we respectfully request that this court reversed the southern district dismissal of the plaintiff's amended complaint your honour's this is a highly unusual insurance coverage case it's our position that zurich breached the terms of the policy it issued to the plaintiffs not by failing to pay a claim that was covered under the policy but by paying a claim that was not covered under the policy zurich used our policy to settle a claim for its own liability for bad faith zurich is not insured under the policy it is the insurer and furthermore claims for bad faith under no circumstances are covered under a commercial general liability policy of this nature and because of his or ex why is that you're just here essentially with capital not zurich i mean capital paid zurich under this reinsurance agreement maybe it should have but i'm not seeing how capital was not covered capitol the reinsurer did nothing wrong here the reinsurance agreement between capital and zurich mandates that winds direct makes the payment under the policy whether it should have done so or not if there are x admits a claim for reimbursement to capital that claim must be paid it does not give the reinsurance agreement does not give capital the discretion not to reimburse or ik so capital has done nothing wrong capital is not in breach of any agreement it is that is in breach of the terms of the policy for paying a claim that was not covered zurich's payment of the claim set in motion the damages to the plaintiffs you wrote that that zurich settled the claim with using policy funds which you mean by policy phones your honour's the policy has a set amount of limits it has five million dollars limits per occurrence and five million dollars in the aggregate the five million dollars aggregate limit is the most amount of money that can ever be paid out under that policy from the  issuance of the policy until the end of time and so when zurich pays a claim under the policy it reduces the limits that are available to the plaintiffs for future claims and this is not the only claim that is made or was made or will ever be made under the policy the plaintiffs should have the benefit of using that whole five million dollars for their own liability that's the whole purpose of commercial general liability insurance has there been claims that have been a result of the payment of this claim i'm not aware of that your hon but it i think that the complaint alleges and on a motion to dismiss reviewing all reviewing the complaint in the light most favorable to the plaintiff the complaint alleges that the policy had limits and that zurich paid the claim out of the policy limits thereby reducing the limits that are available to the insured there's been no instance in which it has either limited or denied coverage right there it has limited coverage in the sense that it used some policy limits so those limits are no longer available to h b i h b i does have a claim that's currently pending under the policy because h b i was also sued in connection with this same construction incident diaz the general contractor sued hayward baker and here were baker tendered that claim to zurich for a defense and zurich said yes we will defend you hayward baker but there was no settlement made on behalf of hayward baker no indemnity was paid on behalf of hayward baker so hayward baker needs the limits of the policy in order to provide indemnity for that claim should a ruling be made against them in the future but other than that existence of the claim there aren't any other facts that i could see in the complaint that suggest you're pushing up against that that limit no your honor i'm not aware of whether the limb is being pushed up against but i believe that that's something that we would need discovery on in order to prove at trial i believe that the complaint plead sufficient facts to suggest that the plaintiffs were damaged not only by the reduction in policy limits but that they were actually financially damaged each of the plaintiffs ended up having to pay a portion of zurich settlement with diaz so in addition to the reduction of the policy limits they were damaged financially and keller foundations also had to pay it to dr bull but isn't that a result again of capital deciding to pay off in the policy not going to arbitration in london and the arrangements between your clients and capital no your honor again capital had no discretion to pay and i'd like to submit to this court that even to the extent that perhaps the plaintiffs have some sort dispute with capital even if the plaintiffs think that capital did something wrong that doesn't bar the plaintiffs from also having a claim against zurich for its breach of contract because the plaintiffs are in direct privity whizzer it for purposes of the policy the plaintiffs aren't a party to the capital reinsurance agreement so the disputed a is properly was direct and you'll find that the complaint does allege each of the elements of breach of contract claim against eric it alleges that the policy existed i don't believe that this fact is disputed it alleges that there was a breach because the policy has certain terms the policy explicitly lays out what's covered and here zurich is the policy to settle a claim that was not covered now the district court sa policy gives broad discretion to zurich to settle claims your honour's the policy gives zurich essentially three rights a duty to defend claims that may be covered a duty to pay claims that are covered and the discretion to settle any claims that arise out of an occurrence an occurrence is an accident first and foremost the duty to settle claims is the duty to settle claims or the discretion to settle claims rather on behalf of the insured zurich settled a claim on behalf of itself it does not mean there was an occurrence and that there was groundwater that leaked into the facility that was being built and the claim was made by diaz as an additional insured right yes your honor under the claim for coverage and it was also a claim for bad faith i believe that if it were only a claim for coverage we wouldn't be here today we wouldn't be disputing that is the record could have settled that claim under the terms of the policy but the fact remains that diaz also had a bad faith claim against eric insureds we're talking about bad faith claim against zurich for its wrongful behavior to diaz that's not insurable because bad faith is an intentional tort the only things that are insurable under commercial general liability policy are occurrences which are accidents such as the that is that is what they were seeking your honor so the bad faith claim that they were seeking against zurich was for bat was for zurich's own liability zrich acted wrongfully towards diaz that was intentional behavior on behalf of his or ex parte intentional behavior cannot be avoid payment for something that's not covered by the underlying insurance section three your honor section three states that when that makes a claim to capital capital is obligated to pay the claim that is the intent of the reinsurance agreement and your honor as i see that i am out of time thank pay claims and the duty to defend as john engle meyer correctly recognized in his decision below the amended complaint is not a lead that zurich breached either of those obligations in fact any sum paid as damages equally dispositive as your honour's alluded to earlier even if paying another insurance claim somehow could be considered a breach of the policy none of the  damages arise out of the alleged breach of the policy instead they arise out of the intercompany relationships between the keller company and capital agree with your adversaries  interpretation of the reinsurance agreement that it left no discretion and capital hands as for payment i do not your honor my upon my opponent referred to section three of the reinsurance agreement which is that  thirty of the record and in section three you see that the reinsurance agreement provides that the reinsure pay claims subject in all respects to the same risks terms conditions rates interpretations waivers modifications as the original policies so the reinsurance agreement provides that claims are covered only if they are subject to the terms and conditions of the original policy and if they are subject to the terms and conditions of the reinsurance agreement so the real insurer is only obligated to follow the settlement of zurich if it finds that that the claim being ceded to it both comply with the original policy and the reinsurance agreement and the part of the reinsurance agreement also has several provisions that contemplate one that a reinsurer would not pay a claim or that it would dispute a claim and of course that provides for arbitration to resolve any dispute as to a claim so the reinsurance agreement certainly contemplated the fact that a reinsurer would have the right to dispute a argument here is based on a false premise it's based on the past notion that what they refer to as policy that they refer to the notion that zurich used policy funds to settle a bad faith claim against zurich but policy funds as your honor recognize don't exist zurich doesn't hold fund you disagree with the concept that by having the policy set claim arise you know that down the line some of there's a potential rejection of a claim your honor it is correct that the policy has five million dollars in limits and that four hundred fifty thousand dollars were used to pay this claim and so that four hundred fifty thousand dollars settlement did road the limits so there is the remote possibility sometime far off in the future that the fact that a claim payment used to ok one insured might affect the right of relates of other insureds and that's one of the reasons why zurich initially denied the diaz claim they would be complaining similarly if we had just paid the claim without denying it  the position that the diaz claim wasn't covered zurich was then sued by diaz and made a motion for summary judgment seeking a declaration the diaz's claim wasn't covered the underlying court disagreed with their exposition the parties went to mediation and made the reasonable decision to settle with diaz and then see that lost to its reinsurer and the the fact that there is the remote possibility that the limits would be eroded is something that judge angle meyer left open for the parents to come back and argue he denied the claim without prejudice as to any of bent that would happen in the future so to the extent that  sometime in the future have a claim that is denied by is direct because the limits of this policy have been eroded left them with or without prejudice to plead that in the in a further amended complaint but as to the facts that exist today we come back to zurich had two obligations under the policy to defend the appellant and to pay claims and by paying a claim to an additional insured zurich has not breached either of those obligations so the amended complaint does not lead a breach of the policy every serious as this is in essence settling a bad faith claim against itself and that goes beyond what any reasonable action of the policy would permit just your honor that is their problem showing that they are injured by that this at this juncture but you could certainly imagine consequences where the bad faith settlement of claims brought against the insurance company and the attribution of those claims to the policy limits could result in harm to the insured yes your honor so first of all this settlement with  bad faith claims pending and the settlement agreement recognizes that judge engle meyer general mayor recognized that there were no bad faith claims pending but even if you assume that the settlement covered bad fa still didn't constitute a breach of the policy obligations we come back to the fact that rick did not refuse to defend the appellant's in the underlying litigation and he ends iraq has not failed to pay any claim they haven't they haven't sought any claim to be paid and and there is currently defending appellant it's be i in the diaz litigation so if we come back to the fact that the amended complaint does not allege a breach of contract your honors i'd first like to know that there was a bad faith claim pending against iraq by diaz florida law operates in a peculiar way if i for kate's bad faith claims right from the beginning of this suit you can't bring a claim for bad faith in till you've proven that the insurer wrongfully denied coverage so you have to first bring your coverage suit and then you bring your bad faith claim so the fact that there was no you know count one breach of contract count too bad faith it doesn't mean that there was no live bad faith claim pending the bad faith claim was coming and diaz tried multiple times to amend his complaint to include that count but it was forbidden to do so because of the way that florida procedure operates and the settlement and release agreement between diaz and zurich confirms that the settlement was not only for diaz's coverage claim it was also for diaz's bad faith claim so it is clear that at least some portion of the settlement was for own bad faith and your honour's let's even say even if bad faith were covered under the terms of this policy which it is not zurich is not an insured it cannot receive coverage under the policy for its own tort liability and moreover zurich has absolutely no right to obtain a defense for lawsuits against itself under the policy a defense is owed by the policy to the insureds an insurer can never obtain a defense for lawsuits against itself under the policy your honour's furthermore this is an occurrence based policy occurrence based policies can last forever there could be a claim one hundred years from now for which plaintiffs can seek coverage under this policy plaintiffs need to have the full five million dollar aggregate limits of the policy available to them because that is the benefit of the bargain that they made with direct if there is a claim in the future we can't say we should not resolve this now just because there is no dispute that perhaps the policy limits are dwindling down to zero this needs to be resolved