let me call our last case interactive communications vs great american insurance printing and may it please the court your income purchased a crime protection policy from great american insurance company to provide coverage for exactly what occurred in this case individuals manipulated incomes i v our computers and caused a transfer of money from income's own account to somewhere the policy language calls for coverage in this case and it is at the end of the day relatively relatively straightforward cannot wait can i if maybe ask you to start at the end of the argument with the currents issue  knock you too far off your stride but if you don't mind starting there can you explain to me i certainly understand that under the language of the policy it's not the act tours that need to be related it's only the act that need to be related but how is it that these acts were related they weren't really related in time so much right this occurred over several months in place this occurred over a number of states and how is it that they were related your honor the acts are related and you're correct the policy language here talks about an act or   vent or a series of related acts or events not involving any identifiable person here the acts are related because it is the exact same method that was used to cause the fraudulent transfers in this  case the the loss was caused by the i v r and the i v are is the mechanism by which someone dials and then enters the codes in response to the props they receive to activate the chit so that they can put money into their account here they're related when you look at how it all occurred it wasn't one person here doing it and then someone else doing it and someone else they were simultaneous redemptions at multiple times they're related because they the method that was used is the exact same we've cited in our papers when talking about occurrence and talk about the related acts and think about the currents the proper test is the causation and the court should be focused on the cause under george supreme court precedent of the of the occurrence of the loss and the cause here was this multiple simultaneous redemptions over and over and over again and your honor while they did take place over over time the record does indicate that the vast majority of them and importantly from a significant financial standpoint occurred over relatively short periods so i think i understand that they are similar and i'm trying to decide whether whether being similar is enough to make them related and if the only relation is that the fraudsters exploited a common code weakness then i really wonder about the reliance on the cause cases because the cause of the fraud rip this is a computer fraud policy not a product defect policy right and so the cause of the loss was the fraudsters intent right not the underlying code error i mean if that if this had been sort of a glitch it caused money to go into every other account in the world or whatever then i can see how the reliance on the cause cases might make these related but because these are fraud claims and brought under a computer fraud policy i'm having a tougher time finding that they are related instead of just similar to two things your order first the phrase computer fraud policy gets thrown around quite a bit and it is titled a computer fraud policy but the policy itself the the operative language from insuring agreement five doesn't say the fraudulent use of a computer it says the use of a computer to fraudulently cause the transfer so we do need to focus on the cause and this is why the all of the acts are related because it is they believe the out years accurate we've used the term software error glitch whatever we want to call it during its it is similar concept as relates to the i our but it's unquestioned that the i v are was not being used in its intended fashion and it's unquestioned that every one of these multiple redemptions was whether we call it unlawful fraudulent criminal everyone in this case agrees that is how they are all related they're not just similar it is one single cause so your are respectfully would point out that those causation cases do need to be considered when considering whether or not this is a single occurrence or multiple occurrence so i just explained to me one more time and i'm sorry if i dismissed it there in your explanation but i think of fraud as sort of an inherently individual course of wrongdoing and there might i guess as you say have been some kind of coupling up of fraudsters here but there was no sort of grand conspiracy so why wasn't the cause each individual's fraudulent state of mind ultimately won your honor you could look just at the language the policy language itself when and figuring out if there's an occurrence if we had to establish and if the insured under this policy had to establish that it was this person's criminal intent or fraudulent and or the next person or the next person then we couldn't have the policy language that says that says not identifying any identifiable person that would be putting language in terms of the policy requirements of the policy that are just not there and again while we're talking about fraud well that word is used throughout this this is not a fraud case we're not suing for fraud we didn't sue someone else for fraud and it's a computer fraud policy but it refers to the fraudulent lee causing a transfer of property dollars to put on my card i get to use that one hundred dollars one time i don't get to put it in over and over and over again everyone agrees that's what happened here great americans own adjustor called the conduct criminal their consultants said this was an authorized so there certainly is that aura of fraud surrounding all of this and we've got to keep in mind also that the only reason someone dials the i v are in this context is one reason and one reason only to redeem the chip and put money into your account so we have multiple people doing it over and over again at the same time clearly inconsistent with its intended use so your honor respectfully while it's not a fraud case per se we need to focus on the policy language and where  transfer occurs and even if you want to dig into what the individuals were doing when you consider what great american has said about it when you consider that the f b i and secret service investigated this when you consider the method in managed manner in which th it all screams of fraud or a legal activity to talk about the other issue use of a computer and whether it should be interpreted to incorporate or include a debit or debit card reload executed through income's phone based system why under the circumstances of this case should we not view the use of the phone as being essentially part of the computer because it's different your honor it's well it's it is different a mouse is different from a computer and the keyboard is different from a computer right correct and the monitor is different correct your honor i would also say that a wife i access is different than a computer the policy language dictates here says use of a computer it doesn't say how you have to use the computer it doesn't say i have to sit at my desk it doesn't say i have to sit on my i phone it doesn't say it can't be if you have to access the computer by telephone and that's the position is lee we think the district court take has taken and what right american has as well i think the analogy of why fi is the best we could go to the extreme and say electricity i can't use a computer if i don't have some either why fi connection or electricity does that mean in this case in these circumstances that where you didn't use the computer used why five to access the computer and that's an added step that's what the district court did here this unquestionably everyone agrees that this the i v r is a computer there of fact about that and that's what these individuals used the way they accessed it has and from our view has has no really is totally irrelevant to the issues in the case the third issue that i would like to address your honor is the language resulting directly in the policy that is the key legal question in the case as the briefs have shown and was shown at the district court the parties have litigated this for a while and have gone back and forth and showed various district court cases and court of appeals from around the country that have looked at this language or similar language and applied different approaches to it some courts have found a more stricter interpretation of resulting directly saying direct means direct others have said  it's more lenient in the context of an insurance policy like this as a proximate cause either way there is coverage under this case the district court sided cases and relied principally on cases that pointed to the direct means direct and interestingly the district court quoted from from black's law dictionary and says direct means straight forward or in an arrow and if you look at what happened in this case that's exactly what we have we could go into the debate about under georgia law which one applies and is this court looked at in the st paul case when there is confusion or two reasonable interpretations under georgia law governing the interpretation of insurance policies the insurer gets the benefit of that and it's construed in favor of the insured but here regardless of that just looking at the facts it's straightforward manipulation of the i v r and then income follows its normal business practice believing that these were legitimate transactions and transfer money outside that's not a situation like many of the cases that have not found coverage here where we have a lot of intervening steps where we have an e mail and then maybe a follow up telephone call and then maybe some canceled checks cases such as past master and others but in this case and what distinguishes this case from those that have applied resulting directly but have not find coverage is that the computer was central and necessary to this in the other cases that have looked at a resulting directly approach and have said well it doesn't apply here they have found other intervening facts and they have found importantly that the use of the computer was merely incidental to the fraud here this whole scheme could not have been conducted without the i v are the whole purpose was to redeem that shit multiple times to allow money to go into their accounts but so i guess when i looked at i don't i don't think our definitions are meaningfully different but when i looked at the definition of director directly i found  without anything intervening straight away next in order without delay immediately and this you're right i mean this isn't like a paul's graph kind of a rube goldberg apparatus but i mean there are a few intervening step trying to mean that the card is loaded step one your client transfers money to bancorp step to the card holder makes a purchase maybe that step two a or three and then the bank corp issues the money to the merchant that's really when the loss occurs right when the bank or when one or pays the merchant your honor the loss occurred immediately when great american transferred its money to bank or so i would disagree that there really multiple intervening steps i don't disagree with your timeline your honor but i do disagree with that with the way the facts apply to the to the causation argument and to the timing of loss but not doing it isn't there some evidence that even after the transfer from you to bancorp that you were able to claw some money back or to prevent it from going out before what i'll call step three before bank or pays the merchant your honor i'd like to answer that question my time is up may i make plays thank you ok so we're talking about the one point nine million dollars that is related to these activities and still sits in the bank or percale income where two hats in this first in connection with the funds flow that we've talked about they were a separate hat regarding the use of the cards in the market place the individual reload will cards that is different and separate from the funds flow and you've probably seen in the papers as their role as program manager the best example i can give is this if you lose your debit card or  your merican express card you dial an eight hundred number and you talk to someone in this case with a relatable card you're talking to someone in com and you say i've lost my card i need you to stop it freeze the use of the card that's essentially what they were able to do here but that is just to stop the use of it once the once the fraud was was discovered and as a result of those actions they were clawing money back they were freezing i'm sure those i would have thought that the better interpretation is that the loss occurred only when the card issuer transfer the funds to a merchant to fund the purchase made with the duplicated chip reload account balance i would have thought it's when the merchant let's say bank corp pays the merchant that's when the loss occurred rather than him one of these intervening steps you're out of that's what this report found but specifically the last fall when you look we start by looking at the policy language the loss occurs when the money is transferred from income or incomes banking premises to somewhere outside of income and that is exactly what happened here the income money was sitting in an income wells fargo account with an income tax id number and then after these ships were redeemed multiple times income followed its normal practices believing these redemptions were legitimate and transferred money into a bank or percale now that bancorp account is an f b o account for the benefit of and it is held for the benefit of the card holders it bancorp it's a separate account it's a bank or controlled account it's got a bank or id number income has no right to go and take that money it's not like it was transferring it from its checking account to its savings account it was transferring the money from it so to say the n r s to say that the analog is closer to a check or in  r instrument that might be fraudulent the funds would be lost only when the bearer cashews the check or exchanges the note for you your honor in this case it's different because that analogue is no good it is not because these specific accounts are held for the for the back up your are think of it in the normal course absent any fraud the the money is sent to the bank or account and if i have a if i have a vanilla reload card that i want to go use that night at dinner and i have two hundred dollars in my account as that in our holder i think that's i think that's my money because it is my money because someone's holding it for my benefit it's not  break it down this way as i see pieces in the transaction the following comprises how and when the loss is sustained tell me as i go through step by step where the loss occurs customer receives a prepaid card from an issue in bank let's call that step eight to add value to the card the customer purchases a chip  let's call that be some time later after the purchase the kit seller wires the dollar amount of the reload to incomes bank account redeem is the chip either online or by phone making the dollar amount of credit immediately available for use on the prepaid card let's call that d after the chit is redeemed income merchant for goods that were and that's the time of loss rather than in one of these earlier iterations you're out of the loss occurred before that the loss of to read or the loss occur i when i laid out for you steps i believe it step your honor where income transfers the money to the bank or account the cost to remake the hundred dollar purchase with a debit card no before that's too late before that when customer calls in com to redeem a hundred dollars and a hundred dollars immediately becomes available on a debit card after the chip redemption the step in between your honor when income wires the money to the bancorp account got it do they make one last and then i promise to let you go there's an issue of course about the transfer from what i'll call inside the banking premises to outside the banking premises the transfer and the loss and your mind have to occur at the same time or could the transfer there one in the same year when we think about the transfer we're talking about the transfer of alternately the ten million dollars plus that went from income to from the income wells fargo account to to bank or that if the loss occurred later  then we would get into an entirely different causation argument and that in that situation and it is i'm getting off on it but in that situation we start talking about the proximate cause analysis because it would be further down in our view is if the loss occurred at that point in time there which that would still be covered are the proximate cause analysis in these cases thank you thank you good morning good morning may please the court to answer the question when the last occurred it absolutely occurred in common least at the moment that money was taken from the card holder account to reimburse merchants for transactions that had already occurred  in theirs in this case we actually have facts that demonstrate that encounter not suffer a loss until that point because there is one point nine million dollars still today sitting in the card holder account income says that that money doesn't belong to it but if it doesn't belong to income who does it belong to it certainly doesn't belong to card holders because the whole point of the claim is that the card holders who did it occur when the card issuer transfer the funds to the merchant grant that occurred before that's the point of the law at the moment that the c issuer transferred the funds to the merchants to reimburse them because that's the first time that the money is gone to somebody who's not entitled to it but i don't all other steps it's either in incomes pocket or it's in a trust account that's being held by incomes business partner and why does that matter is because of the direct as opposed to maybe the proximate cause yes that's precisely why it matters the because without the real cause of the loss at that point is when somebody takes the card that's been reloaded goes to a merchant and obtained by the t v or a stereo or whatever it is they use it to buy that's the first time that the people who engaged in this activity got any property from holding the bag because of their contractual obligations they have to reimburse ultimately the merchant and so that's that's why it's important to determine when the losses because that's how you analyze the causal connection is a direct this is so if we were to just apply a normal proximate cause a law you would be wrong you can only win and we can only sustain the district court on the theory that resulting directly from means proximate cause loss no i direct this in an immediacy that goes beyond traditional proximate cause analysis to have that right you know i disagree with that respectfully your honor the even under  proximate cause analysis i don't think that there's a sufficient causal connection between the initial telephone calls that were made to the subsequent reimbursement of the merchants in the reason why is if but for the subsequent intervening event of this individual going into a best buy and purchasing a t v the money is still sitting in the account in income be able to retrieve it and they have a contractual right to retain the funds in the account so that purchase at the best buy in that example broke the causal chain sufficiently i thought that the approach certainly the want to employed by the district court it was something like what the third circuit did in jefferson bank versus progressive case insurance are you familiar with the the case that in that case the third circuit says the phrase resulting directly from does suggest a stricter standard of causation than mere proximate cause the words imply that the loss must flow immediately either in time or space from the allegedly covered conduct direct means direct it means something more than a sequence of that's that's correct your honor i believe that that is the proper interpretation of the language result that's more than just proximate cause i i just named that for convenience proximate cause plus you can call it direct cause a me the it caused but somehow it be speaks to something more and a higher burden than simply proximate cause do i have that right or have i mis apprehended this yes that's absolutely correct your honor the word direct is in the policy because everybody knows every layman knows what direct means a direct connection is one thing connected to another with nothing in between which is the dictionary the judge newson dictionary definition judge news and read bears that out  so if there are three intermediary steps that are a nexus area before the laws can be consummated that's not direct that's correct moving on to the other issues with respect to occurrence has to be a series of related events everybody agrees on that what is related typically what the cases in the area of fidelity insurance million prime insurance of look to those applying the cause theory that georgia has adopted is one of two things either number one how many transactions are there if that is the test in this case we've got more than twenty five thousand separate occurrences because that's how many phone calls were made to redeem these chips when and the amount the largest amount is well under the deductible of five hundred thousand the second think the courts look to is the state of mind of the actors so he if there's one actor who is committing fraud scheme a fraud that involves twenty seven separate transactions for example that could be viewed as one occurrence because it's one state of mind by one dishonest actor and that could also be applied in the case of a conspiracy with the number of actors who are occluding together if that's the case there still multiple occurrences none of which exceed the deductible in this situation because there's not been as far as from the record incomes never identified a single person who we know was actually involved in redeeming these chips the individuals who to whom the cards were registered but incomes corpora presented have admitted that those individuals may have been the victim of identity theft and there's no reason to believe that they were actually involved in the conduct and even if they were none of them were involved in any transactions where the aggregate amount exceeded the five hundred thousand dollars deductible so the only thing that income has pointed to is the method that was used by these actors or you can redeem multiple chips simultaneous phone  method using method to say that events and acts are related to each other would lead to absurd results the example is with respect to a retailer these policies were initially designed to cover employee theft which is the largest risk to any employer and so take the example of in one thousand nine hundred fifty a mcdonald's employee in california takes a dollar bill from the till puts it in his pocket fast forward to two thousand and seventeen last week an employee at a mcdonald's in atlanta puts a dollar bill from the till into his pocket under income's theory both of those transactions would constitute a single occurrence and that's an absurd result and it would actually in practice if there was an opinion that that applied that it would be do more harm to insur and the not because if a large company had multiple employee thefts over the course of let's say there's a three year policy and they've got employees all over the country engaging in petty theft now those are all one occurrence subject to one limited liability whereas if they're viewed as separate appearances they sure they're each subject to the doctor but there's not a cap on the total amount the insured can recover so that's that's why the it would lead to an absurd result to say that all of these everything's connected if these actors use the same method  finally the finally should i want to address it is with respect to the use of the computer the district would reach to what i think is a common sense conclusion at least that using a phone is not the same as using computer is using a keyboard at the same as using a computer it's certainly closer it is that a yes or is that a no that's a yes using regular keyboard is the functional equivalent of using a computer why wouldn't a phone mouthpiece or a phone keep that can import a device be the same thing speech recognition software has become much more common a smartphone and streak command technology among other things allows a computer device to be controlled through speech so if the way the computer is set up i get on the phone and i punch in a number and the computer takes that as the command or it recognizes my voice which is the functional equivalent of punching in a number on the telephone or punching in a number on a keyboard where's the difference well the difference i think a useful way to draw the distinction is what is the device design for primarily and how is it connecting to a computer in the case of a keyboard for example keyboard is designed for the specific purpose of providing commands to a computer and it's usually if you go to the store and buy a computer the keyboard is packaged with it in the case of a laptop there you can't take them apart at least without destroying the computer at least i could but functionally speaking isn't that the same whether i type onto a keyboard i give a command the computer has software and it spits out a result or i use my telephone and i type in a number just as if i had typed it in on a keyboard it was a command to the computer the software is constructed in such a way as to spit out the same command i'm having trouble seeing the difference other than i typed the command into a keyboard or i typed a command into the numbers that appeared on my smartphone well i think the difference at least with respect to the phones that were used in this case and we don't know if they were smart forms or rotary phones or what have you but i think the real critical distinction is that these phones before they were providing any kind of commands or communicating with a computer had to pass through the airwaves and public utilities i assume i know i'm not a telecom person so i don't know exactly how that works but they had to pass through phone lines and i soon switch boards and all kinds of things of that nature before income answered the phone call with the computer it wasn't it wasn't an instance of an individual with speech recognition software for example who has set up his computer specifically so he can provide because he wants to provide prompts to a computer the choice was in comes to answer the telephone call with a computer not the consumer who's using his own personal multiple separate our current is a none of them exceeding five hundred thousand dollars to five hundred thousand dollars deductible was that issue addressed by the district judge no he was briefed fully in summary judgment so there's a full record but the of the the time of loss as i mentioned that is what sit as a remain as a result of income after they discovered this being able to stop the use of certain accounts there was a one point nine million dollars balance the rest was gone in co contend on your timeline that you've lost that one point nine million your i think it's a question of damages the total loss was what was or mitigation the total loss was was ten million whether or not income can go recover that money back is a relationship is a question between it and bancorp and ultimately a question of damages it's the total loss as a result of this was the money transferred out over ten million dollars over the policy limits the fact that one point nine million now remains as a result of incomes ability to to hold some of those accounts in its role as program manager is a question of damages or maybe the total amount of loss or maybe mitigation but certainly not a question of coverage but that's just a main isn't that isn't that just sort of lost in the air that's not really a  nine millions just sitting there waiting for you to come get it well your honor it's not enough for the record shows that it's just sitting out there on for us to go to go get it that would be as i said a question which we in cut and bancorp but even so it goes to the total amount of the loss the damages in this case and not whether or not there is coverage for the for the activity or perhaps it's a question of mitigation which is certainly a defense that great american can rise but not not a question of whether or not there is actually actually coverage on the issue of the issue of the occurrences which was your honour's first question the scenario that counsel for great american presented multiple things over fifty years that this not what we're dealing with here it was a haunt all of a sudden bang great american income realized what had happened and they worked immediately to fix it unfortunately by the time they fixed the issue with the software ten million dollars was out the door but everybody has looked at this case from their own investigators to everyone else has seen that this all occurred it is one of the aunts for purposes of coverage the cause was this use of the i v are in this fashion do and do do companies either your own company or companies in your a company's business have separate policies that cover losses resulting from product defect your honor my client is not in that business so they would not but there are certainly and we cited in our brave senate summary judgment below cases from the product liability context and in those cases courts will look at the defect itself as the cause as opposed to well it was defective for for customer a customer b customer c customer d it's the broken lawnmower that is the cause that caused hundreds of injuries or the broken tire whatever it might be so i mean you understand i think the reason i'm asking the question is that that actually makes sense to me in the product defect policy situation and makes somewhat less sense here and i don't want to characterize mischaracterize the policy as a fraud policy but this really is a policy that aims to coverage to cover losses resulting from product defects where you might look at the defect itself as the cause instead the cause here seems to me to be multiple individuals formulating and fraudulent intent to steal the money your honor it is analogous the broken lawnmower in my hypothetical in the product the feds case is the same as the i v are it was the broken  lawnmower that caused the injury or the design defect is even better it was the design that went out into all of these here it's the i v r and the manipulation of the i v are in the simultaneous simultaneous manipulation of the i v are that cause cause fraud she's in the cause cause loss or you are see my time's up thank you very much for talking to you both for your efforts this case will this court will be in recess until nine am tomorrow morning thank