good morning in hooking to the six circuit jets kept woods and i would like to thank the honorable robert dow from the northern district of illinois for joining us today we're really grateful for helping us with our persian caseload and you guys are lucky and so are we that is here the court my name is alan f curley and i represent plaintiff and title insurance company in this appeal in this case entitled was forced to pay in excess of three million dollars on its closing protection letters as a result of wrongful acts by want to its title agents in the form of in title made a claim under its professional liability policy issued by the defendant but the defendant refused coverage the district court then granted summary judgment in favor of the defendant holding that because the title was not legally obligated to pay the loss and because public policy precluded the loss there was no coverage here we respectfully submit the district court was incorrect and request the court reverse and enter judgment in favor of entitle it's really kind of these closing protection letters can you tell me a little bit but it sounds like from the record there are fourteen of these closing protection letters that you guys it extended at least as to the policyholders whose claims were the issue here how do you how is it decided who gets the c p l who doesn't well under ohio law we are required title is required to offer a closing protection letter to the to the closing parties it varies state by state it's up to them whether to accept it or i think that would be true in ohio i believe the obligation is that we offer it and we did so typically  other states it's when the closing parties the closing transaction parties request the closing protection letter and virtually one hundred percent of the time the lenders in these transactions do request that sometimes the borrowers if it's a cash deal do it occasionally a seller will ask for one but typically it's the lenders that are driving the issuance of the closing protection letters the get a fee for the water we get a small fee it varies state to state some states don't allow fee the states here i think it varied from thirty to fifty dollars something like this because there was some kind of there was a small fee at least for some of the fourteen that are involved here and how many people the content does the record tell us anything about how many people declined we know the fourteen people  accepted it what's the what's the universe of those who declined i'm not sure the record indicates that your honor and once again from the perspective of the lenders i think it would be a very very small number it's virtually unheard of that a lender would engage in a in a closing like this with entitles title agent without a closing protection letter having been issued so that it can look to the title to the title company to be responsible for the title agency felt cation and so it sounds like for the c p a all of the  entities that are involved in it would be the state to the extent the state requires you to offer or permits if it's permissive it's different than if it required you and then there's the your client and then there's your client's client basically that's right but darwin the darwin's of this world have no involvement in that whatsoever do they have any can they dictate what the terms are darwin being the professional liability and right they don't they're not involved in that transaction in any way shape or form or in  what what the document what's contained in the c p i absolutely not your honor but it's certainly our contention is and i think the record fully supports that darwin was well aware that as a routine matter it's title company insurance issue closing protection letters and in fact in some states it's required by law to offer them but darwin didn't require you to darwin didn't say we won't do business with you unless you have a c p o in place no they did not get our thanks i just want to sort of we're in the universe of thank you i'd like to address the two provisions of the policy that relate to contracts because i think the underlying a lot of what the district court held in this case those are sections t  m seven of the policy and seven b three the parties have conflicting interpretations of these provisions and entitles interpretation would give would give plain ordinary meaning to both of the provisions as well as read them in harmony with the entire insurance policy consistent with ohio law darwin's interpretation on the other hand isolates a single phrase in one provision fails to take account of the policy as a whole creates unnecessary redundancy and would in fact no if i section seven b three so this this policy clearly covers certain contract liabilities the insuring provisions are very broad this is a broad for professional liability definition of of professional services and then there is an exclusion in seventy three for all contract liabilities but there is an express exception there for the insuring provision that's at issue here and that we care about the professional liability insurance agreement so it's apparent that these losses that were suffered as a result of the closing protection letters which were triggered by a wrongful act of a covered entity it would be covered under the ensuring provision and what darwin is trying to do is to eliminate coverage by citing to a an exception to the definition of loss which which provides and there's a provision they want to isolate just that language in the provision and there's more to the provision than that there's a there's a non exhaustive list of what it is what it applies to and we cited the henley case from the ohio supreme court to apply  maxim to say that that non exhaustive list modifies amounts due and we think that's completely consistent with the presence of section seventy three which is a broader section that provides coverage for a liability under any contract or agreement i mean that application of that cannon is completely backwards from the manner in which it normally applies them and that's one of these canons that isn't sort of a thumb on the scale candidate sort of  an explanation really of how people would just normally understand things you know one example that people know is you know nails screws and other fast s nails screws and other things and you know you're talking about fasteners the general language comes at the end not the beginning here comes at the beginning and also includes but not limited to lip if if in the way we looked at it was that it supplies a rational way to resolve the conflicts between to him seven and seventy three what is the conflict in your  way darren wants to interpret to him seven it would completely notify seventy three it's not to make it redundant or just mere surplusage it would say the opposite because two seven b three says there is coverage for loss pursuant to loss that results from liability under any contract or agreement that's a very broad statement a very broad provision to him seven says something more limited we think but darwin interprets it as basically meaning anything it ever oh under a contract and if if it covers anything you ever oh under a contract then it notifies to him said and or you could or you could conclude there's an ambiguity i think under darwin's interpretation an ambiguity is created one section says one thing the other section says the opposite then if you were to adopt their version of it it's going to nullify to him seven  and so rather than and it's also going to create redundancy in other provisions of the contract it's going to create redundancy it's going to make the the provision right above two m seven completely redundant surplus it would make darwin's interpretation would result in ambiguity notification redundancy our interpretation harmonizes all of those provide i understand i mean the conclusions that you're offering i guess what i'm interested in hearing more about is why you think you know all those things are true why it's a plus a cheer why you harmonize there to protect our interpretation would give meaning to two m seven a basically would say that the liabilities under a contract are covered and there is an exclusion in i'm sorry seventy three would say there's liability under it under a contract or to be liability under seventy three if the liability arises from a professional liability wrongful act that's right  and yes it end and to him seven does have a use in a meaning it it it excludes amounts do pursuant to that contract we think there's a very good example set of examples in the provision as to what that goes do what it doesn't do is make the mirror image of seventy three and exclude everything it ever zero under a contract because that would notify seventy three and it would i said she one could clear it up for time's up so legally responsible is your position the same if ohio said nothing about offering this requirement of offering these closing protection letters i mean i'm trying to figure out the role i can imagine a world in which ohio said you not only have to offer may have to exist in every case that could change things but that's not what's going on here so does your position change if ohio said nothing about offering cause and protection matters and trying to figure out what role that plays in legally responsible does not your honor because we've we feel whether we're obligated by state statute or not we entered into this contractual relationship just doesn't make a difference in a deal how does that issue difference should not make a difference my time is up well let me just make sure you have any three and i'd like to offer a hypothetical that i think demonstrates the distinction between these two provisions and why there is no conflict between them but let's say i enter into a contract with somebody for services and i agree to pay a thousand dollars and i also agree to pay an additional one hundred dollars if i don't pay timely under that contract so the services are performed iow with thousand dollars but i don't pay timely so i don't pay by the end of the month i think under no reasonable interpretation of that letter would i be able to say oh i only know the hundred dollars i don't know the thousand dollars for the services i only have the liquidated damages because i didn't pay on time so i think that's the reasonable interpretation up to be seven that says lost does not include amounts to pursuant to a contract i don't think it reasonably can be read to be limited to the penalty provision and then to to explain why there's no conflict with the exception to the contract exclusion let's take my hypothetical a little bit further not only do i not pay timely i don't pay at all and the country actor gets very angry and he filed suit damages and he seeks attorney's fees now that potentially is a liability under the contract because it arises as a result of the contract but it is not an amount i ever greed to pay i agreed to pay the thousand dollars i agreed to pay the penalty i never agreed to pay consequential damages i never greet his attorneys fees and i never agreed to pay punitive damages so that's the distinction it's the amounts on the one hand that i agreed to pay first is the amounts that he could potentially try to hold me liable as a result of the contract and that is the distinction between these two provisions and that's how you read them coming and when mr curly argues in his reply brief that there is no difference between the amounts that an insurance company would over bad faith versus the amounts that it would go under a policy or a c p l the reply brief quotes the policies definition of extra contractual claim that's in the proof that that's in there and it's on page thirteen of the reply brief had put no date but there is a big lips in the middle of that quotation and the reply brief states that policy defines extra contractual claim as a claim requesting a mouse and then there's the ellipse in connection with an alleged breach of any duty of good faith or fair dealing by any insured now the language that was not quoted in brief but that appears in the policy is that an extra contractual claim means that claim requesting amounts not covered under any provision of an insurance policy issued by the company meaning entitle including applied damages and that's the exact distinction the purpose of this professional liability insuring greenman in this policy is to provide coverage to insurance company for bad faith claims against them in some states that's a contract claim in some states it's a tort claim but the purpose is to cover them because when an insurance company is sued for bad faith it's based on the allegation that they didn't pay the claim timely they mishandled the claim they did something wrong in this case entitle didn't do anything wrong in issuing the c p l policies they greed to make a payment in the event something happened it's no different than the liability they owe on it or insurance policy it's not based on their wrongful conduct so the exception to the exclusion is intended to make clear that the policy provides them with coverage for their exposure to bad faith claims the long provision that's intended to m clear that if they owe money to their own customers that they greet to pay that's not something that's covered under professional liability insurance policy so i'm a little confused i mean this is  policy here is providing insurance for liability that arises from professional services as defined in the contract right and so you're saying that professional services just the provision of insurance here no professional services is defines who include services performed for their for their customers and rising and but you were just i thought you were just  describing this underlying you know agreement with the client as basically just title insurance and if it turns out somebody had a you know prior interest in the property or something and they refused to pay quickly then you know it's just bad faith failure to pay amounts of for insurance liability but the contract seems retirement services well an insurance company provides services to its policyholders in handling claims when a claim is made against policyholder that's one of the services they provide is not just incidental to paying about so you know well insurance policy to the extent that the claim against the insured is disputed i mean it can involve a lot of things that can involve you know failure to settle on a timely basis or failure to settle at all can result in excess the ability and the insurance company in the context of a title insurance company they also provide services their customers they do title searches they do underwriting they so that they do other things it's not just the issuance of the policies in addition to him no one claims and one of the one of the services they provide is claims handling  adjusting you know when when there's a claim under a title insurance policy and there's a dispute as to whether there's a lien or were an easement or something like that i mean there's frequently litigation in the title insurance company runs the litigation they hire the lawyer take they call the shots on the strategies so those are professional services but on the other hand if the title insurance company is asked to pay under their own policy or under a c p l that's an amount  responsible could have that meaning but it also means it's true when you're obligated to do something and our contract you're legally responsible for it so why would one say there's ambiguity there ambiguity gets read in favor of the insured and that's a problem because the the provision in the policy the definition of professional liability wrongful act it doesn't just say legal responsibility it says for a person or entity for whom entitle is legally responsible and so when we when there's no that makes it an agency point i think that makes it an agency point or it if and title argues that because they're contractually responsible that turns it into a legal responsibility for that person or entity but when you look at the documents that's not supported and the relevant documents are the issuing agency greenman and that document specifically limits direct titles of authority to issuing and direct title it's a contract between entitle and borrower a lender that document doesn't say that entitle becomes legally responsible for direct title as a person or entity and in fact it says the opposite it says that we are not responsible they are not our agent that document only says that we will pay the loss in the event certain things happen so the analogy that we used in the brief is like i insuring you know if an insurance company insures a property and there's fire on it you know even though it pays the fire loss it doesn't become responsible for the arsonist but that's that that's the analogy which we think explains this pretty well  and i would like what your answer to the point judge da was asking in terms of the so fourteen there were fourteen payments here how many other people were there affected by the fraud but didn't have c p o i don't know the exact number but there several and in fact several being two or three or four well or there are in total has submitted several other claims under this darwin policy which darwin has acknowledged potential coverage for i believe there are three or four  and darwin has been advancing defense costs and settling these other claims and those are cases in which there were no c p s issued and the plaintiffs in those cases were alleging that in title itself did something wrong you know it was either involved in the fraud or you know did something wrong in and we're certainly not saying entitle had any responsibility for direct titles wrongful conduct but those suits were filed they're not c p l claims and that's something that's covered under the policy but no but entitled to not pay out on the ones that are not cut without c p o they only reimburse the customers who had c p s is that accurate or wrecked and there are thirty b six witness said specifically that if there was no c p o they would fight that you're theory that is that the loss was outside the scope of the agency correct and i do want to mention one thing in the reply brief that entitle filed on its legal responsibility in the district court and in its opening brief it limited its argument to saying that the legal responsibility derived from the c p l's in the reply brief for the first time they argued that this leeward sponsibility also arises by virtue of statute and that cite statutes from nevada florida illinois so procedurally that's a problem because they didn't raise that argument the district court and they didn't raise it before the reply brief and before this court but then substantively there's also a problem with that argument because in the record entitle pursuant to that statute and then also just we took a quick look at the florida statute that was cited by the american titles reply brief and there are cases under there which of course haven't been briefed in front of the court that shows what would happen your position on legal responsibility if ohio law said you know you have to i mean every one of these things has to have a seat so in other words it's not just that there's an obligation to offer it it's that all of these transactions have to have c p o that change the legal responsibility argument i don't believe so your honor but why wouldn't it i mean it seems then because the question no option the wording under the policy is or entity for whom entitle is legally responsible but ohio law on that and since would make it clear that they are when it only says that they're responsible for the loss in the event that there's a theft it doesn't make them legally responsible for the entity and that's the critical distinction and that's why that because it's outside the agency in other words their policy only goes there very very didn't see it as with the title insurance it's not an  and that's what that is so judge sutton's point is if the law requires this and it's you know it's not where we're trying to figure out whether it's fourteen or seventeen fourteen eight hundred fourteen out of one hundred whatever it may be if it by i mean as a matter of was fourteen out of fourteen every time and you know you're going to have a c p l on ever attached every one of your your agreements every time you extend coverage to the entitles the world there's a c p l that's attached that hold stop as a matter of law then the scope of what you're insuring becomes a little more obvious the ohio statute wouldn't extend farther beyond the wording of the c p l itself and the c p l only says that they are legally that i'm sorry that they greed to indemnify for the loss in the event certain things happen and that's the agency point  but the t m w case that mr curly submitted in his first twenty eight a letter specifically says that belts and suspenders you know redundancy in insurance policies is actually not such a bad thing so i don't think the redundancy point should really carry the day here abundance he is a tough one with insurance contracts i've been down this road many times before it's like one when was the last insurance contract that didn't have some series of seven words that the exact same thing and it seems like anyone in the insurance industry should not be allowed to ever invoke that that can and it seems like it's a cannon that applies to the rest of the world but not insurance contracts but by the same token if if two m seven the last provision is read as in title proposes a sensually there deleting the first fourteen words of that provision there deleting any amounts of pursuant to an express contract or agreement including but not limited to and the provision you end up with a provision that says there's no coverage for liquidated damages and that's not what the provisions says so i think redundancy is better than nothing cation in the context of insurance well of course redundancy is better than no if occasion your honor and as a t m w case indicates but darwin's reading of two m seven would undoubtedly know if i seventy three it doesn't create surplusage it doesn't fi's it makes it say the opposite of what it says and and the way we interpret to him seven does not know if i that provision it and it it applies to all things like liquidated damages or any other amounts do that are of a similar category it doesn't know if i that provision so we think that their interpretation is the one that leads to no if occasion and that to him seven has to be harmonized in some way with seventy three there is does not do that in ours does it take you back to legal responsibility so if if your head coverage for all the losses relating to direct titles misconduct why did you only pay reimbursement for the ones it's because the c p l is what creates the legal responsibility your honor and in fact that's why they exist to create that legal expert responsibility only to our customers only to the people that we are providing the professional service  to the general agency is disclaimed in the issuing agency agreement because title has no desire to be generally liable to everybody in the world that deals with direct title is willing to take on the responsibility for direct title views of the its own  customers and so that's why these these two agreements are structured in the way that they are it doesn't matter that we're not there not our agent for purposes of something unrelated to what's in the c p l say what matters is that we enter into an agreement with our customers that creates a contractual responsibility there's there's no there's no reasonable basis to conclude it isn't a legal risk bonce ability it's the plain language of the term legal responsibility that when we obligated ourselves but it goes on it doesn't just say legal responsibility it goes on and who are an individual or entity i mean that language d just so you know you're what you're spying to it does suggest agency to me there i would respectfully disagree your honor in that if it's given a plain and ordinary meaning in in the context of the we are taking responsibility for actions that are specified in the c p l that are undertaken by direct title when they then you know when they then undertake those actions we become legally effects you it's isn't it spelt certain scopus spelled out in its agreement with them yes but i think that the ordinary and and plain meaning of how when we are legally responsible is satisfied here we are responsible for the activities that they undertake in the contract to the extent they undertake those activities were we become legally responsible for direct title and i think that would be the case in any situation even in an agency setting you know when the when the when the employee the same distinction your honor roger soko i mean you have this c p l this legal responsibility and yes it's related to these types of transactions but what if it just have these totally immaterial unrelated clauses that says we're legally responsible not just for things like this but you know if the yankees win the pennant we pay another hundred thousand would you what would happen then so it's not even connected but yet everything you're saying is still true you contractually made yourself legally responsible the event happened what would would you still say i would say that we are one stars that's how it's a bill for direct title to the extent it undertakes the activities that we've identified would be darwin would start to pay so you have this just crazy clause and there's an extra hundred thousand dollars if the yankees win the planet well i don't i mean we don't have a crazy club now but i mean that's i understand but i think the i think the darwin was well aware these are these are closer to have a better answer than you're giving to this question i don't understand how you could say that with this contract you you go outside it and you do something which is not even related all to a title and i think this may be the answer of course the only thing that daryn is going to be liable for is a professional liability wrongful act i mean that's a that's an underpinning of the entire situation but there you go we got i kept pushing and i'm glad that i finally figured out  for the contractual liability ok do we have any other questions ok thanks to both of you for your helpful briefs and very helpful arguments thanks for answering our questions we appreciate it the case will be submitted and the court may call the next case