the morning honors matthew kane on behalf of the consolidated appellant dennis huff may it please the court this case presents several questions of law that are arising from a collision that took place on august third two thousand this morning to focus the court on four of those questions of law as the injured party mr hough has been fighting for years to get some compensation for injuries and lost wages but he has nothing to show for it despite the fact that he has a determined final judgment from the state court in two thousand and five why has it taken us so long to get here there are two reasons first mr margulies defaulted in the underlying state court action and then declared bankruptcy second usa the insurer here mr margulies insurer hasn't gauged in needless gamesmanship for years let me give you some examples it didn't conduct an investigation a reasonable investigation of the accident although it had the right under the policies and this is in mr duke's testimony attached to the appendix they were notified back in two thousand your honor at zero after the or the occurrence was august third of two thousand and late two thousand i don't have the date they were notified that the testimony from the witness from usa a mr duke is they had a right to conduct an examination under oath to determine things like intent and declined to do so they declined to talk to mr hoffa and i declined to put issues that were resolved the liability and damages issues that were resolved by the state court action that's true you're out of the that was not a final judgment the appellate division held that and as your honor knows in new york we couldn't get to the court of appeals under c p l r fifty six zero one until we had a final judgment from the state estoppel standard res judicata in new york is the transactional approach which is that anything that was subject to the underlying case and this court held in jacobson anything related to the factual grouping in the underlying case or that constitute a legal malpractise they did there was a default judgment the court of appeal says that default judgment is race judicata and the issues in the underlying case that relate to liability and damages from legal malpractise cannot be tell me how this got to be four and a half million dollars yet your honor in july of two thousand and five there was an inquest hearing before judge tangling and judge tingling took evidence bought off on the medical evidence and on the lost wages so it was calculated based on lost wages so your honor we have a ledge that is we played in the alternative that either it was willful and malicious and not subject to the discharge or it was unintentional and therefore an accident so we've alleged both with alleged this is not a classic with the alternative if it's an accident it's just a article and you wouldn't be at this point at all it's because you succeeded in showing that it was intentional and malicious that you get to argue anything about the insurance policy or  purpose and the other for the other no i understand that you're on about as a judge fail less than one of her decisions there is a little bit of daylight between the bankruptcy standard and the intent standard and so what we've alleged in the alternative is to make sure that what is that that you say you fall into that the court did not appreciate here i don't your honor i say that they're one in the same standard build i don't understand that answer i'm protecting my client that if a court were to say that there is a difference between a bankruptcy standard and the new york insurance standard that that he would not he would not walking up to him this both intentional and malicious conduct for purposes of discharge and not an accident for purposes of the the thirty four twenty action in two thousand and seven to the adversary proceeding that it is and that it was an accident and there should be coverage we have alleged in the alternative that if it's deemed not an accident then it should be subject to not be subject to the alternative but you lost on both alternatives here it's not like you can win on one and lose on the other you possibly could but the bankruptcy court found you lost on both that it wasn't it was willful malicious as it was an accidental the  was how's that wrong well bankruptcy court found that we won on the willful and malicious but i did so with a novel legal test of the success of states of consciousness finding that it was first negligent and then reckless and then intentional within a span of a  reckless or negligent it arises from the occurrence or accident and therefore is covered and that's why we say one reason why under both servant and the in the air canada case cited in our brief that that that constitutes an accident the reason for the default and one of the things that actually the disc was he was not informed of usa not only did they fail to appear to defend but he was not advised what happened is only served in the initial x my understanding and this  in part of what the district court laments at the end of its decision is that mr margulies ultimately didn't deal with the case because his young son had died right around the same time and so he abandoned it for a while as a result of that he then tried to move to right now which is the follow up to your honor's question and i'm not sure of all of the details leading up to the exact timing and circumstances of the defaults i know that there was a failure to defend i know that there was an actual absence of notification which is why he didn't appear in the first instance and i know that ultimately he could have appealed the denial of they could have fallen didn't because of the circumstances i'm not sure your honor i don't believe that he did i believe that that was part of the action from two thousand those issues unfortunately are dead now they were five when they were raised when he tried to move to vacate the default judgment and that motion to vacate the default judgment was ultimately denied and then it raised  in state court your honor in state court so now where we are and leading to this question is part and part of the circumstances were noted by the district court and the district court actually notes that the result is troubling to it in part because of the circumstances that led to what ultimately it believed in what the bankruptcy court believed was a judgment that was a huge judgment for an injury that really probably was not so huge but putting that part aside where we are now with respect to the legal standard is the question of whether the debt can be discharged now i will note in terms of the troubling aspect of this you know mr margulies has noted in his papers as well in his briefs that he actually of course did plead guilty to reckless assault so we face criminal liability and acknowledged his actions in that context he has ultimately had to declare bankruptcy at substantial cost to him financially he did ultimately notified because he is an attorney he notified the bar the bar the new york state bar that in fact he had been convicted of a crime and the new jersey bar as well so all of that has been at a cost so it's not that through his defaulter through the actions there was no penalty to him there has been substantial penalty to him and really usa through its actions he had an insurance policy they had an obligation to notify him they had an obligation to defend the bankruptcy court when  broad sense in broad strokes is willful and malicious the only question and this was expressed by the supreme court in the case the only question is whether the injury was intended in this case the facts of the case  different from any other case where conduct was deemed to be willful and malicious because the injury was clearly unintended in fact well your honor that's actually not accurate what happened here is that he was waiting at a light the flag man was standing in the intersection flagman hough then walked out of the way and when he stepped out of the way margolese then at that point released he did accelerate he released the brake which caused the part a move forward because it was in dr that time hough was not in his lane and he believed in the bankruptcy court credited that he was not in any danger of hitting cup so he had no expectation of that and he did not intend it he was trying to get to a meeting with then governor mar opportunity to avoid the accident or back into the way well your honor actually because the car was moving so slowly at once two miles per hour you argue the facts to us right i'm now asking you why the banks of court could not make the finding it may because what the bankruptcy court did is instead of analyzing the issue as a whole it concluded as a matter of fact i'm using its factual findings that mr margulies never intended to actually cause contact  standard is acceptable but substantial certainty as just judge justice cardozo said in messersmith actually has to be gauged you have to look at the accident as a whole not in constituent parts so the error that the bankruptcy court made is it took a portion of the restatement that dealt with successive mental states in other words recklessness negligence going into recklessness going into intentional and instead of applying that to a mental state as a whole it broke down the accident into momentary fragments to the point where it achieved an absurd result because in the end if the bankruptcy is court is right that with every negligent or reckless act you have to look at the exact moment just before it happens even though it's not intended even though it's reckless but at the exact moment before it happens you know that it's about to happen if that substantial certainty but but the bankruptcy court here never found that he had the opportunity to stop it that's how a bankruptcy courts what it talks about how we only apply the brakes after eating it well your honor actually looking at the facts you know the bankruptcy court says that it never relies on an opportunity to prevent it and because it was so momentary here when we look at substantial certainties looking at substantial certainty right before it happens with respect to the opportunity to stop it you know every accident theoretically if the reaction time is fast enough potentially could be stopped what mr  stood here which evinced his lack of intent which is what this is all about is he did apply the brakes in his deposition testimony he specifically testified in the bankruptcy court had this before him that he applied the brakes before he hi immediately before hand was enough to stop the hitting it wasn't enough to stop it and then when he  distinction without a difference and this is why we're looking at this on the question of whether he intended to cause injury if mr margolies had intended to plow through half to get his meeting had intended to injure him he would have been surprised he would have applied and yet well he stopped and then he looked behind him and he saw that mr hough had at that point gotten up and seemed to be ok in fact threw his flag at him and cursed at him and so mr margulies then continued and so it appeared that hope was ok in fact have stayed at work for the rest of the day and continue to work so it appeared by all outward indications that there was no injury now i'd like to direct the court toe donnel which is o'connell rather which is an important case on the question of of not just whether you intend to make contact but whether the nature of the surrounding circumstances reveals that you intend to cause injury o'connell is a case where the defendant pushed a person and while he pushed her he actually threatened her as well and so the question there she claimed that she had sustained all of these injuries from this push and the court o'connell said well look the push even though the push was an intentional act with a moving shoving someone we can back it in them with a car but your honor the car was not a car that was accelerating towards someone at any speed at which she would expect an injury to occur in rafferty where the injury was inherent which the bankruptcy court relied on was inherent in the act of accelerating at a person with a car the person was two feet away from a garage door the defendant crest on the accelerator and rammed into the person injuries inherent in that it's expected it's intended here big hitting somebody with a cord injuries not inherent if the car is moving one or two miles per hour your honor what you would expect to happen and in fact faced with an impossible hypothetical that that actually was contrary to mr margulies statement that he never expected he always assumed till the last minute that half would just get out of way when a car is simply going one to two miles per hour you would expect reasonably expect i would posit that a person would step out of the way of that no testimony on this record whatsoever that there was a choice or decision not to break have testified this all happened in the blink of an eyelash what were his words so in that amount of time if this isn't about whether the accident could have been prevented that's not what the test is the test that requires that an act be willful and malicious and those two elements are separate elements requires not that you can stop the engine the accident from happening but that you are intending to cause the harm intending to cause the injury so in this case mr margolis was intending to get to a meeting for him to it's actually contrary to common sense if he was trying not to be late for a meeting the last thing he would want to do is actually hit someone with his car because that would only have the effect of making him later to a meeting we know his intention was not to plow through half because if that had been the case he never would have applied the brakes nor would he have been going at one mile an hour reasonably iran are just rushing to dress your question directly what a car is moving one to two miles per hour which means it's simply and drive you can put your hand on the car and you can stop it from progressing you do not expect that an injury will occur so it is exactly the same exactly the same as a push you don't expect that when you push someone an injury will occur but more importantly it reveals the intent if he intended to injure him he would have accelerated that's what the defendant did and run in a rafferty if he intended to injure him to plow through him he would never have applied the brakes but he did apply the brakes and whether he did so in the moment before as he testified in his deposition or in the moment after is irrelevant and the last part of this and i recognize my time is up but respect to begin talking about the facts the last part of this your honour's i also want to highlight that this is not just about willfulness which is all we've been discussing here but this is also about malice because that is also required and malice is an element of motive it is an element that looks to the motive or the purpose behind an act joshua margulies the district court found and i'm not challenging  single finding the facts by that court and the bankruptcy court found i'm not challenging the single finding of fact his motive that morning was to get to a meeting with governor cuomo his motive was to not be late his motive his intention throughout was to pass half without making any contact with him because if he had touched him if he had made contact with him if he had injured him if that had been intent his intent then he never would have made his meeting he wouldn't have been delayed by circumstances can change it and move from being reckless to being bush's correct but his intention would have to change too so when you're relying on a substantial certainty test is the question the substantial certainty test looks only two so the example that's given in the restatement is i think actually most instructive in the restatement substantial certainty deals with a situation where you have a person a who throws a bomb into a building intending to call to kill this is the actual example he knows that c is in the building and therefore he not only intends to kill b but he's acting with a substantial certainty that he will kill seat even though he bears see no malice there see no ill w nonetheless that act is intentional he's acting intentionally as to that result because of the substantial certainty the other example that's given which is really analogous to this one in that same restatement is converse lee if you have a person at night driving on a road that is a curvy road and he takes a hairpin turn around a car knowing but recklessly disregarding a risk that he's going to ram into that car and cause injury to the occupant that person has acted intentionally in the act but has not intended to cause injury so that would not be willful and malicious what happened here or what mr mark least it is the epitome of recklessness recklessness and recklessness by definition just like the driver in the restatement who took the hairpin curve disregarding the risk that he might hit the driver so to mr margulies here went around huff allowed his car to keep going hoping that he would pass him expecting that he would pass him disregarding the risk that he would hit him but his intention was never to cause injury so it is not only not willful with respect to the injury but more importantly it can never possibly be why aren't you libel than i did new york state law for failure to disclaim disclaimer was improper but under new york state law usa is still entitled to litigate the issue of whether there was ever coverage in the first instance and that clear new york state law says that even even in the face of a insurer breaching its duty to defend if that's were going to call it you can still really to get the issue of whether or not there was ever coverage in the first instance and that is wh rights but still holds nonetheless that coverage does not get created where it never existed in the first instance and that's why we litigated this matter in the bankruptcy court to determine whether or not this was an accident and mr huff articulated his two alternate theories he prevailed on this charge ability he lost as to whether or not this event taken as a whole was an accident and now wants to through his regular cut argument set aside the this was all decided by the four corners of the underlying default judgment why did we have a bench trial to determine this very issue and at the at the trial and after the trial the bankruptcy court made very specific factual findings that preclude the thirty four twenty claim here against the usa and really the key fact in this was touched upon earlier is there came a moment where margulies understood that huff was in his path he did not have a means of escape and yet he did not apply the brakes until after he struck that's not an accident it was intentional not in the correct not just georgia i'm not here to argue the discharge ability piece that's really i guess the separate question everybody you're not covered and not an accident or occurrence under our policies whether it's the question was was it the correct and you know huff now would like to set aside the clear findings of the bankruptcy court this was in that it came a moment where he knew he was going to strike him he chose not to break and we can parse this and say what was first reckless and then it was intentional you're operating an automobile on sixth avenue in manhattan and you have a flagman in front of you and he can no longer has the means to escape and you don't hit the brake that's not an accident that's not your foot slipped off the pedal that's not i chose the accelerator by accident over the break his intent and bankruptcy court addresses the question of subjective intent you can still under new york  intended act without intending this specific harm and the bankruptcy court found exactly that said that yes margolese did not intend to strike hough in the conventional sense but in a legal sense he intended the consequences which were the direct and immediate applied the facts to the law as articulated by the district court and found that any injury that was suffered by our flow directly and immediately from margolese intentional act to proceed and that because it was substantially certain  this would happen this event taken as a whole could not be considered fortuitous from his perspective and and this goes to a point that counsel made earlier there's an expressed finding on the fortuity piece of this that this was not a case where things happened too quickly for margolies to stop that isn't expressed factual finding by judge bernstein it's in his remit decision and that's one of the factors that he argues precludes this incident from being reasonably viewed from the perspective of the insured margolese as as unforeseen or unexpected now as i mentioned earlier huff sort of had a heads i win tails you lose against the two different parties and he prevailed on one but that's not the result of what he wanted to collect against the insurance company so order for him to prevail we would have to find the findings were clearly erroneous i agree i agree and i think that on this record they clearly are not my point was only that  does because i think judge bernstein uses the fact that margulies was substantially certain that this result would happen to conclude that that is why any injury to half was direct immediate result from what he did and i think that that's how it ties in i agree in the first instance it's referred to in the opinion under the will for malicious analysis but i do think that if it applies there as well then the judge silver on motion for the argument it was rejected by the first department and as i said our view is that the clear law in new york under two and lange is such that that doesn't it's not a means the applicable standard under jacobson this court's ruling and jacobson second the finding that margulies acted intentionally is inherently inconsistent with the bankruptcy courts finding on two separate occasions that mr  subjective intent to cause injury throughout the entire episode judge bernstein found that with that it can get just as it was striking your client right well the opposite i'm accepting the judge's func factual finding that mr margulies lacked the subjective intent to cause injury i accept that finding and i think any further finding is entirely inconsistent with the record but also with new york law which says from miller to city of joint judge johnstone and on that the subject of intent of the insurer is what controls that should have been the end of inquiry as a matter of law if he lacks objective intent to cause injury that should have been the end of the there is with respect to willfulness your honor and judge judge fail instructed judge bernstein to apply the subject standard in which and he did the majority of circuits apply the subjective standard the six the eight the ninth and the tenth circuit all apply a subjective standard the fifth circuit does not the success was that once he wins he chose not to apply its brakes as he was coming upon your client that the substantial certainty of injury was such that he had to have intended that is the finding but it's based we say on a flawed legal analysis it's flawed because it to get there you have to apply this excessive state which flies in the face of judge art by this excessive state of consciousness said expressly in that case that you couldn't break an accident into its component parts such that if you were just looking at the intentional act of turning the wheel left that would be enough for a willful and for a willful wolf in this finding she said that would that would render the standard meaningless so it was wrong as a matter of law under both giger and messersmith to do that also just as judge fail as well as usa say that the sole fact that this successive state of consciousness final eureka moment of substantial certainty was based entirely on a hypothetical question mr margulies asked judge bernstein what did you think would happen if you did if you proceeded which is which is entirely hypothetical because mr margulies testified throughout i thought mr hough was going to move out of the way when i finally saw him when i started he wasn't in my way and when i turned to the left which was reckless by the way and then back to the right which was reckless by the way within a car length and closing in reckless at that moment i still thought mr hough was going to turn out of the way and the court accepted the hypothetical and based the salt fact the linchpin of the success of consciousness on that hypothetical we say that was an error as a matter of law and lastly i would say that the inherently and  same position i would be under the coverage of usa and so i would be and we found it was that if some court found it was an accident us it would be put to their proof on what the policy covered correct that if the claim is just charged big because it would be an accident within the policy and we stand in the shoes of mr margulies as the result of the winning party not having a problem understanding what the concern  obviously didn't want this discharge if it were if it were discharged your honor then we still stand in the shoes of mr margulies with respect to usa as a matter of contract and we have coverage under that contract for an accident or occurrence would only zero a discharge or you saying that the insurance policy somehow trumps that just not understanding that we would collect the judgment up until the policy limits your honor and the remaining balance would be discharged because of the district correct i do want to get back to judge your question of of chicken which i think is entirely what this was about i agree with you and chicken is a classic game of recklessness and there is nothing that brings that more forth than the inherently intentional cases that we cite in our brief because it can so long as is not based on a hypothetical question your honor thank you very much thank you  it seems like there's a lot of emphasis put on this question of whether he applied the brakes beforehand and really what the tenor of it at the tenor of the arguments is whether that was reasonable under the circumstances that however is not the test and so what i want to focus on is now i'm going to change gears a little bit and i'm going to say even assuming that he purposely that the bankruptcy court was correct in finding that he purposely did not apply the brakes beforehand even that he had an opportunity to do so that would not be tantamount to finding that the injury was willful and malicious and the reason for that is that the bankruptcy court also found that the testimony showed that he didn't apply the brakes because as mark only said he believed and he expected that huff would move out of the way now your honor's question particularly yours as rogers's i have looking at you for honest question suggest but how is that reasonable when a car is moving towards him when this is a moving vehicle how is it reasonable to believe that it would naturally hit him in the end and so i want to draw upon case law for that analogy there is a case would is the name of the case that cited here where the defendant drove over a tent at six fifteen in the morning he did it because he had a personal vengeance or vendetta against the people who were at this particular campsite and the question became whether he did that whether he intended to cause injury by driving over the tent what the court reasoned was even though he had good reason to believe at six fifteen in the morning the tent would be occupied he said i didn't know that there would be any way anyone in the tent and so as a result of that the court found well if there's if there was a possibility of no one being in the tent then in fact there's a possibility that even though that was so reckless even though it was on reasonable to believe that nonetheless it was not happens because pulls the trigger the first time and there's no discharge and so the person who suffers the injury says you should never point a gun at me don't ever do that again well then he goes and he points it at the abs many pulls the trigger again and lo and behold the gun fires and so the injured person is injured in determining whether or not that was willful and malicious whether that was accidental whether that was intentional the court found it was not and the reason that it was not was even though the act of pulling the trigger was clearly intentional and even though it was so reckless it was clearly reckless to do that what do you think would happen if you pull a gun if you pull a gun if you pull the trigger to a gun what do you think would happen if you drive over a person's tent in the morning what do you think would infection was clear if the question is posed that way then it's assuming the fact that is not in evidence and contrary to the findings of fact here margo is did not apply the brake because he said he thought that haas would move out of the way and that's dispositive as to the willful and maliciousness now there is one other point and i recognize my time is up but i think there is a i realize that your honor if there is just one one small clarification i want to make it's not enough for the district courts analysis that the substantial certainty test be satisfied the district court in order the bankruptcy court in order for the analysis to work also had to show that the inherent injury test was satisfied here and there are two very different things and i'm just getting from the tenor of the argument that that may have been misapprehended here lost in the in the details the district court found as a matter of fact that mr margulies did not actually intend to make contact with h in order to overcome that finding the fact he said you're right he didn't intend to make contact with him but there came a point where there was a substantial certainty that he knew that he would make contact and we've already addressed that about the question of any that at some point you get a substantial certainty it'll happen if i'm carrying a glass of water i don't want to drop it but at some point right before it slips out of my hand i'm certain it's going to happen and so you can apply that test in that piecemeal fashion and we've all argued that but the second part of it your honor is that there's second element to this the court then found ok so he didn't intend to make contact but it was substantially certain to occur now the question is did he intends to injure and to satisfy that he had to apply the inherent injury test for rafferty to say and that's because in this case like the push a car going one mile per hour isn't necessarily he expected because it's the hypothetical example that the district court relied on once it actually asked mr margulies specifically what did you think would happen and he said i thought stopped by putting your hands on it that when he's driving with a group but again your honor that's not the standard as to injury the inherent injury test specifically requires in rafferty the court said that it is a very narrowly defined exception it's not meant to be applied commonly it's only reserved for cases like rape like child molestation like malicious prosecution where there is no possible way to hav in the act without intending the injury that's the whole point of that doctrine and that doctrine had to be satisfied to so neither substantial certainty was properly applied nor in hand parrott injury and looked at it as a whole this is my last sentence as the supreme court mandates we must do looked at it as a whole all parties agree here and all courts have agreed here that mr margulies intent was to get to his meeting on time to go