• Version: v11.10.0
• Platform: Windows 7 x64

1. Create foo.js:

   function test(foo = "foo") {
     return {bar};
     
     function bar() {
       console.log("test");
     }
   }
   
   test().bar();

2. Run c8 --reporter html node foo.js
3. Line 3, 4 are marked as uncovered:
   

It works fine if test has no default argument:

c8 v3.4.0