same individuals that operated in conjunction with one another and they've just fled disappeared nobody knows what happened to they went out of business apparently in the two thousand and eight construction mass as did a lot of other businesses i mean they do still technically exist i know but the on that i do not know it we've had some contact with the gentleman who owned the companies several years back five years ago were they ever served with  in july of two thousand and twelve there's communication between the claims adjuster for energetic and for the attorneys for silver star who were the lead defendants in the underlying construction defect case and in that there's discussion of hey is this part of the other case is this part of the hartman case no it's not it's a completely separate lawsuit well we're going to have to  coverage you do what you need to do so lexington covered the hartman litigation but declined coverage on this exactly your honor approximately i'm sorry go ahead and finish your answer if you had more than that you know i'm i'm i have a few questions here yes first of all i want to make sure i understand a couple of your arguments correctly the  limits clause doesn't say that failure to pay the twenty five thousand is what determines whether had access over twenty five thousand is covered instead it says that although the district court read it that way instead what it says is that there's no duty to defend until the twenty five thousand is exhausted and that energetic remains responsible for the twenty five thousand if it fails to pay it is that true if i understand your question correctly what you're asking is is the duty to indemnify triggered by non by non payment of the s i r a selfish our attention right what i'm getting at is is the coverage duty suspended until the insured actually pays the twenty five or is the coverage duty just for the amount in excess of twenty five regardless of whether it's paid while the insurance policy is actually made up of two separate parts which are roughly co equal to one another one is the duty to defend that self assured retention covers and if the self insured retention is not paid there is no duty to defend but the question is what effect insurance company was in absolute control of the language if they wished to exclude any indemnification requirements then that's what they would do as a matter of fact under section four of the actual policy itself which is not modified by the s i paid there was no duty to defend the duty to indemnify as the amount of the loss up to the policy limit minus twenty five thousand yes ok but how are you even perhaps not even including the twenty five thousand that's an issue that wasn't raised but that certainly worst case scenario for my clients would be the entire amount of the judgment minus twenty five thousand now let me ask you another question and as i understand it after the silver star and silver stars sued energetic and there was a settlement or i'm sorry i misspoke a judgment and wound up happening is that the four hundred fifty six thousand dollars that was left over and that is the subject of this claim a court adjudication for four hundred fifty six thousand that's not for damage to the house because that was already settled that's for the attorneys fees and expenses of the similes and of silver star which was assigned to the seventies is that correct what the what the state court decided  state court decided was that the damages were damages to the home plus the assignment damages that were in there which was one hundred thousand dollars which was paid for the damages to the home plus the attorneys fees and costs as was allowed under nevada law under chapter forty at the time i'm not asking for the justifications now i'm just trying to find out what the present judgment is for my impression was that it's not for damage to the home anymore that's been settled what it's for is mark the the next issue that's the first issue is regarding the s i are and how the s and i are in our opinion was improperly read and applied by the district court the second issue has to do with whether the district court improperly granted summary judgment by making inferences in favor of lexington in this case one of them has to do with the intention of the parties and what the parties intention was regarding the terms of the contract as we just discussed another one has to do with the  august twenty fourth two thousand and twelve letter we call it in our letter lexington calls it a reservation of rights letter well it purported to be a reservation it writes a letter but there's a question as to whether you guess it came back to the insurance company is a material facts in dispute as to what that letter was that letter specifically says we're denying coverage oh but if we're going to pick up coverage at some later point then perhaps we're going to do all of this at there was no reservation of rights letter that was  when they actually picked up i think the court below looked at that argument and said well he would if the second letter given the fact that the first one bounce back it would have been futile to send a second one because energetic disappear isn't that what the district courts are i'm not sure i believe that they said that they just said it was a reservation of writes a letter and they didn't need to send a second reservation of writes a letter when they began to to defend which is in violation of out there that says when you begin to defend you must do this even if it's if you don't you have to try as a practical matter what difference does it make because there's no indication that had a second letter been sent that it would have suffered any different from the first one and there's no indication that had the second letter been sent it wouldn't have been received either well we know that the first one was not received as undeliverable the i thought the testimony about claims adjuster was that he tried to contact made several phone calls the phone was disconnected basically had no contact with the insured from the time that letter was sent to the to the present is in that state of the record  that shot thank you yes but doesn't he say that in the declaration he says i he says i did and then i didn't bother to try it again because i didn't think it would be successful that that's the affirmative record evidence it's in the record and the best response you have to that is had we been given more time to conduct discovery we might have been able to refute the truth of that exactly station your argument yes your honor ok we were not we were not allowed to do  you're old for lexington and this will matter thank you for taking the time to hear is today we always appreciated well it's an interesting case but can you help us with regard to the interpretation of the self insured retention and as i understand it the insurance company elected on its own to defend did it correct under the policy so it didn't wait for the for proof the thousand five thousand was paid or simply made a decision that they would provide a fa correct the insurance company exercised its discretion to defend pursuant to the terms of the policy that language was specifically attached to the r o y r letter that you were just discussing which was you know likely never read by anyone right think i have a question about this it looked to me pretty clear that there was no duty to defend just a potential election until and unless  energetic paid the twenty five thousand but i don't see an exception or an exclusion from the duty to indemnify until and unless they pay the twenty five thousand the what i saw that was relevant to paying the twenty five thousand on the duty to indemnify was that energetic remains responsible for the twenty five thousand the self insured retention if it fails to pay for a language of that in clause remains responsible if energetic fails to pay the self from further attention suggests to me that the best inference from it is that the duty to  y survives despite their failure to pay twenty five thousand it's just that you knocked twenty five thousand off the total obligation when presented with that i understand that is position that's been asserted  by why is it wrong i can't find a policy language that supports your interpretation that paying the twenty five is a condition precedent to any duty to indemnify i know the district court went that way and i can't find the policy language that supports it understood the policy language starts at the top or says self insured retention endorsement in that it states the limits of insurance apply excess of self insured retention let's make sure we're both looking if the same clause that says you are seventy one got it ok the general rules on how that language has been are you talking about the language in defense and settlement no above that it's caught clause ro one the limits of insurance clause correct ok word says the limits of insurance as set forth in item three of the declarations that was the million right correct and then it says shall apply excess of the self insured retention which is twenty five thousand correct ok i don't see where that implies anything one way or the other about whether it's a condition precedent understood  california courts and in fact this court have dealt with this issue repeatedly well when you say california courts and this court have dealt with it repeatedly i noticed that a lot of your citations were to unpublished disposition as you know are not binding we can't treat them as binding law understood i'm referring to forecast homes be stedfast which is a california court of appeal when citing to cross ski and the california practice guide stating an essay r is a specific amount that must be satisfied before any coverage applies or is which case was that again that's forecast homes be steadfast or is this court stated was the policy language in those two cases identical to the policy language in this case i'm going to say that courts it's hard to glean that specifically from the decision that's a real problem for me because you really can't say what what a particular insurance policy does on the basis of what other insurance policies to understood is there not standard forms the city of oxnard in general stark cases both deal with exactly this type of language where they say the limits record which makes it clear that if the insured is unable to pay it doesn't have any impact on the obligations under the policy the way i read that and maybe i'm reading it wrong is that if for some reason the insurer just can't come up with the twenty five thousand the insurance company is not completely off the hook which i think is your argument correct and i would like to address  but i do think there's a difference between the duty to defend and they didn't join democrats agreed and to hit that point head on that language is in there i believe by statute which is that bankruptcy does not problem that judge coleman does when i read the relevant parts of that sentence under insolvency it says your failure to pay the retained limit will not increase our obligations under the policy and and then it says you will continue to be responsible for the full amount of the retained limit  could be new for the limits of the insurance under this policy apply in the case willie we be required to pay the retain them and now when i read that work that clause the word that jumps out at me is responsible and i'm responsible for paying my phone bill whether i paid it or not responsible means it's my liability and i don't see why the word shouldn't be read similarly here they remain responsible for the twenty five thousand but that doesn't mean that they have to have paid the twenty five thousand it says before the limits apply well before the limit so is it possible that that you have to do a condition preceding to qualify for that it references your refusal to pay as well or it's just before the limits of the insurance apply that's the million dollar limit that's the limits of the this insurance and why can't we give meaning to the last sentence of no case will be will be required to pay the retained limit or any portion thereof as simply triggering a sound off in the amount of twenty five thousand dollars or the balance if the insured in bankruptcy can pay some portion of it and and therefore the insured doesn't increase its obligation or the insurer does not increase its obligations under the policy but it doesn't excuse the insurer completely from any responsibility of the policy does no and that is going to circle back to my other point which is this is not a judgment creditor action rather this is the insured bringing a breach of contract action right so this language is designed to protect judgment creditors in eleven five but your argument is essential in trying to read in as judge jack put  condition precedent that triggers all obligations under the policy which is the payment of the twenty five thousand dollars and i just don't see the language in the policy that supports that argument i i'll grant you that you may not have a duty to defend although i think that issue is kind of moot given the insured insurers voluntary decision to exercise its right to defend so now we're just simply talking about what are the limits if any on  indemnify i would say i would frame the question slightly differently which is do the claimants here and have a breach of contract cause of action for failure to indemnify that's the cause of action that is broad and that's highly significant to establish a breach of contract if a contract of the plaintiff perform its obligations under the contract these plaintiffs effectively breached multiple of their obligations they did not give notice they did not satisfy their essay are they defaulted would you agree that had would have energetic gone into bankruptcy and a judgment been entered against it so that there was a judgment creditor knocking on the door in the face of this language the insurer would still have a duty to indemnify even though the bankrupt insurer would not be able to pay the  i r i would say that that question is being wrestled with by courts in different ways in different fashions and i don't actually know what the answer is going to be on that what's the purpose of the language of the i effect and we have to give meaning to every portion of the contract correct and you're asking me to read that entire paragraph out of the contract in the context of a breach of contract cause of action yes i think because they are coming and saying that lexington breached its contract we're entitled to point to the fact the plaintiffs in fact did not comply with their obligations under the contract and they need to do that in order to state a claim for breach of contract and notice judgment creditor issue is a much more interesting convoluted issue but that's not what's before they all are all i can see that  is an important sort of reached that could bear on the duty to indemnify is fair to give notice the reason for those clauses is usually to prevent  e arrangements between the insured and the insurer where the insured confesses to a judgment that's very high and then assigns rights to the judgment in exchange for a covenant not to execute but in this case that really isn't an issue not only i think it is well the the problem is the record seems to show without contradiction that the insurance company knew the litigation because of the hartman litigation sent the question to the exchange correspondence with that the attorneys and knew about the  i think there's some loose terminology being used there the right to repair statute is the claim that was presented by a different company to lexington not a  suit that's entirely distinct lexington never got a notice of a suit against energetic energetic defaulted before lexington got notice we decided that's not the hartman litigation dealt with defective work on eleven othe homes and and lexington was involved in that litigation and and that was because silver star had cross claimed against its sub contractors in separate litigation versus silver star you're insured energetic and it says hi dick i am writing to request your attendance on behalf of chartists at the upcoming mandatory settlement conference in of this bow i'm sorry that was him and he is the one we're talking about but the city vs silver star is also the reference to the right to repair claim not the actual suit they would be called the same thing as my point it says here it's a vs silver star i understand she says an email my my point is energetic had already defaulted had not given notice to its insurance company of that he still had notice in time to show up and prevent any collusive arrangement we attempted to the court rejected the efforts to intervene and allowed the judgment to proceed but you didn't send anybody to this settlement cause we did there's undisputed evidence in the record that we don't think  these presented the rather interesting argument that summary judgment is never appropriate in bad faith claims the underlying court did not agree with that it was an interesting argument so we wouldn't get up we found twenty five cases under nevada law granting summary judgment on bad faith claims and found that the united states supreme court framework for summary judgment applies equally to those types of claims as to any other claim of lexington presented evidence as the movement the opposing party presented in the earlier reference that there was a fifty sixty request there was not on this summary judgment motion there was one on a summary judgment motion several months  earlier the court probably granted summary judgment on that issue which i'd be happy to answer any questions i don't have to question them about that ok going back to the fundamental issue that the court has inquired about which is the duty to indemnify we would submit with the multiple breaches established by the plaintiff of their contract that there is therefore no ability for these plaintiffs to claim breach contract he would also submit that the language which states the limits apply excess of a self insured tension has been found by many courts to make the duty to  subject to that condition precedent ok i think we have your argument in hand with that thank you for your rebutt errors first there was some discussion there about when lexington learned of the lawsuit the sunnis lawsuit was filed on october twenty sixth of two thousand and eleven the e mail i'm sorry your voice trailed off at the end i'm sorry october twenty sixth of two thousand and eleven the emails that were referred to as being in july of two thousand and twelve specific in this part she specifically says to mr shaw that to me is not a part of hartmann it is the same project but it is not a home in the hartman case and is a totally separate lawsuit that was filed on seventy so it is the same i mean at that point they very clearly were on notice of that there are a lot of the comes out approximately a month later also specifically references the lawsuit and so they were clearly on notice of a lawsuit by that point approximately a week after that email happened is when the default the initial clarks the faults were taken the final default judgment was not intel now let me ask you about something that you're opposing counsel said he said there's a lot of authority including california court of appeals that deals worley with fair you'd meet the self insured retention and its effect on the crew to indemnify could you speak to that certainly are actually what winds up happening then is if if it is excess insurance as lexington argues then it winds up being a co insurance situation  armstrong world case i'm not sure i'm not sure you and i are talking about the same things one kind of excess and sure is where there's a self insured retention under an insurance policy and the policy cover say up to a million and then there's an excess insured for the layer from one million to ten million and sometimes there are multiple insurers after various reasons who have to share the burden of the case but that doesn't come up in this case also i don't really care what unpublished cases say or what cases from other jurisdiction for purposes of our discussion right now you know they may be enlightening but what i want to know now is is there a california court of appeals decision looking at similar language that says that the self insured retention is a condition precedent as was addressed in lexington's arguments it's very difficult to tell exactly what the language is from all of these policies the policies do not quote the relevant language in many instances they do not have to be perfectly honest i do not go through every single case that has been cited in here to try and figure out if it says it or not they do did you read the cases that your opposing counsel just cited to us to see whether they really do even have cat if california law is that failure to pay the self insured retention in a similar policy is a condition precedent that has not been met for the duty to ind if the policy language might appear to us not to support that if that's california law we're bound by your are the pacific employers versus domino's pizza case which he referred to which was decided by this court about twenty years ago was interpret in california law is a california case that had come through this court interpreted california laws at that point and the issue in that one was a car crash case and there are dominoes being a huge corporation have multiple layers and multiple different types of policies and which policy was there which which as i are had to be paid how it was applied the language the policy language was not included in that but in that one they did say that they did have to cover it they just had to we do not know what the language was in that one it is not my job believe it is quoted at all in the in that policy when we are preparing the brief and i did look at it but i don't remember seeing any language in there in specific but in the  casualty insurance company which is in one thousand nine hundred six california appeals court case it's the if if the if the primary coverage is not paid the excess coverage still needs to pay and that would be the policy says that self insured retention primary coverage i agree really looks a lot more like a deductible i would agree on and there's we could probably be here all day talking about the differences between you like primary coverage it's like primary like companies like to say we're self insured which means their money insured honestly are we could be here all day talking about the final intricacies between all of these different types of policies it's kind of like primary coverage it's kind of like a deductible it's kind of like a front end policy it's kind of like self insurance  is what it is it's it's medieval this is that's what it is that self insured with attention of the risk of loss that if it worst if it were truly self insured then the policy would say we have no duty to cover anything and tell this twenty five thousand dollars that we paid the policy language specifically says in section four that this is primary insurance i don't know if you're if you wonder stand my concern is my concern is we have to follow california law and i want to know what not fall within the scope of coverage then there is no duty to indemnify so if i have auto insurance and somebody slips and falls in my home my auto insurer has no duty to defend me in that case because there is no potential for coverage other question i think we're out of time thank you very much thank you both very much the case just argued is submitted thank you very much and we will be adjourned for the benefit of the high school students welcome we're going to  go back and talk about this case and the other cases that are on the calendar our law clerks are going to talk with you while we're conferencing and then we'll come out and meet with you