given the horrific weather that we encountered and so we very much appreciate the court changing its schedule to accommodate us this case involves an insurer denying a clearly covered loss under the policy based on technical defenses that are insufficient in our judgment under maryland law if not resolved and if not reversed the result here is that a policy holder that paid more than three hundred eighty thousand dollars in premiums will lose all benefits so the litigation insurance that it paid for a result that is not only contrary to maryland law but plainly on just now the factual and procedural background of the case this litigation has consumed about seven years is set for that length in our briefs but a few things bear highlighting first no one at a ph i knew of the existence of the quito lawsuit until quito filed judgment enforcement papers maryland in february of two thousand and nine once that happened a b h i promptly notified st paul they engaged counsel and they pursued overturning the default judgment and you started going back to they learn of it now from their point of view they can hardly be concerned about internal management of the company and you've got served by c t c the senate down here vice president's desk he was gone and it sat there but you were served in accordance with the way it's best buy and read and received notice constitutional notice at that point through your agent from the insurance companies point of view how you set up your internal management isn't concerned that they they have a policy where they say you have to know but scientists in this part practicable no later than sixty days after the several pieces in response to your question your honor number one the rules of procedure are worded entirely differently than this insurance policy and i concede under the rules of procedure which say you have x days to answer or respond once you or your designated representative are served there's no flexibility there at all but the language of this policy the notice provision is about three paragraphs long and your honor focused on the as soon as practicable but no greater than sixty days after the expiration of the policy year but if you go on it describes in detail what the insured is required to do and that clearly requires actual knowledge not constructive notice there's nothing in the policy that says when your representative is served or within x days of receiving a summons or anything that it could have said that would inform the decision that they made all that says it is we have to give notice cut off in an absolute sense by sixty days after germination it doesn't say sixty days as soon as practicable or sixty days after it's as soon as practicable but in no case later that well the court is correct in reading the language however you don't breed language in an insurance policy in a way that is coverage defeating you do just the opposite and that's what maryland law has always required in addition to the outer deadline which was nov twenty ninth two thousand and eight is what they specifically cited in their denial letter it's what they specifically cited in the declaratory judgment that they filed and i specifically refer the court to paragraph twenty nine there which says that as do all their paragraphs but that one stick out so november twenty ninth is the date that they've relied on and told us was the reason for the denial now they didn't issue any reservation of rights letter before that and if you look at the record and their conduct they were in fact contemplating defending the case in issuing a reservation of rights letter that's what the original adjuster on the file was doing it wasn't until they did some googling and found out that this guy quito was a very very bad actor there after the original adjuster was reassigned a new adjuster put in his place and the reservation of rights letter which would've supported the defense was not issued and instead of denial that are predicated exclusively on the end the choice of counsel and in settlements and so under these circumstances the cooperative nature of the defense and the fact that we're dealing with a corporate defendant all of suit rather than an individual respectfully respond no your honor as far as i'm aware there is nothing in maryland law that would hold a corporation to a higher standard than require anything other why can't why wouldn't the district court have been able to take into account given that language which is sort of a reasonable this language the fact that you're dealing with a corporate defendant here that corporations know what service of process is all about they know to notify the insurer this is this is stuff that  that's why corporations have agents well just as it is here your honor you're you're absolutely correct that is and under the rules of procedure there is not that flexibility but when one looks at this insurance policy and again hearkening back to we must read it in a way that a reasonably prudent layperson would understand the plain meaning of the words why should there be this dramatic divergence between the way we read a policy and new and the meticulousness required by the rules of of civil procedure i mean it well it i mean they didn't incorporate by reference the rules of procedure in the state in against any insured commenced by the service of a complaint that is correct the surface of the complaint was effected in this case that is correct as well but they define the definition of a claim in the policy they defined what a claim is but they haven't defined what you must do upon receipt of a summons they haven't defined what you have to put whether as soon as practical you have to provide the insurance won't you know it if you don't know about it is it says you know about it whether you internally what it would if you set it up to have c t e give it to the head secretary of the secretarial pool and the head secretary three weeks later gone and her desk they're piling these service a process suits on her desk and you don't do anything about it you think that lets the insurance company on you were served with the complaint not only served at c t but served on the corporate officer by c t and it was on his desk and had nobody covering his desk and the policy defines the time period running respectfully disagree on the policies admonitions with regard to what must happen there after it is not the can to the rules of procedure now and the actual notice rule that you can sit on your rights and do nothing for an eight and eight month period and if that's reasonable behavior i mean it really just lets companies give notice to the insurers whenever they kind of feel like it i mean this wasn't something that was a day later a week later a month later it was eight months and nothing happened and you always have to look down at that down the road and ask what kind of thing you're setting up are we setting up an eight month  well your honor in fact the cases that we've cited from maryland involve notice that occurred much much later than what happened here years later the the question is as a result of late notice has the insurer been actually prejudiced here according to st paul we could have given notice on november twenty ninth two thousand and eight and the policy would have permitted the defense to go forward let me know if that is true let me just ask you a change in subject briefly because i want to catch you before you put down the policy as i understand it provided coverage or reimbursement or indemnity for a liability and in some cases or it depends with respect to this claim it provided just reimbursement for liability but not for the defense the cost of defense  would be borne by the insured although the insurance company might be called upon to advance the monies during the defense and they get reimbursed but let's just assume for a moment right now that the coverage of the policy is a liability and defense it turns out there is no liability and never will be isn't this now a situation that's moot that the since the policy covers you have to bear your own defense on this type  crime defense laws why is in this case moot now because that's all that's at issue it is not moot your honor the definition of loss includes defense costs this is a loss reimbursement policy not their reading i mean that they don't listen provides defense in some cases and doesn't provide defense and others but in case of provides no defense i don't disagree your honor and in fact this policy says they are required to advance the monies until it's determined that there is no coverage and i see my time is up and thank your head you can finish that your and offering its quest time it's a process where you say that you get your defense costs in this case there's an explicit check mark i think the insurer job provide the defense now the insured must retain defense counsel under the quote box that's checked for duty to defend but this is a but the policy clearly doesn't provide for your defense costs i respectfully disagree if you look at what the policy covers under this is a landing act liability policy it fits the definition for coverage it covers a loss as a result of a lending act loss is defined as not only the indemnity for the liability but the defense costs as to hire defense counsel and loss pay the choir's that they reimburse us if you didn't read that paragraph either because that paragraph says until it determines whether the claim falls under the your responsibility or there in this case it clearly falls under your responsibility because that's the nature of the claim and in that case it says you have to reimburse the insurance company for the costs your honor i respectfully disagree with that conclusion and i simply let you know but st paul has never argued that to this day so i believe that the defense costs are reimbursable i far exceeded my time and thank the duty to defend which included selecting defense counsel and running the defense and mounting a defense but then what the policy becomes in that situation your honor is a reimbursement policy so that st paul covers covered loss at the claim is covered it covers the loss resulting from that claim including defense costs that are incurred by a b h i so what's different  correct about this is that when you have the insurer has the duty to defend the insurer gets to select defense counsel it pays defense counsel directly and those costs are paid directly by the insure events costs right in the event that the claim is alternately determined not to be covered there are certain exclusions in the policy that are contingent on the outcome of the underlying case for example there's a fraud exclusion and a profit exclusion that requir adverse adjudication against the insured it's a trigger those exclusions that provision that you just read comes into play if and when there's that adverse to judy cation if the insurer has been advancing defense c even in a situation where the insured has a duty to defend being sure can seek reimbursement if the claim ultimately turns out not to be  here where is your honor was pointing out this was a the insured had the duty to defend they had to select the fence counsel they had to mount a defense but the insurer had the right to associate in the defense to monitor the defen at a critical juncture in the underlying case and instead what was originally a frivolous lawsuit became better company litigation in which a b h i then spent nearly two million dollars defending to vacate the default judgments that and its undisputed that were entered through no what is fault other than a b a tries that's the prejudice but in terms of the fact that a b a tried breached its duty defend by not retaining defense counsel not having someone appear and submit some sort of response to the underlying complaint in a timely manner or even somewhat late manner it was as your honor said is close to eight months and there's no need in to give any benefit of the doubt to anybody or to treat any insurer differently because the policy is clear when the duty arose to defend and when the duty arose to give notice there's a default judgment automatically we don't have to reach that notion here i mean reach a point here your honor and i would not say that it would defend it really be a breach of the duty to defend if it can be readily rectified and cured i mean suppose you an answer that was seven to ten days really be a breach of the due to you know it depends on the facts and circumstances of each underlying case your honor in some jurisdictions a short the lay like that may which may result the clerk's entry of a default order which is completely temporary and normally readily fixed by some petition to the court here in this jurisdiction by not responding in a timely manner a b h i was susceptible to a default judgment once that the fault judgment was put in for one hundred million dollars the plaintiffs focus completely switched dismissed the ten other defendants and focused all his energies on trying to enforce that judgment and trying to if best he can extort a multimillion dollar settlement so we're not suggesting arguing that this case presents the question of that that anytime you have a default order or the fall judgment that there's a definitive breach there was a material breach given the time delay and the absolute failure to respond so i have a very answer lies in the term materiality materiality and also the cure if for example an insured basis of the fault order and the next in files an answer within seven days of the deadline after the deadline consults with the plaintiff's lawyer and gets a consent ruling vacating the default order there's a cure and whatever cost they spent during that initial breach is on the insured properly but then the case can go on the insurers given a clean slate this is sort of like the wood fence case if the insurer once you give insure the clean slate to start no harm no foul you back exactly where you work we've taken care of the default judgment that's on us we fixed it how many commercial liability policies are written in this fashion where there's a sort of bifurcated or qualified due to this customary in commercial insurance it's customary your honor in a specific line of commercial insurance which is now an internet liability insurance so for public really start of public companies they would have claims made director and officers insurance and these big companies did not want the insurance companies guiding the defense through their own lawyers and they did they wanted to be able to select their counsel and so it started largely in what is dino insurance management liability insurance this policy is actually a composite polity salvador's these these things are at the instigation of the insured for act and obviously what is odd about this policy is that normally the insured select to defend themselves management liability claims which is one part of the policies coverage the professional liability errors and omissions which is almost like lawyers earners and missions  accountants normally the insurance alack to have the insurer defend those here the insurance elected to have the insurer defend management liability claims but elected to have to defend professional liability claims so that is in my experience somewhat unusual but i do want to make clear that it's not a joint duty to defend the duty to defend rests solely with a b a h a i think the insurance company has given rights to associate in the defense wanted to be of interest here then they well let's assume just for round numbers they spent two million dollars to get rid of the ball jug and then they spent some money  well if we can divvy it out the way you did your honor where they they spent a set a certain amount of money they came in the default judgments and then we had the clean slate and we addressed personal jurisdiction as we would have from the start of the case then we could from terms of prejudice we could bifurcate that and say look you gave the clean slate the cost of vacating the default judgments is yours we'll pick the case up from here i thought your answer would be that once they reach the condition of notice you have no further duties under the policy well therefore you wouldn't even have to make up the jurisdictional well in this case that's exactly how it works your honor because there was no way to separate out the personal jurisdiction if you could separate they gave you a bill that broke it up it seems to me that your argument i think if they don't they're not titled coverage of any obligation of coverage and then alternatively given the way the duty to defend was structured in a policy where the duty to fail and fail your right and i apologize if i'm not explaining it clearly enough but under the late notice provision it's a condition precedent to coverage they had to give notice as judge me not niemeyer pointed out as soon as event later than sixty days after the expiration of that policy year they did not comply with that provision at all and it is our position that by breaching that condition precedent to coverage there is no coverage due to the late notice and the story to the extent however that the court finds that there has to be proof of prejudice we think proof of prejudice  as judge titus so found group writing this would lead to a permanent judgment for them getting part of their cost proof of prejudice only confirms that you can rely on the condition present you can't rely on a condition i said we st paul was prejudiced by being prevented at a critical juncture of the quito action to kamen present stand alone defenses without one hundred million dollar default judgment hanging over its head  bound to lose so that the two those issues all got combined together most of us in international law firm assembly in austin had to be retained to present the arguments given the bet the company nature of  litigation at that point but further they had to defend multiple cases in multiple jurisdictions now seeking to enforce the default judgments let me as i have to go to questions go into their stoppel argument their search your stopped to assert any coverage defenses obviously there's a dispute of fact but doing as to whether or not the bank was told there was coverage or not they say we were told you say they were not they say we were also instructed not to pursue settlements so what about negotiations but the amount of the first yes what's your best argument that is spite of there being a dispute a fact that you're entitled to a summary judgment on that issue but there's no about your honor it's a fact that there was no detrimental reliance the facts are undisputed that a b h i drafted the petition to vacate and occurred over two hundred thousand dollars in fees before even giving notice to st paul then it was just forty five days later after giving notice to st paul that st paul denied coverage and contrary to what mr meza not excess of reservation rights letter was issued the first day notice was given paul they say you know we did not pursue settlement because of what you told us and so what you say what disputes that or what shows that's us on true it's not untrue they didn't pursue settlement then more importantly after that forty five day period they didn't dispute they didn't pursue settlement after the forty after that defeat summary judgment that makes a good jury argument but is that relevant to the summary judgment because they cannot prove detrimental reliance under that circumstance it they said we didn't pursue seldom no reasonable jury and the court as a as a gatekeeper on this has to do it make a determination as a matter of law when forty five day period from the date of notice that the dated the denial letter occluded with a reservation of rights ladder and no activity no efforts to super susanto ment after the denial of coverage is issued there is no the country their testimony is only that we didn't pursue settlement in this forty in this forty five day period but they're not disputing is that they never pursued settlement after the denial of coverage in there was no reason for them not to do that if they were otherwise inclined to do it before the nihil furthermore your honor it's also true is there the stock will argument is framed in a either or meaning on that second day after we gave you notice you either had to tell us it was covered or tell us it was not covered the fact is that same politician a reservation of rights and under reservation create that sort of evidence that there was an opera it speculative in that with evidence is there in the record a live there is no and that's why i'm saying who's they have the burden of showing detrimental reliance they would need to show that they had an opportunity and would have taken the opportunity to settle with mr quito in that forty five day window there is no evidence of that and in fact the evidence that is available is that mr quito demanded ten million dollars after he had the default judgments and he never came down below the ten council repeatedly sets up a straw man that st paul has always argued that the only late notice that mattered was the notice that was given after november thirtieth two thousand and eight and that this as soon as practicable argument was something new created on summary judgment reply it's simply an accurate you sort of tribute that you sort of talk about today and the policy as one time which they not reported as soon as practicable fended also has the duty to defend claims under the policy and to cooperate with plaintiff by providing timely information regarding claims defendant breached those duties by failing to defend the kwaito lawsuit and provide information to plaintiff that's st paul prior to entry of the default judgment in the quito lawsuit plaintiff is not required to prove prejudice due to untimely reporting but the fact is that plaintiff was prejudiced the fa judgments totaling almost one hundred million dollars were entered in the lawsuit long before plaintiff ever received notice of the claim that's the argument and that's the argument you would see and make they contend that if we didn't make this argument on summary judgment but we absolutely did it's on appendix pages four seventy one the four seventy seven the whole argument is premised on the notion if you had given st paul notice in a timely manner we could have avoided the default judgments we could have brought in and mediate substantive meritorious defenses seeking early dismissal of the quito action actual prejudice actual prejudice has been discussed in the number of maryland cases but a case that says increase in defense costs alone constitutes actual prejudice doesn't exist all of the cases talk about the loss of opportunity to affect the outcome of the case here there was no loss of opportunity if st paul had researched which they didn't whether there was an ability to sustain that default they would have concluded one hundred percent that there was no way that that judgment could stand one there was no personal jurisdiction to the procedural  underpinnings for that judgment were entirely contrary to the illinois rules of procedure they could have attacked it just as we did they could have spent less money and hire different counsel that was their prerogative they chose not to yes and you know if the court is inclined to go in the direction that saint paul is suggesting i would respectfully ask that this case be sent to maryland to be decided by its highest court because in my view most respectfully this would be a radical departure from the existing case law in maryland what we have here if this case is reversed i do think we're entitled to a trial on the waiver stoppel issue there is a dispute of fact on that but that is only if the court concludes that we're not entitle to judgment as a matter of law on late notice this duty to defend was created five years after their denial letter it wasn't in their denial it wasn't in anything it was in an amended complaint filed in two thousand and fourteen as a result of the fact that the sherwood brands two decision made clear that the actual prejudice requirement applied not only to claims made policies but to claims made and reported policies as well their argument prior to that had been that this is a claims made and reported policy not subject to the actual prejudice requirement under and on report at the situation from the circuit we never agreed with that position and i don't even think it's a claim made in reported policy but if the court is indulging this idea of defense costs being actual prejudice that's a fact question too as they point out themselves the extent of the prejudice i eat the increase in cost between what they would have spent and what we spent is something that has to be decided by a trier of fact as was the case in way they haven't put in any evidence that would support their claim that we're not entitle to our defense costs so this was a case in which st paul was resolute in deciding to deny coverage and the litigation was a constant search for a new reason you know the date was always november words i mean that they really are taking the position in there and just in iraq the tories pointed out they said that they were prejudiced by the default judgment not getting notice before the entry of the default judgment which is not a sin this practice but i don't know why you won't accept the language of the policy that clear language says as soon as practicable but in no event later this week and that to me is one time period defined by two aspects one as  nov twenty ninth two thousand and eight that is timely notice even if it's shown that that wasn't as soon as practicable even if it says should shown that it's not as soon as practicable and that's what their witnesses say there are thirty b six witness their claims representatives that's what they've been saying not only in their denial letter but in their first summary judgment in their complaint in their amended term plain and up to their reply brief in the underlying proceeding with that i respectfully ask that the court reverse the situation and enter judgment in favor of a ph i or in the alternative reverse and remand for a