good morning good morning please the court my name is kevin hart's olan the attorney for attorney's liability protection society says the core issue in this case is the right of an insurance company  alaska law to be reimbursed for defense costs that it paid to independent defense counsel subject to reservation of rights which included expressly the right to recover defense costs and invents in the event there was no duty to defend and where the policy had a specific provision that allowed provided the insurance company the right to recover defense costs if there was no coverage of the district court in correctly concluded that this contractual right was precluded under a last under statute twenty one nine six one hundred section one hundred that despite a prior ruling by the district of alaska in two thousand and five in the union american case which we discussed in our brief america the court of the district court here also ruled on preemption issues let's start there was the district court right and its preemption ruling that's an interesting question your honor and it depends on the construction is applied to section one hundred as to the recovery of the fence costs ar view is is that if the district court's construction of section one hundred stands such that the ability of alf's to enforce a right given it in its insurance policy to recover defense costs if that is precluded then that by that construction of section one hundred then that that then section one  and it's not exempted it's not an interpretation of law and on the other hand if section one hundred is given what contends is an appropriate ruling and it allows the recovery of defense costs then it doesn't conflict with the policy it doesn't remove or eliminate any terms of the policy it's consistent with the law of montana which is state and there would be no preemption because it would have no effect on the operations of ups and has if section one hundred is preempted under your honor the ninth circuit has read preemption of of the l r r that's a difficult thing to say is the ninth circuit has read it rog broadly and in operations of an r r g as an insurance company operations is a term that has been written differently in different contexts and particularly in different circuits the ninth circuit at least in prime guard referred to that that meaning of operations as insurance coverage and insurance coverage is the sign of quanah on of an insurance company it exists to provide insurance my contention would be that the l r a operates to preclude any montana on this narrow issue in this case the only issue is the reimbursement of defense costs when there is no duty to defend the policy expressly provides for that right it's under montana law alps could recover defense costs it paid to its insured under alaska law under this construction by the district court in this case it would not be able to recover defense costs and it would not be able to enforce a term of its policy its coverage and my view is that's exactly what the hell are is intended to prevent the difficult wrinkle here is that in our view the district court in correctly read section one hundred preclude us from exercising its right to recover its defense costs when to defend exists i believe properly construed alaska section one hundred does allow the recovery of defense costs which would allow to assert the rights so that it provides in its policy and in that case that alaska would stand under section one hundred would be the say it would stand the same as every other jurisdiction in the country that allows an insurance company to recover its defense costs if it's properly reserved if the right to do so is properly reserved as it was here or if the policy provides an express right as it does here what do you make of section thirty nine zero five   construed to provide insurance policy coverage that's prohibited generally by state statute this at the policy provision here is not a provision of coverage it's a limitation on coverage provision of coverage at thirty nine zero five c does not allow the provision of coverage that is not permissible under state law regardless of which  you can't provide coverage for punitive damages there's no preemption issue that law controls yes yes you're on and so if alaskan law assuming for purposes of argument prohibits reimbursement cos then why would that analysis apply under that same section because the the specific language of thirty nine zero five c doesn't doesn't it it doesn't prescribe any coverage  allowed or different than state it's only the provision of insurance that's not my last of the states to regulate the terms of insurance policies right that that's the legislative intent greater power to non charming states to regulate terms of their own insurance policy so i don't understand the distinction between alaskan law saying you can't provide coverage for punitive damages and that that there's no that's a fair question i believe and i believe the ninth circuit has ruled and i refer to the prime guard case that's it's admittedly and stick to the issue hasn't been actively and chorley addressed but the i believe the issue is what is a provision of coverage versus a limitation of coverage i don't understand that i'm trying to look for principle distinction between those two a provision of coverage but it is it is not a provision of something to the insure that it would not be entitled to under state law it is a withholding of something that it may otherwise be entitled to the distinction is one of what is a prob vision if read broadly in the theory you could read the term prove vision to mean any term of coverage in an insurance policy view that the regulation of operations operations is the operative term for the application of the l r if that's defined as insurance coverage coverage provided by insurance policies which is the reason that they exist it seems mutually contradictory that congress would say laws are preempted if they regulate the operations of an r r g but then simil is sleaze saying that well if it regulates any kind and all kinds of insurance coverage the state does then it's it's mutually contradictory there must be some grounds for operations means insurance coverage which is what the hell are a pretense then the the the for the operations of n r r g which for an insurance company is ultimately it's insurance coverage which it provides through insurance policies if thirty nine zero five c which says that any provision of coverage is not presented if it's impermissible in the state law if that's red if provision in that context means any insurance any insurance morning hours my name is my name is bill and number presenting my law firm and i'd like to start off since the court asked questions on the preemption issue and if you take alps argument to its logical conclusion it would so narrow that subsection that it would it would mean only that you can't regulate coverage unless you're saying you can't apply a certain type of coverage when you say prohibited coverage means terms of one of the most important functions of states that they regulate historically has been insurance and when you're talking about the type of insurance you have in the type of coverage you have that's what that section is talking about insurance coverage  if a state says if you're going to write insurance in this state you cannot have coverage in alaska that does not include payment if you defend on a reservation payment of attorney's fees that's part of the coverage it's not the operations it's not telling you what what assets you have to have it's not telling you how you what type of underwriting that you partake in it's not setting the type of forms that used for insurance the business of insurance is not regulated it's regulating coverage and so i think clearly judge lisa is correct that it does not preempt this law in alaska but second and there's one other point that seems to not even have been addressed by elves and that is that to preempt if there is a preemption it means it means there must be some conflict it means there must be some conflict between the state law and the elves policy in order to preempt that's just common sense but what what they're not addressing and have not addressed is in the policy in section section four point one seven of the policy it specifically says any and all provisions of this policy that are in conflict with the political laws of the jurisdiction where in this policy issues are hereby amended to conform to such laws so to the extent that elfs is arguing well we have a different type of coverage here we have in our policy this contractual language allows us to get back the money that conflicts with alaska law and the conformity clause rewrites that otherwise second form clause means nothing and you have to give some meaning to that so aside from the preemption argument which i do not believe is preempted and they say conformity clause does away with that the conformity clause means it's not even an issue which gets us to this whole argument of what is a twenty one nine hundred one hundred mi what does that what does that really mean and does that allow you to get recovery and you know i want to start off with saying one point out one thing to the court net is this law was enacted nineteen years ago and to borrow a phrase from judge ferris in an earlier argument and the point that he made in the first argument today not one case in alaska has appealed that because it is clear it is clear that you do not know this issue has never been raised from the alaska supreme court and i would suggest that it is because it is clear that you do not get to get that money back no one has even raised that issue in alaska with the alaska supreme court because the statute i would suggest is so clear and the cases that that are being relied on then discussion by alf's in their brief about well if you put it in the contract then it somehow does away with this and he did cite to some jurisdictions where they made that distinction but all of the cases that have addressed this and i point out with notice and i apologize because it actually wasn't our brief but in washington case that  i gave the court notice of late yesterday that kind of gives a really good summary of what other states have done there's two issues that they've that they've really focused on one of them is that the equitable argument all of the states that have said no you have a right to recover the money basis on an equitable argument and the equitable argument is you didn't pay for this coverage so why should they have why should the insurance company have to cover it and as if you don't have a statute like our statute that i'll call the chinese statute because that's what we refer to it here after this child case if you don't have a child statute and then those states did the washington supreme court said well insurance companies are going to big benefit here if they teach they they have the not only the right the but the responsibility to tell you up front we're going to offend without reservation we're going to deny coverage or we're going to offend under reservation and if they do the third they don't get a we win with no risk there is a risk if you defend if you deny coverage there's a risk that you're wrong there's a risk that the that the insurer does or own defense and maybe they don't do it the way you want to they don't defend the way you want to maybe enter into a settlement and you're maybe you're exposed to bad faith for not defending so you can avoid that by pain for the defense and you're buying that sure certainty and so you are getting something but even more significant than that is that in alaska those arguments the arguments of people saying you're getting something you didn't pay for simply is not true and the reason for that is that the alaska statute requires requires that if you defend on a reservation that you pay the attorneys fees until either it's a term by a court that there's no coverage or at any time you can say case that is cited often and they look at the california law california statute this is significantly different than the alaska statute as a different in this regards if you look under the alaska  they have the paragraph c of that statute which first of all paragraphs eight of the alaska statute in california statute aren't very similar they both provide that insured has it and sure has a duty to defend and insured if a conflict exists and to provide independent counsel but what's different is paragraph c and then further on there it says if the insured reserves the rights didn't churchill provide independent counsel if the reserve rights and the reason that's significant is in california just because you reserve rights doesn't necessarily even mean there's a conflict california says there may be a conflict so you only provide number one and there's a different maybe of differing opinions as to what provide means but in california they specifically have language you're talking about where there's reserving the rights to talk about attorneys fees and so forth but what's significant that doesn't have that the alaska statute has is that i says that the in church likes independent counsel act the insurers expense and that's repeated in paragraph easy at insurers expense and most significantly in paragraph f if you decide to waive conflict counsel you need to have an as an agreement from the insurer ed where they not only knowingly waive and allow to use the the counsel provided by the insurer but it has to say that the you have to inform them and the waiver has to be that you have the right under state law to have all reasonable expenses of an independent counsel the only state then we're also the only state that has civil rule eighty two that allows recovery of attorneys fees and i'm i'm i'm talking trying to figure out it's different i mean the washington in washington  decision from two thousand and thirteen they don't have this statute and they've also ruled that no you have to pay until you deny stop coverage you have to pay you have to and you cannot retroactively get the money back there's a pennsylvania case that we cited as well that it came to the same conclusion some of the cases talk about whether or not it has a language in the policy allowing you to get it back again there's a conformity cause that says it has to conform with alaska so that policy language that else is relying on has been conformed by their own policy to be consistent with alaska so but even the states that have said that washington didn't deal with it didn't deal with that issue but the washington court talks about the growing trend that the my words the light and view that you should not that the insurance companies should not get a free ride they should not have the ability to control at least in part to the defense and in this case let's take the perfect example is our case we have a case it has settled and they knew this for fifty thousand dollars they're running the defense they're not provided the law firm that bails the bills are going straight to them and they allow defense costs exceed two  dollars do you think any reasonable person is saying you're not insured or we can get the money back would allow two hundred thousand dollars to be spent for the case you could sell for fifty thousand dollars but the insurance company has a different goal and if they're looking out for themselves they're look at all for well maybe there's going to be other lawsuits so we don't care about this english mohsen fitzgerald firm there are other firms that maybe we want deter them from bringing claims so we're going to keep defending this case they could do a lot of things if they think we're just get the money back from this law firm they had the choice the choice could have been to deny coverage and let their insurance know we're not going to pay we don't think there's any coverage but they don't have the choice to defend under reservation and then come back later under las and try and get the money back and again as justice ferris no there's a reason not in this case but there is a reason that this has never been addressed never been addressed by the alaska supreme court because in alaska it's clear no one doubts this and if you look at the legislative intent if you're trying to get which judge gleason noted in her decision that the legislature specifically talked about and dealt with the issue well you mean this means that that if it later turns out there isn't coverage they still have to pay yeah they have to pay they discuss that issue so this this was was clear but i would suggest that if there if you have to me this is very clear but if there's any doubt at all as to whether th significant issue because it will affect not just risk retention groups but every single policy in alaska and if people can get around can get around the provisions of our choice statute  of twenty one nine hundred one hundred fifty or one hundred nine or so i think and get around that statute by putting some language in their policy every single insurance company will do that and that statute will be meaningless and so i would ask and lastly let me make this point alpes was not unlike some of these other cases that have argued including the dissent in that washington case that i mentioned that have argued well you're getting something you didn't bargain for angles and you're getting your law firm's getting coverage it didn't bargain for and that alice didn't intend to pay that is not true for two reasons number one the conformity clause it conforms it to this statute and presumably alice is looking at alaska law when you're writing insurance up here because they insure probably ninety percent of the lawyers or more in alaska but second because as this law that says if you defend under reservation you have to bear the costs and tell you until either you has a decision that you don't have coverage or you withdraw coverage they know that and so they know and they can factor that into their premiums that they charge because they know what the alaska law is they know what the alaska law provides so we are paying a premium for that we're paying a premium for that coverage and again that if you look at the conformity clause in their policy it seems to me that the only issue is the issue the judge when brought up which is is there something about this policy about the statute that does not allow them to have reimbursement and i don't think any plain reading of it when they talk about expenses and have someone there are there is a statute very much like section one hundred under alaska law and that's twenty eight sixteen california and one thing i wanted to specifically point out is that both statute have a condition proceeding essentially in their first subsection and in section one hundred that is if the provisions that's california section one hundred is if and insure has a duty to defend then the rest of the section applies the question there is whether or not a duty to defend exists and there's a suggestion that alps or any insurance company in alaska has no choice but to either deny coverage or defend is a bit of a skill encourage this situation i got that from the side of don't remember the case but it was an insurance case but it is skill encrypt this because and that's what california recognized twenty eight sixty in us in that it's unjust and inequitable unjust and an unjust windfall to ensure to provide a defense under reservation of rights via independent defense counsel without providing an opportunity to recover those costs because an insurance company especially under alaska law has no practical alternative but to defend it can deny coverage and refuse to defend but the consequences of that if it is wrong are jerko nian meaning that if the duty to defend is wrongfully denied then the insurance companies a stopped to deny coverage for the claim subsequently regardless of what a policy says has been interpreted this particular statute do you have a response that's fair says question do you have a  certified question or decided ourselves your honor i'm going to suggest you decide it yourselves because i think it is clear and i think i think section one hundred isn't different from twenty eight sixty there's under california law there isn't anything significantly different in one hundred from twenty eight sixty and every jurisdiction in the country that is considered this issue not only to have statutes alaska in california but it's it's a common law issue every jurisdiction in the country that has considered this issue has concluded that there is a right for an insurance company to be reimbursed for defense costs when there is no duty to defend if there's an express provision in a reservation or rights of the right to recover or there's an expressed term in the policy as there was here and that construing