with new york by the insurer who had offices in connecticut or by the policyholder who was in california and the policy was issued to a california a good faith and fair dealing and the punitive damages claim there is also some distinguishing differences i believe is between how the policies are read in new york in in california not a big i'd also submit your honor that there is how the the payments are considered the drop downs are considered there are nuances between the two  think california is somewhat broader california is much more defined under california law we have the diamond heights case which i think is has just recently by this court been a firm and to be a apply in in new york i think there's a substantial difference in which the way the courts would who read these policies and the rights of the insurers in the insurance as to california  state is near another state and therefore it's ok to apply it is not appropriate the courts reasoning was that and reliance was on this one eight hundred jump case and that wasn't a summary judgment case there was factual underpinnings that were presented to the court that said look our business we're a canadian corporation but our business is really located in washington and therefore washington  because they paid three point five million dollars as a settlement that with cash that actually went to the recipients of the settlement agreement and they also paid one point four six seven five hundred something like one point five million in defense costs for a total of three point five million and that was part of the settlement agreement so they tell you why having been put one of the drafters one of the i don't know fourteen or fifteen law firms of the settlement agreements i'm pretty familiar with it and the two years that it took us to negotiate the terms of this is a year and a half it took us to get a plan of approvals of this most complicated settlement agreement and the reason that that's wrong is because what that says is the amount of the recession lawsuit that it was about in order to do that you h l paid r s u r i one point five million dollars one says are as you i paid in addition as i already paid one million four hundred sixty seven thousand five thirteen as defense costs the third paragraph and this is where the issue comes in says that you i could then just fund it and through the negotiations it was decided this would be the way that that money would go into the iris you and we could have said ok r s you are you write a separate check for this amount and put it in the iris you i trust that could have happened and it would have been one pocket paying out of another pocket in order to avoid all of that which included by the way all we have to get permission for this person is going up the ladder of the insurance companies in this is going to be a very complicated thing to get it done there  ok we will pay you one point six million dollars because we're going to settle are coming against you so when you say you i'm sorry pay are as you are one point six million dollars right  may believe the past so i just i am mystified about how a separate litigation settlement payment in a rescission suit could ever be construed as a payment under the are as you are a policy in terms of of it but they did do that and that was the agreement and there are a swell i agreed to pay one point six five million dollars to settle the class action case there's nothing wrong with that when i'm struggling saying is anything wrong with right what i'm saying is it doesn't fit the language of the policy so the lord's policy says if but reason of the payment of any claims or losses by the insurers of the underlying policies the amounts of the underlying policy limits are totally exhausted there's just there's just i understand all these other fancy things happened but the literal language of the lloyd's policy was the insurance company asked to pay on behalf of its insured find million dollars either by way of payment of settlement and by word or haven of defense cost because it was  a liquidating policy and they did that they paid five million dollars they paid the one point four six million in defense costs they paid two million dollars on one hand and they paid one million six hundred fifty thousand dollars that they were otherwise entitled to get what argument from our as you as we hereby submit one point six million pursuant to our policy other people saying oh here's how we read the contract doesn't change the language that we have to deal with we deal with the face of this contract your honor would it make a difference to you if r s u our eyes out we didn't establish the trust at the same time they just said oh and by the way we will pay you every dollar of coverage that's what you're asking us to believe our issue i suit you h l to rip the contract up but you're saying oh no in fact our issue i paid every dollar they additional time beyond that we'll give you some way bottle time thank you very much thank you requires exhaustion by the underlying insurers by payment of loss under those policies in order to trigger the excess the documentary evidence that was before the district court and is before this court proves unquestionably that that did not happen and the dixit suggestion from counsel in briefing an argument that in some manner off of the face of documents that are integrated and part of the record there was some passing of cash that should be counted as exhaustion of this policy is without merit and should not be countenanced the r s u i's settlement agreement that's at issue in this case states clearly and expressly that the parties intend that no payment shall be one in two are the two million dollar payment that was made by r s u i into the settlement and paragraph two is the million four hundred sixty seven thousand dollars in defense costs that they had already paid so well that what's lying out here is the disputed one point six five correct my sleeve your honor and the effort to construct the artifice of exhaustion is in paragraph three it states if you take a lot of the words out of the beginning out of the middle of this paragraph it simply says q h l then skip down to the third to last line after the person of the nominee three i'm sorry it's of this agreement i'm looking at excerpts of record record page seven hundred which comma and if we skip down after the words in the paragraph before the very end of the paragraph the just tell when that's when his pain is going to be made is his cue h l and then third to last line will make a payment to the r s u i one million six hundred fifty thousand dollars and then we skip down to paragraph five of that same page and you will see the language that i was quoting when i first began speaking today after the first sentence the second sentence reads the parties intend that no payment shall be required from r s u i under the are as you i policy other than for the payment provided under paragraph one and two no nothing to do with paragraph three as far as the r s u i policy is concerned the artifice that you're seeing here your honor is is your honour's is essentially an admission of the law that requires under the terms of this coverage requires the exhaustion of those underlying insurers before there will be any trigger there would be no purpose to create this artificial leg of the law regarding i think he language in your policy is that  payment has been made by the underlying insuring that's correct your honor and late in the argument is that this one point six five was not really made by the underlying it wasn't made by r s u i it was such contracts they are there are other matter of fact as though as the evolution of the industry moves in shorts have bargained for manuscript policies that do precisely that allow it's called limits shaving policies ok but then so is my guess my other question is though you if you had been brought into this settlement you might have and had been part of these discussions or had willingly joined i don't know what the real situation is here you also could have agreed as per in her as part of this meant that you would be in this thing to actually satisfy your policy you could have done that in a separate some in agreement that's right your honor we better than you didn't participate and i don't know why i think i can explain that at that point in time the understanding from lloyd's was that the exposure to liability had declined to the point where it would not be necessary for them to take a trip across the country and participate in a mediation the letter that was written that's part of the record states very clearly that they are available by phone and will reconsider as soon as they get any information that would suggest that their presence was required the position that they were taking at that point was that all of the evidence suggest to us that you should be able to take care of the settlement in the underlying limits and that's precisely what happened they took care of the case within the underlying limits leaving one point six five and yet to be paid by any insurer that there was some movement of money without insurance being involved that was done according to some i'm not sure what doesn't have the lloyd's policy and the argument there is that the underlying settlement that they entered into was nominally ten million dollars and they got five million dollars from others and they assigned to a tell the owner of the policy signed a right to pursue the beazley lloyd's underwriters policy to the plaintiffs so the plaintiffs a taking the cudgel of that as a gift in the settlement only what they got was a policy that was never triggered so the nominal valuation of ten million dollars five in real cash from other insurers and from q h l plus a right to pursue lloyds for a nominal five what was missing from the calculation as they named it ten was the fact that that top lloyd's policy had not been triggered because the terms of coverage of that policy never got triggered because there was not an exhaustion of the underlying limits and why wasn't there an exhaustion the underlying limits because the settlement didn't require it of liability exposure and damages exposure this case has declined since the last we met about this we think it could be handled within the limits of the underlying insurance if it can't please call us we get on the phone we'll deal with it what happened is well i ask you with respect to the choice law leaving aside punitive damages with respect solely to interpretation of these agreements does it make any difference whether you're under california or new york none whatsoever your honor common case in the appellate court in california and the other cases in new york that we've cited ali many against federal insurance company hold the exact same that indeed the language of the policy so provides you must exhaust the underlying insurance by payment from the underlying insurers in order to trigger the coverage there's no difference whatsoever and that's true because then you go in terms of who is actually paying and exhausting that's just a question of who the insurer is that's right you just you look at the terms of coverage usually identify those precise policies or their policies pay according to terms then the excess is triggered if they don't pay according to the terms the excess is not treat me as you s triggered but still here if the underlying limits are partially reduced in other words it's reiterating that the ultimate that that underlying insurance has to be fully exhausted before we're triggered what i'm not understanding is this three million have been eaten by defense costs we will stay in force in excess of the two million left that's it ok or could be another case right or could be another case that's precisely it and that's one reason for that language it doesn't or another if there's another notification of another case it would still be we would still be alive above you but you have to still get rid of the an extra two million before we're tricked so you're borrowing to always keep a five million dollar requirement in this policy that's pretty that's exactly what happened was a contractual obligation of the insured to get five million dollars out of that policy before it got to us the only other point that i would like to address is the the the if indeed the excess insurers are not triggered as was not the case here for the reasons that we've been discussing then there is no obligation of the excess and show to participate in the settlement therefore a failure to participate before the exhaustion or commitment to exhaust of those underlying insurers provides for no obligation on the part of the excess insurer therefore it cannot be bad faith to not participate in a set up so they notify you that th that's right we had notification the claim paid attention to the claim listen to defense counsel understood followed what was going on because we had a notification in an insurance company opens a file to make sure and watch what's going to happen and that regularly made decided that there was at the point the mediation was coming and threw out there was no likelihood that the liability exposure would render a reasonable settlement within the limits of the access so the determination was made will not come to the that the settlement got through the underlying insurance it stayed were the value was estimated by the excess and the only reason we're here is because there's a constructed argument through the artifice of the settlement agreement to create the appearance of exhaustion we've just had an hour discussion that says there's a lot of difference of opinions as to the underlying facts houses testimony about what the that company knew and and how they act tilt and so the underlying problems there was a lot of discussions on this i respectfully judge disagree with your contention about these payments but even even if you accepted that go back and read the insurance policy and it says payments by the insured ok or it could be the insurance companies insured in this case q h always the insured so if you want to say that they didn't