forty four helen federal insurance company the first thing i want to talk about is whether there was a potential for coverage and therefore a duty to defend and our contention that the district court erred in its decision on this point we believe that there was potential for coverage because we in the insurance cases distinguish between disparate impact cases and just pre treat been cases in courts find coverage for disparate impact cases and not for disparate treatment cases because if the when i read the complaint it looked like everything was on purpose according to the complaint well that's the citation i handed up was for that point because we view the complaint is a very vague a very plain and short statement of the case but not elaborating exactly exactly what was going on and so what having trouble finding the bigots i have a complaint here that says that is purpose they refused to rent k'naan korean's at the multifamily residential rental properties there were a few in the koreatown section they refused to rent to african americans in the beverly hills section and what is and what it lays down hears according to the justice department if they can prove it that these people are just maintaining say we're gated housing on purpose and then let me just add to that the paragraph in the d o j complaint that says the action was intentional willful and taken in disregard right so there's the intent to do the action versus to cause the harm or be one issue but just to directly address that issue they talk about the conduct constituting a refusal to rant and refusal to negotiate for the rental or conduct otherwise making unavailable or denying dwellings to persons because of race national origin and familial status that comes from thirty six zero for a of of the state of the fair housing i think the structure of your argument and educate me i'm misunderstanding it is that the justice department alleged in its complaint intentional wrongdoing but they could as well have alleged in their complaint violation of the statute by  a practice which unintentionally had a disparate impact and therefore there's a potential for coverage for just because there could be disparate impact and not intentional yes they could prove their case either way and so for instance this language there have to be either allegations in the complaint that fall within the coverage or true facts known to the insurer that fall within the coverage or facts reasonably likely to occur as known to the ensure that would fall within the coverage and i don't understand where you get any of those required things that have to be in new trial practice of some sort and there is no allocations a neutral practice was where their facts that were known at the time to the other two insurance companies a felony trial practice well the other two companies were receiving communications from the insurer they received the complaint and our position is  complaint is very faget uses this language otherwise making unavailable in the texas department of housing decision last june the supreme court said took up the issue of whether the fair housing act recognized  claim for just part impact which was a surprise to us since all the circuits had felt that that was the case but they took up that issue and what the court looked at is the title seven uses this otherwise make unavailable language the eighty eight uses this otherwise make unavailable language and the fair housing act uses this otherwise make unavailable language and that's where the court found that there was the possibility for a disparate impact theory to be allowed and that but if you find that with the facts that are laid out here it doesn't seem to be any practice alleged and no adversely disproportionate impact that i had just trouble looking at the complaint and divining that has so that it's not enough that the plaintiffs might have claimed something different that would be within the coverage either the plaintiff has to claim it or true facts known to the insurer must make it likely that the complete will be amended to that effect yes that would do but there's nothing here like that now sometimes what happens is in a year or two into the litigation the discovery changes things and it turns out that there are some facts that would justify had a complaint that would be within the coverage and then the point if makes another tender of  defense along with the evidence of these new true facts which then become known to the insured through the tender but that never happened here there's nothing in the record indicate that that's what you're what you're what you've got here zero and entrance policy that covers negligently inflicted injury but not intentional assault and battery the plaintiff pleads an intentional assault and battery and nothing else a facts pleaded are had the defendant walked up to me and punch me in the nose no coverage now under the defendant's liability insurance for that and even though a plaintiff might have said the defendant negligently bumped me he didn't say it and never did say it and the true facts are known to the insured are that that's not what happened it was on purpose and that looks like this case then but that's why i'm having trouble understanding why your argument but that's my delgado case you're describing right and so all of those cases like delgado and the cases it cites in there like juan those are all respect well i think that you know anything homeowners policies are usually construed more liberally i would agree with that but there is a distinction between doing something yourself versus an agent or employee doing it and you're being held liable disparate impact question which is no neutral practice is alleged i think the texas department of housing as a plaintiff at the pleading stage has to produce just statistical evidence showing a complaint i mean i think the complaint really seems to follow the language of the statute and it doesn't really say one way or the other whether it's just for treatment or disparate impact i mean i think either of those are possible how  so later on in the case you know you could have things they were playing claims made that putting the word korean in the name of the building somehow indicated a preference for a korean americans and therefore was discriminatory or that posting to the tenants in korean and without an english translation was you know conduct that could have a disparate impact could discriminate against the other tenants there are things like that in their you know they  insures new facts that would have in effect put them on notice of the tension really neutral practices are you making that argument now in the appeal as well the we have the  answers from the department of justice that are in the excerpt of record but national union contends they did not get them i don't think century surety contends that research at who was their candor i mean the way you would have new true facts known to the insurance companies is that there would o j complaint the d o j complaint there is correspondence in the fourth volume of the excerpt of record from defense counsel for the insurer to the insurers talking about the case what's going on mentioning  related somewhere davenport case a woman who claims she was terminated for not going along with these policies and that she had the insurer to taint a jury verdict a defense jury verdict in that case talking about the case being very vague they had no idea fifteen that i was or you've already been asked about it it where it says paragraph fifteen the conduct of defendants is described here and was intentional willful and taken in disregard for the rights of others that is about as clearly as you could say and your insurance is not going to cover your wrongdoing now what i'm wondering is why would the government do that is there a different remedy when the conduct is intentional willful and taken in disregard of the rights of others more damages or penalties or something like that not that i'm aware of that mean there is a provision for penalties when the government does bring an action but i'm not aware that that's a matter of makes a difference it doesn't matter if it's disparate impact or intentional you get the same i don't know what remedy i don't know that often in ordinary civil litigation people ledge that something's negligent when everybody knows it's intentional so that the insurance will cover sure i mean that happened in delgado that happened in many of the cases that have been discussed in the briefs but here it looks like what the government would like to do is punish the sterlings not their insurance company i don't know what they intended to do but they pled the case i think just parroting the statute frankly and the statute allows both types of theories and in to on top of that you can have you know negligent supervision type of claims if you look at the proposed order that was sent with the letter from defense counsel to all the carriers it says it talks about training it what they want training for employees and agents they want very clear procedures set down  so that's what the government's talking about and the other carrier the other insurers had that information because it came in a letter from the defendant appreciate letter from the d o j to the defense attorney and then that attorney to the carriers talking about this is what they want right this is what they want by way of a consent decree so they're talking about training and supervision they're talking about here procedures so i think that you have that possibility and that's what the court of appeal in federal versus steadfast found that there this potential claim for vicarious liability that there are these potential claims for negligent training and supervision then it vicarious liability when there's not direct liability in this whole complaint sets out a case for direct liability i think it sets  if your bus driver kills passenger the bus company may or may not have vicarious liability depending on whether it's a superseding intervening act but if the bus company has ordered the bus driver to kill or injure the passenger that's a direct liability i would agree with that yes but that's not what's alleged in the complaint looks like it is it says that they did it  defense the other the defendants make a lot of the direction in control but that's just the definition of agency your agency employees are under your direction and control it is an independent contractor it says that donald sterling rochelle sterling and the korean land company which they owned and the sterling family trust which they controlled did this them directly and through agents and through agents ok but they also allege that conduct in other places where the conduct was done by agents and employees so i think that raises that possibility of vicarious liability and that's what the court of appeal found in fact there's a steadfast that that would be better if the agents  something that the sterlings had not directed them to do and i think that's process up os ability under the complaint your honor the complaint is very short is like four pages long doesn't give a lot of information it just basically laying out the elements under the statute  so so to the extent that the the national union policy if they argue the employee was volunteers others real estate manager are all on a insured by insured basis so if you have an employee that commits an intentional tort and you don't direct them to do it like the bus driver example if you don't direct the bus driver to do that then he'll have he'll have coverage excluded because he intended it to larry it's at the mother could be held it could get coverage for her individual tort or negligent supervision correct but that there was no expectation that she would player given the separation of insured provisions you consider it on an insured by insured basis whether that insured intended versus they're just like curiously liable or they're liable because of some negligence like nagle those who provision their training so if they this complaint negligent supervision yes particularly i think when you look at the proposed consent decree that was sent in advance of the lawsuit we're talking about we want these clear procedures we want this training of your employees and agents and yes i think there was your honor there's a public policy that underlies these definitions of occurrence and accidental intentional acts provisions and insurance policies ye the public policy is that people should not be able to insure against their own intentional wrongdoing even where insurance policies don't have that sort of clause it's often been implied by the courts triad and we have a statute in california california is not a common law state in that sense yes even in the common law states it's usually been implied by the courts ye now why wouldn't that apply why quite wouldn't there be a public policy against buying insurance for intentionally segregated creating segregated housing all the way the court decisions have come down  least so far in this at least so far as the complaint says and any true facts known tenders made to the insurance company it's just plain intentional segregation own flesh and nineteen pre nine four segregation this is how it's pleaded you could read it that way and i think you could read it the other way that it's just vague and it doesn't say whether it's just pretreatment or disparate impact or there's a mix of all those types of claims there you want to save some remaining time for  yes thank you agents the second ground is that it comes before you even get to the complaint is that beverly hills property is not insured under coverage of the national union policy that will have the burden of proving before you even get to whether there's coverage whether there's an insured the only named insured under privileged b is near north there's no language in the policy that says that members of near north which apparently policy identifying them so they say look it's it was purchased for purchasing group and they have the purchasing group is listed on this document why isn't that enough to create a genuine it should matter of fact that the untanned of the parties to the insurance contract was not to give a purchasing group an independent insurance but to insure all of the members of the purchasing group so the policy can only be amended or modified or changed by an endorsement made by national union we don't deny that a purchasing group purchases insurance in general for its members and the bordereau says that this number is insured under this policy number we don't disagree with that for a policy period that incepted on may first two thousand we don't disagree with that coverage any of the policy they're covered under that part and that part of the policy the coverage for twenty five million dollars for a policy period incepted may first two thousand they're they're covered because they're also covered on a two million dollar primary policy issued by chicago title or some chicago insurance company so the purchasing association did what it was supposed to do it purchase insurance for a member for twenty five million dollars in setting on may first two thousand that's what the policy language says that's what the border a says there's still no tribal issue that we intended or the policy was changed to also add them as an insured for coverage be there's nothing that says that a purchasing organization has to purchase others might consider interpret in the policy or interpret ing the scope of who is near north so i guess your position is it's not in there and their north is near north end of story is that your p in there you're supposed to interpret the policy based on what it says not based on after the fact arguments about what make more merced make more sense or what might be fair sample of a homeowner's insurance policy they live on a fault and earth for half of the people in california the court can't come in after the fact to go that's not reasonable that's not fair we're where we're an earthquake indorsement is available but a high price many people choose not to buy it even though they live they knowingly live on a fault which is right right and all it says about the policy is beverly hills properties in dorset what does that mean and why doesn't the cover that discrimination i don't know what that means it's not we didn't create that document it's not a national union document but where you're not limited to documents you create that the only advantage you get of not creating the document is the doctrine of interpreting it co umbrella policy which would be the whole policy but it only lists the policy term as beginning may first two thousand the whole policy started in one thousand nine hundred ninety think november nine hundred ninety nine i just means that this border a didn't apply to the earlier time or it means that it applies to cover day what are these as factual questions that i mean it's seems like you've you've agreed that this border row indicates who's covered under coverage a even though it's not referenced in the policy eyes it's not a part of the policy and so then the question as well does it also apply to coverage b and then you're providing us with some factual arguments which seem more appropriate for a just record to this i'm the first instance how could we say as a matter of law it applies to a only and not be i'm not saying that it confirms their coverage of coverage a i'm saying it's consistent with what we do concede which the policy language says the covered under cover day there's this other document the can't change the policy and i'm saying well if you look at this other document which is not part of the policy and it's not endorsed but the policy there's nothing  entrance policy is still bound and limited by its terms but the policy says it can only be changed by an endorser this is not an endorsement of the policy issues names who the ensure it is an endorsement one and so the factual question i think is what does that mean that in california at least a court would be willing to consider parole evidence to determine whether the parties had high when they issued a policy to have the purchasing group that in fact the insured were the members of the purchasing group because that's the purpose of a purchasing group so that's not changing the policy that's interpreting the language of endorsement the so the language of endorsement one which is who the named insured in says it's a purchasing group right and so then the question as well does that mean that the insured the are the members of the purchasing group that's the purpose of a purchasing group is to purchase insurance together to cover their activities well you agree that there are a member of the purchasing group i guess our our view is that the policy doesn't provide coverage under coverage for members of the an argument settles argument this complaint is repeat replete with allegations of attentional discrimination based on race or other protected status and it's a pattern in practice it's not random acts of discrimination this is a policy a pattern and a practice set forth by sterling there's nothing in here that as the trial court said looking at this complaint there were no allegations of unintentional conduct there were no allegations of a neutral policy that played out wrong could could not a practice be a neutral policy not if that practice first of all everything is intentional that's when the complaint says which is a required allegation for disparate treatment understood and then following the intention how of the provision of the complaint then there is another provision that talks about pattern or practice and so my question is thank you is there anything in that consistently throughout the complaint are treating nominations differently from the agents could not but i think there are some other races involved but treating people differently based on race intentionally that's the theme that's an overall theme of the complaint it's clearly a disparate treatment theory and there are no allegations of acting through agents either every allegation in the complaint says that sterling and that means in concert with to gather with if there are allegations of agents running off and doing things on their own part of sterling's business if i were to prevail on the argument you're making now that the complaint alleges intentional acts which would be expressed we exclude from the definition of  maybe you're going to cover it but i just would like to hear one of the other insurance companies talk about the impact of steadfast and what that means in terms of your cover sure in with respect to century surety at least it is completely different our policy covers only accidental discrimination it clearly doesn't cover disparate impact discrimination and it's california based on point that because our policy is limited to discrimination caused by an occurrence which is defined as an accident that accidental discrimination is the key and so the conduct that leads to the injury or the damage has to be accidental disparate impact doesn't satisfy that requirement and there is case law on point the vista medical supply case for instance deals with that issue and in vista medical supply it's employment discrimination case that insured argued what maybe there's disparate impact and that would that would constitute the accident here and that the vista medical supply court said no no no that's not right the act of setting an employment policy is intentional and that's not an occurren underage disparate impact theory a plane does not need to prove that the employer intended to discriminate but the possibility that the employer may not have intended the harm does not create coverage under this  discrimination claims what kind of discrimination claims would be covered under your policy accidental discrimination federal argues well that's a looser rico i'm asking you what does that mean yeah it's important my point was i went to the internet and just punched in accidental discrimination and i got dozens of hits are usually comes up with employment that might have some sort of test and no discrimination was intended but one group does better would be plausible in the housing area of accidental discrimination a disparate impact that isn't intentional and in the area of housing i don't have one off the top my head your honor it's an advertisement that goes out and miss states the requirements you look at on a billboard it says and actually there is an example right in the which federal concedes was exhausted through payment is a completely affronting policy meaning it's all the insureds money both for defense and in them that century got a five thousand dollar s payment for writing the policy but it's essentially all self insured that has the broader coverage that has this same coverage that federal and national union century chose to write narrower coverage in the insured accepted that under the policy that included real century money and we said we will only provide discrimination coverage based on accident and here there is clearly nothing accidental alleged in the complaint with respect accident requirement i wanted to point out a recent california case of two thousand and fifteen case on the negligent supervision issue came in after our brief for all the briefing was filed here it's the albert counsel in general that's why we have this little roll call twenty eight j so that we can get these as we often do on friday night so we can at least look at them before the argument so just part of downstream suggestion i apologize  sues both the treat your murder and sues the owner and the company says there's no accident here because the tree trimmer clearly intended to trim the trees that were that were in fact trimmed in the court agrees with that that's in fact the case so the insured says well what about negligent supervision there's a there is at least a hint that there was negligent supervision here and negligent supervision would constitute an accident and therefore because outward court we had none of that it said first of all that the complaint doesn't allege any facts suggesting negligent supervision and then it goes on to say negligent supervision requires an employer supervising employee who is incompetent or unfit the employer had reason to believe that under risk of harm would exist because of the employment of that unfit contractor and harm a curse there are non koreans african americans or whatever there is no coverage for that that's not an accident and i think that's the point that the court is making here finally with respect to vicarious liability your honor for vicarious liability to be covered under a policy like ours or actually like any of these policy the underlying claim has to be covered that's even in main court that the supreme court makes that point when it talks about derivative essentially if there's no in our case discrimination by accident at all the in the named insurer doesn't get coverage for that because directly on one the diverse of northbrook property casually which is cited in our brief that's an employment discrimination case and it's it's right on point a alleges that he was wrongfully terminated and discriminated against he sues he is the boss who fired him and he says the company there's no coverage under the policy because it's a cause by accident policy is ours and clearly the role of the wrongful termination was an intentional act of the employer says wait a minute now i'm vicariously liable i didn't do the firing and the court in dyer sa no that's not right there is no coverage for that the question isn't who's covered under the policy the question is is there any coverage for this intentional act for anybody under the policy and the court answer is no same is true here if there is no accidental discrimination which there isn't in this case then nobody has coverage for it because that is what triggers coverage under the century surety policy  and that formulation i just want to point out was the formulation of the exclusion in grey versus zurich that the court found to be hopelessly confusing and resulted in the duty to defend in that case that intentionally by or at the direction of is the formulation of the exclusion the exclusion they've used the national union a century surety have used in their policies with regard to the named insured issue of water over the dams and cirque is that a lot of water over the dam since  wrongful termination case and i think the point of what the courts say in there about vicarious liability is just that a company is not vicariously liable for the acts of its manager or supervisor you know terminating someone i think i just don't understand that s old lady in a nursing home inherits an apartment building and the managers manage it for she don't know anything about it really but it turns out her managers are discriminating that strikes me is your vicarious liability take case that would certainly be but i don't understand it here well here and you know they're there they talk there's talk about actions by them which would you know if it's direct discrimination by them if it's disparate treatment by them i agree that would be covered but i don't think that that's the allegation for close disparate impact and they certainly don't for close vicarious liability because they talk about acts of agents and employees and they don't foreclose negs and negligent failure to supervise or train because the draft consent order draft consent decree specifically wanted training of all agents in employees so i think those are issues in this case thank you thank you  thank all the counsel for your argument this morning federal insurance company versus nash on union and century surety is submitted in wagering for the morning