

If, apropos its counsel's comments on August 28, LA County wanted the "interpretation of policy provisions" tried to the court, or, apropos its counsel's comments of November 4, had decided to take "another look" at those policy issues for another presentation to the trial court, or, apropos its counsel's comments of November 22, had decided to present hard number claims based on the various auxiliary benefits provisions, it certainly gave no indication in its motion to bifurcate trial filed on December 20, 2002. As we will now see, that motion gave the trial court no hint that LA County was seeking the trial of any coverage issues "to the court" or some opportunity to present claims based on the auxiliary benefit provisions in the policies that had only recently surfaced as issues. The bifurcation motion was keyed strictly to properties, not issues.

The motion was entitled "motion to bifurcate or sever jury trial on certain claims/causes of action for one insured property." Reading this motion in detail does much to explain why the litigation progressed as it did.

The order sought by LA County asked for one of two alternatives. Either (we now quote them in full): "(1) Bifurcating or severing the jury trial in this action so that there will be separate jury trials for each property at issue, starting with the causes of action for declaratory relief and bad faith as to the Hall of Administration and, if necessary, followed by separate jury trials for the Los Angeles County Courthouse (aka Civic Center Courthouse),'Auto Park 18, Auto Park 10, Beverly Hills Courthouse and Pasadena Courthouse; or, [¶] (2) Alternatively, the County seeks an order bifurcating or severing the jury trial for the County's complaint properties (i.e.. Hall of Administration, Los Angeles County Courthouse, and Auto Park 18, sometimes referred to as the `Civic Center Properties') from the defendants' cross-complaint properties (i.e.. Auto Park 10, Beverly Hills Courthouse, and Pasadena Courthouse)." (Italics added.)

The motion was predicated on the need to narrow issues in the upcoming trial. It pointed out that experts had exchanged "in excess of 140 banker boxes of documents and over 1000 DVDs and CDs containing backup data, computer runs, and other evidence." Moreover, retained experts would be offering "in excess of 232 opinions" to be "offered at trial."

The motion also noted that the insurers had asserted an affirmative defense of fraud, based on LA County's proof of loss for Auto Park 10. The motion pointed out that: "Even though twenty-seven different structures were insured and the total premium was based on each structure's insured value, defendants argued that fraud as to any one insured property voided the policy in its entirety."

Clearly, LA County's litigation orientation was on each of six properties individually. One of the subheadings for the motion was that the motion sought "separate trials based on the number of properties for which coverage is sought."

For their part, the insurers were not keen on a property-by-property approach to the litigation, with the possibility of running a bad-faith gauntlet up to six times. And they clearly understood that LA County was seeking to structure the trial on a property-by-property basis. As the introduction to their opposition stated: "The County's current motion to bifurcate this litigation into as many as six separate trials is no less absurd than its prior motion to bifurcate. Separating this litigation into a distinct trial for each and every property in the complaint and cross-complaint will not be more efficient, nor will it assist the trier of fact. . . . [¶] Rather, as in its prior motion, the County wishes to `cherry pick' one building from among the six buildings that have been the subject of this lawsuit for more than five years because it perceives it will obtain a strategic advantage. The County's proposed procedure will lead to as many as six separate trials and will result in no savings of time or resources, but, to the contrary, will result in duplication and waste." (Italics added.)

And the insurers were also alarmed at the possibility of LA County receiving multiple bites at the apple in regard to its bad faith claims: "If the County's bad faith claim was successful for the Hall of Administration, it is likely that the County would then seek to litigate each of the remaining properties to take advantage of the ruling. If the bad faith claim for the Hall of Administration were unsuccessful, what would prevent the County from continuing to litigate that cause of action as to the remaining properties along with the declaratory relief action?"

5. The Briefing and Hearings of January and February 2003

a. the January 13 brief

On January 13, 2003 LA County filed the third of the three documents which its brief now claims "brought these issues to the court's attention" at a point in time before the Phase I trial. It was a "supplemental brief regarding the court's duty to determine the effect of the endorsements to the County's manuscript policy form and to interpret same."

The brief sought to present the problem of the auxiliary benefit provisions as it had been presented earlier: As a reason to gain a recovery in excess of the policy limits. The brief opened with a reference to "the Court's comments made at the November 22, 2002 trial" and then presented a single issue.

In reading LA County's formulation, readers should note that the focus was on using those auxiliary benefit provisions to exceed the $125 million policy limits, as distinct from ascertaining how those provisions might affect damages below the deductible. At this point, the possibility that LA County would not show enough repair cost damage to exceed the deductible apparently was not being seriously entertained.

Here is the formulation from the brief: "May the County obtain sums under the loss adjustment expense, expediting expense, consequential loss, debris removal, assistance and cooperation, code compliance, extra expense or continuing expense provisions separate from, and in addition to, the indemnity limit set in each individual policy if there is no expressed limitation set forth in the policy"?

And of course the sought-after answer to its own rhetorical question was yes. Thus LA County continued, emphasizing its theory that the auxiliary benefits could provide it with beyond-limits recovery, i.e., gravy on top of a policy limits payout: "With a few exceptions, the indemnity limits set forth in the policies are separate and independent from, and do not impact, the defendants' obligations under the policies to pay the full costs of loss adjustment expenses, expediting expenses, consequential losses, debris removal, assistance and cooperation, code compliance, extra expenses, and continuing expenses. Had defendants intended to limit these obligations, they could have expressly done so, but did not. Thus, like a duty to defend obligation, that may exceed indemnity limits many times over if not expressly limited under the express terms of the policy, the defendants' obligations set forth above should likewise be found not to be capped by the indemnity limits." (Italics added.)

To the degree that LA County was presenting any new theories of recovery in its January 13 brief based on the auxiliary benefits provisions, the brief made it clear that those theories were linked to an anticipated recovery in excess of the $125 million cap. Hence, the "summary of the County's position" opened with the words: "In addition to the stated indemnity limit for each policy, the County is entitled to recover all sums that fit within the" — and then the various auxiliary benefit provisions were itemed. After a long section on general insurance law (and identification of the various auxiliary benefits provisions) LA County's main substantive subheadings reiterated the same theme: "The rules of interpretation support the conclusion that the County is entitled to payments separate from and above the stated indemnity limits." (Italics added.) The idea that auxiliary benefit provisions might be used to obtain a number that exceeded the deductible is not to be found.

b. the January 31 hearing on the bifurcation motion

By the time of the January 31, 2003 hearing on LA County's bifurcation motion, LA County's entire theory of recovery was based on the actual damages sustained to only six of the 27 properties covered by the insurance plan. Limitation to six properties was the ineluctable import of what LA County's attorneys told the trial court at that hearing.

By way of overview, what happened was this: The trial judge was initially highly skeptical of the bifurcation order, and indicated a strong presumption against granting it. But, the judge was also intrigued by the possibility of narrowing the case to make trial more manageable, including the hope of a settlement after a first trial. The bifurcation motion was only the first of a number of pretrial matters taken up by the trial court in that hearing, and so final resolution of the bifurcation motion was put over to February 7, 2003, just prior to trial. The ultimate resolution was a compromise, finally put forth by LA County's counsel on February 7: LA County would drop its bad faith claims as regards the two of the six properties (the Pasadena and Beverly Hills courthouses) that were being split off for later. By waiving the bad faith claims as to the latter two properties, the prejudice to the insurers from bifurcation was minimized, yet some of the advantages of bifurcation would be achieved.

With that, we begin by noting the trial judge's opening remarks as regards the then-pending bifurcation motion. The trial judge thought the motion too one-sided and was fishing for some sort of compromise:

In the course of his remarks, the trial judge also made clear that he considered the entire case one limited to six properties:

And with that, the trial judge plainly sought some sort of modification or alternative:

LA County's attorney then replied. (And we quote the entirety of his reply). In no way did he attempt to disabuse the trial judge of the trial judge's understanding that the whole case was limited to just six properties:

The trial judge struggled for closure, noting that LA County had over 200 buildings:

But if the trial judge had fears that other buildings were involved, LA County's attorney allayed his fears:

And LA County's attorney hastened to show that the other matters were for another day, and another case:

Even so, when it was time for the insurers' attorney to speak, he reiterated his dislike of the idea of any bifurcation with the inherent possibility of returning to court and facing multiple bad-faith claims:

In particular, defense counsel didn't like the idea that this case would only make LA County hungrier for lawsuits on other properties:

But the trial judge remained interested in the idea of a four-two bifurcation, and the idea that, given a first trial, trial as regards the latter two buildings might actually go away by being absorbed into a separate lawsuit:

The trial judge continued, now positively warming to the idea of splitting off Pasadena and Beverly Hills for a separate lawsuit:

Insurers' defense counsel then sought to comment, and brought up the issue of other properties. His point was that the 27 properties in the insurance plan could not be equated with other, more numerous county buildings which might have separate insurance policies:

At this point, there was an exchange as to what might, or might not, be encompassed in the lawsuit, with defense counsel making the point that the lawsuit only encompassed six properties, a point which LA County's attorney did not dispute:

But then, another defense counsel spoke, to make the point that he represented some insurers who did not participate in the insurance program, and therefore did not like the idea that those insurers might be involved in litigation not really having to do with them:

The trial judge then asked why the case had increased from only three structures to six:

At that point LA County's attorney was plain: Only three properties were really at issue in the complaint. And he explained why the case had been framed so narrowly. To keep the litigation "simple and focused":

With that, the trial court asked for more thoughts, making it clear that LA County's motion for bifurcation was denied, but allowing for the possibility that an amended bifurcation motion might yet be granted:

The bifurcation motion was not revisited that day, as the trial judge then proceeded to take up a series of motions in limine.

c. the February 7 2003 completion of the hearing on the bifurcation motion

On February 7, 2003, the bifurcation motion was revisited. Counsel for both sides had had time to think things over, and a compromise was in the offing.

The trial judge began by bringing up the old, unresolved business:

Again, counsel for the insurers made the point that his clients did not want to face to separate bad faith trials.

LA County's attorney reiterated his hope for a four-two bifurcation:

The trial judge liked the idea of bifurcating, but still was concerned about unfairness to the defendants, in particular the "amorphous" standards governing punitive damages. Interestingly, the trial judge now floated the prospect of bifurcation on lines of issues, rather than properties:

But LA County's did not propose the more traditional bifurcation based on a coverage-punitive damage dichotomy, but kept to the four-two split he had wanted all along.

However, the logjam broke when LA County's attorney removed bad faith from the bifurcated two properties to be reserved for another trial:

d. the January 31, February 7, and February 18 hearings vis-à-vis the January 13 supplemental brief

We will not make a too-long opinion even longer by going into the details of the balance of the hearings of January 31 and February 7, as well as the February 18 hearing, in order to show what didn't happen. Readers should simply recall that LA County's January 13, 2003 supplemental brief was just that — a "brief." There was no "hearing date" specified in the caption (only a date already more than two months old — November 4, 2002) and there was nothing on the brief to indicate a request on LA County's part that it should be treated as a motion in limine, a motion for summary adjudication, or any other sort of request for an order from the court. The trial court did not bring up the brief in the hearings of January 31, February 7, or February 18. More importantly, neither did LA County, despite several instances in the hearings (most notably at the end of the hearing on February 7) where it might have been brought up. In fact, at the conclusion of the hearing on February 7, the trial court specifically invited counsel to bring up any matters to be heard on February 18 (other than a defense summary adjudication motion already scheduled for that date). LA County's attorneys did not avail themselves of that opportunity.

6. Phase I Trial

The salient details for this appeal about the trial of Phase I, now limited to just the four properties, but including all bad faith claims which LA County made attendant to the claims handling of those properties, are again significant for what is not there, in this case — not in the opening brief: There is no claim of error made in the opening brief as to the conduct of the trial, the admission or exclusion of evidence, or (with one big exception which is its own major issue, discussed below) the jury instructions given or withheld.

As noted, the jury returned a defense verdict for the insurers, and also rejected LA County's bad faith claims.

7. PrePhase II Skirmishing

LA County's appellate briefing, particularly its reply brief, identifies three key pre-Phase II hearings where it contends that the trial court somehow misled it into thinking it could have "evidence on policy interpretation issues." These hearings were April 12, 2004, August 20, 2004, and October 4, 2004.

a. April 12, 2004

Interestingly enough, the April 12, 2004 hearing was not reported.

That is not a typo. The one hearing that LA County now contends was the most important to this appeal that exceeds 104 volumes of Reporters Transcript was not reported!

All we have is the declaration of one of LA County's own attorneys, offered to support LA County's opposition to a motion brought by the insurers to prevent the declaration that was offered in support of opposition papers filed against the insurers' motion to "exclude plaintiff from offering evidence re: claims for damages, policy benefits and/or exhaustion of the deductibles for buildings other than Beverly Hills Courthouse and Pasadena Courthouse." The "other than" to that opposition of course indicates that the insurers were not opposing the offering of evidence on "claims for damages, policy benefits and/or exhaustion of the deductible" in connection with the two properties that had been set aside for the Phase II trial.

The declaration offered by LA County's attorney was this: "I was present at the April 12, 2004 Status Conference. During the Status Conference, counsel for the Defendants, Marjie Barrows, argued that policy interpretation and deductible issues should be resolved before the start of the Phase II trial. In response, this Court stated that policy interpretation and the deductible issues would be resolved following the Phase II trial as the Phase II trial is a continuation of the same trial."

b. August 20, 2004

On August 20, 2004, the court took up a number of pretrial motions preparatory to Phase II. Toward the end of the hearing, the trial court specifically considered two motions brought by the insurers: The first motion was denied, the second granted.

The motion that was denied was an attempt by the insurers to preclude LA County from offering evidence in the Phase II trial concerning some $33 million in attorney fees that, the insurers argued, was being belatedly asserted by LA County as loss adjustment (as distinct from litigation) expense.

In arguing for the motion, counsel for the insurers apparently became a bit impassioned — for which he later apologized to the court — because he felt that insurers were being sandbagged by belated claims.

Here is how the argument opened:

The insurers' counsel then moved on to elaborate on the unfairness of being hit with new claims regarding additional policy benefits so late in the process:

After a few more words about how LA County had not made these claims in answers to interrogatories when it had the chance, the insurers' counsel inveighed about how LA County was now trying to get, as an insurance claim, attorney fees that had been spent in the course of Phase I of the trial:

The trial judge, as he was wont to do throughout the entire case, listened to the insurers' counsel, waited for him to finish, and then turned to LA County's attorney to hear his side of the story. LA County's attorney opened with comments reminiscent of the November 4, 2002 hearing, i.e., asserting that it was the insurers who were under an obligation to tell LA County what wasn't covered, as distinct from LA County being obligated to present claims. Along the way, however, he also asserted, as if it were established fact, that the court had already determined that additional benefit provisions would be tried after Phase II:

Further, returning to the theme of a putative insurer obligation to tell LA County what wasn't covered, LA County's attorney appeared to recognize that, indeed, additional benefit claims had not been presented to the insurers:

Since it was the insurers' motion that was being considered, the trial court gave the insurers' a chance to have the "final word" in the argument. Attorney Rudloff pointed out that LA County's attorney missed the part of Phase I where the scope of the claims was actually talked about:

Apparently, as noted, the insurers' attorney became somewhat impassioned at the prospect that LA County might be allowed to present new claims that had not been presented previously, and mentioned how much trouble and expense LA County's litigation strategy had caused, and alluded to his future section 998 motion for expert witness fees:

The judge caught on to what appeared to be an allusion to a future 998 motion:

The trial judge was understanding of counsel's frustration:

Soon the trial judge alluded to the "next phase." The insurers' counsel returned to the theme that the insurers were being sandbagged by belatedly made claims:

At this point the court mentioned "the next phase."

Again, counsel for the insurer returned to the theme that the insurers were being sandbagged by the presentation of new claims:

We should note here that in the discussion we have just recounted, the trial judge said nothing to confirm attorney Mason's assertion that "what the policy provisions provide" would be resolved "at the conclusion of the Phase II trial." Judge Bauer simply listened and let attorney Mason make his argument, then simply listened and let attorney Rudloff make his argument, and denied an in limine motion to preclude LA County from putting on loss adjustment expense evidence in the Phase II trial. Judge Bauer's allusion to a "next phase" is at best ambiguous: Given that, literally, the next phase of trial (Phase II) was looming, the natural reading of his passing comment is that he was indeed referring to Phase II. And that meant, as is logical given the trial judge's denial of the insurers' motion to exclude evidence concerning the $33 million in attorney fees, that LA County was free to put on such evidence in Phase II. (After all, that $33 million went to only the properties that were in the complaint or cross-complaint.)

The "last" motion to which the trial judge referred was granted. It was a motion, in the judge's own words:

LA County does not, in this appeal, argue that the grant of the motion was error. We will simply note again that, throughout the course of the August 20, 2004 hearing, the trial court said nothing to confirm what, at that point, was LA County's assertion that there was some go-ahead to save auxiliary benefit claims for some post-Phase II trial. We do not think a trial judge is required to immediately disabuse counsel every time, in oral argument, counsel makes a statement which may not be accurate. Moreover, there was nothing pending in front of the court regarding a possible Phase III — the only items which were before the court were the in limine motions regarding Phase II, and motions by the insurers to boot.

c. October 4, 2004

Finally, there was the October 4, 2004 hearing. In some ways, the October 4, 2004 hearing was a replay of the November 4, 2002 hearing 23 months earlier.

The trial judge had just finished up a motion preparatory to Phase II on computer modeling, and then brought up a matter, precipitated by a letter to the court from the insurers' counsel in September, as to the court's "prior rulings." The court was clearly addressing counsel for LA County:

Still addressing counsel for LA County, the judge continued, and even made an apparent reference to the old "6 of number 6" brief from October of 2002:

Counsel for LA County then said:

The judge then asked for comments from the insurers' counsel (though it appears he misspoke and used the name of one of LA County's counsel):

The insurers counsel argues that the matter really was not appropriate for the day's agenda:

The judge, however, seemed to willing to keep the matter as a "watchpoint":

Defense counsel was certainly aware of the issue:

But then defense counsel raised the question as to how the matter "fits," and perhaps should have been a matter for jury instructions back in Phase I:

Defense counsel changed course and welcomed the chance to discuss the matter:

The trial court agreed. He was ready to discuss the matter:

But then the court gave LA County's attorney a chance to put off the matter for another day:

And then, something that in retrospect seems unexpected. It was LA County's attorney who affirmatively declined the chance to take up the matter on that day:

The trial court came to closure:

(Reply br. at p. 66.)

Not so. A fairer reading of the colloquy is that the trial judge was giving LA County's counsel the opportunity to raise it later if LA County so desired. There was certainly no "agreement" to definitely consider the matter at a future date.

8. Phase II trial

As with Phase I, the remarkable thing about Phase II is what is not asserted as error in the opening brief. There is no argument that the trial judge made an erroneously evidentiary ruling, or that the ultimate determination lacked substantial evidence. There is, in the opening brief, the assertion that evidence relating to the auxiliary benefit issues was indeed put to the trial court in Phase II, and that the court did not "did not address or rule on the policy interpretation and deductible issues." But, conspicuously absent from the opening brief is any assertion that LA County specifically requested a ruling on any of these "issues" in Phase II and was refused it.

As noted, the Phase II trial resulted in a determination that the damages to the Pasadena Courthouse did not exceed the deductible, but those to the Beverly Hills Courthouse did by about $400,000.

9. Post-Phase II Skirmishing

a. the April 11, 2006 hearing

While the Phase II trial might have been completed, there were still plenty of numbers to be crunched, and that process continued into 2006 at a hearing conducted on April 11, 2006. The hearing resulted in a direction to insurers to prepare a draft judgment and statement of decision. LA County did not appear to raise (and certainly makes no argument in its briefs that it did raise) any of the auxiliary benefit issues on which it now relies in that hearing.

What did happen was that the trial court itself, in the process of its comments about deductibles, stated its belief that the various benefits should be bundled per applicable property. Significantly, the trial judge began by agreeing with the insurers that LA County really hadn't put on evidence as to the total amount of expert fees, investigative fees, or other ancillary costs incurred by LA County.

AND THAT REALLY, I THINK, COMPLETES THE ANALYSIS THAT I WOULD TENDER TO YOU ON THESE QUESTIONS ABOUT THE DEDUCTIBLES, EXCEPT A COUPLE OF MORE POINTS THAT I THINK WERE POINTS THAT YOU LEGITIMATELY DISCUSSED IN RESPONSE TO THE COURT'S SUGGESTION THAT THERE MIGHT BE OTHER TOPICS PERIPHERAL OR RELATED TO THE QUESTIONS POSED BY THE COURT. AND I THINK THERE IS AT LEAST A COUPLE OF POINTS THAT I WOULD ADDRESS IN THAT REGARD. THERE'S A LOT OF DISCUSSION ABOUT THE PLAINTIFF'S CLAIMS FOR INVESTIGATIVE WORK, ATTORNEYS' FEES, TRASH DISPOSAL, AND OTHER CATEGORIES THAT ARE LISTED IN THE POLICY AS SOURCES OF COVERAGE. I'M AS FORGETFUL AS ANYONE, BUT CERTAINLY MY RECOLLECTION OF THE EVIDENCE THAT WE'VE HEARD OVER TWO SUMMERS IS QUITE CONSISTENT WITH THE DEFENDANTS' RECOLLECTION ABOUT WHAT IS IN THE RECORD AND WHAT HAS BEEN PRESENTED IN EVIDENCE ON THESE TOPICS.

THE DEFENDANTS MADE THAT POINT; AND THEY WERE, I THINK, VERY, VERY PRECISE AND I THINK JUSTIFIABLY SKILLFUL IN THEIR ANALYSIS. HERE AT PAGE 14 OF THEIR REPLY BRIEF, THEY SAID NO ONE TESTIFIED ABOUT ATTORNEYS' FEES ALLEGEDLY INCURRED BY THE COUNTY. I THINK THAT'S TRUE.

THEIR NEXT PHRASE IS VERY PRECISE. THEY SAID, "NO ONE TESTIFIED ABOUT THE TOTAL AMOUNT OF EXPERT AND CONSULTANT FEES ALLEGEDLY INCURRED BY THE COUNTY." AND I ADMIRE THE PRECISION WITH WHICH THAT PHRASE WAS PRESENTED, BECAUSE THE WORD "TOTAL" IS VERY IMPORTANT THERE. AND I KNOW IT WASN'T PLACED THERE INADVERTENTLY, BECAUSE THERE WAS TESTIMONY AT VARIOUS TIMES FROM EXPERTS WHO TESTIFIED ABOUT THEIR BILLABLE RATE AND THE AMOUNT OF HOURS THEY SPENT. SO THERE WERE LITTLE SNIPPETS OF TESTIMONY HERE AND THERE ABOUT THE FEES CHARGED BY THE EXPERT.

BUT WHEN THE WRITER OF THIS BRIEF SAYS THAT NO ONE TESTIFIED OR GAVE EVIDENCE ABOUT, QUOTE, "THE TOTAL AMOUNT OF EXPERT AND CONSULTANT FEES ALLEGEDLY INCURRED BY THE COUNTY," THAT STATEMENT IS TRUE.

AND THEN IT GOES ON TO SAY THAT THERE WAS NO EVIDENCE ABOUT THE AMOUNT ALLEGEDLY INCURRED BY THE COUNTY TO INVESTIGATE AND REPAIR ANY P.P.P. PROPERTIES, EXCEPT THE TWO COURTHOUSES IN PASADENA AND BEVERLY HILLS. AND THAT SECTION OF THE BRIEF GOES ON TO NOTE WHAT I THINK IS AN ACCURATE SUMMARY OF THE RECORD ABOUT THIS POINT. (Italics added.)

Then the trial court did turn to the subject of damage and its relationship to some of the auxiliary benefit provisions, and gave a ruling, or at least a "thinking" if not a ruling:

AND THEN I HAVE ANOTHER THOUGHT ABOUT THIS ISSUE, AND THAT IS THE QUESTION ABOUT WHETHER THERE IS — WHAT THE IMPLICATION IS FOR THE DEDUCTIBLE IN REGARD TO ANYTHING THAT WAS PROVED IN THESE CATEGORIES." (Italics added.)

The trial judge then reiterated his point that LA County had to have damage before any of the auxiliary benefit provisions kicked in:

b. the June 1, 2006 hearing

By this time, the prospect of a no-recovery judgment had galvanized LA County, and, at the hearing on June 1, 2006, it put forward this theory of recovery: Damages from all 27 of the buildings in the insurance plan, plus additional amounts from the auxiliary benefit provisions, could be aggregated to clear the hurdle of the $20 million maximum deductible.

Here is the point, as put forward by one of LA County's attorneys at that hearing. The theory was that it was enough to put the question of the deductible in issue to raise the claim:

And at the end of his comments, LA County's attorney argued, as one of his colleagues had prior to Phase I, that the court had somehow lulled LA County into thinking it could have a Phase III in which it could aggregate its damages from beyond the six properties:

Another of LA County's attorneys now jumped into the fray. His point was that trial was still ongoing, a de facto "Phase III":

At this point the trial judge turned to defense counsel and asked for his thoughts:

This comment prompted the trial judge to interject a thought. What LA County really wanted to do was "reopen" the case:

Then the insurers' counsel also confronted the point that the possibility of asserting other "coverages" had been floated previously:

When LA County's attorney got his chance to respond, his point was that LA County had already "raised" the issue of auxiliary benefits, and that was enough:

At this point the trial judge turned to the more basic question of whether LA County had indeed already proffered evidence supporting its position in regard to the auxiliary benefits claims. Basically, the trial judge wanted to look at some exhibits before he made any decision:

A few minutes later (after some discussion that appears to have centered on the nature of the excess coverage) the trial judge uttered the comment summarizing LA County's position that there was no need to "reopen" the case, and then called for comments:

The insurer's counsel's point was that the auxiliary benefit claims required factual determinations, and that two trials had already been held:

In response, LA County's attorney did not address the problem of whether factual predicates —such as actual numbers of amounts claimed for debris removal — were needed, but wanted to talk about recovery from the excess insurers (as a quotation of all of his remarks shows):

However, another LA County attorney jumped into add a few more comments, which more directly confronted the auxiliary benefit claims. His point was that the issue had already been "reserved":

The trial judge then changed the subject, and asked defense counsel to discuss the issues of "interest, prevailing party." The insurers' attorney made the point that the insurers had clearly won:

But the judge was still apparently open-minded on the subject of prevailing party:

Then followed a discussion on prevailing party and credits, after which the trial judge self-consciously gave LA County's attorney a "wild card" to discuss anything "pending or unresolved":

But LA County's attorney did not force a ruling on any aspect of the auxiliary benefits issue, including whether there even needed to be a ruling on the issue, whether it had really been "reserved," or whether LA County needed to make a motion to reopen.

Rather, the hearing ended with a discussion of another case referred to as the "Agricultural case."

c. five months later: November 15, 2006

After a few remarks from the court about the calendaring for the conference, and the point that the trial judge was now taking up the question of the statement of decision, LA County's attorney started right in with the unresolved auxiliary benefits provisions argument. As was the case with the June 1 hearing, LA County's position was that the auxiliary benefits issue had been "reserved."

The insurers counsel also reiterated his position — there was no more need for litigation, there had already been two jury trials, and LA County had had its chance to offer evidence on those provisions:

There was no more discussion on the question of the resolution of supposedly unresolved issues that day. After asking for any more comments ("Anything else? [¶] All right.") the trial judge then proceeded to deliver a lengthy statement, and eventually came around to what had been called "Phase III."

The trial judge squarely rejected the idea that the auxiliary benefit issues had been reserved:

d. and finally, the motions for new trial and JNOV heard January 8, 2007

LA County made postjudgment motions for a new trial and for judgment notwithstanding the verdict, which were heard January 8, 2007. The auxiliary benefit provisions figured in considerably. LA County's attorneys argued:

And on the "Phase III" problem, LA County's attorneys argued that it was established on October 4, 2004 that they could have their Phase III, including the presentation of evidence in Phase III:

And then LA County's attorney asserted that it should have been allowed to bring a motion to reopen:

The trial judge interrupted and took issue with the statement that somehow LA County had been prevented from filing a motion to reopen:

LA County's attorney answer was quite a bit different from LA County's earlier position that it didn't need to reopen, that it was somehow agreed that issues had been reserved, or that what it wanted to litigate were strictly "legal" issues that didn't require any further fact finding:

When defense counsel's turn came, he asserted that LA County had not asked for any jury instructions concerning its auxiliary benefit claims (a point that, we would note, is not contradicted in any of LA County's briefing):

The court took the motions under submission (they were eventually denied, of course). The trial judge made a point of noting that any intention on LA County's part to bring a motion to reopen at the November 15 hearing was news to him:

THE "UNTRIED ISSUES" ISSUE: DISCUSSION

It is only after slogging through the record, from complaint to status conference after status conference after status conference, and only after one reads through the actual transcripts of those conferences where the auxiliary benefit "issues" were supposedly reserved (hence we have erred on the side of quoting more of each transcript than might be strictly necessary so that readers could have a more accurate flavor of what took place), that one acquires the dawning realization that LA County's argument that the trial judge somehow deprived LA County of due process by failing to try "key issues of policy interpretation" borders on the frivolous. The most that can be said in favor of LA County's position is that the trial judge did not go out of his way, in the course of considering two motions in limine brought by the insurers preparatory to Phase II on August 20, 2004, to immediately disabuse LA County's counsel of his theory that somehow there was going to be a Phase III trial, or to go out of his way to reject LA County's attorney's (self-serving) declaration as to what had supposedly been said in an unreported status conference.

Let us now enumerate the reasons LA County's theory — that the trial judge somehow erred in failing to "try" issues which he was required to "try" — must be rejected.

1. LA County never put those issues into its complaint. We have gone practically line-by-line though LA County's never-amended complaint, and learned that it made no claims based on auxiliary benefit provisions of the insurance plan.

2. LA County raised its auxiliary benefit provisions claim way too late. Not only did LA County fail to include any such claims in its complaint, it also did not raise them in discovery, and never squarely asked the trial court to include them in its own plan for the case — the modified bifurcation motion that determined what was to be tried.

3. LA County had numerous chances to squarely put its auxiliary benefit provision claims before the court, but it never actually did so. LA County did not press any auxiliary benefit claims in discovery. It never sought to amend its complaint. It did not seek to include any such claims in its bifurcation order. It did not present them in Phase I. Even after Phase I, there might have been a motion to include such claims in Phase II, or to modify the bifurcation order so as to schedule a Phase III. It did not do so. It never brought a motion to reopen.

4. LA County misreads the record of the hearings on which it relies: Those hearings never resulted in an agreement, much less an order, scheduling a Phase III for any auxiliary benefit claims. In examining this record, we have noticed a pattern: Attorneys for LA County would allude to possible auxiliary benefit claims in the context of some other matter (such as a motion on something else). When the trial judge would ask the insurers' counsel for his comments, the insurers' counsel would, in effect, scream "bloody murder" because consideration of such claims would be severely prejudicial to the insurers, not having had the opportunity to do discovery on them, and being hit with such claims very (very) late in the litigation. Counsel for LA County would then beat a graceful, face-saving retreat by indicating that LA County would consider bringing up such matters another day. For example, the fairest reading of the November 2002 and October 2004 status conferences is that LA County, faced with pointed arguments from the insurers' counsel that the insurers were being sandbagged by the late proffering of the auxiliary benefits provisions claims, would go back and proffer something else later. In each case, the denouement was not that the claims (or "issues" as LA County wants to call them on appeal) were on the court's docket, but that the ball was in LA County's corner if it wanted to press those claims later.

5. LA County ignores the standard of review. In its reply brief, at page 57, LA County says that the trial court "led County to believe it had deferred resolution of the issue until after Phase II." And yet this confident statement is based on one of its own counsel's declaration of an unreported status conference. It contrasts starkly with the trial judge's own, well reported and unequivocal statements that he never led LA County's counsel to believe it could assert its "issue" (i.e., its auxiliary benefit claims) after Phase II. As between the two — the trial judge's unequivocal recollection and an attorney's self-interested assertion based on an unreported status conference, this court must, of course, consider the conflict resolved in favor of the trial judge's version. And that is particularly true when (as noted above) one realizes that LA County never presented a motion to reopen in which one of its attorney's declarations might have been squarely addressed in an open hearing, and opposed by the insurers.

6. The incredible prejudice to the insurers that would have ensued if the trial court had indeed held a Phase III trial on the belated auxiliary benefit claims. Perhaps the strongest point for rejecting LA County's argument is that if the trial court had somehow allowed LA County to put on its auxiliary benefit claims, and if by doing so LA County obtained any recovery at all, reversal would be in order. We could not imagine a more egregious abuse of discretion than to allow a party, after making no claims on certain matters during discovery or in its complaint for more than six years (conservatively speaking, from 1997 to 2003), or any time before the first phase of trial, to present evidence of such claims just so it could recover something. But, as noted above, LA County never even tried to present a motion that would have allowed it to press its auxiliary benefit claims because if it had made such a motion, such a motion — given the horrendous prejudice to the insurers (who had been defending a single complaint since 1997 and had already undergone a six-month trial on the three properties mentioned in the complaint) — have been inevitably, and properly, denied.

With that, we now turn to three remaining issues presented by the opening brief (which begin on page 84 thereof).

THE BURDEN ISSUE

The trial court gave the jury in Phase I an instruction that required LA County to carry the burden of proving that its four properties (at issue in Phase I) sustained damage from the Northridge Earthquake. While that seems intuitive — plaintiffs usually have the burden of proving their cases — LA County's theory was that it was the insurers' burden to prove that damage did not come from the Northridge earthquake.

Here is the jury instruction as given:

LA County's theory goes like this: The insurance plan was an "all-risk" first party property insurance policy; under Strubble v. United States Auto. Assn. (1973) 35 Cal.App.3d 498, 504 (Strubble), the policy is assumed to cover all damage, and it is the insurer who has the burden of showing that an exclusion applies. Hence, putting the burden on LA County to show damage from the earthquake, as distinct from preexisting damage or simple wear and tear, was erroneous.

The trial court did not err in giving the instruction. In enacting section 10088 in 1984 — more than a decade after Strubble — the Legislature intended that earthquake coverage be a matter of specified peril (as distinct from "all-risk"), with the burden on the insured to show damage regarding the specific peril of earthquake. But to properly explain that we must review that rather esoteric aspect of insurance law known as "concurrent causation."

Concurrent causation is the term used to describe the problem that occurs when there are two causes of a loss, one (or more) specifically excluded by an insurance policy, but one not specifically excluded. (See Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 398 (Garvey).) The concept may be traced back to at least an 1840 insurance law treatise (see Mattis, Earth Movement Claims Under All Risk Insurance: The Rules Have Changed in California (1990) 31 Santa Clara L.Rev. 29, 33 ["Phillips' 1840 treatise on insurance law discusses concurrent causation in connection with marine insurance."] ("Mattis article").) It is a concept that has been used in both first party (property) insurance cases (e.g., Garvey) and in third party (liability) cases (e.g., State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94) (Partridge).

Concurrent causation became a hot topic in insurance law in California in the 1970's due to three major developments:

First, in the 1940's and 1950's, first-party property insurers had begun to write "all risk" insurance policies covering buildings. (Mattis article, supra, 31 Santa Clara L.Rev. at p. 35.) Previously, buildings had been insured on a specifically named peril basis — e.g., fire or lightning — so that the burden was on the insured to show that the loss was caused by one of the named perils. (Id. at pp. 33-34.) With the proliferation of all risk policies, however, the burden shifted to the insurer to show that the cause of a loss was excluded; otherwise the loss would be covered. (Id. at pp. 34-35.) And in fact Strubble, the case now relied on by LA County, is a perfect example of this shift in burdens caused by the shift to all risk policies. There, a landslide under a house on a cliff prone to landslides combined with a small (3.1) earthquake to make the house largely unsafe (city officials were worried the entire house would slide down to the beach below). (See Strubble, supra, 35 Cal.App.3d at pp. 501-502.) In an appeal by the insurer after a judgment for much of the value of the house, the Strubble court held that the trial court correctly instructed the jury that the burden of proving that the loss was caused by "a peril excluded from coverage" under the policy, such as landslide, was properly on the insurer. (Id. at pp. 503-504.) The appellate court recognized that this burden represented an "admittedly unusual burden of proof on defendant," but noted that the result was required because "[t]he policy is an `all-risks' policy. It is not a specific peril policy, such as a policy of fire and lightning insurance." (Id. at p. 504; see also Croskey et al, Cal. Practice Guide: Insurance Litigation (The Rutter Group 2010) ¶¶ 6:253- 6:253.2, pp. 6B25-6B-26 [noting differences in burden of proof between all risk and specific peril insurance].)

The second development was the effect of Sabella v. Wisler (1963) 59 Cal.2d 21 (Sabella). The court there treated builder negligence as itself a nonexcluded peril — in Sabella it was poor compaction of earth. (See Sabella, supra, 59 Cal.2d at pp. 27-28 [describing trial court's findings of cause of loss]; Mattis article, supra, 31 Santa Clara L.Rev. at p. 36 ["This meant that losses caused by man-made or man-caused forms of earth movement were covered under the policy simply because they were risks of physical damage, and they were not specifically excepted or excluded under the policy terms."].)

The third development was a third party case, Partridge, which at least, as later explained in Garvey, if applied to first-party property insurance, seemingly made any nonexcluded cause of loss, "no matter how minor," an occasion for coverage. (See Garvey, supra, 48 Cal.3d at p. 408 ["As we shall discuss, if the rule in Partridge, supra, 10 Cal.3d 94, were extended to first party cases, the presence of such a cause, no matter how minor, would give rise to coverage."].)

It would be safe to say that, combined, these developments were loathed by insurers. Intermediate appellate courts, applying Sabella, Partridge and the doctrine of concurrent causation all together, were apt to find coverage in any situation in which a crack in a structure could be linked to builder negligence, usually (as in Sabella) bad compaction, despite language in the policy trying to exclude all losses caused by earth movement.

In the 1970's, insurers fought back with language that excluded losses resulting even "indirectly" from earth movement, hoping that such language would exclude even "man made" earth movement, but courts held that the failure to include a reference to defective design or construction meant, under principles of concurrent causation, that earth movement (excluded) plus defective construction was still covered. (Mattis article, supra, 31 Santa Clara L.Rev. at p. 37.) "Commentators working for the insurance industry," says Professor Mattis, had come to believe that "the doctrine of concurrent causation constitutes a conspiracy by the courts against the industry." (Mattis article, supra, 31 Santa Clara L. Rev. at p. 35 [Professor Mattis makes a point of expressing his rejection of this conspiracy theory: "This simply is not true."].)

Insurers turned to the Legislature for help. (See Bragg, Concurrent Causation and the Art of Policy Drafting: New Perils for Property Insurers (1985) 20 Forum 385, 396 (Bragg article) ["Numerous industry meetings were called to discuss California judicial developments and to attempt to forge a legislative solution."].) Practically, however, insurers could not get the whole loaf, which would have been "broad legislation" obviating the effect of the concurrent causation doctrine on ordinary earth subsidence cases. But they could obtain relief on the one area that threatened the very solvency of the industry itself — earthquakes. The result was the legislation in 1984 that enacted sections 10081 through 10089.4 of the Insurance Code, dealing with insurance for earthquakes. Section 10088 was part of this package.

As one assistant counsel to State Farm wrote of the passage of the 1984 legislation, the point was to change the existing rule of concurrent causation as regards earthquake coverage: "[T]he insurance industry introduced several bills during the 1982 and 1983 legislative sessions which would have either repealed or amended both sections. These efforts were strongly opposed . . . and each of the bills died early in the legislative process. [¶] Realizing that broad legislation to resolve concurrent causation had little chance of passage, the insurance industry focused its attention on the one peril whose catastrophic potential endangered its very solvency — the peril of earthquake. Unsuccessful efforts were made during the 1983 session to legislatively exclude earthquake losses from property insurance policies which did not specifically cover earthquakes. Finally, some relief was achieved in 1984 with the passage of Assembly Bill 2865, which became effective on January 1, 1985." (Bragg article, supra, 20 Forum 385, 398, fn. omitted, italics added.)

Here is the complete text of section 10088: "Notwithstanding the provisions of Section 530, 532, or any other provision of law, and in the absence of an endorsement or an additional policy provision specifically covering the peril of earthquake, no policy which by its terms does not cover the peril of earthquake shall provide or shall be held to provide coverage for any loss or damage when earthquake is a proximate cause regardless of whether the loss or damage also directly or indirectly results from, or is contributed to, concurrently or in any sequence by any other proximate or remote cause, whether or not covered by the policy. The term `policy' as used in this section includes all policies of any nature, including, but not limited to, business and commercial forms providing coverage against loss due to damage to the property of the insured. Nothing in this section shall operate to affect the provisions of Section 2071 or preclude an insurer from specifically providing coverage for direct loss caused by explosion, theft, or glass breakage resulting from an earthquake." (Italics added.)

As Williams v. State Farm Fire & Casualty Co. (1990) 216 Cal.App.3d 1540 (Williams) observed about section 10088: "When the Legislature enacted the earthquake insurance law, section 10081 et seq., in 1984, it explained its intent in an uncodified section: `It is the intent of the Legislature in enacting this act to promote awareness of earthquake insurance by residential property owners and tenants by requiring insurers to offer that coverage. It is the intent of the Legislature to make clear that loss caused by or resulting from an earthquake shall be compensable by insurance coverage only when earthquake protection is provided through a policy provision or endorsement designed specifically to indemnify against the risk of earthquake loss, and not through policies where the peril of earthquake is specifically excluded even though another cause of loss acts together with an earthquake to produce the loss.'" (Williams, supra, 216 Cal.App.3d at pp. 1544-1545, italics added.)

And then the Williams court went on to make it very plain that, as a matter of law, all earthquake insurance coverage in California is a matter of insurance for a specific peril: "Section 10088 precludes recovery for loss caused by an earthquake, absent a policy or endorsement specifically covering earthquake loss. Other sections of the chapter require insurers either to offer earthquake coverage to a homeowner or to forego insuring the property altogether. Section 10081 provides in pertinent part, `No policy of residential property insurance may be issued or delivered . . . in this state by any insurer unless the named insured is offered coverage for loss or damage caused by the peril of earthquake as provided in this chapter. . . .' (See also § 10083, specifying the language of the offer.)" (Williams, supra, 216 Cal.App.3d at p. 1545, fn. quoting statute omitted, italics added.)

At this point we should also note something that might be easy to forget: The only reason for, as the Strubble court put it, the "unusual burden of proof" of requiring the insurer to prove an exclusion rather than the insured having to prove a loss is solely the result of the normal operation of all risk insurance policies in the context of the concurrent causation doctrine as applied in California at the time. And — important to note — at the time (1984), intermediate appellate courts were still using the third party Partridge case to find coverage even if the covered peril was minor. (See Garvey, supra, 48 Cal.3d at p. 398 [declaring that "some courts have misinterpreted and misapplied" Sabella and Partridge].)

In this case, however, the trial court, familiar with Williams, recognized that under section 10088 any "recovery for loss caused by an earthquake" was necessarily a matter of coverage for a specific peril even if the earthquake coverage was a matter of insuring against "all risks." Thus, as is the case with all other coverage for specific perils, necessarily the insured had the initial burden of showing the loss resulted from the specific peril, here, the Northridge earthquake. Indeed, not to have done so would have nullified the intent of the Legislature in carving out earthquakes from the usual rules that apply in concurrent causation contexts. The jury instruction was therefore correct.

THE 998 ISSUE

1. Introduction

Section 998 of the Code of Civil Procedure sets forth a procedure by which expert witness costs can be shifted to a party who rejects a settlement offer made pursuant to the statute. (All references to "998" will be to section 998 of the Code of Civil Procedure.)

Section 998 is a remarkable statute: It applies equally to both plaintiffs and defendants. It allows for gradations in projected outcomes, hence the "nominal" winner of litigation can be the "998 loser" if the winner has rejected a 998 offer which was more "favorable" than the actual outcome. And in cases, like this one, which involve competing armies of expert witnesses, the consequences of not accepting a 998 offer can have a real bite. Here, about $3.88 million of the $5.9 million award of costs are attributable to LA County's having rejected the insurers' individually-made 998 offers.

The insurers' offers were made in two batches, the first in September, 2001 and the second in November, 2001. Each one was for some amount between $100,000 and $500,000, and, if our math is correct and if all had been accepted, would have resulted in a payout to LA County of about $4.8 million. (Trial, remember, would not actually occur until February 2003, and LA County, as we have seen from the bifurcation motion, was still thinking in terms of how much more than the $125 million total policy limits it would recover.) The offers were made by each of the insurers sued, and were substantially the same. LA County makes no argument that any variations in wording between each insurer's offer should make any difference.

We now quote the 998 form used by the insurers in this case:

On appeal, LA County argues that these settlement offers were, as a matter of law, not sufficient under section 998 because they did not properly advise LA County of what it would be "getting" if it accepted them. (LA County's lead topic heading is: "To Be Enforceable, 998 Offers Have to Clearly Advise the Offeree What the Offeree is Getting into if the Offeree Accepts.")

More specifically, LA County asserts that the offers were fatally uncertain by leaving a series of questions unanswered: (1) Whether the offers would bar claims on the remaining 21 properties covered by the insurance plan? (2) How much LA County would actually receive in light of the $10 million advance and the deductible provision of the insurance plan? (3) How the aggregate deductible would be affected by the settlement offers as it related to the other 21 properties covered by the insurance plan? (4) How the offers would affect another lawsuit instituted by LA County (the "Agricultural" case)? And (5) how LA County's other rights under the insurance plan would be affected?

Readers should note at this point that LA County's argument is one that asserts impermissible underinclusion in the insurers' 998 offers. That is, by not including terms in their 998 offers that addressed various questions, the insurers' 998 offers supposedly made it impossible for LA County to reasonably ascertain the effect of accepting them.

2. The Problem of 998 Offers in the Context of Multiple Claims Between Litigants

a. Overinclusion: Trying to Grab Off Too Much

LA County's argument essentially implicates the problem of how courts should deal with 998 offers in contexts where parties have multiple and possibly interrelated claims against each other. As noted, LA County's argument here is that the insurers' 998 offers were underinclusive, by leaving certain questions unaddressed.

LA County, however, provides no authority for the idea that a 998 offer must, in order to susceptible of reasonable evaluation, deal with claims outside those made in the relevant pleadings, that is, underinclusion. And we are aware of no such authority. Rather, the authority LA County does provide — mainly Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692 (Valentino) — is only a warning against overinclusion.

When one looks at the facts in Valentino, one realizes that the case is an object lesson to 998 offerors not to be too greedy and try to settle outstanding claims outside the pleadings. As such, it is thoroughly distinguishable from the case at hand.

The year — 1988 — is important to understanding Valentino. The case was decided in that window of time between Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880 and Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, when a tort claimant seeking damages against an insured tortfeasor had potentially two claims: One against the tortfeasor for the tort, and another against the tortfeasor's insurer for failing to obey a statutory duty to reasonably settle when the liability of the insured was "clear." (See Ins. Code, § 790.03, subd. (h)(5).)

Valentino arose out of a classic tort claim: A slip and fall at a gas station. The plaintiff filed a complaint against the gas station. The gas station was insured, but the 998 offer, for $15,000, proposed to settle not only the stated claim in the complaint against the gas station, but also eliminate any potential "Royal Globe" claims against the gas station's insurer and defense attorneys. (See Valentino, supra, 201 Cal.App.3d at pp. 694-695.) When the plaintiff only recovered $13,000, the plaintiff was hit with the gas station's expert costs, but the appellate court reversed that award. The point was: The plaintiff could not evaluate the potential Royal Globe cause of action, outside the pleading that the 998 was explicitly asking her to give up. Said the court: "Evaluated in the light of this condition, the monetary term of the offer is not really $15,000 to settle the causes of action at issue in the instant case. Instead that $15,000 is diluted by the worth of other present and future possible causes of action Ms. Valentino must surrender in order to receive the defendant's cash." (Id. at p. 698, original italics retained and some italics added.)

It was the extra condition of giving up more than the claim in the case before it that drew the appellate court's peculiar disfavor: "It would be hard enough for a trial court to place a value on a condition requiring the plaintiff to dismiss a single specific lawsuit she had already filed against the defendant in another court. But when the condition mandates surrender of an array of potential lawsuits against not only the defendant but two other parties the task becomes impossible. Even if it were possible, it would not be worth the cost. Recalling the underlying purpose of section 998 is to promote judicial economy, this court is not about to encourage defendants to add conditions to their statutory offers which introduce so much uncertainty to those offers the courts must spend hours or days sorting them out to determine whether plaintiffs have achieved a more favorable result at trial." (Valentino, supra, 201 Cal.App.3d at pp. 700-701, italics added.)

In short, if Valentino is at all apposite the case before us, it actually favors the trial court's decision and the insurers' position on appeal: The 998 offers here stuck solely to the complaint and cross-complaint on file, in a discrete case bounded by a certain docket number, and did not try to force LA County to settle claims outside those made in a specific complaint and a series of cross-complaints.

Barella v. Exchange Bank (2000) 84 Cal.App.4th 793 (Barella), the other major decision in the case law invalidating a 998 offer on the basis of uncertainty, slots into the same category of trying to grab off too much in the 998 offer characteristic of Valentino. Barella arose out of a defamation action by a real estate developer against a bank when an officer of the bank wrote that he had master-minded a certain fraudulent development scheme. As in Valentino, the 998 offeror tried to settle a little bit more than the claim in the complaint: The bank's 998 offer was for $25,000, but the developer not only had to dismiss his complaint, he also had to agree to sign a confidentiality agreement as to the amount of the settlement and the settlement itself. In affirming the trial court's order not to award costs under 998, the appellate court waxed eloquent about the additional item the plaintiff was being asked to give up: the opportunity to clear his good name. (Hence the opinion includes references to both the King James and Shakespeare (Richard II specifically) about the value of one's reputation. (See Barella, supra, 84 Cal.App.4th at pp. 795-796, and p. 795, fn. 1.))

The Barella court recoiled at the thought that the developer's reputation could be valued in the space between the $25,000 that the bank offered and the $10,000 the developer recovered: "[I]t is this court's view that the trial judge cannot assess the relative importance to any individual of his or her good name in the business community or neighborhood, no matter how relatively trivial the issue may seem to a neutral, dispassionate jurist. The contention that in a defamation action a judge can attach a monetary value to an individual's opportunity for public vindication (in matters either great or small) contains as its tacit premise the notion that `everyone has a price' — that reputations can be bought and sold like any other commodity. We are not prepared to validate that premise in the service of promoting settlements and clearing dockets." (Barella, supra, 84 Cal.App.4th at p. 803.)

We need only note in this case that LA County makes no attempt to compare the brick and mortar (literally brick and mortar) issues in this case with — to borrow another of Shakespeare's phrases — the "bubble reputation" that was so inherently hard to value in Barella.

The insurers' 998 offers here clearly avoided the errors of those made in Valentino or Barella. The operative language here is a model of minimalist simplicity: The insurer "pays" X dollars to LA County, and LA County dismisses its complaint and the insurer dismisses its cross-complaint. There are no general releases and no grabs at outstanding claims outside of the complaint or cross-complaint. In fact, the only reference to "claims" are to those claims specifically raised in — and therefore confined to — the complaint. The exact language is: "to compromise the claims raised in County's complaint." (Italics added.) They are thus very unlike the offers that tried to encompass claims outside the discrete boundaries of litigation that offended the courts in Valentino and Barella.

b. Underinclusion: Modesty Has Its Rewards

By contrast to Valentino and Barella, 998 offerors who have simply stuck with trying to settle a discrete item of litigation in an identifiable pleading, have met with success — even when other claims between the parties were left outstanding. (See Westamerica Bank v. MBG Industries, Inc.(2007) 158 Cal.App.4th 109 (Westamerica); Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899; accord, One Star, Inc. v. STAAR Surgical Co. (2009) 179 Cal.App.4th 1082 (One Star).) An examination of these cases shows that they are inconsistent with LA County's assumed paradigm that a 998 must necessarily address all claims between two parties for a 998 offer to be intelligently evaluated.

Westamerica perfectly illustrates how a 998 need not resolve all interconnected claims arising out of a given event or transaction in order to be valid. There, a bank sued a borrower for an unpaid credit line, while the borrower cross-complained against the bank for sex discrimination. The borrower proffered a 998 offer on the complaint for the unpaid debt, but not her own sex discrimination claim. That was important because the borrower then lost her sex discrimination claim when the bank successfully brought a summary adjudication motion effectively dismissing the cross-complaint. Even so, the borrower went on to obtain a stipulated judgment that was more favorable to her than the 998 offer, and the appellate court upheld the validity of her 998 offer despite the fact that the bank had to weigh that offer against the value of the cross-complaint for sex discrimination.

The point: the court looked to the pleadings and their relative independence from each other, despite the fact that the claims were intertwined factually: "[The borrower's] offer to settle only the amended complaint was valid to trigger the provisions of section 998, even though it would not have resulted in an appealable final judgment, because it was an offer to the other party in the separate and independent action of the amended complaint which would have allowed `judgment to be taken.'" (Westamerica, supra, 158 Cal.App.4th at p. 114, italics added)

Goodstein is to the same effect. It was series of disputes between a bank and a businessperson. There, three actions were eventually consolidated for trial, including the businessperson's action against the bank for the loss of the businessperson's investment in a certain business (the "Jook Box Corporation"), plus another action by the businessperson for abuse of process and malicious prosecution. The bank sent a 998 offer for $150,000 in exchange for a dismissal with prejudice of the action for loss of the investment, but did not include the abuse of process and malicious prosecution action. However, the bank proposed, in its 998 offer, the execution of a general release, and each party's bearing its own costs and attorney's fees. The 998 would be later challenged as "fatally uncertain" because it failed "to specify whether it was an offer intended to compromise all three of the actions consolidated for trial, or just [the businessperson's] action" against the bank. (Goodstein, supra, 27 Cal.App.4th at p. 907.) The appellate court affirmed the award of costs under 998 because "the offer was clear and unambiguous and was intended to settle only [the businessperson's] complaint against Bank." (Ibid.)

Indeed, in distinguishing Valentino, the Goodstein court specifically rejected the idea that the outstanding abuse of process and malicious prosecution action was included in the 998 offer. The "clear and unambiguous language of the offer provides that the terms and conditions applied only `in full settlement of this action.'" (Goodstein, supra, 27 Cal.App.4th at p. 908, italics added.)

One Star reiterates the theme that 998 offers are analyzed in terms of the specific action sought to be settled, as distinct from the totality of claims possessed or asserted by the parties. While the facts in One Star are too complicated to explain here (the case mostly dealt with sorting through which of three separate 998 offers was operative), the court made it clear that a 998 offer need not clear up all claims flying back and forth between the parties: "`Section 998 "does not require a [party] to make a global settlement offer to all [opponents] in an action, or to make an offer that resolves all aspects of a case. . . ."'" (One Star, supra, 179 Cal.App.4th at p. 1096.)

The insurers' 998 offers here are like those in Westamerica, Goodstein and One Star in confining themselves to discrete and specific items of litigation — namely an identifiable complaint and cross-complaint in a given case with a given docket number.

3. A 998 Offer Need Not Clear Up All Uncertainties Between the Parties to be Valid

Another assumption on which LA County's challenge to the 998 offer in this case rests on the idea that uncertainty invalidates 998 offers. To be sure, as we have seen in Valentino and in Barella, uncertainty as regards potential claims outside the litigation specifically encompassed by a 998 offer may invalidate a 998 offer. But when, as in the case before us, the 998 offer sticks to disposing of the litigation at hand, case law has affirmed its validity, despite remaining uncertainties, as illustrated by Berg v. Darden (2004) 120 Cal.App.4th 721 (Berg).

Berg is particularly instructive for the case at hand because the appellate court sized up the underlying reality of the 998, and cut through a miasma of putative uncertainties thrown up by the party as retroactive excuses for rejecting a 998 offer. In Berg, a patient filed a malpractice action against her dentist. The patient made a 998 offer (under far less formal circumstances than those before us now — it was in the last paragraph of a letter about other things, namely discovery matters and the merits of the litigation). The 998 offer was for $225,000. The dentist's attorney didn't believe it was a valid 998 and never responded to it. The patient, however, recovered more than half a million dollars in the subsequent litigation, the trial court awarded her 998 fees, and that award was upheld on appeal.

The dentist argued (as LA County does here) that uncertainties in the 998 offer made it invalid. Specifically, he argued that it was unclear whether the offer would be "a final disposition of the underlying action" because it didn't address whether there would be a judgment entered against the dentist, whether the patient would have an "`award' entered in her favor," or if the malpractice action was going to be dismissed with prejudice (an important point, we note, given the effect of a judgment for malpractice on the dentist's professional reputation). (Berg, supra, 120 Cal.App.4th at p. 728.)

The appellate court rejected the dentist's arguments, even though the 998 offer "could have been stated with more precision (specifically identifying entry of judgment against [the dentist] as the proposed final disposition)." (Berg, supra, 120 Cal.App.4th at p. 728.) As in Goodstein, it was enough that the 998 offer contemplated a final disposition of the lawsuit. The point was: It was enough that the 998 offer was a "`formal, written offer'" that was "`sufficient to show that its acceptance will result in a final disposition of the underlying lawsuit.'" (Id. at p. 729.) The uncertainties thrown up by the dentist — would there be a judgment? a mere payment? a dismissal with prejudice? — were nothing more than makeweight quibbles. The 998 offer clearly intended a final disposition of the lawsuit, and that was enough.

Significantly, Berg (and another case we are about to discuss) introduced the simple idea that the 998 "offeree" actually has an obligation to explore whatever uncertainties might be teased out of a 998 offer, rather than standing pat and hoping the trial or appellate court will look at those uncertainties and invalidate the section 998 offer after it is rejected. Said the court: "If the offeree is uncertain about some aspect of the offer, or would prefer the action be dismissed rather than have a judgment entered against him, he is free to explore those matters with the offeror, or even to make counterproposals during the period in which the statutory offer remains outstanding. By doing so, he will not run the risk of having the original offer revoked and may still accept that offer on the terms extended." (Berg, supra, 120 Cal.App.4th at pp. 730-731.)

A few pages later the court reiterated the point that a 998 offeree cannot simply passively sit back and conjure phantoms of uncertainty to avoid the effect of the offer. The dentist's attorney, said the Berg court, "was free to explore any uncertainties he had with Cohen during the period in which the offer remained open, without precipitating an automatic revocation of the offer." (Berg, supra, 120 Cal.App.4th at p. 733.)

And the Berg court even returned a third time to the theme of encouraging talks to iron out any possible ambiguities: "It requires no statistical study to establish what every litigator knows: once a section 998 offer of compromise is extended, negotiations between parties during the 30-day period are a normal occurrence in virtually every personal injury action. Permitting, indeed encouraging, such routine exploration and discussion of settlement alternatives among parties, without endangering the viability of an extant offer, best advances the policy of encouraging settlements." (Berg, supra, 120 Cal.App.4th at p. 731.)

In short, as every litigator knows in terms of discovery matters, sometimes picking up the phone and trying to find out some information informally is a necessary aspect of the conduct of litigation.

The same emphasis on talking about any questions a 998 offeree might have about a 998 offer, rather than hiding beyond putative uncertainty divined long after the offer has lapsed, was also made in Hartline v. Kaiser Foundation Hospitals (2005) 132 Cal.App.4th 458 (Hartline). There, Justice Cantil-Sakauye, writing for the court, flat out declared that if a 998 offeree has any uncertainties as to how the 998 offer is supposed to work, the offeree should "communicate" that "concern" to the offeror. (Id. at p. 472.)

Hartline was a case where a staff physical therapist at an orthopedics clinic struck a pedestrian and his dog as they were walking across the driveway of the clinic's parking lot; the therapist was getting to work about half an hour early that day. The accident happened "`just off the street.'" (Hartline, supra, 132 Cal.App.4th at p. 466.) The pedestrian sued the therapist for negligence and sued the clinic for both negligence and premises liability. The clinic, however, got out of the negligence claim in a summary adjudication motion, based on the going-and-coming rule.

Four months later, the clinic sent the pedestrian a 998, which was basically a waiver of costs in exchange for a dismissal with prejudice. The pedestrian, however, didn't accept the offer. Later, after the pedestrian finally did dismiss the remaining claim against the clinic, the trial court awarded the clinic costs under 998. The pedestrian appealed, challenging both the summary adjudication motion and the cost award. (Hartline, supra, 132 Cal.App.4th at pp. 463-464.)

In dealing with the cost issue, the Hartline court looked at how the 998 offer logically fit in the context of the litigation: Silence was not ambiguous, but was to be augmented by the surrounding context: "At the time of the offer, there was only the second cause of action remaining for trial. Therefore, it is logical to assume the section 998 offer was referring to a dismissal with prejudice of [the pedestrian's] second cause of action, thereby settling such claim against Kaiser without trial. The offer is silent with regard to any appellate claims involving Hartline's summarily adjudicated first cause of action. The offer was not conditioned on entry of a final judgment in favor of Kaiser, or other similar language, from which a waiver of appellate rights might be implied. [¶] [The pedestrian] however, apparently believed the offer to include a waiver of appellate rights." (Hartline, supra, 132 Cal.App.4th at p. 472, italics added.)

And then came the punchline: In such a case, said the court: "Then the reasonable course of action for [the pedestrian] to have taken was to communicate his concern to Kaiser and to make a counteroffer." (Hartline, supra, 132 Cal.App.4th at p. 472, italics added.)

As in Berg and Hartline, the 998 offeree here, LA County, made no effort to clear up any of the uncertainties which it belatedly raises as a reason on appeal to invalidate rejected 998 offers. We say "belatedly" because the obvious inference from the record is that uncertainty was never the reason LA County turned down the insurers' 998 offers. Given LA County's position at the November 4, 2002 hearing and later in its own motion for bifurcation, the trial judge could easily conclude that the real reason LA County rejected the insurers' 998 offers was the huge gap in LA County's opinion of its case versus the insurers'. As we have seen, at the time in late 2001 when the insurers made their 998 offers, LA County's preoccupation was with how much it was going to win on top of the $125 million limits. There was no way at the time it was going to settle this litigation for a piddly $14.8 million (the $4.8 million offered plus being able to keep the $10 million advanced, as we show below), no matter how "clean" the offer.

That said, LA County makes no attempt to distinguish Hartline or to confront the necessity-to-communicate language from Berg. It does contend that Berg is distinguishable because: "Berg was a straightforward medical malpractice case. The only criticism of the Berg 998 was that it failed to specify that the court would enter judgment if the defendant accepted. (Id. at p. 728.) That peccadillo cannot compare to the uncertain consequences to multiple claims that County' acceptance of these 998s could have triggered." This attempt to distinguish Berg fails because these 998 offers were confined to the claims in LA County's complaint. (We also address the putative uncertainties more specifically in the next section.)

4. Basic Principles and the Standard of Review

The basic principles governing appellate review of 998 offers can be found in any number of appellate decisions. Several of these have to do with the basic burdens inherent in litigation: It is the party seeking something who (usually) has the burden of showing he or she is entitled to it, hence the 998 offeror "bears the burden of assuring the offer is drafted with sufficient precision to satisfy the requirements of section 998." (Berg, supra, 120 Cal.App.4th at p. 720.) A corollary (usually traced to the Barella case above) is that the 998 offer "must be sufficiently specific to permit the recipient meaningfully to evaluate it and make a reasoned decision whether to accept it, or reject it and bear the risk he may have to shoulder his opponent's litigation costs and expenses." (Id. at p. 727, citing Barella, supra, 84 Cal.App.4th at p. 801.)

Most importantly, 998 offers are interpreted as contracts, and as in contracts ambiguities in 998 offers are construed against the 998 offeror, i.e., the drafter. (See T. M. Cobb Co. v. Superior Court 36 Cal.3d 273, 280 ["Since section 998 involves the process of settlement and compromise and since this process is a contractual one, it is appropriate for contract law principles to govern the offer and acceptance process under section 998."]; Berg, supra, 120 Cal.App.4th at p. 727 ["`a section 998 offer is construed strictly in favor of the party sought to be subjected to its operation'"]; Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 184 [applying to 998 offers rule that "`In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.'"].)

As to the standard of review, we agree with LA County that the applicable standard of review for the validity of a 998 offer is de novo when the underlying facts are uncontroverted. The reason is this: the validity of a 998 offer is a matter of comparing the language in the offer with the language required by the statute. As explained by Justice Croskey in Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720: "Ascertaining the terms of an offer, including the determination whether the offer is sufficiently specific and certain for purposes of section 998, is a question involving the interpretation of a writing. We independently interpret a writing if the interpretation does not turn on the credibility of extrinsic evidence. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865 [(Parsons) and other cases].)" (Fassberg, supra, 152 Cal.App.4th at p. 765, italics added.)

Fassberg itself is an example, like Goodstein and Berg, of an appellate court cutting through made-up uncertainties to get to the substance of the 998 in the context of the litigation as a whole, and thereby uphold a 998 offer against a challenge to its validity. There, a construction company wasn't paid by a housing authority, so it sued the housing authority. The housing authority cross-complained, saying the construction company hadn't performed according to the contract The housing authority's 998 offer contained a proposed mutual release that the trial court, relying on Valentino, thought too broad: The 998 offer (1) required the construction company to release not only its own claims but also those of `"a long list of other possible, ill-defined third parties'"; (2) encompassed not only claims against the housing authority but also claims against `"a long list of other possible, ill-defined third parties'" [we note here — this was essentially construction defect litigation and so necessarily would have entailed subcontractors]; and (3) encompassed all possible claims pertaining to those third parties that could have been alleged in this case. (Fassberg, supra, 152 Cal.App.4th at p. 765.)

But the appellate court reversed after some high-level exegesis of the 998 offer. It noted that the proposed settlement and mutual release agreement identified only two parties to the proposed agreement (the housing authority and the construction company) described the `"subject matter'" of the dispute as any and all claims or causes of action `"which could have been alleged"' in the action, except for any claims by the housing authority for latent defect. The Fassberg court then construed the language "as an attempt to define the subject matter of the settlement and release to encompass the whole of the action, with only the stated exception." (Fassberg, supra, 152 Cal.App.4th at p. 767.) The language releasing claims "on behalf of" the construction company's "numerous related persons and entities" was interpreted to be "an attempt to identify" those persons and entities who had potential claims depending on the construction company's claims, and the reference to the release of claims against numerous persons and entities related to the housing authority" was merely "an attempt to identify any persons and entities whose potential liability may derive from or depend on that of" the housing authority. (Ibid.)

And then came the coup de grace. The court said: "Absent some indication of the existence of a valuable claim in favor of a related person or entity, independent of Fassberg's actual and potential claims arising from the subject matter of this action, that would be extinguished by the release, we conclude that the release is not overbroad or incapable of valuation." (Fassberg, supra, 152 Cal.App.4th at p. 767, italics added.)

The principles just noted dispose of any remaining issues in the case.

First, it is clear that the insurers have carried their burden of assuring that their 998 offers conformed to "the requirements of section 998." While section 998 is a fairly lengthy statute, the operative language governing the necessary content of 998 offers is confined to only the first two sentences of subdivision (b), and even then mostly in the second sentence: "(b) Not less than 10 days prior to commencement of trial or arbitration (as provided in Section 1281 or 1295) of a dispute to be resolved by arbitration, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted." (Italics added.)

That's it. The offers here comply: They make a specific statement, and they contain the terms and conditions: The insurers each pay LA County a sum of money between $100,000 and $500,000, and LA County dismisses its complaint with prejudice.

As we have seen, uncertainty in a 998 offer does not necessarily invalidate it. We should note preliminarily that an important distinction should be drawn between the kind of uncertainties dealt with Hartline and Berg, on the one hand, and those in Valentino and Barella, on the other. Harmonizing all four cases gives us this rule: It is not uncertainty per se that makes a 998 offer fatally uncertain — if so, then Hartline and Berg should have gone the opposite way. Rather, it is the difficulty of evaluating a discrete claim, outside the pleadings but encompassed within the purview of the 998 offer that can make a 998 offer fatally uncertain. There was no question — no "uncertainty" if one pleases — as to whether the Royal Globe claim possessed by the plaintiff in Valentino, or the right of the plaintiff to vindicate his "good name" in some public forum in Barella, were within the purview of the 998 offers in those cases. They were. The appellate courts in those cases simply balked at the idea that the offeree should have been required to put a value on those discrete claims or rights. On the other hand, uncertainties confined to the disposal of the litigation itself which can be cleared up by some simple communication between the parties do not, under Hartline and Berg, invalidate a 998 offer. The present case falls into the latter category, not the former.

That said, the basic rule that 998 offers are interpreted as contracts goes one better than Berg and Hartline and does, in this case, resolve any putative uncertainties asserted by LA County. We take these uncertainties in the order they are mentioned in the opening brief.

(1) Would acceptance of the offers bar claims on the remaining 21 properties covered by the insurance plan? No. Those claims were not part of the complaint. It is only LA County's retroactive wishful thinking in this appeal that posits that it was asserting any claims in its complaint about those properties.

We also note here that, by offering to drop their cross-complaints, the insurers were offering to give up the contention made in those cross-complaints that alleged fraud by LA County as regarded one of the properties rendered the various policies making up the insurance plan void ab ignitio. That was a claim within the cross-complaints, and had the offers been accepted would have been the object of a dismissal with prejudice.

(2) How much LA County would actually receive in light of the $10 million advance and the deductible provision of the insurance plan? Answer: The entire half a million net, on top of the advance. "Pays" means pays; it does not mean "credit" or "offset." To the degree that any ambiguity on the point might be teased out of the 998 offers, that ambiguity would have to be read against the insurers, and would have to be interpreted as a waiver by the insurers of any claim for credit or offset based on the $10 million advance. In that regard we note that the $10 million advance was only as regards the three properties mentioned in the complaint and not toward repair of any of the other properties.

(3) How would the aggregate deductible be affected by acceptance of the settlement offers as related to the other 21 properties covered by the insurance plan? Answer: The insurers, having failed to include language in their 998 offers that would have exempted their payments from accumulation toward the $20 million aggregate deductible, would have been stuck with the consequence, which is that the payments would count toward the aggregate deductible in relation to the other properties.

(4) How would the offers affect the separate "Agricultural" case? Answer: Not in the slightest, as not only required by construing the document against the drafter (the insurers) but by the actual holdings in Westamerica, Goodstein and Fassberg. A fortiori, if claims that were part of the same litigation were not affected by the offers in Westamerica, Goodstein, and Fassberg, which confined themselves to identifiable pleadings, claims that were outside of the litigation, like the Agricultural case here, would be even less affected.

And finally, (5) how would LA County's other rights under the insurance plan would be affected? Answer: In the first place, LA County does not identify what "other rights" it refers to. In its brief (on page 110), LA County construes the 998 offers here as: "The offers purported to dismiss with prejudice claims and issues related to each defendants' specific insurance policy, since the 998 offers state that the offer is pertinent to the terms and conditions of that specific defendants' policy of insurance." (Italics in original.) However, as we have seen, the 998 offers only mentioned those claims which were "raised in County's complaint."

Thus claims outside the complaint would not be affected at all. (We note here that LA County is once again insinuating the idea that the complaint encompassed more than it did.)

6. Conclusion

Overall, LA County's arguments against the 998 rely on the assumption that LA County, and not the insurers themselves, would have all conceivable ambiguity and uncertainty construed against it. But 998 offers operate exactly the opposite way. In any event, in context, none of these uncertainties were a cause of LA County's rejection of the 998 offers — if LA County had been at all interested, it could have — as the courts in Hartline and Berg instruct — inquired about them in the period while the offers were still open.

The 998 offers here were valid. The trial court was correct to award expert costs under section 998.

THE PREVAILING PARTY ISSUE

LA County's entire argument that somehow it was the prevailing party collapses in the wake of the Supreme Court's decision in Goodman affirming this court's analysis of sections 1031 and 1032 of the Code of Civil Procedure. (The same trial judge whose decision was affirmed in Goodman was the trial judge here.) It is now clear that a plaintiff who recovers nothing monetarily in the judgment from a defendant is the losing party, not the prevailing party, even if the judgment is the product of credits (for example, prior settlements with other defendants) received by the defendant offsetting an award received by the plaintiff.

We should mention one more thing, though: Section 1032, subdivision (a)(4) of the Code of Civil Procedure provides that when a party recovers "other than monetary relief" the question of which party is the "prevailing party" is left to the trial court's discretion. Here, of course, any thought that the trial court abused its discretion, i.e., acted unreasonably, in determining that the insurers were the prevailing parties as to any issue of nonmonetary relief borders on the frivolous: As shown by the motion to bifurcate and the hearings at the time, LA County failed in its litigation objective of recovering the policy limits and obtaining bad faith damages beyond $125 million. In fact, LA County, as plaintiff, didn't recover anything from the insurers it didn't already have, and ended up paying their expert fees because it rejected the various 998 offers they proffered. Even the small glimmer of above-deductible damages on the Beverly Hills Courthouse was obviated in the wake that the insurers had already paid more than enough to cover those repairs.

THE CROSS-APPEAL

As noted, the insurers filed crosscomplaints for fraud, based on what they alleged to be a fraudulently inflated proof of loss for Auto Park 10. The trial court granted LA County's nonsuit motion and directed a verdict in favor of LA County on the insurers' fraud claim. In a cross-appeal, the insurers attack that decision. However, the insurers' respondents' brief says at page 4: "If the judgment is affirmed, the court need not address the cross—appeal." Since we are affirming the judgment (and consequent cost order) entirely, we need not address the merits of the nonsuit and directed verdict motion.

CONCLUSION AND COSTS

We have given some thought to this court's discretionary decision regarding appellate costs. There are two independent reasons we now conclude that the insurers are to recover their costs on appeal.

First, substantively, the insurers are clearly the prevailing parties. Second, the borderline frivolousness of LA County's main issue, based upon distortions of the record and ignoring the standard of review as well as the basics of its own complaint, has put the insurers to unnecessary expense at the appellate level. At the most elementary, the main issue in this appeal — 84 pages worth in the opening brief — is as simple as pie: LA County is complaining about the fact that claims on which it did no discovery and which were never included in its complaint were erroneously not "tried" by the trial judge. That argument is an obvious loser (see generally Kozinski, The Wrong Stuff, 1992 B.Y.U.L. Rev. 325) but the unsoundness of its premises only becomes apparent after one wades into the actual text of the various hearings that made up the case and discovers that — far from the trial judge imperiously refusing to "try" various "issues" — time after time this trial judge bent over backwards to give LA County's attorneys a chance to make any points they wanted and bring any motions they wanted. When one examines the actual reporter's transcripts — not the paraphrase in the briefs — one finds that if there is any criticism to be made of Judge Bauer, it is that he was judicious and patient to a fault.

So, to disguise the basic fact that the supposedly untried "issues" on which this appeal is predicated were not even pleaded in the complaint, LA County has presented a record- and factually-intensive argument more closely resembling the irrational number Pi: an argument that requires going through the dispositive status conferences, hearings and motions in the course of a 104-volume reporter's transcript to ascertain if what LA County claims happened really happened. And on that examination, one finds it didn't.

The insurers should receive their appellate costs as a matter of justice. The judgment is affirmed in its entirety.

WE CONCUR:

BEDSWORTH, J.

MOORE, J.