our next case is fifteen dodge one four seven one six robert furer and michael goldberg as trust these verses national union fire insurance company and twin city fire insurance company three major morning your for as the chapter seven trustee of the bennion entities which turned out to be the largest feeder funds into mr ross jane's massive ponzi scheme your honour's the outcome of this appeal today is of critical importance to different exclusions are you telling us every director or officer of a bank has this kind of policies our decision controls them or do they all have different kinds of policy no i'm not saying they are all the same what i will tell you is this is a standard national union policy help me i don't understand the professional how you're interpreting the professional services exclusion it's they are it means something tell me what you think it means and give me an example of where you think it would apply it means what it says your honor and that is the professional services exclusion in this policy as all the case law from out the country has pointed out is that when you include a professional services exclusion in a director an officer management liability policy it must be narrowly construed to only bar coverage for allegations of you know misconduct professional negligence to the customers it must never be construed tell me give me a real example where you think it applies sure i'll give you an example from this case in this case the fiduciaries filed suit based upon what your brawl tour was alleged to do in allowing ross stevens ponzi scheme to continue not be stopped shorter and  it must mean something give me an example where you'd say yes our clients wouldn't be covered had they done x tell me give me the an exam and i'm trying to within the context of this case we have never never have claimed that all of the allegations in the underlying litigation do not run into the professional services exclusion you bet we alleged i know i'm lazy i'm struggling help me get ok sample i'm in suspense sure harris and ellis were alleged in this case  teen's request taken funds from trust accounts belonging to banyan which was a feeder fund belonging to mr morse and gibraltar knew these funds did not belong to not claiming that the claims against harrison ellis don't run afoul of the professional services exclusion they absolutely do here's the problem we also allege quintessential management liability against the chief compliance officer mr sanders and the chief executive officer mr hayworth of gibraltar not for doing anything with respect to mr ross dean or professional services but by not  bank policy federal law and regulations that are aimed to curb money laundering and bank security act fraud the officer in this case julian on sorry the bank security officer came to mr sanders and said shut these these accounts down there is illegal activity i think there's a legal activity going on in these accounts mr sanders and by extension then mr hayward we're obligated their duties do not come with respect a customer they come by federal law this is a highly regulated industry they're gee you're talking about a why in a general world they should be liable if your allegations are correct but i think she can correct me if i'm wrong i think which it's current is trying to ask you is where where does the professional services language stop in other words you can have a banker who commits money laundering by engaging in professional services the transfer ing of money from one account to another that belongs to a same client there are no restrictions as between accounts and yet the banker is facilitating money laundering by allowing money to move to sort of try to hide the paper trail would that come within the professional services exclusion it may your honor if it was done for the benefit of or at the behest of a customer it it was but the client the customer was committing money laundering with fun stolen from another victim in other words i steal money from i am bezel money i steal money somehow some way from ten victims i have two accounts at your bank i put the proceeds of my fraud or my crime into account number one i go to you and say listen every three days transfer x amount of dollars from my account one to account two and then three days later transfer half of that amount to account three of mine also at a different bank through wire transfer ok so everything is legit with you and me within our bank but i tell you on the side listen i know it's a lot of money and i know you may need to get approval to do this given the amount but i'll give you a little bit of a kickback if you do this for me and the bank officer does is that professional services arguably that bank officer who performed that for the kickback yes run into the professional services exclusion who would not would be the chief compliance officer who like in this case received a separate complaint about those accounts but why why isn't that compliance officer also performing professional services in reviewing whether or not other bank employees have correctly done their jobs and whether federal law is being complied with why do you define the professional service of achieve compliance officer in other words ok that and this is comes right out of the policy language and it's critical that professional services exclusion in this policy only applies to professional services performed for others which has been roundly interpreted as for customers the duties that we're complaining about with respect to the c e o have nothing to do with anything done or not done by mr harris for mr ross dean those duties are independent and imposed by federal law so that so that the institution complies with the federal regulations that is the line that you are looking for that is the line that every district court decision in the country that is looked at this has the right covers so the policy in your view provides coverage for bank employees who are doing who work for the bank as the bank but not for any particular client that is correct and the law says it's for the bank or for by extension the regulators because the regulators tell the banks what they've got what case do you have that talks about that issue one way or another all of the cases in our brief outside of florida that talk about how a professional services exclusion must be narrowly construed to not swallow the coverage for the individual executives for dno wrongful acts this is wrongful acts in the management of a business that is what we're talking about here and that is i know personally i was my question is a little more narrowly tailored and there may not be anything out there but we're looking for help ok geo star is one of the decisions that deal with the banking context and the narrow the narrow application in the banking context i believe it was a banking case that because these are dno policies and because you're talking about professional services exclusions the case law is all over the map but it it always focuses on businesses that provide a business service to customers and what the courts have been clear about is you've got to drop banks provide services for others absolutely that's why you're saying that people within the bank might not be caught within the exclusion because some employees are not providing services for others they're doing it for the bank itself even though the banks mission is to serve others correct in merican bancorp says it directly it says not every professional service provided by an executive a bank is for a customer it is also for shareholders and regulators for example here's the perfect example and that in that case involved a similar exclusion it did indeed customer service that that's a great question and here is why the district court got it wrong remember where here on a motion to dismiss the district court's job was to look to answer my question for some intrigue to look at the answer and  answer is if he if the c e o is soley accused in the underlying litigation of doing things rothstein's be hast and not also accused of violating know your own custom rules and reading is actually that mr sanders the chief compliance officer and mr hayward the chief executive officer did not provide any professional services for austine they fell asleep at the switch that's the compliance not saying all that there's some allegation in the complaint you said that does not seem to suggest that he they were dealing directly or helping directly that's correct and we cited them in our brief and what is incredibly important is that the allegations have to be separated the allegations draft amended complaint against all these executives which is that docket entry seventy three dash one in less the insurance cares and this is why the district court got it wrong unless the d n o insurance carriers who abandon these executives could come forward and say every allegation in all of that underlying litigation only involves professional services for rothstein with all inferences in our favor then that motion to dismiss ought to have been denied and leave to amend granted there in the district court relieve the carriers of that burden in appropriately and simply cherry pick the allegations that were on professional services or let me  we've taken you way over time and we'll give you your full time for rebuttal mr major but i have one more question for yes or is there anything that you think that this record got right with regards to your claims in other words claims that we don't have two subsets of claims that we don't have to worry about an appeal that might have been asserted in your initial complaint in the district court what the district court right got right was the holding that this dno executive liability policy rights to each executive director and officer and the problem with the district court's opinion that's what she got absolutely correct the problem with the district court's opinion is contrary to florida law in the premier decision and this court's decision and design build she then construed jointly the any insured language in the professional services exclusion to foreclose even a defense to executives accused of corporate mismanagement of any defense because either the bank itself or one of the employees did in fact or was alleged to have in fact performed a professional service for rostering and that's flat contrary to florida law ok mr major thank you very much you for thank you got your five minutes for a bottle and who's going first mr hartley yes you are made please the court my name's michael i represent national union we've split our time today so that i will be addressing the professional services exclusion my colleague mr kaplan who represents twin cities may have some comments on that exclusion as well but he would be addressing the arguments as to loss yours are right that this is an important case but for a very different reason than what mr maser has articulated this case is important because the court is being asked as a district court was to uphold the plain language of the exclusion at issue you know everything that everybody talks about plain language in text these days but every time somebody talks about it there's somebody on the other side saying you know it's not quite so plain well let me direct your attention let's ask the let me ask you the question that judge carnes asked mr maser and flip it give me an example of a scenario banking fraud scenario like this one where the professional services exclusion would not apply i can give you several ok if a if the bank's shareholders would derivative action against any of the directors and officers for any form of mismanagement of the bank pretty broadly so any form of his management or any of those allegations are covered if it's a scenario that they're covered even the mismanagement inherent in the fact that professional services were provided to rostering that's correct because derivative actions which are designed to encompass exactly the kind of management issues that plaintiffs are asserting here is part of the definition of securities claims under the policy and which are expressly excluded from the exception so that securities pack compounded by itself in the exclusion in compass is all of the different kinds of mismanagement claims that are typically broad by the most likely constituency to actually bring those claims and of course this is a privately owned bank but you're saying the concept underlying securities kline's apply here it's not even the concept it's the plain language of the definition of a securities claim not only encompasses what oftentimes gets typically associated with this a curate is claim which is atten five or an offer and say oh but the actual definition of securities claim has a sub part that specifically includes all derivative claims period as long as they're brought by if security holder of the bank so anytime a bank shareholder here a private a private bank but one that would have shareholder issues those would be covered how about if there's a shareholder action based on something the bank did in correctly with regard to a client the bank decides to sink one hundred million dollars into a burgeoning new start a bunch or for a client and it all turns out to be a ponzi scheme and the bank lose one hundred million and they get sued by shareholders is their coverage that would be a derivative claim by the shareholders to the extent they're talking about mismanagement of the company you know what is a matter of the plain language says that the performance or failure or perform professional services for others or acts errors or omissions relating there too so they didn't do due diligence in figuring out whether the startup had any chance of any realistic chance of success they just think it's a friend of the bank's a friend of the c e o s a friend of the board's nice guy and we're going to pump in one hundred million dollars of the bank's money into this new venture they don't do due diligence and it goes by the wayside and now there's a lawsuit or they covered it if it's a shareholder your honor that's bringing the case yes the answer is yes and let me explain i know why because that is the insur performance or fate if you think it's the giving of the loan or failure to perform the not not doing due diligence professional services for others or x errors or omissions relating there to that plain language covers my hypothetical i agree with you your honor and if you go to the next paragraph of the exclusion it says notwithstanding the foregoing it is further understood and agreed that this indorsement shall not apply to any it includes a securities claim needs not only violations of rules and regulations dealing with the purchase and sale of securities but also one berat derivative  behalf of an organization by a security holder of such organization so to the extent that there is a derivative claim that falls within that with falls within that definition it would be expressly excluded from the professionals are carved out to the professional services services exclusion because of the way that a security claim is defined that's correct so no matter what the underlying basis is all shareholder suits are covered a shareholder suit for this ross team stuff there's coverage and not because it doesn't involve professional services necessarily but because it falls under the securities claim carver because remember this is a policy that provides coverage to not nose but to the bank for securities claims because this policy was issued with a companion ian no policy that provided coverage for in matters and then a dno policy that provided coverage for these types of matters along with other matters as well so is there anything else besides derivative claims that are covered there are a variety of categories yes there are there are that would still be covered under the policy in addition to derivative claims and other types of securit there are employment claims so any type of harassment discrimination and wrongful termination and any claim like that there's a definition of employment practices in the policy your honor that appears in definition and i know that lists a wide variety of employment practices that are also covered by the policy wrongful dismissal harassment discrimination retaliation all those kinds of things there also may be other claims that aren't present here that would nevertheless like the district court said this report pointed to securities claims she pointed to employment practices but she also said that this isn't her her ruling wasn't eliminating the possibility that there were also other claims that may fall within the scope of coverage irrespective of the exclusion and there may be other circumstances not present here that what lawsuits arising out of dealings with suppliers as opposed to customers for example say an officer is involved in any transaction later becomes accused of absconding with confidential information from the target things way you're not actually dealing with conduct that arises directly out of the conduct that is effected by the professional services exclusion i would like to point out very quickly because i only have t minutes two things one is that the simplest and most direct language in the exclusion itself is that it bars coverage for any insured for claims arising out of the organizations and other words the bank's professional services that is a very clear concise eggs are probably language of the policy and under under florida law and particularly under the target's case or the taurus case of projects arising out of is clear and unambiguous under florida law it requires some connection not a proximate cause but some connection you take that language plus the taurus case at least directly to the decision that the district court made here if you could you please address in the time you have left the joint several issue or the several in joint issue and insured language typically comes up in a situation where you have an exclusion that says this part of this exclusion but lose coverage for claims involving intentional conduct by any insured there's no other qualifying language an expressly the exclusion shows that it is applying joint obligations as between the insured who is sued the any insured and the organization itself so in that context this case significantly different and frankly even clearer than all the other cases in florida and elsewhere that if a construed just think any insured language by itself number one number two the arguments as to severability are all predicated on an express severability clause in the policy itself which we don't have here so when the typical policy you have ensuring agreement you have an exclusions that modify the ensuring agreement and then you have conditions which modify everything else here we have in ensuring agreement we have exclusions but we have no condition no separate severability clause that creates an ambiguity within the rest of the policy you know of a provision that says this policy shall be construed as to ensure as if none of the other insurance existed we don't have anything here and every single one of the cases that are cited by plaintiffs on that point everyone involves an express severability clause and expressly holds that that is the basis for their decision and i thought the district court said in a footnote you know all this is fascinating i use that term loosely  it's very hard to tell the need but she said it doesn't matter because all of the claims here sort of the saying is that true in this let's say in a hypothetical that they've thrown an additional climb beyond what's already in the complaint to say yeah and joe blow the employee he had a supplier issue that that's not covered if a claim is thrown in here that had that plot that would not be subject to the professional exclusion then are you saying that employees subject of that claim would not be covered are several several or are you saying no you know if you've got one good claim stuck among others that aren't covered everybody goes down with the ship those are i think two separate issues your honor the joint and several he surrounded back claims that are that's where severability my comment affect what happens to that that defend it to the extent that there is a separate standalone for example employment law claim that's placed in the policy the policy may address and respond to that defendant that's being on time and our case like no i understand so if there is what is the answer the answer is if there is a if there is a defendant that's added and he just has an employment law claim against them then the policy would probably provide coverage to that employed before the employment law claim against him but not at standing else all right thank you  frequently i agree but in this case it's apt and it was used by judge williams and she took great care in her analysis you'll find that on page seventeen of the order being appealed from and the plain language here really matters because it's why the decision here ought to be relatively simple the exclusion says that professional services are barred because any claim based against a mean sure so here where you have more than one insured if any one of them committed professional services for others and that is the basis of the liability sought in the underlying complaint then the claims are barred and my hypothetical that i just ask which perhaps i should have directed the this is your area i'm  sorry my hypothetical throws into a defendant sued for employment issue or supplier issue and that person not covered by the exclusion does everybody go down with the ship under your interpretation no because in your hono hypothetical you have a none ca did a separate claim this is not about lawsuit this is about claims so in your honest hypothetical if you've got these four bank officers who are allege yes that is exactly the point so the other point that i wanted to make before i move on to loss you can you plead around that by segmenting a claim in other words you know there was this error committed with regards to this request by rothstein in january of twenty two thousand and seven and yet there was this other event that the people high up at the bank the c f o the c e o the board failed to catch committed in june of two thousand and nine i think the answer to your honor's question is yes and let me elaborate what we're talking about here is not missed a maze hers complaint no we know it's the only alondra lying complaint complete absolutely you can plead around that and people do it all the time for all kinds of tricky strategic reasons either because they want to implicate coverage or because they want to exclude coverage and that's a plaintiff's lawyers right he is the captain of the ship he is the captain of his pleading and he can do that but the moment mr maser gets hired the dye has already been cast he's stuck with the underlying complaint and in this case that made judge williams job not simple but also not complex she read the complaints carefully wrote about them at length and reached the correct decision the other point i'd bank on professional services before i leave the area is that it is so clear that this door s is joint and not several by its language by the reference within the exclusionary portion of the policy that highlights specific other exclusions that are to be read separately but not this one and most importantly by indorsement fourteen which relates to the application and which judge williams analyze separately and it kind of jumped off the page of her because at the top of the page literally in a larger font and in bold print it says severability of the application indorsement full individual severability indorsement fourteen when they wanted to address for ability they knew exactly how to do it now judge williams did not reach loss but if for some reason you decide that she was wrong on the professional services exclusion you have the right to affirm on that basis in this case let me stop you for a second you're almost out of time but that wasn't addressed by mr maser and we obviously are going to address every single issue that was raised in the breeze by both sides but if you want to raise that issue then go ahead but we're going to give him an opportunity to discuss it in his r so you never know ok mr mays you've got your five minutes thank your honor this case and the interpretation reached by the district court does not involve the carve out for securities claims it involves this private bank did not spend hundreds of thousands of dollars in premium for twenty five million dollars in annual director and officer liability coverage for a small bank to protect against a derivative claim by some of the small bank shareholders or certainly no security suits can sometimes be very expensive and demand a lot of private banks were smaller here's the point where the d n o exposure is is from regulators and fiduciary is that's what this that's what management liability insurance is designed to prove that this has a tag alone e r i employment practices it's limited to sexual harassment claims that's indorsement number ten doesn't even include all the rest of the other employment it's just a fabulous one that is but that's because generally speaking most anti discrimination statutes in the employment context don't allow for individual liability so for example if your term in on the basis of race or gender or ethnicity or religion your claim is against the entity that discriminate against you not against the individual person who effectuated that discrimination is that makes perfect sense to me there's no coverage for that either under this what's that there's no coverage there's no entity coverage for anything besides what it sexual harassment claims but sexual harassment claims you could assert under state tort law theories against an individual you could my point is this policy doesn't cover it and what the district court got wrong was on a motion to dismiss the insurers carrier burden was to demonstrate that each allegation against each executive accused of misconduct falls conclusively within the professional services exclusion not subject to any other inference would you think that you think all of them fall with and because when i asked you before you know if you didn't give me an example of one that she got right i'm sorry if i misunderstood your question the allegations of no misconduct by harris and ellis absolutely fall within the exclusion this was a case brought by i said do you share that we're clear this is the guts of your argument harrison ellis whatever that one is not covered what is covered hayworth the c and sanders where the allegations against them were for pure management liability what a d n o policy is designed to cover and unless the insurance carriers could demonstrate which they can't and they didn't that every single allegation in those three complaints i talked about that comprise the underlying litigation only complain about professional services provided to rusty in the motion to dismiss and the compliance person was pure management liability is covered but the problem with your argument is that the exclusion gives another exclusion for securities climb showing that policy is looking at certain types of climbs but the policy says the only type of law build your climate will cover that might be implicated you securities not your management liability that's just wrong your honor the ensuring agreement makes clear that it covers typical dno wrongful acts which are breaches of duty the coverage specific to the executive says you are covered for any management wrongful act that is what a dno  policy covers the reason a district court got it wrong by applying this exclusion jointly if it gets absolutely gut management liability for a professional services corporation like a bank that's why all the case law say you cannot read this exclusion so broadly you must only read it so it only excludes the allegations against those banned german people or those executives who provided the actual professional service and absolutely not where a c e o or chief compliance officer decides not to listen to one of their b s a officers saying we've got problems in these accounts you've got to issue  asar and they decide not to do it that is just pure management liability that is what this policy covers and the reason that district court got it wrong is because she didn't employ the florida required rules of construction which is that exclusions must be construed narrowly that coverage should be preserved where reasonably possible consistent with the type of the policy purchase is conclusively excluded because you paid for that duty don't have fan when you bought the policy here when you look at the underlying litigation when you look at those three complaints that documented twenty five dash one seventy one dash t and seventy three dash one it will scream up the page that the chief compliance officer mr sanders and mr hayward were alleged to have breached their management responsibilities that's what's covered by this lawsuit and i will not