court decisions addressing the significance of the duty to defend starting with gray versus zurich which holds that the duty to defend is broader than the duty to indemnify and indeed a policy holder cannot lose coverage simply because of the figures in defense costs in preparation for the trial and the trial has not yet occurred again it is set for february i think the next significant case is the machos one case which sets out the obligation of an insurer when moving for summary judgment on the duty to defend there are two aspects one they must show that indeed the meaning that they offer is the only reasonable interpretation of the policy and i feel they fail in that secondly they must show that under no set of facts is it possible that there is a potential for coverage next is the bus case which holds that even if there is but one cause of action or claim in a complaint that triggers a full and complete duty to defend by the insurer and next  which involves successive policies one complaint and holds that in fact if there are events that trigger successive policies even though in one complaint there is a full and complete duty to defend for each insurer on each policy with that background i think it is also important to recognize that there are two very common forms of liability insurance claims made coverage in occurrence coverage our current car which is more typical and there are many different ways of categorizing insurance this relates to the trigger of coverage occurrence policies the trigger is whether an occurrence apply occurred during the policy period that's determined by the date when damage occurs and another type of policy claims made the trigger that is what must occur during successive policies is when the claim is first made this policy is neither this policy is a media liability policy where the trigger is when matter is first  disseminated and indeed i don't know whether it made it to your honor's i hand it to or the clerk a timeline just to help it's illustrative of the facts just to make sure that in fact we all have them in mind it was presented to the trial court and reviewed by the trial court there had been an objection the objection was overruled again the point is illustration so if liquid drinks comes out of the the second policy is triggered because matter was first uttered and disseminated in the second policy period again that's under speed and i don't think they really contend otherwise right but if you're talking about the liquid each loss is and the function of the clause is to aggregate in certain circumstances and determines whether or not something is treated as the same loss or each l or whether there are separate losses now the second policy is triggered because liquid dreams and it's undisputed the owner of the copyright j records didn't even exist in the first writes about it but if the music example if that were amended  focusing on liquid dreams again under the montrose case it's quite clear their burden is to show that under no set of facts is there the potential for coverage under the second policy they didn't do that we came up with an actual concrete example we don't have to do that we just have to show that there is a potential and indeed they need to show that there is no potential that under no set of facts could the second policy be trigger we actually came up with a hard concrete example liquid dreams was first played on a launch during the second policy period that triggers the second policy the next step of the analysis is does it well within the that is can national take the fact that liquid dreams or other songs were played on the second policy and treated and collapse of so that the coverage is only under their first policy that it's not burden is to show that there cannot be under any set of facts an example the trickles of the second policy and well i'm usually have to prove that in your view you'll have to show potential they don't have a crew with absolute certainty actually your hon think it's quite clear under the mattress one decision they do have to prove that the duty to defend as directed by the california supreme court is so broad that if there is the potential they have the duty their burden to show that there is no potential and again we've come up with a hard concrete example based on the records in the facts of the case liquid dreams was played during the second policy period the next step of the holders the internet is not traditional but if you look at the policy and you look at the policy language the origins of the language that are in the aggregation clause they talk about you aggregate if damages and expenses arising out of utterances and dissemination of matter are right relate to the same subject person or class of persons where does that language come from it comes from defamation  cited the restatement of torts the debt defamation law talks about subject questions class of persons and if you think of this policy in that context it makes sense in fact if someone makes it a family tory statement and  subject of the defamatory statement is the same it makes sense that that would fall under one policy similarly if the target is a single person it makes sense that that would fall under one policy similarly if it's class of persons which may be the most confusing part of this policy is applied to these facts and again they of course chose the language we did and they chose this language to apply to internet liability we did a class of persons is a recognised kind of term of art within defamation and law and would apply for example if someone made a slander certificate for a comment about say members of a church or members of a club  members of a company and in a setting like that you would want to aggregate it so that it is treated as one loss of the policy language also goes on and says repetitions of the same thing over and over again does not trigger policy having said that now we can look at the facts of the case and how the aggregation clause applies and what a reasonable interpretation of that clause is we only need to show that there is a nother who reasonable interpretation of the clause indeed i believe our interpretation is the most reasonable interpretation of the clause and indeed their interpretation is not reasonable that's not my burden but i hope to convince you that in fact that's the case the first element of the aggregation clause is same subject obviously a reasonable interpretation of the word subject in this setting is a song it has each song has a different subject the clause is quite clear that if you play the same song over and over again that doesn't give rise to yet another claim under the policy but it is a logical and reasonable interpretation that each song has a different subject and as a result subject doesn't aggregate their position is and frankly  interpretation i think also tracks with what i said a moment ago that the origins of this policy relate to defamation claims i think subject in a defamation claim would talk about the subject or content of the defamatory statement here the subject or content is the content of the song their position is not on a no subject means copyright infringement when you play music the effect of that interpretation and  reason they use that is because they need to capture for example liquid dreams and other songs that were first played in the second policy period the problem with the interpretation is in an effort to capture what happens during the second policy they wind up with an interpretation that is way over prague the effect of that interpretation would be for example if you have three successive policies and in fact launch had three successive policies their policy isn't involved here but if music were played in the third policy period a totally different copyright owner than anybody was involved in the other under their interpretation of subject which is copyright infringement of any so played on the internet that totally separate music involving a separate copyright owner would get funneled back into the first policy period and subject to the limits of the first policy that makes no sense that that's a way overbroad interpretation of the policy now again all we need to show is that there is a reasonable interpretation because we're course entitled to any ambiguities of the policy i think it's quite clear that subject equating to song or the content of a song is a reasonable interpretation of the policy language the second critical phrase in the aggregation clause is a person we say person means person and that indeed at the time for example liquid dreams was first played during the second policy thereby triggering the second policy j records was a different person then b m g now it is true that later after the lawsuit is filed and the chart may be helpful on this he may already have the facts in mind but after the lawsuit is filed in the name of the m g b m g then later acquires j records and in fact through the course of discovery it becomes clear that b n g lines of asserting the copyright claims of not only its own copyrights but also the rights that it has acquired the j records rights we think procedurally if the underlying action had involved thousands of songs the way that would be dealt with most properly would be a supplemental complaint it's quite clear that when a plaintiff files a complaint they can only assert the rights that the plaintiff has at the time the complaint is filed if you choir later writes or if there are other facts that have changed after the facts procedurally the way that's gets resolved is you make an application for a supplemental complaint that wasn't done a california case was quite clear that the mere fertility as to how pleadings occur in the underlying case doesn't deprive a policyholder of their ability to seek coverage particularly the duty to defend in a setting such as this so the issue with respect to person is when do you look at whether it is or is not the same person have knowledge that if you look at it say today b m g and j records are the same person there is no doubt b m g acquired j records but on the other hand it is also quite your honor it again that's the phrase that is probably the most awkward from there policy and again i think the reason for this is i was it was drawn from defamation which is the classic kind of risk for media liability i think class of persons can have a number of different meanings many of which would not accomplish what they seek to accomplish one interpretation that we put forward in our reply brief is it would be a sub label within the music industry there are big names like sony and there are a month number of little labels that fall within the sony group of companies another interpretation that we also mention in our brief might be for example members of a band who may jointly own a copyright if you're going to that would be a crack but wouldn't a class off the record com it could be your honor it could also however be say class actions these are liability policies the number one thing that liabilities apply to affect the only thing under the power a decision by the california supreme court the only thing  liability policies apply to are litigation in a litigation context one obvious meaning to the phrase class of persons would be members of a class in a class action and we don't have a class action and as a result if that were the interpretation and if that's a reasonable interpretation we as a policyholder entitled to the benefit of they have to get what he's in their policy language and again the reason why this happened is they took an old media liability that's because that's not my burden it is not my burden to show that the only reasonable interpretation is my interpretation indeed under the montrose case it's quite clear here is a reasonable interpretation burden is simply to show that there is a reasonable interpretation that does not do what they say it does and there are a number of reasonable interpretations one is a sub label another is joint owners of copyright for example members of a band yet another would be members of a class action none of those apply here and as a result they wouldn't dare gate but there's yet i think maybe even a more important reason that is there are interpretation to class a persons has the same fundamental problem that their interpretation of subject yes they would like a class of persons to refer to all poppy right owners of all music that's played on the internet and they need to come up with such a broad language for their education clause to accomplish what they want to accomplish they know that part of the difficulty got with your position so far as you articulated it very well is that it isn't founded in the complaint i mean in the underlying action because the complaint is that is you're asking to have defended a service a decision to in effect have mass copyright infringement not what what's what's alleged is that at a point in time there was a business decision made and i practice adopted and pursued a systemic systematic thing and if that's not sound if that's not correct then you're trying to suggest to me that's not correct then it seems to me the alternative is it put you in the position of having to pay self and self insure attention on each and every song that was hit which of course you don't want to do and it's a position you're not taking can in fact you're right the allegations are a systematic decision like much in life it is more complicated than that in fact launch had individual discussions with each record label then are you going to pay twenty five thousand bucks for each one of the hits well your honor if there was no aggregation based on persons it's quite clear we both agree that persons is part of the again that's really quite clear that theory well it seems to me hard i'm not sure i understand their argument that although there are ten record labels there's one person which  is i don't know of another theory that they have on this i don't know and one of the difficulties to me they're all going which is that there was that there was one thing that happened in the one person you're out of the you know it was one subject what happened was that that you infringed and i mean the infringement was a nasty offering of songs to which you had no of what has happened also comes into play and indeed we do know that in fact the actual claims involved in the lawsuit include liquid dreams which was first played during the second policy and there by first trigger well yeah i'm sure there could be there could in theory be a lot of things that were first played in the second policy and other third policy for that matter but if it stands from one action then what difference does it make because one action isn't in the policy we need to look at this subject i'm sorry my subject well one interpretation of what a subject is is all copyright infringement i've and that's their position for sure but you want i mean otherwise if it if they're not correct then why isn't it why doesn't necessarily follow that you're on the hook for individual retentions on each infringement because of the aggregation language that focuses on a person it is clearly aggregated based on each person and to the extent there is a different record label which owns copyright or does label cause the i guess i just have trouble understanding where label even gets into it what i think i mean we don't think i can understand i can understand infringement terms saying you know if i play a part as song by whomever that's an infringement and doesn't really make much difference who own who's who's label it aggregated based on person and in this context what that means is who owns the copyright ok and the record labels own the copyrights and there are ten record labels who own the copyrights that brought this action and you would aggregate it and as a result there would only be ten s r s by their count eleven by ours you have to give meaning to the word person you can't just ignored yes they've argued over all the songs that are played you wouldn't want to play thousands of stars that's a red herring they've nor their own policy language you have to give meaning to the word person and the only reasonable interpretation of the word person that's in their policy language is to focus on what people or persons or entities own copyrights and in this case it's clear that there were ten and if you also look at j records during the second policy there wants to stay focused on the abstract along california's very clear when you interpret policy languages for determining whether there's a duty to defend or you to do indemnify you compare the language of the policy with the claim that's being presented in this case the arista records claim is the claim being presented a lawsuit was filed in two thousand and one which is in the second policy period when i refer to in our brief as the four for a policy however it alleged that the conduct the systematic continuous infringement of copyrighted sound recordings being played over the web without getting a license from the copyright holders began in one thousand nine hundred nine during the first policy period would have been one loss there would been one s i r and if there had been ten separate lawsuits there would have been only twenty five thousand dollars paid by launch with respect to whichever lawsuit expended that money for it but you but you would have to find out all  until the policy limits exhaust and we would have your honor and that's the basic difference in the approach that launch is now taking it should be noted that over the course of this relationship from the time that the suit was first tendered in two thousand and one the time of two thousand and three there was no protest there was no argument there was no oh no this is covered by two policies the acceptance of the tenor of defense on a reservation of rights made it very clear there was one last one as i r i was being defended in the four for the first policy it was defended for three million dollars with the defense cost during that time from two thousand and one to two thousand and three the number of plaintiffs in the arista records action the person's never changed by increasing or changing and adding anybody it does appear that there were settlements that lead people from the suit but no additional defendants were ever argued were ever added same as a risk to records if they had alleged that launch media had systematically taken x copyrighted sound recordings publish them on the web without a license that would have been the same subject matter th but but it also would not have occurred in the first policy period well your honor that's why you have to look at the aggregating language because the this policy is not a straight occurrence policy it is a policy that is designed to deal with media risk right is also a policy where the duty to defend isn't triggered until the s i or is paid unlike your automobile or how homeowner's policy that has a deductible where it is soon as the occurrence or the liability creating action  and there's a claim there's a duty to defend in this policy until the s and iras exhausted there is no duty to defend there is no obligation at all and the policy and in order to determine the s i rs or as they are that have to be paid you need period why would you defend that on the second policy because if the allegations of the complaint and again this is one of the problems we're having is the j records isn't in this case it is not a pleasant i call that a hypothetical i understand and what i'm trying to do is address that your honor is that when you're making duty to defend decisions along californias very clear that you don't speculate on what other claims might be covered what other claims could have made been made in the lawsuit that weren't made but you do look at potential i mean california some broader than other states and that respect it would be your honor but the law is also that you always apply the terms of the policy when making them so i just don't understand why if j records making files a copyright infringement suit in the second policy period sank this happened in the second of second policy we wouldn't depend on the second policy because it would have been assuming the arista records actually already exists which it does it would have been related to that first that would be a single last what would have happened i j records would have been defended in the first policy until the first policy exhausted if the first policy was already exhausted there'd be no coverage and that's because of the aggregating language of the policy in the requirement for satisfaction of s i ours the issue is not foremost j records is not a plaintiff it's not a person it's not alleging any claims in this case the only people very alleging claims in this case that have to do with liquid dreams is b m g and b m g was always the plaintiff in this case it was a plaintiff in this case for records that sound recordings that are not copyrighted that were webcast without a license in the four four period policy period and the four for a policy period one of the difficulties with the argument that launch wants to make that its interpretation of the language is reasonable is that they've never really consistently decided what their reasonable interpretation is initially they said well you know anytime a copyright material is played that's that's the subject matter that would lead to untold numbers of s i ours then originally it was well it should only be two policy periods it should be all the records of were played in the first policy period and all the records of that played in the second policy periods be aggregated together that that that couldn't get past the language of the policy that talked about utterances in a policy period or policy periods then their argument was well there's some number between two and eleven well they never really explained how you you get a patient of two three four five six seven eight nine or ten losses there eleventh loss isn't sustained by the record even if it could possibly be rational because the record demonstrates in the declarations that were filed that there are dozens and dozens and dozens of something like us or labels as opposed to record companies and if that's true and if their definition of person is the person who owns the copyright it's the copyright at the time that the and in this case there were ten record companies so let me make sure the rule you want to adopt your let's assume for example that there is another insurer i'm sure is the second policy period you're out totally new insurer same type of policy what you're saying is if a decision is made to webcast in the first policy period the second insurer is completely off the hook there of the absolute no liability for a in french and sort of current second policy if their language was the same language as the policies yes your hon pollution cases environmental cases where one of the difficulties that has led california to apply the continuous trigger rule is that you can't tell when the damages occurred you can't even tell really when the thing happened in this case there's no question going to stablish that when the cat when the song is broadcast that's an infringement people know when that happens it's readily ascertainable it could be determined just as you can determine who owned abroad who own the copyrights at the time it was my past so this is not a continuous trigger or continuous injury or continuous exposure to two harmful conditions kind of place this is a case where because of media risks because of where the defamation whether book copyright publication theoretically for example of it in a book copyright every book is enough itself is a violation each time you sell a book is a violation if you didn't have an aggregation mechanism what would happen is literally you would have thousands and thousands and thousands of losses the interpretation that national casually has consistently applied has yielded one lost in this case it was a single loss that meant one s i r when but the fact that the policy limit wasn't adequate doesn't mean that somehow you have to breach the language of the policy to try and get more limits that's just not the way it works the other problem with mr siebold approach to trying to interpret the aggregation language is it's internally inconsistent when he talks about the aggregation language that the relating to has to be with respect to the utterance he says well it has to be it has to be the content of the utterance so therefore the content of the utterance of a copyrighted song recording must be the subject of the song but then remarkably when he wants to talk about person it's no longer the content of the utterance it's the status of the ownership we think and we have consistently applied and we've explained to the court below and here that the real modification there is it's damages or claims expensed arising from utterances during the policy period or periods because that tracks the language of the insuring agreement and that's cool phrased that is damages the kinds of damages covered by the policy relating to the same subject person or class of persons is the way the language needs to be read and it's the only reasonable way to read it with respect to these kinds of media ri particularly in the arista records action which is the only thing you can really be looking after determine whether or not there were any further duties that need to be imposed or can be imposed on national casualty the arista records action alleged that launch continuously and systematically webcast copyrighted song recordings of the plaintiffs the ten named plaintiffs from ninety nine to two thousand and one during the politic policy and expand it to poli periods without a license the subject of the potential liability is webcasting that is disseminating without a license copyrighted material the persons are very very straightforward the persons is the persons who are trying to impose that liability in this case it's the plaintiffs plaintiffs never change either liquid dreams in because they b m g got an assignment of rights in which case it's entitled to assert its rights for copyright infringement to those songs as well as the thousands of other songs that were broadcast or webcast by launch both during the ninety nine forty four policy or the two thousand and forty four a policy or it's not or if it's not in the case because j records is the only one who can assert that soft and you has an infringement on policy period what you're saying is that the first insurer gets stuck all the way down whether it's go on ten years twenty years right that's your position yes to deal limits of their policy  series of damaging articles yes and you start investigations or if your answer that if you have defamed somebody in the second policy period it relates back to the first decision about publication yes your honor in this way the policy is drafted it specifically exhausted for that during the first period because it's part of your overall program yes and that's because at the time for example liquid dreams was first uttered it was prior to the lawsuit being filed that course of conduct that liability creating breach and use of license copyright material without a license as a singular continuous business plan had already occurred  i understand your honor and i'm your answer your question is yes there's a turntable policy there's no insurance no point getting insurance for a second policy period not trigger on an absolutely not true for example if the argument was the j records had entered into a licensing agreement with launch media in the second policy period and that launches agreed to pay x dollars and then refused to pay and therefore was not was in breach that would be a different course of conduct right that  the whole business of this of this is webcasting basically your honor if it is webcasting but what i'm saying is i'm not given the hypothetical so long as we're dealing with hypothetical or the hypothetical in this case is if j records filed a lawsuit in the second part period alleging the same course of conduct that is that a launch simply took the liquid dreams played it without ever bothering to get a license i am agreeing i'm conceding your honor if you will that yes that would be in the first policy period because it's the same course of conduct as the arista records action covered but if jay records had entered into a license agreement with launch media and then launched media then breached it for example the license agreement you can only broadcast the song to more than ten times in a day or something like that and they breach that agreement that would be a different subject that would be it's not any and all copyright infringement states popular infringement in the context of the arista records action so in that case your honor in that situation given that it is a different it's not related by either the class of persons or the subject matter then in other words they're differently situated then it would be covered on the second poli the bottom line is that it's the end of the day what launch wants to do is pick and choose the terms the policy language that it wants it wants to aggregate because if it can't aggregate it knows it's faced with impossible numbers  satisfied so what it wants to do is it wants to aggregate a little bit by persons and say well persons give this ten we'll call it eleven but the fact the matter is the record doesn't support that if you look at the nelson shape declaration the record demonstrates if there are dozens and dozens of record labels if you look at the allegations of the complaint and the nelson shape declaration you'll see lists of songs and those songs were over the period not only the first policy but the second policy period at the end of the day what you have is national casually made a reasonable decision that maximized coverage for launch what launches fail to do is they failed to provide any alternative interpretation of the language that they can sustain that demonstrates that it would get more a better coverage than the interpretation offered by national casually judged we're made the right decision below and we briefly your honour's i think in fact you have highlighted the absurdity of their interpretation under their interpretation in fact j records which is first played in the second policy period somehow relates to a systematic decision that occurred under the first under their view of the world every copyright infringement wherever it occurred whenever it occurred relates to the same decision it gets related back to the first the policy language doesn't say that and indeed the supplemental letter that they to the court last week it's interesting that that language may accomplish what they seek to achieve that is not the language of this policy they're entitle to aggregate only if the aggregation language that they used applies they don't have the language that's in the case that they sent you last week and indeed as your honor suggested under their interpretation it is clear the principle risk faced by my clients are copyright infringement based on the playing of music on the internet it's not a defamation risk they don't they don't make written statements that could wind up resulting in a defamation risk it's copyright infringement for the placement of music their interpretation would result in there would be no reason for my client to ever pay a premium after the first policy whether it's in with a different insurer or the same insurer because under their interpretation absolutely every thin funneled back and collapsed into the first policy that makes no sense that's an absurd result it also to to go back a little bit to the systematic decision and i am concerned that it's true the allegations of the complaint make that allegation but just as the allegations in the complaining gray vs service said it was intentional if that allegation were true there would have been no coverage under that policy but that was not the end of the issue the supreme court held that although intentional conduct was alleged and although the allegations would result in the no coverage that there was never the less a duty to defend and as a suggested earlier although the plaintiffs in the case allege a systematic decision in fact life is much more complicated than that my clients did reach out to the record labels to try to negotiate license there were many individual decisions about what to do and what not to do with respect to licenses from the labels will you want each one of those individual decisions measured i'm sorry do you want each one of those individual decisions rather again or surviving and it seems to me what you're suggesting is again the red herring which is each of those decisions somehow results in an individual self insured retention the problem is that ignores the aggregation language based on person in the context of a copyright infringement lawsuit the most reasonable interpretation of what person means is the individual persons who have the rights to make the claims and as a result there would be ten or under our view eleven such persons and they would be aggregated on that basis and that would be the number of s i r c we don't need to worry about individual decisions or thousands of songs because in fact you've got to look at every card of the policy and if you look at that part of the policy the aggregation clause applies and would avoid that result thank you so much you have any other questions