liability incurred handling claims under the b f m c policy but the court further rule that beneficial would be discharged from that reimbursement obligation if penny handled the claim obtain licenses to sell health and accident insurance not casualty insurance any agreed to enter the transaction only if it would have no ultimate exposure or expense und casualty policies let's look at the evidence the transit reinsurance agreements which preceded the final purchase agreement that transit reinsurance agreement stated the transit just be responsible one i guessed when i was getting out did penny continue to receive any benefit from those policies in any way no no no whatsoever none whatsoever the business was terminated penny did not want to have anything to do with  penny had no claims handling employees and did not want to be in the casualty business that's precisely why the parties agreed that transit would handle everything having to do with any claims that came in under these older that in that case penny had the obligation to defend to cover to handle claims in the first instance however under the purchase agreement many which agreement called a contingent liability in the event transit fails yes b f and c and later penny would have to step up and take care of the take care of the claim however the agreement  tendered them to transit as required by the transit reinsurance agreement they also tendered them to beneficial after transit was insolvent they weren't required to do that but as they did they did ask beneficial to come in and take over beneficial refused and instead under the district court's ruling what we have is a situation where instead of taking over the claims and minimizing any expense or for stalling these problems beneficial now has an incentive to sit back let penny handle the claim then take potshots at how many how old the claim in order to get out of its reimbursement obligation so what we're going to see if this ruling is upheld is an unending stream of federal court actions in which beneficial penny dropped the ball we don't have to reimburse that's that's the problem with the district court's rulin alleging on remain and in this case beneficial says if this case three man that it will challenge penny's claims handling after penny admitted the existence of policy twelve eighty one so we know that litigation will be forthcoming and in every case it's spent it's in beneficials interest now to challenge penny's claims handling in order to get around its reimbursement obligation that is just a recipe for  schedule d of the purchase agreement and in particular note for a beneficial standard life insurance company as an opening a matter i need to correct the factual record in fact the tenders that your owners asked about were initially made to beneficial standard it was beneficial standard in the context of pennies assertion that beneficial standard had an obligation under article five of the purchase agreement to step into the shoes of beneficial firing casualty the actual issuing insure previously owned by beneficial standard and the stock of which was sold in its entirety to penny in one nine hundred sixty seven so what we have occurring here is the transmission of an operating existing insurance company and all of its liabilities from one parent in that instance beneficial standard to penny so beneficial firing casualty continue to have contractual obligations to policyholders and policies that it had to when it received claims under the b f and c policies was to beneficial standard not to transit and in fact as the findings of facts and conclusions of law which are in the evidence re record at approximately page five show still honoring claims and in fact these have been categorized as a class for claims but maybe recategorized as class three claims in which case there would in fact be money available in the transit receivership to pay  completely removed from the transaction it had no contingent liabilities nothing that was all in the auspices of beneficial standard beneficial standard had to handle the policies had to pay the claims and had to seek any reinsurance that it should point to it was only when the district court in its initial summary judgment really disagreed with penny's construction of the contract and found that indeed beneficial was a beneficial buyer still had the me but you are the very last sentence applies just specifically to this block of business and the first thing that beneficial standard has to do is to make sure that those reinsurance arrangements are maintained by transit now at no time has penney asserted in this litigation that beneficial failed that contractual obligation there is no evidence whatsoever that those reinsurance arrangements are in place and fact maintain those reinsurance arrangements that arguably penny has recourse whether you want to call it has questions and just preach of that promise to keep those insurance contracts in place or whether you want to call it that we revert to the general  language the first place we have to look is to see if beneficial did specifically what it promised to do which was to cause transit to maintain those reinsurance arrangements no matter how you construe this contract whether you adopt pe construction whether you adopt beneficial standards construction or whether you doubt the trial court's construction you still come to the conclusion that the last person you would come to in this list would be beneficial standard that's the purpose for having all of these reassurance arrangements and we know that because the only party who could take advantage of those reinsurance contracts were penny and b f and seem beneficial standard is not a party to any of the reinsurance contract we also know that custodial accounts were created and even further back up to this reassurance arrangements beneficial standard put five million dollars of its securities up to back up the reinsurance arrangements transit put nine million find that as a condition proceedings to coming to beneficial standard for in general the reimbursement any first had to exhaust all of its rights to reinsurance it had to then seek only come back to beneficial standard and i'd like to just address that because when we look at a contract like this and we look at competing claims to how it should be construed we have to look at it as a whole and we have to look at the equities that will result by application of one construction  another and so let's step back for a second and look what really happened here for the three hundred and fifty thousand dollars net of cash that was transferred pending bought an existing operating insurance company beneficial fire casualty and it got all its licenses to do business it got all of its already approved forms it got all of its rights to reinsurance it basically had the day after the closing the ability to conduct business for three hundred fifty thousand that is included in the purchase and sale agreement expressly by then official fire and casualty regarding its authorisation and its license is to conduct business as a property and casualty insurer this is contained back in the schedules now if in fact penny's argument that all it ever wanted was some accident and health policies why then would there be representations about beneficial fires right to issue property and casualty and it goes beyond just the licenses your honor because a license to do business as an insurance company just means that you can sell insurance it doesn't mean that there's any policy form that you can issue in any state because that is  additional condition proceedings to selling insurance i have to have forms that every state regulator has approved and that was an extremely valuable asset that penny acquired as a consequence of buying into poto beneficial firing casualty now in the stock sale unlike an asset sale the liabilities of the company being sold travel with it and they are undertaken by the enquirer of the star unless there is a very sickly or statement assumption of the liabilities by the selling company well this is contract does not have an assumption agreement you may say it has an indemnification provision but it's not have an assumption agreement and so again stepping back for a moment and looking at the circumstances of the transaction on the day before beneficial standard so all beneficial but beneficial fire and casualty beneficial standard had itself no liability and no exposure to risk for beneficial fire and casualties policies if the official firing casualty couldn't pay policies or couldn't recover reinsurance to its policyholders that liability could not be upstream to to beneficial standard so many is asking the court to construe this contract to mean is that for the low low price of three hundred fifty thousand dollars beneficial standard agreed to take on wholeheartedly voluntarily the assumption of thirteen million dollars in estimated policy liabilities now typically when you look at a stock sale and you see that the selling company has taken over his student some of the liabilities of the company that's being sold there is a statement of valuable consideration there is a price the lower the price for the stock sale contingent liabilities for three hundred fifty thousand dollars and even if that was going to do that why would it not have made itself a party to any of the reinsurance contracts which were providing the protection for  just doesn't make any sense any saying we can be as cavalier as we want in our contractual obligations to our policyholders we don't have to act reasonably we don't have to act in an objective manner as an insurance company are passive you are ultimately the trial court concluded it was active negligence but the mccourt went further and found it was even more the court found that it was actually on reasonable policy without any evidence that there was any similarity between the insurance relationships and created a policy from whole cloth they said this is now the policy that is in effect for all time to come between the port of drafted in one nine hundred sixty seven then attached to it what appeared to be a draft invoice that identified the policy number and said how much the premium would be for that and i did and that's both with regard to a one to a one the primary policy and one to wait for the i d x that's policy there was still little secondary evidence of this policy that it was disputed if even the alleged primary policy was in fact a primary policy there was no cancel check there was no policy register there was no evidence offered by anyone who had personal knowledge of the policies there was literally nothing but the one letter and the attachment to it and the court found that that was not only of the policy because it never showed that it took a fact or that it was ever cancelled but that there was absolutely no evidence in the material terms and conditions there was no evidence that beneficial fire in casualty had you standardised forms or in fact what kind of foreign policy had been used here if any and in fact there is some evidence that it might have been negotiated manuscript policy but by ignoring the existence of a policy one two eight one and creating these terms for it and this notion that the court somehow error in just charging any notwithstanding what penny admits was objective lee and reasonable conduct we find ourselves saying how can anyone in an indemnity contract ever be assured that it's indemnity will i could perform consistent with not only the terms of the written indemnity contract but the terms of civil code section twenty seven seventy eight which is written into every indemnity contract and here violated multiple provisions of the twenty seven seventy eight it didn't act with the discretion that is referenced in twenty seven seventy eight three it did not act and as a consequence it also with the defense under policy twenty four thank you thank you contract had an implied covenant of good faith and fair dealing as all contracts do any of course has an obligation to act in good faith the trial court never concluded that he did not act in not just indemnify but also reimburse the active passive issue that judge fletcher mentioned does not even bear on the reimbursement provision there's no law that qualifies a reimbursement promise but the articles are very clear then official well done this by beneficial reimbursed and lest there be any doubt notes for in schedule d if there are the policy please take care of that beneficial would forwarded on to transit beneficial never questioned its obligation never questioned the fact that penny had nothing to do with these claims have no yes counsel so the purchase price was three hundred fifty thousand dollars i don't i'm not sure that's correct i didn't see that in the record and i don't see it in the briefs so maybe penny just got a better deal that's the way it turns out of parent think that would happen they contemplate the possibility i assume they expect the transit to continue on to everyone's benefit but that didn't happen transit failed the spell to penny and now beneficial wants to escape it interpretation of the agreement by penny we have consistently interpreted this agreement to require unqualified reimbursement there's never been a change in position on that the council may be referring to the arguments on the duty to defend which was disputed in the district court the parties disputed whether beneficial or penny had to step in and defend in light of france's failure ok that was that was  you're going to be sued for then think you're supposed to put yourself in the position of the insurer that's exactly right your honor and that is why penny is between a rock and a hard place penny is supposed to accommodate and  he has two masters that that that's not a tenable position the more reasonable view is that beneficial cannot control or restrict penny in the claims handling penn obligation is to the insured if beneficial wants to minimize or limit or completely eliminate the possibility he will have to later pay a penny beneficial should simply take the claim in the first place so it's going to pay for the client beneficial can take the kind of the first place and thereby eliminate any risk that penny might make a decision more favorable to the insured than beneficial let me let me just get to policy twelve eighty four before i close the district court held that beneficial was discharged under not only twelve eighty one which penny did admit the existence in terms of but also twelve eighty four penny never admitted the terms of twelve a day for the last policy defense is still available should a claim come in under twelve eighty four a penny was not unreasonable beneficial has not been prejudiced yet the the california supreme court the insured must prove both existence and terms penny has never admitted the terms of twelve eighty four and in fact the court's findings of fact so state ne never admitted the terms of twelve eighty four so the judgment should be reversed with respect to the finding twelve eighty four has been admitted and finding that beneficial is discharged under twelve eighty four that finds no legal or factual support in