appeal is whether mr alpert's whistleblowing statements to law enforcement and other entities arose out of his business pursuits to just a court said that they did and for that reason that the statements fell within an exclusion in the relevant policies for the business pursuits the district court was wrong as a matter of law and as a matter of the record and for that reason we asked that the summary judgment be reversed with directions to the attorneys for the albertsons alberts submitted the case to charges of property under the homeowners policy and i asked as i understand it for participation in the my understanding and they were represented by their own attorney but i don't i don't think that's in the record your honor ok so my understanding is because the business insurance carrier did contribute to the subtle guess that is in the record yes it did ok can you address the settlement agreement which begins with a recital that says the claims right raised in the lawsuit the employment relationship between each and various folks if the claims arise out of that why don't they arrive by by some of the parties in this case who say this is what this complaint was about and now we're settling so well why isn't that sort of an admission it arises out of the employment agree but because it's more than that your honor because the alpert's were also facing defamation a potential for defamation claims that didn't arise out of a business suit and we know that from several parts of the record  for whether the business pursuits exception applied had to do with two things did the defamation arise either out of mr alpert's work as a consultant for evil h or did they arise out of mr  alberts what we call was going to be a subsequent business his subsequent this and we know that there is evidence that the insurance carrier had an obligation to consider that shows that at least there was a potential that his death his alleged defamatory statements didn't arise out of either why did how do you know we have to read this complaint which doesn't seek damages for defamation as a defamation complaint in order to to accept your position yes and in the claims process chartists conceded that the complaint created a potential liability for defamation and that's really that's really the test under arizona law as as jonna well knows if a complaint has the potential for coming within the coverage of any claim in the complaint has the potential for coverage then the insurer has the obligation to defend the lawsuit so let's go back to the right what would it what do you believe the arising out of the test is in arizona well it is that's a that's a central question this case these these these claims here are not unrelated to his business activities they have some some firm connection to his business activities are you saying that we're not saying that the whistle blowing must be part of his business activities or you know i'm i'm not saying that your honor but we know from the fibbers case the court said we understand it's costs referred to business pursuits conducted on the insurance premises the term arising out of implies a causal connection so what does that mean so let's if we could examine the two businesses that are relevant separately i think that would be helpful so did mr alpert statements a rise out of his consultancy well we know that the statements that the defamatory statements were made about fourteen months or more after the the consultancy ended q so so let's just let's scripts he discover something was rotten in denmark fourteen months later and he says i got to set the record straight because i was an employee you're saying that doesn't arise out of his business relationship because that's that's essentially what happens here there's another there's another set of contacts in between but just to just leave the first one your honor first of all i look at may i may i address that the premise of your statement which is there are two sets of statements that he's making one to h statements was enough to sever the connection so that his statements don't arise out of this consultancy is there a case suggesting that which case are you relying on i'll rely on several different authorities  couch on insurance addresses this directly saying once an employment relationship is terminated there is no longer a connection between the employee's actions and the activity of the employer's business accordingly the of means originating from having its origin and growing out of flowing from incident to or having connection with so extremely broad and there's no suggestion that so long as there is a connection which here there clearly was the information in the actions when he was working is what led to his setting the record straight as judge her would said so so how do we how do we interpret this this very broad language from  begins we understand this clause to refer to business pursuits conducted on the insureds premises wasn't his his business pursuits as a consultant for equal age i don't know if they were uninsured premises but that couldn't make the difference now that we have telecommunication you can work from home but the information he got the problem that he ought to rectify was arose from his employment relationship whether on the insured premises or not i would argue that's not the case particularly with the information that he conveyed to law enforcement it didn't arise out of his work looking l h because it's based on information i'm sorry i'm going to finish please it's based on information he learned in the chadwick letter seven months after his work i'm sorry your honor could your so he says exactly the same things that he says to her eyes and the various law enforcement authorities but he does it while still under contract to you know age there's the exclusion apply that would be a much tougher case for  think i think it would i think it would too and so what you're saying is because he waited and you know learn more information then the exclusion apply that is your position is yes yes and there's a policy i mean there's a there's a good reason for that and it goes to interpret what the business pursuits explosion is all about i mean the reason for the business pursuits exclusion is because you don't want to assume that a homeowner's policy or an excess liability policy is covering the risks so you associated with the operation of a business but that purpose doesn't have any meaning when you're when it comes to statements that are made fourteen months after the business relationship is over and they're not in furtherance of that business they're not in furtherance of his consultancy the complaint filed by l h arises out of mr alpert's business pursuits can we start with with the question i asked mr knocking if if this  complaint describes it in eighteen or fourteen month pattern of conduct right but that's really quite that's not the question i'm asking the question i'm asking is let's assume you had no business exclusion here would you required to cover and required to defend indemnify in this case well a defamation claim is a potential personal injury claim in a homeowner's policy but it's not subject to when you read the no obligation to defend this complaint see that's my question then are you saying you had no obligation to defend this complaint because there was a business exclusion or you saying we had no obligation to defend this complaint because there was a business exclusion and it didn't raise a covered claim we never got beyond initially the business exclusion so at that point they probably would have defended the complaint  complaint s plaid does not fall within the duty to cover claim there is no obligation to defend or investigate any further the exception to that is under u s f n g unless the insured provides a factual showing that there's something within us facts outside of the complaint that would create a covered claim so what that was the whole purpose of their saying well we have this information and they kept saying please provide it will consider it and they didn't do it they didn't do it they didn't do it we asked for it many times and they finally did it and then they settle the case but i'm looking at your your your denial of coverage letter which is july eighteenth two thousand and eleven your charter says obviously and it says overall the allegations in the complaint do create a potential of liability for personal injury offense of defamation my bone slander is more f said where we disagree with your conclusion of the business pursuit six exclusion is inapplicable so really the position you take it is we would have covered this but for the business pursuits exception right  go let's move on you agree with mr romack and that absent the business pursuits exception you would you would have had the chartists would have had a duty at least today to defend perhaps under reservation of right but at least a duty to defend but for the lawyer sent a letter that said the allegations in the complaint do appear to create a potential for personal injury for defamation crime we're not covering you because of the business pursuit exclusion is that your position that was there are certainly there are positions that your position today i'm sorry position today to right and if that was their position then and that's your position today clearly ok so now let's turn to that it's a we're only relying the business pursuits exclusion what if we were ten years after what happened tell me mister mr alpert is ten years removed from any connection with the r h so he went we finish i'm sorry and he goes to the he does he sends out exactly the same letters is it covered by the business pursuits case where the the business pursuit ceased sixteen years before the injury occurred and they said that specifically hell doesn't matter it arose out of a commercial activity that's all that that's required that dispels this whole fourteen months or however much time welcome to do understand your position to be that there is more or less a bright line rule that if you're reporting what whether you want to call his or was a blower or whatever your motive is if you're reporting something to a third party that is potentially defamatory that you acquired but you acquired that knowledge as an employee e that that automatically put before or after i'm and i'm working clearly would be an early could be considered covered claim by from the business who you're saying because i learned about that information as an employee i'm coverage i believe that based on the arizona cases as long as that's connected or related to the business pursuit that's enough they specifically rejected this where you look at the the specific act in a vacuum and say if there wasn't a business pursuit for that specific act it's not they that has been rejected by the gavel case it was rejected by the febreze case it was and in the whitesnake case negligent act was cleaning up after the dog when the when the babysitter was doing it and they just said that doesn't matter it fact is that the child was there because you were babysitting the negligence the specific act you can't focus on that and say it wasn't a business pursuit as long as it's related to or incident to or in connection with commercial activity which you you read the complaint and even read his deposition and there's no question that this whistleblower stuff is is just a fabrication of counsel he met said no more than ten to thirteen times in a deposition before he even knew about the lawsuit the deposition was taken before he got served with this lawsuit it was taken in a different suit and he was asked numerous times why did you do this and he said i was afraid because i was a consultant for l h that people were going to sue them and they were going to sue me too because i was a consultant and i was part of their alleged consumer fraud he was protecting himself and his family even when he said i was soul searching he specifically said and it's on page fifty of his deposition fifty eight of his deposition i was soul searching because people believe i did this to hurt the owners of the l a that's not why i did it i did it to protect myself and my family from getting sued because of my business relationship with the l h because when i was there i made false statements unknowingly and i did this to correct the record that's and judge joe i don't think that's contested here i think that i think the other side says that's exactly why he did he was involved with he was involved with the l and so he went to everybody he could to correct the record so we're not fighting about that the question is is that kind of activity as a matter of law within the business pursuits exclusion absolutely which absolutely tell me why well because because there's no fears no qualms about that on text see that what they're what they're trying to do is isolate little facts the case that the complaint alleges a is you know sixty seventy paragraphs they take two to words false you took before we have an uncontested series of what he did nobody's disputing what he did and why he's being sued for it the question is why are those statements to one foresman authorities and two and two  within the business pursuits who should just help help me with that tell me what i think we're all he admitted they were all made in connection with or related to not just his consulting that was the beginning of it but he had an ongoing multiple business disputes because you know again it doesn't stop with the consulting that was the genesis it went with the heat the hiring away of employees and disclosing confidential information and starting new businesses to to allegedly compete with them which is the reason why it's alleged in the complaint and why it's on its face is not a personal injury covered by the policy of a homeowner's policy because it expressly states the false statements were made for business reasons so you know that's where i'm having trouble following your argument i hear i hear one argument being it's because he learned of this it's because of something he did and something he learned about wilde while consulting but now your argument seems to be well no it hasn't that's not the real problem the real problem is he's now in competition he has all kinds of other disputes because he supposedly poached employees and now he  now you seem to be arguing well he made all these statements as part of this new business and that's the business pursuits exclusion problem well so is it the new business or the old business it doesn't matter if i made the industrial indemnity versus a gaggle case specifically stated use of plural pursuit suggests a more expansive construction profit motive applies to the business pursuit not to the isolated activity so it's it doesn't matter if it's multiple businesses or if it's one as a matter of fact our business pursuits exclusion and it is more expansive because it's it includes investments and i know at one point he says i'm not i'm not a consultant i'm an and i'm an investor well this applies equally to his investments and the point is that it started with the consulting business you know the complaint is very clear then it goes to take hiring people away and violating his contracts that he had with the l h about the confidential information and starting computer businesses and continuing to hire stuff people away so matter of fact the the whole genesis of the the false statements that he made to verizon was he had he had a business dispute he had a joint defense agreement with his new employee chadwick who he took away from e l age and they wrote a  their response was done by their their attorney he admitted they met with their joint defense attorney for the purpose of protecting himself and his family from sue interrupt you for a moment i think were were aware of these facts and could you briefly address your collateral source rule a contract claim this is you know do we did we do we owe them for their or for their defense costs which they never submitted anything or do we have to pay for the settlement which again their company paid for alpert didn't pay a penny out of his own pocket but rather the money came from james as i understand it that you wouldn't have to cover in any way that he didn't suffer any liability is not your is that your argument the the settlement don't say he has to but so he has to cause it to be paid and he didn't pay it they didn't provide any proof that he paid a nickel out of his pocket and so your position just that i understand it is that because somebody else paid the judgment at the end of the day he suffered no liabilities at your something no loss so no loss and therefore even if you were required to cover him there's no evidence of loss correct ok i just that's the question i think judge of good was asking  i'd like to return to the standard that we're operating under for the duty to defend which is is there a potential for coverage and in on this record i there is a at least a potential for coverage the statements that were made particular the statements to law enforcement were made after the employment relationship or the consultancy ended fourteen months later based on information that he didn't know at the time of the consultancy but that he learned  after the consultancy ended if you were right what what would we do in this case now there was a there was a settlement the one insurance company kicked in three hundred thousand dollars for a suit apparently concluding that it related to business pursuits entire six hundred thousand dollars that was not picked up and i'll tell you why they tell me tell me why that all arises out of defamation because there's a lot of non defamation claims in this case it may not and if charges it stepped up the to the plate and made its duty to defend they would be able to argue that the money should be allocated to other claims but under arizona law that the price that it gave up that's what it gave up by refusing to defend why isn't you said it would be responsible for the six hundred thousand that the other insurance company to pay why would it be responsible for all nine hundred thousand if the payment from a separate i understand entity covered the other six and i wish i would have thought of that your honor i think i'm in now then that's it that makes a lot of and i didn't think of it so so but but what i'm understanding from that is you understand if there's another source to to cover the settlement amount than the injured the additional insurance is not required i mean is not required i'd like to focus on the language of the insurance policy that mr albert paid for and the insurance policy requires charges to pay damages and insure it is quote legally obligated to pay so so they breached the contract but there's no damages because the full nine hundred thousand was paid so i want to understand why they the argument that james coverage of the the remainder doesn't eliminate the damages i don't think that james is payment the fact that james paid is relevant at all but i see other insurance companies so if he had another insurance company is completely separate from him kick in the other six hundred thousand i don't think we would care that's correct your honor although i must i must acknowledge i haven't looked at the insurance policy to see whether or not by its own terms any amount would have to be reduced by sums that were paid by another insurance company an important case i think that is very helpful for this is the delaware supreme court's decision and eighteenth tee versus clarence and clarendon which was applying california law and it looked at the language very similar to what we have in our policy the legally obligated to pay and held it that way which required an insurance company to pay for the employees settlement and defense costs even though the employees didn't pay them but they were paid by the employer punished so that was the rationale but is there i don't know what the rationale would pay for an insurance company i mean the insurance company wasn't the tort fees or didn't do the wrong so why would they add apply why would the collateral source rule apply in this kind of well your honor i don't even think you need to get to the collateral source rule although it doesn't apply i don't want to agree that it applies i don't think that there are any authorities that are contrary to the ones at least i'm sorry to pelleas didn't cite any authorities contrary to the one that we cited but i think we have to look at economic reality here to the evidence is that albert owned james investment company is an alter ego was there anything in the record showing it was an alter ego not that i'm aware of but does that make a difference well i think you know as the delaware supreme court s clarendon the existence of a covered law should depend on economic substance and not transactional form so yes the money came out of want to count versus another but what if he had just paid it himself and then turned around the next day and asked  james investment company to to reimburse them it's the same economically it's the it's the same point