if please the court my name is james burtis i represent the insured robert rizzo i represented him in the district court proceedings below i represented him in the parallel civil actions underlying this coverage dispute and represented him in the related criminal cases related to this dispute i'd like if possible to reserve five minutes for rebuttal and we're asking the court to vacate the district court's ruling that there was no finding that there was no duty to defend we're asking the court to find that there was a duty to defend the civil cases to find that the defense of the criminal case is reasonable and necessary to defend the civil cases and we're asking for a remove and at a minimum to deal with the unrelated causes of action in the complaint that do not depend on the duty to defend issue there is a pending request for judicial notice filed by mr rizzo that establishes that we successfully defended the civil cases as it will cases had professional negligence claims the underlying plaintiff's attorney general for the state of california and the city of bell pursued two avenues one negligence theory and the other an intentional misconduct theory and we successfully defended that case law in california is unequivocal that if there are covered causes of action the carrier has a duty to defend the entire action what is most convincing clear in california that if you have both a criminal action and a civil action which there's some there's clearly some overlap that an insurance company has a duty to defend the current criminal action so the issue of what yes that's the aerojet line of cases and the issue here is not whether the policy has a duty to defend a criminal acts and if it was tendered as a freestanding action there there is precedent for people tendering a criminal case saying i may potentially be sued in the future civilly so carrier please defend this but that's not what we have here we have a prior filed a civil action then we have subsequently filed related criminal action that must be defended in order to defend the civil case so the law in california is clear that any work that's reasonable and necessary for the defense of the civil case do we reach that issue in order to reach that issue don't we have to conclude preliminarily that the don't we have to get to exclusion zone p and the question of whether these cl inextricably intertwined and you have to win on that issue on those issues and then we can get to the criminal case right yes yes and the exclusions olympique were way that the tell me more about that because i actually i think i have pretty good notes on the correspondence between insurance company and the insured and it seems to me that there is a reference in all of the correspondence to the exclusion p so their letter of december sixteenth two thousand and ten their letter of april twenty eighth two thousand and eleven and it's it might be think it can fairly be said that in all these letters they don't say we're denying coverage based on these exclusions but there's a very clear reservation of rights in each of these letters just because we've said whatever else we've said we're not waiving these exclusions and then you get to december excuse me october seventh two thousand and eleven and i say if any damages awarded fall within the well anyway this question is taking too much of your time but i guess i guess i  read i don't see an absence of reference to own tea i see its ubiquity of units not just simply is there a reference to an insurance policy otherwise carriers would vote for a whole policy in their reservation of rights letter the reservation of rights letter it's e r a twenty seven states exactly why olympia is quoted in the letter and it's very clear to the extent damages are awarded for wrongful act arising from a crime or other fraudulent conduct coverage we're not a place so where this is a duty to defend case if this were an indemnity case the analysis would be entirely different and the inextricably intertwined analysis done by the district court is erroneous because it focuses on indemnity cases and other distinguishable cases i'd like to address that but there's a controlling california supreme court case right on point horace mann it's cited extensively in our reply brief faced on the opposition brief but most importantly no party briefed this inextricably intertwined argument for the district court the district court came up with this on on its own and skipped horace mann but others  could not be a duty to defend the carrier itself acknowledged there was a do these offend there were claims for professional negligence so the starting point is yes there's a duty to defend and the carrier agreed the withdraw letter is really  important to this analysis because in when the carrier withdrew its defense it was in response to a demur filed by the a g in the civil cases and it was based entirely on exclusion eat the attorney general had written that we are not seeking damages they were trying to respond to a successful demur previously made that if they are seeking money damages there are procedures that the attorney general didn't comply with so in a demur they said we're not going to seek money damages and the carrier then jumped in and withdrew its its defense based entirely on exclusion and so yes it doesn't matter the reasons why the carrier withdrew and there was no of duty to defend and so that's way that's rusty's and it's progeny and we briefed that extensively but the biggest i think mistake that crept into the district court briefing was all of the argument that mr rizzo had been charged with stealing from the city and thousand meant there was no allegation in any complaint even the criminal case of theft or embezzlement this was a negligence case actually in both for you know  in the first instance they could have denied coverage i'm sorry denied a defense based on olympia and then this litigation would have been about whether or not that was proper this whole litigation is focused on the reservation of rights letter which reserved the only basis for denying a defense and that's why we are a twenty seven assault court and they had a limited in vocation of olympique that's that's the point if they had said we won't cover you because even though right but if they don't if they don't have cover you then they then they can also decide not to defend you but they didn't because this was a professional negligence kate and that's what the error of the district court is based on that the allegations of covered and uncovered conduct and to a lot so and in that eye on i'm looking at the top of a twenty eight because this is the this is the carryover line from the paragraph the bottom of the twenty seven that you're referring to  and they tell you there that except would be entitled to reimbursement from brazil for the cost of defending those claims if they're entitled to reimbursement for the cost of defending them why can't they decide not to defend you in the first place they could have but didn't find that unless you reserve in the reservation a rights letter the basis for denying coverage or defense then you must defend professional negligence this will become the most cited case period for allowing a carrier to require cast professional negligence cases into other conduct horace mann dealt with this the supreme court doesn't horace mann say that that the duty to defend is not extinguished when there is a dispute of fact about whether or not the conduct was innocent and if intertwined that that's correct and the withdrawal of the defense was done  in in april on april twenty third two thousand and eleven so our analysis is rolling back to that date when the defense was withdrawn and it is impossible to say that these were undisputed facts in fact the court of appeals in california affirmed the dismissal with president the district court below cited the an appellate decision that had remained in the case to allow an attorney general to repleat cases but that was in error and we tried in our motion to recommit for reconsideration to correct that error that part of appeals had actually affirmed dismissal based on immunity grounds so there were clearly covered and uncovered plains and to this rizzo would prevail i think in a reimbursement claim but that's a future acts and that the carrier can bring against mr rizzle we entered our appearances and the duty to defend can exist and if the carrier wants one day to sue mr rizzo i guess they can do that i think they would lose again i'm looking at the december sixteenth letter and i'm back to eight thirty five i mean there's a lot there's a lot of there's a lot of different language here and on a thirty five they they've cited olympia again as well as exclusion he and they've said here that there's no duty to defend them they've said well we agree to pay reasonable unnecessary costs defending against the attorney general action two paragraphs later it says l reserve our right to seek reimbursement from you if we determine that they are not covered and except also reserves the right to withdraw from defending so i mean if they if they said right there we reserve the right to withdraw from defending have a haven't they told you that there was a possibility they would not defend you there's no they have not because all of those clauses the court's reading are dealing with the right to get reimbursement from mr rizzo or the right who in the future when the facts become known withdraw from the defense or do a wide variety of things but the right to withdraw from a defense it seems to me has got to be based on the right not to defend you in the first instance it does yes and if if they got the right not to defend you in the first instance and what's the problem they would have cite what willful conduct falls within olympiad just like they did in fact cite the when they did withdraw it's not a question of just naming all the exclusions and certain policy in a reservation of right letter and then just terminating the defense they have to say why they terminated the defense they did that in this case you say you think on this record mr rizzo reasonably expected to be defended for the gun the which he committed in this case language of the policy when we look at the policy we've cited on our six six zero which is the complaint that alleges professional negligence against mr rizzo which was in fact affirmed on appeal that that mr result had immunity for those claims he could not be sued for that negligence and to the ultimately in march two thousand and fifteen the a g t dismissed its claim it's case entirely so you rely on the complaint that's what california law requires in fact if i could just highlight the the unprecedented nature of this ruling because in california and even if there was evidence that placed in dispute whether or not insurers actions eventually be determined to constitute an occurrence and a carrier must defend it and the casualty in all the cases that that stemmed ultimately from the reasoning of graver zurich require a defense of there's a question  i don't i don't know if your opponent disputes that some of the claims standing alone might be covered the question is this brings us back to inextricably intertwined and isn't that question to be sided on the essence of the underlying claims as now serving time so i guess i don't need to say allegedly the to rizzo approved contracts for persons including himself within the city of bell that he knew were wrong  of of the case that the a g brought in the sun and i accept the friendly amendment so it doesn't have to do with the critical a criminal case i'm just saying that the essence of the legit underlying conduct i think was as i stated but no but it wasn't angela spots his contract with the police chief randy adams contract was not even alleged to be a you scratch my back i'll scratch your back theme the district court erred by finding a fact that the grab amended the cut case was a he's each scratches the other's back and to allow a carrier to do that would would eliminate the allegation to defend as long as there is a question was adams contractor is for the first time in reply no it was not the the fact is that nobody raised the inextricably intertwined argument in the district court and no one neither party briefed any of those cases required us to just in a motion for reconsideration to highlight for the court that you can't just come up with his own in the strictly intertwined argument and there's a contract here that has nothing to do with mr rizzo reviewing his directing the court so precisely to e r six six zero which is the complaint that is what the court will analyze to determine whether there's the potential for coverage and it's just incorrect to say that mr result i serving time for the same allegations that were made in the civil case and that police chief adams contractor spa she is contracts that anyone has ever alleged as part of a he scratches your back i scratch your back of different grounds and store if you have so much land landscape to cover today but i'm hoping that among your the things that you address will be why it is that we shouldn't remand to the district court for a fuller consideration of the question of your clients having accepted for a period of time the duty to defend which is an issue that i'm not sure the district court adequately considered and i'm not as i sit here now i'm not overly persuaded by the district court's conclusion that this was somehow bundled in to the summary judgment briefing the claim is made clearly in the complaint a claim by the insured is made clearly in the complaint and i don't think the motions are judge she's ordered arrested and so i'm not sure as i say if you're not prepared to firm on everything right and i will address that i think i should go through in a little more logical place to get to that because at the end of the day if there's no duty to defend never a duty to defend what the insured received here was a windfall and they were entitled to anything and so that's what's proper and the entire bundle the entire point the i'd like to start with the questions that you posed to counsel and that is you are here obviously looking at this the novo the letters that the insurance company sent to mr rizzo did not quote every single exclusion in the policy every single provision there were very specific they said you don't qualify as an insured there are no damages claimed here there's exclusion no these are all dishonest conduct that is being alleged exclusion pietists wrongful acts for of money that was paid to somebody else the money was never given just traditional restitution if i if if anyway that the money went to somebody else's network like damages if the claims here in the state clarified it in the whole demurrer proceedings back and forth is what they were after was restitution not a damage claim that they would have to make a tort claim for so if you look at the complaint and i think that that is the side looking at the policy and that the provisions that were reserved on are in the policy and you can decide on those bases but also looking at the complaints here the state's complaint the state having had to file that complaint in september two thousand and ten because mr rizzo was still in charge of in control of the city and then the city's complaint process the point and those are replete fifteen pages seventy paragraphs of what the conduct is that is  issue here and it is a story of dishonest conduct all geared towards increasing the amount of money that mr brazeau and his colleagues would make and for for a long period of time all done very secretively done very consciously crafted is the word used so that mr rizzo received three times what any person in a similar situation in a similar community would have received that his raises were increased exponentially each year that he took gave himself credit for one hundred forty three days out of a two hundred fifty day work here as vacation and his sick pay and then cashed in those amounts and did this all in a way that his retirement benefits would be increased and did this all with memos ordinances five contracts a different way so that no one could figure this out and purposely put out to the public information that was misleading that indicated that nothing was above board so that the story that's told in the states complaint and mirrored in the city's complaint is a story of someone who has taken complete advantage of his position his title this already given to him dead and all for his own personal gain and what does the state and the city at for the city and also in addition ask for voiding of an employment contract but they ask for a constructive trust voiding of contracts injunctions to prevent money to continue to be paid to them and for restitution those are the words used discords mint of the money that was received so that those monies can come back to the city that is the complaint that is before the court is what was proposed was tendered to the insurance company and simultaneously there were criminal actions three criminal complaint complaints and an indictment and they were all tendered so before the insurance company was that the city and state were after rizzo to get the money back that he had wrongfully taken any taken in a dishonest and in a matter that concealed it so people can easily find out what was going on so do the basis for finding that there no coverage is double exclusion oh and p you've already talked about a little bit and let me talk about the major arguments that mr rizzo places forward is that there's been some waiver here exclusion or n p r not only cited in every single letter that the insurance companies sent to mr rizzo they are quoted in full there can be no question that the insurance company relied on a number of bas exclusion pierre very clear and very clearly pertaining this the results council says that in fact there are covered in non covered claims here but they're not the labeling something as negligence doesn't change the facts that are being alleged and the case authority is clear on this just to put a title on it the record here that what you want to know he's going to rebut the record shows that the the conduct was intentional and it shows that the kind that was intentional it was it it could not have under this record administration isn't that the argument you are making that said that he didn't do anything wrong or was or wasn't criminally charged that's not what is at issue here what i just issue here is what are the claims against mr rizzo and if you look at the complaint that the state filed they spent quite a bit of time in this complaint talking about mr adams that rizzo's was under the paragraph forty five of the complaint five sixty three rizzo hired adams as the city's police chief even though he believed that adams was not able to fully perform his law enforcement duties because of preexisting injuries he paid him half a million dollars he gave an increase in salary every year and he gave them the benefits of the retirement program we're talking about what is rizzo's conduct what is rizzo going to be held liable for not that mr adams may have been successful and in persuading that he was not responsible the same with space here so it all here there focuses on mr rizzo we're not here looking at whether there's coverage for adams or for space here but for mr legal and his conduct the the point was made that successful demurs were brought in that was on the basis of immunity well that doesn't take away from what just the complaint alleging there may be defenses that could be made it's like if this complaint had been a claim for slander just because that's easier to think about the insurance company has to look  t insurance policy and decide is there coverage for slander they don't look at they look at whether the facts if alleged if the facts alleged if true would be covered if these facts in this complaint as alleged were true would there be coverage for these a slander claim you don't look at it and say oh but you could prove that it didn't actually happen or you could prove that the statements were true those defenses just as here you can say we have arguments or is immunity or maybe it didn't happen or they're all wrong that's not what you look at if you look at the facts as alleged if true are those covered by the policy and here clearly they're not there at least dishonest und exclusion no they are for for wrongful acts for gain and profit exclusion p also mr these same allegations lead to the conclusion that mr  qualify as an insured on the policy the most attention is not spent on their to their two prongs for when how he gets coverage one is that he is a city manager and has to be acting on behalf of the city and no one's even disputed that he wasn't acting on behalf of the city and would pledge here that it concentration everybody's briefing is on whether he was in the course and scope of his employment and that district court erred in this regard in that the court relied on the respondent superior or line of cases the case that really should be relied upon is the farmer's case from california and the the the rule is that if someone acts actions significantly deviate from what is their job that they're not in the course and scope for purposes of insurance coverage zulu case that counsel is cited in the briefing and brought to the court's attention did not use this substantial substantial deviation from employment duty standard instead it used the respondent the period or standard and the criticism of that case in the dissent and subsequently is that this is not the right standard to use even if you use that standard is do these acts would is it in the course in scope you do you judge it by three things stimulating the government to greater village vigilance spreading the loss and compensating  those are the factors that are looked at for respondent superior or not as those are factors that would lead to a ruling here that mr visit was acting in the course and scope how can there be greater village vigilance here when the city was run by mr rizzo how can there be a spreading of the loss by using a course and scope analysis here when at the end of the day that would mean the city would pay for this and how is this compensating for the victim the victim here is the city it makes absolutely no sense here for the city's own insurance policy to be defending the victim the perpetrator mr rizzo against claims by the city makes no sense so on that basis also that mr ritter does not qualify as an insured case the court can find that there's no duty to defend address damages let me get to your question which is why it can be dismissed the whole thing let me frame it for you a little bit so you understand what i mean so i do have as i said the concern that the district court didn't give this issue with its attention and anticipating something that you might say which is well there never was a duty to defend in the first place even if even if the panel agrees with that is just a rejection it's like a counteroffer well maybe that's what happened here and i assume that's what your client would say if we remanded and that is that we offered to pay a certain amount and they were willing to accept it only under certain conditions so no contract was f don't have of us to that i'm wondering why shouldn't the district court have to address that issue i don't think that the district court has to we have to go that far with there's never a duty to defend here that means that any dining quarter dollar thousands of dollars spent here was a windfall to the insured it makes absolutely no sense and now asked it's the insurance company where there's no duty to send to pay more and then the insurance company to mr rizzo to get that money back does this top take the position that if there is no duty to defend but the insurer tells the insured we're going to defend anyway that that can never create a duty in the insure it's it is not a duty as such to pay it was a windfall it's we company we gave you money and the record should be clear that the allegation here is that the insurance company did pay money and the dispute is over the rate and over whether the self insured retention of two hundred fifty thousand dollars had to first be satisfied so payment was made and the insurance company has a right to reimbursement of that it makes no to require the insurance company to pay more there are so you and i know that in your letter that you said that you said that you that if you did undertake to defend and then decided later on that you didn't have a deja found that you might seek reimbursement so when you refer to the fact that there is a win for you telling us that the insurance company has not thought reimbursement of anything above the two hundred fifty thousand dollar self assurance provision at this point the insurance company decided not to sue mr rizzo to give back the money they already paid but to ask the insurance company now to pay more i bet that would follow with a reimbursement action just makes no sense for mr resort of face another lawsuit to get money back for something he's not entitled to in the first place so and but sometimes in the law we require process even when it's not the most efficient thing i'm still stuck on this question of legally isn't it possible that a contract was created and what i'm hearing you saying is no there wasn't but moreover even if there was so what because we could sue to get reimbursed if we wanted to find that second one three three and there is no offer acceptance consideration here there is no contract there's no contract pled the i do think that there is a practical aspect which is what i'm also arguing that it makes no sense to have an insured face another lawsuit for reimbursement when they had no right to the money in the first place so it's both of those no contract and it makes no sense the also i think i should i go by the dresser question ok rest so criminal question that was brought up earlier and and there is no stein  is the case and an insurance company code section five thirty three point five is the statute in california an insurance company cannot be required to defend a criminal action there's no provision in the insurance policy that they will defend it's a sticky question of state law and we're three federal judges if we went your way on inextricably intertwined we don't need to reach this issue do we know i don't think  nowhere in the record that shows that mr results conduct was intentional the inferences to the contrary are simply wrong the attorney general dismissed its case the meaning was you mean he did it by one could have done it negligently they dismissed their case there's nothing in the record that shows intentional misconduct is what he did doesn't it no it doesn't because there are allegations of professional negligence that he unreasonably approved for example police chief adams contract and then ultimately after five successful  urs a successful appeal and further process the a g dismissed the allegations there is nothing in the record that the court could point to that shows that mr result conduct was inexplicably intertwined with uncovered conduct particularly in connection with the contract for police chief adams and boss yes on this record there's no dispute about what he did there's an absolute dispute about what he did he he didn't know that the money he didn't take the money no he he acted reasonably there's no law that would prohibit the salaries paid anywhere in any statute anywhere which i let you know but you're out of there is what the court is i think focused any finding of intentional misconduct by mr rizzo in any form it is this is a conflict of interest case and a lack of authority meaning that the city council didn't have the authority to approve the delegation that they made to mr result we were on the of trial in the in the criminal case with resolutions from the city council to delegate authority to mr result and the issue was were those resolutions posted for seventy two hours before they were approved yes or no that is not i think what the court is thinking you know fast embezzlement no one has alleged that type of conduct and i think because it's written about in the briefing it creates its own momentum but the underlying criminal embezzlement the underlying civil case has simple him an area allegations of intentional misconduct but then there was the alternative theory of unreasonable approval that triggered coverage so it's just record shows the conduct was intentional so i am actually speaking to the court's turning to me right before she answered that question and she didn't point to anything in the record because there is nothing in the record this is not you can't recast negligent claims as counsel's trying to do to say what this case is really about is that than embezzlement the look at law and insurance in california doesn't allow it this is defense only which means is that the potential for coverage and the answer is yes because if you missed a result unreasonably approved randy adams contract because it was too high then he's responsible personally for the damages the wait the essence of one of your significant arguments was morning is that once the attorney general cases relied on by the district court two were indemnity cases ehrlich and meant for us where the basically the plaintiffs were assigned the defense of policy and they were trying to get payment for damage claims so those don't apply result never going to see definitely in this case this is only defense and the other two cases metal was that was would side the district court side it is simply saying that when you assume a duty under a contract and there's a contract exclusion the duty to perform under the contract is off i think i'm more stuck on this point than my colleagues are in response to my question about the so it's a mystery well among other things she said there's never a breach of contract claim that was put in this case so i don't need to get to that this is not before us i mean this is what mr burke said and i was thinking i have no idea what she's talking about and i don't have any idea what you're talking about what is in the record is that is that there's a dispute over whether that retention had to be paid during the period where the carrier did it is critical that the court follow a process for missed or to say that while the we promise to pay and didn't since we would have no duty once all facts are known which they never have been this court should not require remain and for the claims unrelated to the duty to defend that and i was on this record and on this record the district court could easily conclude that your response to the insurer was a conditional acceptance that extinguished their offer i don't believe that this record can because we made our appearances and defended the case and did the work i don't think the judge the judge didn't reach that that's the critical issue before this court but if we have the chance to go back respectfully i think she's going to find if you said you had to pay you have to pay because that's where you get the benefit of the work the carrier can then it's capes say i'll pay escape paying a penny and then later on if there's a finding of no coverage therefore reco actively not to do to defend rather than sue for reimbursement they can just say we got three work from an attorney and that's not what the law provides you don't disagree that the cup could sue for reimbursement if they thought they were entitled to it no absolutely not in fact mr rizzo would welcome that lawsuit he was very grateful that we appeared for him and we discussed this issue there's no conflict in my seeking payment and then reimbursement that's exactly what mr is a want ms this thorp is just incorrect when she says that it's unfair to mr rizzo we don't need that type of paternalism mr brazil is very grateful for the four years of litigation work done by my office and it's very hopeful that the carrier will pay and hill really defending a reimbursement