defend mr kelley and mr de wald the provision of the defense is perhaps maybe the most significant type of insurance coverage that directors and officers would see in order to ensure that they have the superior resources provided by an insurance carrier to defend claims that might pull into officers and directors for activities that they probably should have been pulled in to begin with shannon or frivolous complaints in this case the duty to defend analysis that's required and that the district court failed to really even explore requires looking at the policy and looking at the underlying complaint and determining whether there's potentiality of coverage it's not about whether there's alternately going to be coverage or alternate indemnity it's just a matter of that duty to defend would be ongoing until it's conclusively determine there is no duty to defend me to this council did reassure in other cases indicate that the misrepresentation can still act as a defen to an insurer in duty to defend it even if formal rescission is unavailable i don't agree that that's what reassure calls for i believe rescission cases that are cited by starr in this matter i don't believe are fully applicable here because all those cases what they have in common are that an actual declaratory relief action was was either brought or in a cross complaint brought by the insurance company and that there were issues of facts ultimately determined by that and so if what your honor is asking is whether or not an affirmative defense is available then i believe that it would be but what we have here is issues of fact we don't know and certainly the district court judge was not certain as to what mr wald understood the application questions to mean when mr brennan was was requesting when he was asking to be paid on promissory notes and because there are issues of fact this needs to be  they could have the reality is if it were rescinded i have an issue oh you have a slightly different situation and that's why i'm asking to get in this case you know there the the underwriter of all of the  underwriter indicated that she wouldn't have issued the policy on the terms as you know one of the two thousand and ten brennan demand if you have any evidence to suggest that that is false is there anything in the calendar that has that's in the record and that  affidavits for summary judgment well that i get that unless it's not countered and in this case well if i understand correctly what was said by the underwriter that she would simply not written this policy had this disclosure been made i don't see you're saying well that's not true there's this and that and then it's a matter of material fact so if it's an it what she said is true   some type of case being brought by the insurer and the other thing to keep in mind here is that there's definitely a dispute as to what started believes was being asked and answer and to what mr kelley i mean mr de wald believed i thought took some exception to his starr's respondants brief in that they continued to say that what was asked was if there was any claim made and that's not what these applications are asking was asking whether or not there was information of the statements negligence errors acts are a missions that would lead and the person answering would would think would reasonably believe to lead to a covered claim i mean that there have to be some accusation of a wrongful act so it's almost like ships passing in the night you have an underwriter who's claiming we were asking for any type of demand for a monetary payment on a promissory note and you didn't give me that answer and  on the other side you have well there was a request to pay a promissory note which is a contract claim and never covered under directors and officers policy so why would that ever lead to any covered cl and certainly the other important thing to understand is that these individuals never backed any of these contracts there was no reason for them to individually believe they had any potential liability they got pulled in by the underlying claimant in an overbroad frivolous action but let me ask you this that i get your point but let's just say we look at the at the form was filled out the checklist and based on that language we think house you know anybody could a mistake in venice and there was no response to it what do we do then and when you say no response you mean what i mean record their underwriter put in a declaration indicating that she never would have underwritten this never would have been a policy you didn't say anything to the contrary so if i get your point that if if these are ships passing in the night then you're absolutely right and you need to have a duty to defend find out what it really means and so on and so on but if we look at this and we say oh this is really clear this is nobody could mistake this what do we do with that that's a great question and i feel like the california law under gray and montrose chemical law and their progeny is meant to create a prophylactic effect so that insurers don't just on a whim or in reading into facts make self serving statements or conclusions and deny a defense it's really important when these individuals needed it most and then come back later when they do get sued for breach of contract in bad faith and then do their investigation and then make their their arguments as to why they may or may not have had a duty to defend if if the courts if the district court's decision is up held i feel as though it's neutering be the  effect that the state of california wanted to make sure to protect consumers and it's there to protect insurers as well because there are remedies available before we even got to hear star could have brought  declaratory relief action it could have sought revenues it could have sought remedies in court and had allocations provided for what was covered claims and on and it refused to do that and left our cour you ask you to do it are you just saying they did that was not their problem or did they teach we decided not to do it there was multiple requests by mr kelley and the wall to please please come and defend us all the way up not to continue the defense so the four corners of the complaint had a potential for coverage i don't think that's in dispute here and because of that there was a duty to defend the court should and should reverse and remain our reserve whatever ok minutes after thirty five seconds wow your own or do we stop there and and let me ask you how would kelly respond to a conclusion restatement made by an underwriter since we wouldn't have written the policy how did the contest that issue well they could have cross examined the underwriter on that issue when they took that underwriters deposition which they chose not to do for whatever reason they could have hired expert underwriting expert to come in and say that's not true but of course they didn't because one would have written this risk if they knew there was a four hundred twenty three thousand dollar demand by an investor that would have been carved out the policy would not have been issued there's many things that could have been done but we did not get that opportunity to do that so to your point your honor you know the record is the record but i will say i would if i respect your waiting which is kind of what you're asking me to do i would say it's not unfair because it's crystal it's crystal that nobody's going to write this risk in the way they wrote it without complete information and that is material to the underwriter and it was material to the insured they act like this was not a big deal to them this this huge demand and the threat of a lawsuit was very material to them this is a two person development so the point here on his point we can raise this as a defense we did raise  defense there's two cases the campo and bear that allow us to raise this defense we do not have to bring an affirmative claim we it we can raise it as a firm a defense that's been settled in california for a long time and the question in the application asked for any circumstance that might lead to a plea but when you have a demand like the two thousand and ten brennan demand it's in comprehensible to anybody that's not that was a contractual a claim wasn't i understand that argument your honor but again you know it's a the question asked not for is the claim covered the question asked for any potential claim that might lead to a claim and under that circumstance we have a demand of that size in a small company it should have been disclosed because as we depend upon the size if not more since it but but  twenty three is big enough for anybody to disclose that certainly the underwriter determines materiality not the insured that was not a tax for whatever reason but the case law is clear that that the under it's the subjective view of the underwriter as a real reasonably subjective view of the underwriter it can be attacked but was not attacked it is absolutely undisputed in this case that pat barrett who would who was the underwriter for this would not have is looking to assess the risk reward and any kind of investment scenario this kind of claim frequently involves a twenty seven different claims that ultimately they made that all arise out of the same fo disclose it so we know what we're writing and it's not unfair to ask them to disclose it which is why it's in the application and right below the application is language that makes it clear if you don't disclose the information you have it's not covered with the disclose or the policy one of which is in the application that says all that's required is a failure to false statement and a knowledge of that of that concealment they knew about the burning demand that's not disputed they've but they just didn't buy it all the d n o policies are claims made and reported paula they all are so i read a previous policy with another company ace and that was a claims made a report and i've been in this business for a long time and that's the the form and claims made a reported in the homestead case in california has been upheld as a perfectly acceptable way to limit your risk it's a short tell policy as opposed to a long tail policy meaning the exposure is supposed to end  a finite period of time and that's why it says claims made you make the claim and we thought it was a claim made policy we thought was a claim made during the policy period when we first got the case which is why we defended initially and then we got information that would have been made for the the i want to make sure i understand your honor which you're asking why i compound the question because i think the august twelfth two thousand and ten written demand for four hundred twenty three thousand dollars based on fo two of which were past two and a threat of to sue if they didn't get the money i think that is a claim made and then thereafter on november seventeenth two thousand and eleven year later there was a written demand made by brennan's counsel on the insured which was after that and if that was it then we would have defended this claim your honor but and but unfortunately for the insured this other demand existed which i look we need to fair is fair right so when you talk about fair so we get the case we defend they send a ultimately after the i think it was a april seventeenth two thousand and twelve two years after the fact brennan sends a draft complaint they passed a draft complaint on to us and at that time we see this problem about a prior claim made that should have been tendered to their their other carrier which they had insurance i don't know why didn't tendered to the other carrier but they didn't that was your first notice of the earlier demand was the face of the complaint that was the first notice was a copy of a demand letter from brennan's counsel second notice was the draft complaint they were separated  i'm not sure if i understand your question i'm sorry about that well the insurance company is saying that eat that the misrepresentation material misrepresentation constitutes specifically is not a claim as well as you know not holding or kucing the actual directors of any wrongful acts is not a claim you thought you think your time's up eleven would like you to answer one more question do you believe that any underwriter who knew the facts of this case would have written this policy yes you do i do you were seen that done in a similar situation while these situations don't normally come out because usually the