morning you're honest peter klee on behalf of of helen's and and also insurance company and what i like to do is reserve seven minutes if i may for both rebuttal and to respond to any arguments regarding the certainly will but i'm going to be extremely efficient in presenting what i have to say and i just wanted to draw that a few things to the court's attention first of all just to give this case context this is not a case about an insurance company that adamantly refused to settle a case and insisted on going to trial so that it could roll the dice and well they turned down that one offer and then they made what twelve repeated offers or something of that kind they did that's correct your honor there was a right the number twelve twelve offers after the february one thousand two thousand and two i never i've never heard or seen that circumstance before and they turned them down repeatedly right the claimants turned down every single offer  that allstate made they did not accept the first policy limits offer in january twenty ninth they did not except or even respond to the second revised offer allstate made on february fourth two thousand and ten and they rejected all states when all stay put the policy on it's back on the table on february nineteenth the claims refuse to accept them and they refused to accept them on on on to technical grounds one not technical application of the rules relating to contract and acceptance and second because the third offer was a mere four days after the arbitrary deadline that they had set forth in their demand and if this court were to apply the the rules that govern the duty to settle i think the court will see that the case and the judgment have to be reversed and even putting aside the rules that govern the duty to settle if this court just looks at the spirit and the intent behind bad faith law which is not to protect claimants and to enrich claimants but rather to encourage settlements and to prevent insurers from being dragged through the litigation process the court will see that that is another reason why this case should be reverse because this is an example of a claimant who attempted to use a law that was designed to encourage settlements and protect insureds keep to get the exact opposite result i want to focus my argument on two fundamental issues the first is the fact that it is undisputed that a demand is not reasonable and therefore cannot take the cap off an insurance policy if it doesn't offer a release of all insurance it is undisputed in this case that the one and only settlement demand that was made by the claimant did not offer to release one of all states potentially libel insureds in fact insured who was later sued and that was mrs tag in fact the plaintiff's own expert admitted that acceptance of the one and only offer that was ever made would not have resulted in an enforceable contract to release mrs tack and the plaintiffs haven't disputed she was insured also she was insured  yes she was and she had live delivery for several reasons and she was sued for several reasons she was the registered owner of the vehicle she was mr chang employer and mr chang was delivering something to the restaurant that she owned at the time of of the accident and so she she had potential liability and but this isn't a case where allstate received and unacceptable to me and unacceptable because it could not it did not allow for the  no allstate responded with offer after offer each of which responded or addressed the deficiency in the demand three separate offer his innocence in a span of of  approximately three weeks and the final offer of those three on february nineteen was less than thirty days after allstate received the very first piece of information it ever received implying that it's insured mr chang might have liability and that was undisputed so we're talking about an insurance company that within less than thirty days tenders three different policy and three different offers two of which are for the policy limits that address the deficiency in the demand and and just in terms of the timeliness of that the department of insurance has set forth what is a reasonable time for an insurance company settle and that's forty days while all of these three offers occurred in less than thirty days to give it context but here's the problem the claimants attorney acknowledged at trial that when he received the first of all stakes offers on  january twenty ninth he realized that there was another insured that needed to be released he acknowledged that trial that was undisputed but what did he do he did nothing and here's what the law told him he had to do and i'm referring to the covert state farm case which is cited in our papers it addressed that exact situation and said that if the demand is deficient once that deficiency is brought to the claimants attention the claimant has an obligation to do one of two things if it wants to argue that faith it has to either make a new demand that addresses the deficiency or has to notify the insurance company that it's revising its existing demand to address the deficiency those are the requirements what it cannot do is sit back and do nothing and then later argue that the caps off the policy because the an acceptable demand was not accepted here mr madison the claimant's attorney did exactly what the law forbids he'd made no attempt or effort to correct the deficiency instead he sat back and then waited and then took the position on feb nineteenth that the cap was off the policy and he refused to settle and he did also what the with the intent of bad faith was designed not to do not only did he refuse to settle he went forward file the lawsuit against the insured and prosecuted to judgment the only argument that the plaintiffs have in response to  fundamental defect in their case is that mr madison had an undisclosed subjective intent to include all insurance in the settlement it's undisputed that that was undisclosed and subjective and they they take that and they say they're for it was incumbent on allstate to conform with the so called duty to clarify that insurance companies have when they receive ambiguous demands well the fundamental problem with that argument is that the district court on two occasions refused to provide a duty to clarify instruction to the jury and why did the district court do that because it just court found that because that was what the evidence showed the demand was not  allstate didn't believe the demand was in vegas and allstate actually took affirmative steps to address the deficiency which is what an insurance company's required to do if the if this court looks at every single so called duty to clarify case that exists out there every one of them have something in common the insurance company got a demand that it didn't understand and sat back and did nothing it either ignored the demand entirely or it rejected the demand that's not what happened here allstate get exactly what an insurance company it should do if it was even ambiguous demand but again this was not an ambiguous demand this was a  demand it required strict compliance mirror image acceptance and it did not include mrs tang and that was not disputed at trial so i want to make one thing big point on this issue and then i'll move to the second point that i'd like to discuss and that is this either of the demand was an reasonable as a matter of law because it did not include all insureds and i believe that is the court can look at the demand and it doesn't relieve release on juries but if the court once to accept the plaintiff's argument that mr madison is subjective undisclosed intent that he would have released had allstate's not clarification if the court wants to accept that argument the case still has to be reversed and the reason why is the jury was never provided with an opportunity to addressed that argument what do i mean by that the jury was never instructed that a demand has to include all insureds all state requested that instruction and the judge declined to do it and in fact the reason the judge a client is because the plaintiffs argued that telling the jury that the demand requires the release of all insurance would be tantamount to in to giving the jury the jury needed to know number one that demand has to include all insurance and that number two if it's uncertain whether it includes all of all insurance that it need to know what obligations an insurance company has to seek clarification  evaluate whether allstate took those steps those instructions were not given so for either of those two issues the judgment should be reversed and i and i would suggest one is that that the easiest ground for reversal is is on the mere fact that the demand did not include all insurers on its face a strict compliance demand that specifically stated that any counteroffer would be doing to reject it so there wasn't any moon room to negotiate per the terms of the demand but if the  doesn't find that that the demand clearly exclude mrs tang and if there is some uncertainty that it still needs to be reversed so the jury can evaluate whether that instant whether there was such an uncertainty and whether allstate complied with its obligations the second issue that i want to talk about is a another reason why the judgment should be reversed and that is the another fundamental principle relating to the duty to settle which is that regardless of whether an insurance company acts reasonably or unreasonably if a demand cannot be accepted for reasons outside the insurance company's control then the insurance company can't be liable for bad faith even if it engages in a reasonable conduct and why does that issue come up here it comes up because one of the conditions of the strict compliance demand was that mr tang provide an asset sheet meaning he disclose his assets there are five separate undisputed facts that took place during that trial that mandate judgment in favor of allstate on that issue and i'm just walk through them very quickly first it's undisputed the demand required an asset sheet for mr chang second it's undisputed that allstate forwarded the demand to the tangs and and so they they could see the requirement third it's undisputed that the tangs were aware that the claimant was demanding an asset sheet they specifically testified that they knew that one of the requirements of the demand was the disclosure of mr chang's assets and it's also one disputed that the tangs never expressed any confusion to all state on that topic in fact to the contrary and this is the fifth undisputed fact allstate repeatedly repeatedly recommended to the tangs that they either consult with a lawyer mr tang had a lawyer at the time or that they talked to some other advisor to advise them regarding the asset issue and their response was that they didn't want to because they didn't need to and so there's and then the fifth fact of course is that they never provided an acid sheet they didn't provide an asset sheet within the thirty day deadline required by the claimant nor did they provide an assett sheet all the way up until today it has never been provided and the only argument that the claimants the plaintiffs have made against this fundamental defect in their case is that well the tangs didn't understand that they needed an asset sheet but that is but again the undisclosed subjective confusion of an insured is not sufficient to impose bad faith liability in this case a fifteen million dollars judgment on an insurance company especially where the insurance company has has provided and disclose all of the information necessary to the insured and has recommended that the insured seek consultation and the insurer has affirmatively told the insurance company that it recognizes the requirement but it does not want to seek any consultation on it and so that is the the second separate and independent ground and related to that ground is the fact that overall states objects and the that i'm sorry that they put in the directed verdict form the causation element and the court declined to and that's one of the grounds for appeal because the law is in the ninth circuit and elsewhere that when you have a special verdict like we had here you have to put in the elements that the that go to the cause of action and here one of the most critical elements was the causation element because as i've indicated regardless of whether allstate acted on reasonably regardless of whether any of its many counteroffers one of them was reasonable or unreasonable it didn't matter because the the because the tangs never provided the assets that was a requirement of consummation of any settlement the only argument that the plaintiffs have raised in response to that is that it wasn't really a special verdict form it was a general verdict form and we addressed that in our papers but just to just to summarize it the district court itself found that it was a special verdict form the just report called a special verdict form analyzed in pro style motions as a special verdict form and the form itself was a special verdict form because it didn't simply say  in whose favor do you find ladies and gentlemen instead it walked through specific factual elements of the cause of action so by refusing by excluding that fundamental element which in this case was extremely important for the reasons  i've indicated that was another reason why this case should be reversed if the court doesn't reverse reverse didn't enter judgment to be entered in favor of all states on the ground that as a as a matter of law it did not act in bad faith because it's undisputed that the tangs never provided sheet which was a fundamental element of the claim so those are the two separate independent grounds that man did not include a release and therefore it could not be acceptable if it was unacceptable as a matter of law and second that the asset sheet was never provided and therefore we guard lists of all states conduct it could not have consummated a settlement in response to the one and only settlement demand that was made and i'd like to reserve time for rebuttal to i didn't believe that allstate would actually present the case to you in oral argument without mentioning the critical fact that on january twenty nine it offers the policy limits and then six days later in writing it withdraws the policy limits and says we're not going to pay you one hundred thousand dollars all we're going to pay you is thirty four thousand three hundred ninety eight dollars that is a rejection by any measure of the demand and allstate doesn't talk about it because it's a horrible fact it's the critical fact in this case but it's something that does have to be turned about talked about because it creates the factual issue that allowed the jury to rule against all state here and it completely precludes all state from arguing as it does that it's intitled to judgment as a matter of law i want to be very clear kluge just kept talking about reversal but the first arguments that he was making the arguments about the assets heat the arguments about including mrs tang as a release those are arguments that allstate is contending entitle it to judgment as a matter of law that the case should never even gone to the jury the only argument that it talks about for a new trial deals with the form of the special verdict so now let me talk about or all address the claims that allstate was entitle to judgment as a matter of law first of all with respect to the there you are to disclose the assets in the ass that cheap and mr klee says to this day mr tang has never disclose assets well that's right and if mr tank walked on the way out of clay court handed mr klee an asset sheet it wouldn't matter the reason it wouldn't matter is that once allstate on february fourth scuttled the settlement and said we're not going to pay policy limits for this claim there was nothing left it didn't matter that the well but the offer the offer to settle had certain requirements and i'm because the issue here is i'm having a hard time maybe maybe counsel is is incorrect but if you make an offer to settle and they're representing mo to pull plaintiffs and you over to settle with one or two of those plaintiffs and not the rest somehow your undisclosed intent not you but counsel's undisclosed intent well i really meant i know i didn't insurance company i know it in tell the other side but i really meant i was going to cover everybody that doesn't fly those are that's not the argument that's not how the posture of this case is what happens is all state on january twenty ninth writes a letter and says we will accept we're offering our policy limits now in the letter they don't say oh and by the way there's another insured mrs tang and the district court found that allstate and allstate had deliberately tried to hide the existence of mrs tang from from madrigal they had written seven prior letters and they always refer to their insured as mr tang even their january twenty ninth letter does that and the letter itself doesn't say oh there's another insured are you willing to release her but instead they say we'll offer we except here's the release that you asked for and the release includes mrs ten now this is what's critical at that point they say here's the release we want so if this were a case where madrigals lawyer the next day had faxed an irate letter saying i never offered to release mrs ten and so therefore the policy is open because this was a rejection and a counteroffer that would be a different case but what happened is nothing nothing he got the release allstate this letter of january twenty ninth said we're waiting to hear from our insurance about this last condition the asset sheet so that's what everyone was doing waiting to see what would happen and then six days later on february fourth allstate decides you know we don't want to pay  hundred thousand dollars let's see if we can save some money let's save sixty six thousand we withdraw our agreement to pay one hundred thousand dollars are not going to do it at that point there's nothing to accept but the only way that allstate can can rely on the absence of mrs tang or an offer about mrs tang which they've knowledge that magical didn't even know about would be if they brought it up and then having brought it up the reason the case didn't settle is because magical said i'm not going to release mrs tang but that's a counterfactual example that's not what happened here here all stay hot an opportunity to settle it was waiting to hear about the asset she and there we have let's assume for a moment that allstate somebody at allstate whoever says look takes a second hard look at this it says this adjuster whoever was dealing with this really made a bad mistake  we gave you your opportunity you turned it down too bad ok well they have the right to do that but where is the bad faith the bad faith is in rejecting a reasonable policy limits demand when they had an opportunity to accept it though if you want essentially what you're telling us is you want us to find maybe you're right that if it churns company within a relatively short period of time makes a bad decision in turning down from your perspective turning down an offer realizes that was a wrong decision but then rectifies it by making a full policy offer too bad what i'm telling you your honor is when the insurance company so the answer is no that's not my position well it is no because there are two ways it is what you said is that they turned down the offer and that's it so they there's no question that they came back multiple times later and within a relatively certainly within forty days within thirty days and said will be the entire policy limits and the lawyer said too bad no other explanation other than you had your shot we're not giving you another shot that's what he has every right to do there right but the next question is is that bad faith and you may be right and  is bad your honor the point that i want to get out is that i'm not saying and when i said that's that's it when allstate does that when they reject it and then they change their mind and they after the offer expires and they relatively quickly try to correct it the law is that the correction doesn't as a matter of law mean that they acted in good faith it creates a trial will factor will issue of whether they were acted reasonably or not that if you went to the jury all state was allowed and got a chance to argue look at the complete sweep sweep of the circumstances in this case and if you find that we acted reasonably and we think we did look how quickly we changed our mind then we acted reasonably the jury would have done that ok i'm not look you know i talk law for thirty four years so i like to ask a lot of questions ok we're in a let's assume here though that we're in this well you don't have to assume this is  situation we have we're in a situation where the policy the general policy implication that time an insurance policy the general policy is behind that bad faith in counsel is correct is to induce insurance companies to do with they're supposed to do we want insurance companies to pay appropriate policy limits and we want there to be a penalty when they refused to do so do we really want to be in a position where and now on well now we've discovered our mistake but it's too late we're not going to make we're not going to make our full policy offer any longer because what the heck we're going to get sued anyway and it may be admission so we won't do it because that's what the end result of this would be all right first of all the this isn't a you're not writing on a completely clean slate here there's a case that we cited from one thousand nine hundred eighty four called chris for four years it's one of the foundational bad faith cases in california and in crist's that the insurance company devaluated the case there was no litigation pending yet they knew that they can't claim exceeded the ten thousand dollar policy limits and before a lawsuit was filed they had a they got a policy limits demand with a seven day deadline and they said we'll offer you eighty to fifty and the crips court said that that farmers chose to expose its insurer to potential liability running that tens of thousand dollars in order to squeeze out a seven hundred fifty dollar saving for itself and instead of giving its insureds interest equal consideration for its own through its policy holders interest to the four winds now when you say that farmers made a mistake i'm sorry the office they made a mistake i want the record to be very clear here there was never indication that this adjuster somehow mistakenly did something any point without having full authority and discussing it with her supervisors at every step of the process there wasn't it's not like you go to wal mart with security guards slap someone and then you  a wal mart policy to assault all stayed here at every step made considered decisions about what it would do with the claim it understood the policy underlying bad faith law the fundamental policy is that the so when it has an opportunity to settle within policy limits if it's a reasonable offer it has to take it this is the textbook example of what happened in that case farmers allstate got this policy limits demand  that the claim one hundred thousand dollars policy was as mr july at least wrote the claims supervisor adjuster that that the damage would be exponentially higher so that's why they offered one hundred thousand dollars then the adjuster thought you know i think we can get it for less i'm going to withdraw it she went to her supervisor and said i want to take that offer at the table the supervisor said ok so they changed the offer they withdraw it and they offered thirty four thousand dollars it's exactly like chris they were trying to squeeze out some savings and what chris says is that when you do that the chris court said failure to settle may occur late or early in the game that the court went on to say that the injured party is insurance company figured out we you know we didn't do the right thing here but the bottom line is that allstate had an opportunity to protect its insured and for the only reason that it chose not to deliberately was to squeeze out some savings and so under california law that's a risk that it takes that if it says we're going to reject your hundred thousand dollars and we're not going to pay one hundred thousand dollars the carrier the claimants allowed to say ok we get to go to trial and see what happens and if there's an excess judgment that's your problem now the carrier can say only that maybe we made a bad decision let's see it and offer offer the policy later but that the equipment's not under to do a duty to accept it and ultimately and this is i think that the critical point we cite the court in our briefing to a very recent twenty sixteen california court of appeal case called barrack men were there the surance company settled offered policy limits within nine weeks but then they kind of dithered about what the language of the releases was that ultimately the claimants i'm going to walk away and did and then they got a three million dollar judgment and the carrier made exactly the argument that allstate makes here that as a matter of law when we act reasonably and offer our limits quickly that's it that's all you look at in the barrack in court said no you have to look at all the circumstances it creates a tribal issue a fact of reasonableness for the jury and i jury finds that that was not a reasonable thing for the carrier to do then there's a bad taste judgment so the issue here is one of substantial evidence and whether there's substantial evidence to support the jury's verdict that farmers act up all state acted unreasonabl i'm just stuck with crits now i'm sorry act of unreasonably and so we're not we're not the one saying that we win as a matter of law or that we should have one as a matter of law but the law is very clear on these facts that when all state has the opportunity to settle and then ten days before the offer expires pulls it off the table and says we won't pay the policy limits even though they know that the claims were multiples of the policy limits that is at argument why have some time i'd like to talk about two things first of all on the new trial motion and the special the alleged special verdict for rule forty nine eight deals with special verdicts and as i'm sure you know special verdicts don't require the jury to apply the law to fact they require the jury to find the facts and then the district judge fills in and lies the law and so it makes sense that if you leave out a critical factual finding in a special verdict form that could be an issue general verdicts don't work that way they just work they require a lot of fact and it's not just who wins there can be special iraq at tory's and they can explore some facts but the critical issue as this court held in this young case it's a functional test what was the jury required to do if it was given jury instructions on the law if it was told that it's going to apply a lot of fat then that's not a so a special verdict and the rules requiring special verdict forms don't apply and so the jury here was instructed in that in the jury instructions the first structure number one this isn't two s c r fifty and fifty one it is your duty to find the facts from all the evidence in the case to those facts you will apply the law as i give it to you you must follow the law as i give it to you whether you agree or not the sixth circuit in the case called portage two versus bryant eight ninety nine belies any suggestion that you have a special verdict so the rule that the all states asking for doesn't apply moreover there's no prejudice the only reason there could be prejudice is if somehow the jury verdict form that was given would not have allowed the jury to find in all states favor on the defenses that asserted and that's not the case here if all states if the jury wanted to find is also he claims that the demand was defective or or or had too many conditions then question number one the jury would have said no it wasn't a reasonable demand and if they have wanted to say that well that would have settled or all state behave reasonably then they would have answered question number two for all state so the verdict form captured all state's defenses in my remaining time i want to talk briefly obviously about the cross appeal also it has never attacked the fundamental argument that we make which is that the damages in a bad faith case extend to the interest that accrues on the underlying state court judgment and the end that the district judge accepted that included three point seven million dollars in interest the flaw and also it doesn't appeal that the flaw is that the district judge believe that when she entered the federal judgment then that damage was no longer to be captured in the judgment and under the carpenter case from the it circuit and the court in the circuit held very clearly that that's not correct that the as long the underlying judgment mr tang's the judgment of madrigal against hang in the personal injury case continues to accrue interest which it does the damages will include that and should be included in the bad faith judgment so as a conceptual level all state doesn't have a problem that it says well this case is different it's distinguishable not that you shouldn't follow carpenter as a matter of policy but it's distinguishable because here there is no real proof that the damages were continuing curve because word prevail is different than the legal term of art prevailing party that we didn't use prevailing party there are all right we didn't thank you your honor we didn't use prevailing party it simply says prevail th leading definition of black's law dictionary of what is to prevail in a lawsuit means is to win win a lawsuit to get the relief that you asked for that what was pled in the bad paid claim we want to recover all of the interest that it crews and therefore under carpenter the judgment here should be modified to include not just the interest that accrued up to the time of entry federal judgment but as damages to include the ongoing interest and i think the issues very clearly stated in our briefing and i don't think that allstate has given you any reason not to follow carpenter here appreciate it company did not make a settlement offer in any sort of reasonable time politically correct in fact the case went to litigation and it only made it much much later after the case already went to litigation here the offer was made within thirty days of the first evidence of the known medical expenses the proven medical expenses and it came with at with a statement that if you have any other evidence of additional medical expenses let us know so we can re evaluate but in any event that was an offer that was made when there was no acceptable demand on the table for the reasons that i've that i've stated the berriman case with all due respect to my opposing counsel it is not on point it has nothing to do with this case in that case the insurance company was held liable because it would not address the problem with the demand it did not take any efforts to solve what it believed to be a problem and in fact the court of appeal found that that so called problem was not even a problem and that the insurance company could have accepted the demand when it was first made that's not what we have here anywhere holding that an insurance company can be in bad faith where it makes that type of good faith policy limits offer within thirty days as allstate did finally on the proximate cause ation issue there is there is they did there are two there is a difference between the requirement that the insurance company act reasonably and that the that the conduct of the insurance company constitute the cause of harm the opposing counsel has conflated them and said that because the jury decided the first reason it must have decided the second but there are two discrete elements let me turn this over briefly to my my colleague on the thirteen million dollars did not prevail under the joint prosecution agreement he prevailed and if that part of the judgment is affirmed mr tank had no ongoing obligation no ongoing damages the second reason is that the stipulation between the parties was limited to allowing the court to decide issues of law contained within the parent article in the judgment what interest and cost exist as issues of law there was no stipulation to allow the court to try damages issue in that if the court doesn't find this cited as an issue of law and there's a rematch it should be a rematch for further proceedings on this so that all stake in the stablished that this interpretation of prevail supposedly