good morning just this is similar by b in also in david waters for appellant liberty surplus insurance corporation may please the court the overarching issue here is the right or preclusion of equable contribution to the monies that travelers paid to defend and to settle a case there are three principal arguments that liberty surplus raised only one of which travis made a response to there are two arguments why it doesn't exist the right to equitable contribution and two of them travelers did not respond to the st one was that this is this corporation was suspended under two provisions of state law one under the corporations code for failure to submit the required statement of information about its officers the nd was by the revenue and taxation code which requires corporations to file tax returns and to pay their taxes this ensure dura art was suspended for both reasons it didn't pay its taxes it didn't file its tax returns and it didn't follow a statement of our officers we argued strenuously both in our opening brief in our reply brief that the failure to file the corporation's code statute information that required that resulted in this is spent ssion has no exemption for insurance companies to well it's like saying you can't speed through a red light you can't go through a red light and you can't go more than fifty miles an hour you have to obey both laws and this is one but that would that would mean then that you could never file it's if the other states you kluge it you can't do it that's that's the palm desert case where the attorney was sanctioned by the court for continuing to represent a suspended corporation that hadn't filed that statement of information and that attorney was relying on one thousand nine hundred and nineteen saying oh it's ok for insurance companies to defend a suspended corporation and they said that attorney should have known that you can't but they brought it in their own name authorized by california cause civil procedure i think it's section three hundred and eighty seven an interested party may intervene in and in that case so they can intervene still get intervene in their own in and nine makes very clear you can't you can't come in on behalf of the corporation corporations to spend it if you're an insurance company then you may come in under your own name i don't see that that violates twenty twenty two of what i'm saying is that travelers well if it didn't violate twenty five because it intervened what i'm saying is there was no duty to to come in but they have the option of coming and they exercise that option that's exactly our point is that the insurance company has the option to intervene if it wishes to protect its own interests and the cases make clear that it is their own interest that's being protected and not they're not defending the insured by doing so and that's illustrated by the western heritage case which although not a suspension that's where an insurance company intervened after a discovery sanction defaulted the employee insured who failed to respond to discovery so they were as a default against that insured the insurance company came in and intervened so that they could protect their policy in effect against having to pay a default judgment and your real point here is that travelers haven't had the option of doing so it didn't have a duty to do so that there is no contribution when nobody had an obligation and somebody did in fact perform is the united pacific vs hannover case which was cited that's a case where three insurance  companies contributed to a settlement and argued which one should have paid more and the court of appeal of california said well we can't apply equitable contribution here because not one of you had coverage if you all had coverage if you all had to do to pay that judgment or that settlement then we could have really distributed it under equitable principles but when you have no obligation you can't re distribute the burden because there's no equity to be exercised now the nd thing that travelers didn't respond to was the fact that there is no duty to indemnify anything other then a judgment entered against the insured here travellers settled there's no obligation to settle under the policy the obligation is to pay entered judgments they did not do so and so there's no and they didn't respond to that argument either so there's two dollars arguments they didn't respond to the corporations code argument did they g suppose that that jurist all had had insurance with both with both companies and that it was not suspended in any way and that traveler said gee we think we've got a duty to defend you in this suit and liberty says actually we don't think we do have a duty to defend could could could traverse comfort for contribution from again that in that case under your hypothetical as i understand it both insurance companies had a duty to defend right only one of them accepted in the honored the duty try found the other one did not right then that's exactly when equable contribution is owed so if if travelers if travelers settles that case within the policy limits it can't collect from liberty again in that hypothetical if if liberty surplus had breached the duty to defend non suspend or perish i don't understand your point here about settlement i understand your point about about the the prior point but i don't understand this point about about that because this is a subtle and somehow obvious there need to for contribution if in your hypothetical you were correct that if travelers had a duty to defend a non suspended corporation and liberty surplus had a duty to defend a non settling and suspended corporation then after we breached that duty to defend then travelers and the insured  both ok left and from the prohibition of settlement sequesters then we do know that we would know the settlement if we breached whether you take it with you get a judge a jury verdict or you settle seems to me to be irrelevant to your point your point basically is we didn't have an obligation to get into this suit so you can't you can't see contributions against us part two flows from part one if we had no duty to defend then we don't have to reverse reimburse the settlement either if travelers had heard had pursued this and it gone to a jury verdict would would liberty then be on the hook yes because the duty under the policy is to pay judgments and sell let's say exactly what happened here and travelers went to trial and there was a judg against dura the corporations code suspension and the revenue in taxation suspension do not apply to judgments and that's why you have the right to intervene is because instead of being prohibited from intervening and therefore there's now a judgment against the insured you have to pay the judgment that's exactly why the right to intervene to protect your own interests is created by the california courts and legislature is so you can protect yourself you protect yourself but you're not protecting the interests of the suspended corporation because like i said in the western heritage case there's default the insurance company was allowed to know if that if they'd recovered if the jury awarded a one million dollars against against then you would be you'd be on the hook for that they settled for less than one hundred thousand dollars you wouldn't be on the hook for that correct  weird rule i'm not sure i follow the logic of a lot of weird salt it's exactly what the california law says that california law says that if an insured thinks i got a good settlement and i'm going to make the settlement without the approval of the insurance potentially potentially because that that often happens if well and i'm sorry i'm sorry and that if and only if we had a duty to defend that was breached often insureds what jamestown case is a case where the insured decided to settle the case without the consent of the insurance company because they thought it would be cheaper to do that then suffer a judgment in the california court of appeals said no it's not o it's the insurance company's choice of its own to settle or not settle you can't make exercise that for us it has to be a judgment if we agree to the settlement will pay but unless we breach a duty to defend we're not liable for settlements and so here the cases show that equitable contribution is only available when there is a breach of a duty there is to duties at issue here one is the duty to defend one is the duty to indemnify there was no duty to defend because we couldn't defend because of the corporation's code now there's arguments why main case it does not impose a duty to intervene it was a case that was considering if you want to protect your interests can you do so in the name of the insured or must you intervene  case said clearly you can't appear in the name of the insured we're not going to make it illegal if you do sell but they still said you can't do it that way you still got only protect your own interests and so if if both routers and liberty it sat this one out and a judgment came out against against the result they would both be on the hook they would both be on the hook for the judgment yes however they would have a defense of lack of cooperation by the insured by you know you prevented us from defending because you're suspended so but that's and that's not the case here there's there default that's why they allowed in the western heritage case the insurance company to intervene after the insured was defaulted and the insurance company was protecting its own interest because they didn't the case pacifically said the insurance company did not have to set aside the default so the insurers left out there with a default against them but the insurance company can protect its interests and i don't have to help travelers protect its own interests is the bottom line  good morning your honour's ray brown from the law group on behalf of appellee travelers property casualty company of america may it please the court liberty liberty circuit surplus argues that it had an opportunity to intervene but no duty to intervene and that it's that it was illegal for it to defend its insured liberty surpluses obligation to its insurer begins with its policy and the policy in this case imposed a right and duty to defend any suit against its insured seeking damages due to bodily injury or property damage it also imposed the duty to pay sums the insurer becomes legally obligated to pay not judgments entered against it but sometimes it becomes legally obligated to pay now there's no dispute that the cross complaint filed by howard s right construction company in the underlying action sought damages against dura art due to property damage to which liberty surpluses policy applied so the only issue is whether gerard's corporate expansion suspension excused liberty surplus from its obligation to defend our art now as the district court noted the policy includes no limiting language the policy does not say anywhere that this duty to defend our insured does not apply in the event that the insured becomes suspended  and liberty surplus contends that it's duty is excused under california law because it is illegal for an insurer to intervene and defend a suspended corporation  basically what liberty surplus argues in its papers is that and insure can has the ability to intervene to protect its own rights but not to defend its insured not only is that not supported by the law but it's a distinction without a difference the manner in which an intervening insurer protects its right is by preventing a default or any adverse judgment against its insured when it intervenes that is defending the insured  whether you are the insurers primary motivation is to protect itself from the consequences of a judgment against its insured or to protect its insured against the possibility of an adverse judgment is of no moment they are literally the same thing in fact as we pointed out in our brief the california statutory and case law are replete with confirmation of insurers ability to intervene both to protect itself and quote to an insurer or to counsel retained by an insurer on behalf of the suspended corporation who provides a defense for suspended corporation in a civil action close quote so clearly nineteen  duration whatever it require well actually the i believe mr waters conceded that intervening an intervention by an insurer it does not run afoul of twenty five that's what travelers did here and what travelers is saying liberty surplus had a duty to do in order to defend its insured you say he's he's admitted it here or before the district court or both i believe he admitted it during oral argument that what travelers did by intervening in the underlying action did not run afoul of twenty five that was my understanding of what mr waters said or what about his statement that if you settle it  and i agree with him the problem is that the british surplus had a duty to defend their art and it did not comply with that duty and it is clear under liberty surpluses policy the policy language makes clear liberty surplus had a duty to defend your art so the question is just could liberty surplus could it comply with that duty and liberty surplus is saying no we couldn't it's illegal insurer to defend a corporate a suspended corporation so we could not do it revenue and taxation code in nineteen thousand seven hundred and nineteen b specifically talks about an insurer providing to a defense for a suspended corporation so unless the legislature was somehow saying it's ok for somebody to break the law that doesn't make sense the legislature was specifically recognizing that an insurer can provide a defense for a suspended corporation if liberty surplus could provide a defense for a suspended corporation that under their policy they had an obligation to do so because they breached that obligation the resulting settlement they are on the hook for and i don't believe mr waters disagrees with me on that point idea well yet a lack of cooperation charge i don't know if we have a lack of cooperation defense what we don't have is a defense of that in possibility that it's illegal because it's not it's not it's not it's not illegal i think the curious thing about the about the about the code is that it's it's permissive it doesn't say well if you're if you're insured that's different you can bring you  bring suit in your own name it's it seems to give you an option and you seem to assume some risk if you don't come in you assume whatever risk there is that somebody is going to call going to collect it and i guess that grace the house ability that you have a  defense to the action well and the reason i think the code is permissive and just says that an insurer is not subject to the penalties set forth in one thousand seven hundred and eighty is because the duty to intervene and defend your insured does not arise by the statute that writes it arises from your policy if your policy as the district court acknowledged if liberty surplus is policy said that our right and duty to defend our insured is excused in the event that the insured becomes suspended then liberty surplus would have no duty to act a hypothetical if if if travelers had sat this one out default judgment is entered well the fact that they can't prosecuted though i mean there can be there can be many reasons why a plaintiff cannot bring a claim or would would lose on that claim but that it reinstated in california which you know once are suspended for this tw reinstated whether they would then have a cause of action against the carriers for for bad faith for failure to defend the you don't want to take the chance we don't want to take a chance on it that's correct your honor the i mean i think another problem they might run into is whether they actually have damages against them which they may or may not depending on the situation but i don't think any of that changes the analysis the insurance policy is a contract dura art and liberty surplus entered into a contract under that contract liberty surplus had a duty to defend your art under certain circumstances that are not contested came into play here so the duty of duty may be excused legally if if the and nineteen i am not sure that it's necessary this decision but i don't think that's accurate as i read the law when you go through the decision in k being the case actually talked about the fact and citing the legislative history of one hundred thousand seven hundred and eleven being the reason why that statute was amended was because there was some ambiguity in the statute which purported to prohibit insurance companies from defending actions brought against the suspended corp but there were cases including the truck insurance case which was decided in one thousand nine hundred and seven that's pacifically said an insurance company could so the there was just this ambiguity apparently that the what they couldn't do was intervene and pursue the insured affirmative rights which is what the k v case was talking about the and the truck case was talking about the truck case was talking about dollars but based on the analysis done by the k b court and insurer already could intervene and defend its insured and what's curious about this is that we keep throwing around the language of you know the obligation to defend or option to defend the statute seems to be permissive you've argued that the contract makes it's mandatory and yet after i've pushed you just a little bit i think i think you had to concede that that the dura art can't enforce the duty to defend against travelers or liberty because it's going to be barred that's correct as  then that that travelers liberty have been relieved of their duty to defend they may have other reasons for wanting to do so but that's why the exception to the one thousand nine hundred and seventy one is so interesting is is it it appears to give you the option of coming in and doing so if you don't have to do it in your own name i don't think that's accurate your honor i mean just the fact that the juror are as it's presently situated could not bring a claim for bad faith against the carriers does not mean the carriers don't have a duty anymore they have a duty under the contract well that they may have they may have a moral duty i've but right now we're concerned about legal duties and those may not be the same thing i think they have a legal duty under the contract which could damage defend but they're saying no no we had the option to intervene but we we could not have had the duty to intervene because we can't intervene to defend the insured we would only be intervening to protect our own interests and that's contrary the courts analysis that talks about the mechanism mechanism by which an insurance company can provide a defense to a suspended corporation to protect the rights of its insured given those clear provisions in california law there's no there's no rational basis for a claim that it would be impossible for liberty surplus to do this that liberty surplus could not have defended your art if liberty surplus could have defended your art then it had an obligation to do so but really how much is at stake is that eighty thousand dollars the ultimate judgment was i believe one hundred thousand dollars ok so you're asking for fifty no i'm sorry the there was a stipulated judgment in the district court and that is i assume that you've tried to sell this case you have any interest in meeting this is a very very interesting question and you know at some point both sides may be unhappy with the answer is that you may be happy somebody may be happy this time but you're going to be unhappy next time  are you interested in trying to be at this time or through the court mediator service i don't believe so your honor ok all right thank you for the straightforward answer and thank you very much mr brown up by the fact that there is the option to intervene by the insurance company if it wishes to protect its own interests there's no duty to do so the there's no duty to do so the revenue taxation code so your position is the travelers in defending them violated the law no they intervened i see it they were divided over the law if they had done it in the name of the corporation that's that is the duty to defend it is owed under the policy the option to intervene is granted when you can't defend your insured and the law says you can't do it the revenue taxation code has the exception but travelers only quotes half of the section it says if you defend and in conjunction with that defense of the insured sue for express indemnity and contribution in the name of the insured but you can't do that anyway the point the point being is that it's not a duty to ensure there's no duty to intervene because the western heritage case says that you can intervene but you don't have to set aside the default of the insured you're intervening to protect your own interests and equitable contribution the overarching issue in this case only applies when there's two people or two insurance companies that both have the same duty to the sane party and did not exercise it and intervention as as your honor pointed out you know we could if there was a judgment against the insured we'd have to pay it subject to a defense of failure to cooperate which requires actually you know demonstrating actual prejudice that you are actually prejudiced by the insured being suspended and not defending the case but otherwise we'd have to pay the judgment but there was no judgment we only had to pay indemnify entered judgments against the insure