number fifteen two two three seven hits financial services incorporated in others versus american international duty lines insurance company and others arguments not to exceed fifteen minutes per side because the funds that mr larson took were funds that were held by hands and also funds that that hance was legally responsible for consequently the district court should be reversed on that ground with regard to the you know policy there's no question here that the loss was a covered loss the only question is whether the wrong the knowing wrongful act exclusion applies and there's an ambiguity of that in that exclusion such that it can be read to refer only to bad acts or to exclude coverage for all bad acts or converse leave only to exclude coverage for bad actors because it does not on ambiguously exclude our claim under michigan law the district court heard on that ground as well and should be reversed i'd like to address the bond that i'd like to turn to what i think is i i want to hear your argument and we do want to hear your mom both of those but i'd also like to hear your argument on the statue limitations question with respect to the first one certainly and it is my intention to start with that because i believe that is are strongest argument and i think it's helpful to look at those claims there in three buckets the monroe judgement the bolton settlement and the set of claims of all the other investors with regard to the settled claims with regard to the with the subtle claims with the other investors we concede that the contractual limitations bar applies and we are not entitled to proceed into the bond on that basis with regard to the monroe judge a limitation being the contractual shortened special imitations michigan statue of limitations would be six years and that would have been timely under that ok with regard to the monroe judgment the contractually short limitations period was mat because there was not a final judgment in that case until after the appellate court ruled and the time for filing an application in the second supreme court had expired and i say that because the language in the policy is obviously final judgment and final judgment can reasonably understood be understood in two ways it can be understood as being the time when an appeal a right to appeal a cruise because the district court proceeding has completed or issued in the trial court proceeding mean that the case is over and under michigan law it's used both ways you see in the michigan court rule that they cite the accrual of the appeal you also see with regard to michigan law and valving collateral stoppel that a final judgment is not a judgment is not final until after all appeal rights have expired because it's it is capable of being interpreted in two ways it's ambiguous and therefore must be construed against the insurer under michigan law a reasonable person i submit reason reading this policy especially a reasonable business person would conclude that in fact the intent is for the case to be over because it makes very little sense the final lawsuit against the insurance company saying pay us for those judgment one of the same time you're still arguing the appellate courts were entitled to have this reversed and not have any money paid and in fact what would happen in that situation would be of course the parties would stipulate to stay or somehow the way the proceedings against  thing would be to tell the insurance company earlier so they could pretty potentially participate in the litigation or the settlement your honor it's the here the insurance company was fully aware of the case and we had the opportunity to participate in fact any settlements were approved by the insurance company so there's no issue with regard to notice the issue is when do you have to sue the insurance company because they've either deny coverage which they haven't done here or they're dragging their feet and hands should be required to incur the cost of suing the additional cost of showing the suing the insurance company it seems reasonable to expect that they wait for their arguments to be completed with regard to whether or not there's in fact a judgment against them what is that the value of that particular claim it's about six hundred thousand dollars here are a little bit south of that five hundred ninety three thousand about the other one the sauternes the bolton settlement i believe it's about roughly the same size it's about five hundred thousand that tells the argument as to that one as well with regard to that claim your honor we would submit that the course of conduct here is sufficient to demonstrate that our client was reasonably lol into believing that the insurance company was not going to be enforcing the judgment or actually enforcing the contractual provision specifically the reason for that on that one i mean you know maybe this was just boilerplate stuff and could be misleading but it seemed like just about every communication they did reserve their rights certainly you're out of that they said that they reserve the rights but they never specifically indicated anything with regard to limitations period even after the limitations the contractual short limitations period had expired as to the settled claims furthermore that the impeachment conduct which is not what you'd expect from an insurance company after the policy after the contractual imitations period expires namely they continue to ask for documents they asked us in fact directed us to submit one of our employees for a statement under oath and even after the statement under a statement under oath they continued to ask for documentation consequently we believe that the entire course of conduct here is sufficient you believe they're just building their case why would your client think the good news it's not that we think that it's not that my client was thinking that this was good news to us for us but rather that my client was entitled to believe that limitation provision your honor i understand of what i think you're correct that my client as and when looking at the communications should have been left with a sense of boy looks like the insurance company's going to deny or claim but not on the basis that we waited too long to sue them but rather on the basis of there are various other other reasons and with the expectation that  perhaps this additional information would be sufficient to overcome that regardless of the ultimate tenor of the communications the issue with regard to whether or not the contractual limitations provision was going to be enforced was never raised and given the conduct of the insurance company i believe the entire course of conduct was sufficient for my clients are reasonably rely on that so let's let's say you're right about that five hundred ninety thousand dollars claim now what do you do about  the underlying argument you're right only in the sense that there's not being a limitations bar so what do you do you know the underlying argument is tricky and you know you've got this bellman idea which brings in the teller example which i think intuitively seems pretty good on your side but you know if you look at the lower court briefs you don't see the word bail bail mean so it's not clear that that was preserved and we don't like to reverse district court judges when they didn't have a chance to look at the the argument themselves so how do you deal with all that well your honor specifically with regard to the issue of we have or we would submit that this court has routinely distinguished as have most appellate courts between raising new or different arguments on appeal and raising new issues and here the issue was does the specific language in the policy provide coverage or not and we address that issue in the district court we have raised the refined argument with regard to belmont's on appeal we believe that argument is very strong and it is tied directly to the language of the policy that was specifically at issue in the district court but you're correct there's no reference to the bailey exception in the district court but it is simply a variation is ba this is really a question for both sides as bam and just another way of saying a specific application of agency law that is just it's just you know who's the agent who's the principal and if this fellow was the lawyer some was an agent you're always acting on behalf of principles you're on i don't believe that it's a specific application agency law as much as it's a specific application of property law the concept here is you've intrusted property i guess in some ways just like a pawn broker or or something like that where the property has been entrusted to them for the purpose for another purpose in the context of lawyers on this of course happens with client trust accounts where the funds are entrusted to you for the purpose of holding for the client that's because that's exactly what happened here and in fact the language of the policy talks about property that's there that would be covered there would be a cover of loss including property that's held by the client and also proper the client is legally liable for here there's no question we were legally liable for it otherwise i would have never said yes go over it like a deposit is me sort of like a deposit it's exactly like a deposit with a bank that if you were talking about deposits he wouldn't usually use terms of bailment would you having i mean sort of taking off on judson's question it seems to me you could you could make the argument without using the word bailment maybe even make it stronger certainly right i believe that in fact let's just go back to the policy language it says held are legally liable for we both held it through our agent and we were legally liable for the the and that's what you do for deposits and that's what you do in the teller example exactly and in fact if you look at the and also in the escrow fund escrow example and frankly that's the context that this bailey exception has been applied and i was not to disagree with the drivers but just to make sure i'm getting it would seems a little different from the teller i mean that's going into the bank bank's account account here it's going to a third party but it's not going to a third party you're going to the bank you're going to in giving the money to the employee the agent of the bank here you're going to hansis from agents expecting that hansen is going to be the one investing the funds at hansen's putting it in still another place so in that i'm really hansis money it's not staying you know i'm saying it's going to a third party that's what it's getting invested in some mutual fund or something correct so perhaps perhaps the escrow example from the southern california case is closer but in the same way in unfortunately unfortunately too familiar with the banking law to know exactly how the the funds deposit is are at the end of being property of the bank even though they're on deposit for you so the escrow example is a better example but in many ways it's just like where the actual situation of what happened here is just like going into a bank and you have these you know direct is direct in you know you could argue this isn't direct because the time the liability of hants happens is after a judgment and a lawsuit and hero that i know you can say that sounds in direct doesn't it i mean it's the it is direct because the prop because it is direct under the property because the policy issues mean the policy because the policy applies to property held by hands not necessarily owned by it and also property for which it is legally liable here was legally liable from the moment it was taken because it had been given to hansen's agent for the purpose of investing and hanson at that point was an officer and larson at that point wasn't it wasn't very larson right it was an agent acting within the scope of his bill he did something wrong with it he had the choice to go ahead and treat it properly or to change his and and gives a deposit in his own account from the client's perspective the same thing happened when they gave him money that they actually deposited when he gave them money that he he took for himself i see my time  expired i will turn to the you know policy on the bottle good morning your honour's harvey hell around behalf of american international specially lines and nation union your honor speaking let me address the are the issues that you were really advocate that acknowledges the best argument the other side and i thought he had a pretty good argument as the five hundred ninety thousand dollar claim i'm addressing that ok and my full sentence was they don't they balance before the court they don't have any argument to the investors who settled that was not argued in their briefs is before the court that they can see that applies to them that leaves us with only monroe in both the one now as to monroe that case was went to was there was a final judgment entered in that case under michigan law in december of two thousand and ten that gave them twenty four months until december of two thousand and twelve to say a reasonable business person looking at a policy would consider an exhaustion of the appellate process required before perceiving a final judgment is contrary to the facts of this case because the facts of this case are undisputed th roughout this entire period of time this is this everybody has equal access to the policies in question number one we have a little bit of a bias or at least i do but i tend to think of the appellate process is a pretty important part of whether there is a final judgment i don't dispute that but the term final judgement you can only appeal a final judgment in michigan yeah and that's that's the law and it's that's what happened in this particular case a judgment was entered it when finally after twenty eight or whatever number of days and it was appealed that's what happened in this particular case i think of the meaning of those words depends on the facts of this case the words either meaning it says final judgment or right the words of the contract interpreting yes right those words either include the appeal or they don't i don't see what the facts of this case have to do you mean the facts of the words of the contract remain the facts of what happened in the case i think we have a the term final judgment in our contract and either means final after appeal as expired or it doesn't mean that those i grew possible meanings agree that's purely interpretation of those words right i don't disagree with you your are not ambiguous why couldn't someone read that to mean some reasonable one out of three business men read that as saying after appeal that's the question right where we're looking at whether that's a reasonable alternative interpretation if there is then there's ambiguity right your honor that's my question i suppose if we were dealing with a different set of underlying facts and i don't understand know we're talking about words in a contract i agree and a final and a final judgment is final at the trial court level i mean when you say that just to make sure i'm understanding your argument yes i think what you're saying is well under michigan law final judgment that phrase usually refers to a district court's final judgment and my response to you is the same we have the same principle in federal court that you know that's a phrase used to trigger what's appeal what's not the trial level but i don't know that that body of law tells us that the phrase final judgment in a contract only refers to a district court and that's that's my pushback if i'm grasping your argument well if one were to suggest just to be responsive to your argument to your position your honor see where you're inquiring in this particular case or not any in any case if you had a final if you had a judgment from a court ok and you had as we have in this case whether it be a statue of limitations or contractual limitations period there is no question that it is not told per say well it's not when something's on appeal one would have to get a tolling agreement and nobody found it sought a totally agreement in this particular case and i think that's one of the keys this case is totally and that's just begs the question because you have a why because the stime period very simply because the period was running on that judgment as to monroe that's what i say you're right that is our position but let me literally forget final judgment law in the sense of when something's appealable or what is appealable to just pretend that body of law doesn't exist and someone asks you the word final judgment what does that mean sure seems one natural reading maybe not the only one but a natural reading would be when the litigation is over i e final why is that i just don't that's just seems like a legitimate reading of the words you know i hear what you're saying your honor in my upbringing i don't understand it that way and i and to me a final judgment of the judgment of the trial court level it is not contingent on what happens on appeal which might be subject to reversal remained or anything else it is a judgment in contract language that way as i stand here before you i don't have one but is never but it's just sort of we don't we're trying to figure out what i guess what the state law would be  what the contracts i mean you can't get a stay on a judgment without a money judgment with a final judge without a bought usually i mean so it's i mean i think to me it's universally accepted now that just let's just think for the the you know the purpose of this why would you do it and it doesn't seem strange to let's just say you have a very close case so you have your quote final judgment the trial level you think it's a good idea to have the litigation about coverage going on while there's a real likelihood of reversal of the underlying judgement and that seems inefficient well that wouldn't have happened in this particular case your honor this case it was it was  well i understand what you're saying no i don't think that's true at all then they had an obligation to seek a totally agreement but you just judge could points out that just begs the question i'm just saying you have this language which was written before anyone knew what would happen here you know it's possible you could have a coverage dispute which is it's a fifty one forty nine case to really close case the trial judge decides the way they decide but everyone agrees it's impossible to predict what the intermediate or much less the supreme court's going to do and your reading of the contract requires a tolling agreement or filing ink insurance coverage dispute in the middle of litigation which everyone agrees could come out either way that seems odd to me well your honor it was then incumbent on them to bring it up the topic of what you're suggesting means as a plot that one must evaluate the merits of the case after a trial court final judgment is is is is entered to determine whether or not it's really final because it's a close call in somebodies opinion that is not an objective reading of a contract i don't think i just to be clear i'm just examining the policies of why you might interpret the word final judgement to mean final after litigations over as opposed to final after trial court decisions happen that's all i'm saying that's the best answer i have  the final judgment when you're when you have contracts in the possession of both sides and both sides are represented by counsel and this argument will never never raise below by the way is a final judgment and right to me it's not raise below our weight on appeal as a boat and i think what's more significant in this case is when on contractual limitations when when the inquiry was made  repeatedly by counsel he first said to the court when asked why the case wasn't brought i don't have a good answer the second time we had a lot on our plate was not a priority from an insurance point of view we know we have two and one rose combined losses this concept of a stop up by the letters that were written is i think a red herring as to bolton and monroe their combined losses exceeded the one million dollars policy that was available fidelity behind there was four months and nineteen months after this case was brought after the of the letters denying coverage were sent out to bring a lawsuit were for due to a third in another mistake counsel made they waited a full twenty four months from denial having nothing to do with what was going on with the monroe case so in our view the the issue of contractual interchange you what's your take of if there's not a contractual limitations bar what your take of the underlying issue and monroe in terms of whether it's direct and so forth you know there's a fair amount of briefing on that point on the under act you know direct it's a very different argument on appeal than it is than it was below we never heard as you pointed out we never heard the issue  appropriate to review the bellman so called bailment exception raised by the council in light of the waiver standards that exist it's a wholly new provision it's not a refinement and there are no arrests ordinary circumstances i don't think  also don't feel it was factually developed it required hands to show i'm sorry or understand it wasn't way but you just have a little bit of time and i want to talk about about the content of it apart from the terminology it seems to me your argument at the very bottom depends on the facts on the assumption that when this money or check was received by who is it lauren is that his name lost and arson yes or when it was received by larson it wasn't received by the defendant because he wasn't because he was being a fraudster and therefore he wasn't acting within the scope but but the difficulty i have with that which is which i would like you to address which is informed by the teller example is that when when he received that check he hadn't yet committed fraud he could have had remorse and treated it properly at some point he then either gave it to himself or gave it to the wrong place and and committed the fraud so when he did that i don't see how it's different from his taking something out of for instance a lockbox that where where something was placed if you want to treat it as bailment or deposit that was made on behalf of the of  depository or somehow otherwise put in the in the care of the properly put in the care of hans but then he took it out of the proper care of hans and put it into his own pocket all right why isn't there in every case a period of time where he was acting on behalf of the of hans and thus that it was within the within the property that's under the contract language the contract language deals with i don't have it in front of me but it's within the care of or under the custody or what it whatever it says the understand what i'm asking i understand what having me in this case doing because it seemed to me your answer to that if i understood your briefs your answer that is no the instant he took it it was ultra virus it was improper it was illegal but i don't see how that could be mean like why didn't he have plenty plenty of seconds minutes hours maybe even days before before he actually did something fraudulent with the answer is to that is it would be speculative to know what went on his mind other than the fact that it's clearly in the record below it matters in terms of hans's responsibility for the for that property what's in his mind you're the one who's saying it we have to look at what's in his mind i would suggest that you don't look at what is in his mind until he does something improper with it as long as he's doing something proper with it he's acting on behalf of the regardless of whether he in that intends in the future to steal it when he why isn't it true i'm not saying this i'm asking this why isn't it true that when he accepts that check he's acting on behalf of the bank until he does something wrong with that check because both parties freely acknowledged the it was an absolute knowing wrongful act in a multiple scheme set up with false bank accounts etc and then answering my question well your honor i with all the they all concede that they don't all concede that he wasn't acting on behalf of the bank when he took the when he took the check there is there is no record on this issue below other than the fact that he everybody concedes he had a scheme in the wrongfully took the money and he planned to do so but he that's the end of the facts and then he killed himself when they found him out understand that but i don't let me not seeing why that doesn't mean that he's acting on behalf of the bank until he does wrong with the money well michigan he could have a scheme he could plan to do it changes mind all of that could be and i'm suggesting not that we know the answer but that it doesn't make any difference and because the bank is clearly in control of that and it's not a bank whatever hans's it is a financial services financial services company is in control of that money because the agent of that agency agent is in control of it and has control of it and legally has control of it until even pursuant to some prior plan he does something illegal with it like steal it your honor and i understand i don't understand what the answer to the other michigan law  good case it would not impose a bellman liability on hands without hands being on notice of larson's wrongdoing we don't have an aided by agency rule about notice of his wrong doing i mean i'm assuming that for a while he hasn't done anything for that period that he has not done anything wrong when he's handling the money and has not yet deposited into his own account which is inherently going to happen and he's acting on behalf of hans he's an agent afterwards which is taking it or grabbing it or giving it to the wrong person when he does that then he does something even if it's pursuant to a prior scheme it's at that point that he's arguably no longer acting as an agent of hans to see what's wrong what's the problem with that argument i'm just not saying and i'm not using the word well for the very simple reason that there's just nothing below on that party stipulated from day one in the complaint that was filed against us it was a scheme of larson from day one it was never an issue if one looks at the complaint in this case from day one or the last report it was always he had a plan he stole nobody ever looked at a cast is the records show that every dime he ever got from a client was pilfered by him you know the record shows the losses totaling two point six million plus interest that's all i know it but i went there more than two point six million dollars and client funds he went vested with him i don't and there's no there's nothing in the record about that and i will ask about the richest twenty three clients that he did this to and there are others that he treated legitimately we don't it's not in the record not that not in any detail that was fully developed need any detail just is there more than twenty three i don't know so when that's in the briefs i was dealing with the specific what i would then raise if i was dealing with specific was these particular cases and and i know my time is up and i just simply want to say that it well i thank you for your time today the we did not get to the losing lose re argument but under michigan law and yes i think your argument with respect to illusory is pretty clear from the breeze thank you may just make one cent point and insured under michigan law means all insureds per the vanguard versus mckinney case it won eighty four m your honour's very quickly three points and then discussion of the you know policy there is there were more than twenty three clients that's well developed in the record even just reading the correspondence with  or the judgement from the offender proceeding would show that also the boltons correspondence demonstrates that it wasn't even all of the money for those twenty three sets of clients it was just some of the twenty some of the money that they were depositing that's why from a there cases out there interpret in contracts with regard to final judgment we ran a search where we were unable to find cases with regard to specifically that issue we found a connecticut court of appeals case that addresses that same language in the statute reaching the same conclusion we've reached at six forty three a third thirty third thirteen zero five and with regard to collateral estoppel in michigan it's seven eleven northwest second for that really say about you know the basic point that among lawyers when you hear final judgment you kind of think final judgment rule and it does have you obsessed with the trial level and and i'm an appellate lawyer rather so of course i have that reaction but lawyers are not the quintessential reasonable people as i think all of our experience probably has demonstrated we don't expect that the person who's buying an insurance policy have the level of sophistication of a lawyer in fact that's why ambiguity is insurance policies are read against the insurer because lawyers sometimes write things in a way that's confusing to the normal person what do you  point that after judgment become final in the fifteen days or whatever the state requires then a bond have people i mean it that that really pushes things to the  ethic as opposed to post appeal your honor i think in practice that's absolutely case but i think the question isn't whether what exactly happens in practice but what a reasonable person looking at final judgment would read and i believe that this that this statement is susceptible to two reasonable alternative interpretations the time for appeal has has attached or we're waiting for the case to be over with regard to that you know policy just very briefly the fact that this you know policy and whether it applies to bad acts or bad actors is in big us is best demonstrated by the fact that the district court got it wrong in looking at this policy and said well any knowledge of the fact of a wrongful act by anyone would be susceptible to this here the the issue is negligent supervision and negligent supervision claim arises for the purpose of allowing a plaintiff to circumvent by care of the the bar on vicarious liability act under their interpretation of the policy that we had negligent supervision coverage that would never cover and they wouldn't supervision claim consequently if you look at the ambiguity and then the effect of their interpretation has on the policy we believe that the district court heard as to that issue as well i seem i like to ask about that earlier argument about direct i was hypothesizing trying to figure whether it was accurate an argument you an argument that he might have made in response to that is that that proves too much there isn't much left what's in what's indirect do you have an answer to that well you know better i mean it's like yeah that's a clever argument but it is what is what is the content of indirect if it's something that indirect we're going to treat as direct as my question makes sense it does i'm struggling to come up with a specific example on my feet here with regard to two alternative situation what i will point out with regard to the direct and indirect issue here is this exception is firmly established and has in fact already been recognized by this court and in every one of those cases the question that it's the same policy language so the same direct versus indirect issue is there consequently when the fifth circuit on the ninth circuit in the various other reports have addressed this issue they have concluded that this is in fact a direct loss and i believe that's consistent with actual policy language here which is actually which is the ultimate touch tone here and that is did we hold the money and the answer is yes we did ok and with respect to the illusory i got a little confused because there was an argument then a counterargument and an argument  form of a looser doctrine it doesn't work the foremost reduction doesn't work it renders the language with regard to negligent supervision nugatory that's that's unless the channel has further questions thank you for your