are we're very flattered that you made the trip here you'll hear two cases today and we'll take a short break after the st one the st case will be heard as a quorum by judge winner and myself and then will break and the nd case will be h it please the court tracy re counsel for the appellate iberia bank corp we are here today in an appeal from the district court's order dismissing iberia bank's complaint for insurance coverage relating to a settlement iberia bank entered into with the department of justice now as set forth in iberia bank's complaint in this action the d o j settlement resolved allegations that iberia bank had errors in admissions underwriting mortgage loans for hud in connection with the f a chase direct interest lender program i bury bank saw insurance coverage for the d o j settlement from its insurance carriers who had issued bankers professional liability  the key issue that you have to resolve here today is whether taking the record in the light most favorable to iberia bank whether iberia bank has stated a plausible claim for insurance coverage under the language of its insurance policy and under governing louisiana law if i bury a bank offers a reasonable interpretation of that language that leads to coverage the court has to accept that on the motion to dismiss and that's because insurance policies are drafted exclusively by the insurance carriers the policy holder doesn't get any input into the to those policies so the courts have recognized that because the purposes for indemnification i'm following you but they may not in the back so you could be a little bit up and maybe slow down just a tiny bit so if i bury a bank offers a reasonable interpretation of the policy that leads to coverage the court is required to accept that interpretation on a motion to dismiss and that is because the louisiana courts recognize that the purpose of insurance policies is to provide indemnification and that they have to be read broadly in favor of coverage in light of that purpose and how a reasonable policy holder would interpret the policy so i like to take the court through the language of the insurance policies iberia banks reasonable interpretation of that language and the record that supports coverage under iberia banks reasonable interpretation so let's start with the language of the policy it's quoted verbatim on page fourteen of our opening brief but just to take you through it under that language under the ensuring language iberia bank has to show that it sustained a loss the d o j settlement by reason of a claim brought by a wrongful acts in rendering or failing to render professional services now iberia bank has alleged that hud is a client because used in relied on iberia bank's professional loan professional underwriting services and that's all that the ensuring agreement requires now normally one would think that the account holders the customers or the bank paying them to borrow money or clients it's  attenuated to think that the government that's investigating the bank is at the same time a client of the bank and i think that it's important to remember that we need to really prove the analysis in the language of the policy and the policy starts off by saying that it will pay for a claim by a rd party client that word client isn't defined in the polls when you look at the dictionary definition of client in the black's dictionary which the district court relied on it says a person or entity that employees a professional for advice to help in that professionals line of business in the term employing means to use or to make use of or to use as an agent or substitute  set up this direct indorsement lender program to delegate underwriting to the banks before the program it had its own underwriters and it would look at the credit criteria compare them and say it is it even if we accept your theory that agreement what's your best case across any field where professional liability extends to cover false d claims to the government do you have any case i know the focus we have is to the language right but can you think of a cage well certainly i mean in the st horizon case is really the only case that has addressed this issue the sure is rely on a lot of false claims act cases that deal with professional services but they're very very different terms of the allegations those cases tend to look at was whether someone lived to get money from the government in the come up in the medical services cases right and what the courts say is that's not medical services medical services or what you provide your patient if you falsely bill the government that's not a professional service and we agree with that but this claim is very very specific to the underwriting in this was the d o j nice theory it's a very creative theory frankly under the false claims act and that is that we employed the banks to write these loans we gave them our underwriting criteria we asked them to check the bar was criteria we asked them to certify that the l complied that is a certification the certification is this low in my professional opinion complies and what they said later was well we think that there is some problems in your underwriting maybe you didn't calculate that was done through contractual relation where where would i look in the record the complaint is the theory has to be that there is a contract and the consideration is the underwriting you did wrong on our theory is that you don't have to have a contract in consideration with thought because the way the policy is structured the insurance clauses a rd party client has to bring the claim for wrongful acts in professional services but it's integrated well but then at the polls even more professional services and a written contract with such policy holder or client for consideration and nearing to the benefit of the can so loan underwriting is performed for borrowers as well as a lie this is the mix and match there you can have client meaning one thing for that  nd clause but client meaning a different not that means different things because if you think about it if a client had to have consideration and a contract you wouldn't need the nd part of professional services and all it would be subsumed within the definition of client so the professional services definition just defines what it is that you're insuring so when you go out and buy a policy what is it you're insuring for medical malpractise policy clearly it's your medical services for a banking policy it's professional service and i don't think there's any dispute i think the district court and the insurers all recognize that loan underwriting is a professional service it's a service that the bank insured and we do you would concede though no consideration was given or with your consideration for the underwriting it's paid through the bars the  borrowers underwriting is done in the borrowers pay for that underwriting to the bank and it's something that they do have no consideration from the government hud did not pay for the underwriting but doesn't have to pay because if you think about it and let's take a medical malpractise claim for example it doesn't matter who pays for the professional services and unless there's something in the policy that says the client has to pay from a public policy perspective it shouldn't matter if a patient for example is injured by a doctor in performing medical cer doesn't matter who paid it could been paid by a medical provider it could have been paid out of pocket by the patient the important thing is the patient received the professional services was injured by them and assert a claim and that's that's a typical medical malpractise case claim same with this policy banks insure the professional services so what are they insuring there are insurance underwriting if a rd party uses that underwriting relies on that underwriting and says you may had wrongful acts in performing that underwriting that's a covered play that's what the policy is for it doesn't say bar it doesn't define the term clients remind me in st horizons how close that case came to saying that the regulating government unit is somehow still a client of the industry being regulated yet and i didn't mean to mislead the court st horizon did not deal with that issue and rule on it what's your best case for that proposition that the united states government in its role as a regulator ultimately in an enforcement entity he is still the client of the aid at the private sector energy and he being regulated just logically orders are is so again i don't think that issue's been decided by in court i don't think anyone has looked at it on under this language in this way so i don't think there's any case on either side of this so it looks at it that way so it's a creative interpretation of client i think is it it's in plain meaning interpretation klein i think that when you look at clients you need to look at the dictionary definition and you did say you know what is a client and do you have to have a contract certainly not to you have to have we think the clause that you read the insuring clause has to be read in full to mean the client has to be one that has a contract and pays consideration you lose i think well st of all i think that you have to decide whether or not my interpretations if you think it's unreasonable that no reasonable policy holder can believe that then i think that that we have not stated that clue but i would point out here that again the language is not just clients because we look at the present professional services definition is a policy holder or client it was supposed to be the same person you would have that language there and then the other point is the primary care has drafted policies that say client as a separate definition and says a client has to pay for professional services and that's in our brief so that's not here i don't see a requirement tight and i don't mean to interrupt judge wieners questions but i had a fact question two legal questions the fact question is there both parties refer to the fact that the insurance company was kept abreast of the settlement negotiations or those communications and exchanges in the record before  all the legal questions they cite the suit the louisiana case eliot and then you may have had time and seen the twenty a j letter that came in today and that is certainly don't fault you if you don't but if you've looked at it and had a chance to think about those services in the courts and will of course not the one lawyer got the case after the other lawyer a statute had already lapse and if there was a fee dispute over who gets paid that's not professional services that case the word client isn't even in it so it doesn't talk to this issue at all in fact it talks about professional services and some of the other cases in professional services are the type of things you would get paid for but again we get paid for underwriting and that doesn't get paid by the borrower we get paid by the bar that's absolutely right but there is an over th obviously very different than what we're talking about here interesting to me in exile specialty is that it stands for the proposition that says pretty early on you look at the facts underlying the liability not the legal claim there's no authority for the proposition that s t a claims are covered on any type of insurance in fact under insurance law it's really hornbook law you look at the conduct underlying the clane and compare it to the language of the insurance p a cases that are cited by the carriers are there are there are several deal with different conduct they deal with billing the government for something you either didn't do or that you misrepresented that's not what we're talking about here and just just so that it's clear the out what's a good allegations of the f d a claim not what's the label of the claim here the allegations are that iberia bank made errors and omissions in the underwriting process and so each loan there needs to be a certificate that says this one complies with your guidelines and what happens is after that happens it's automatically insured the lumbee perform you may never have to pay on the insurance or the blow may default and at the back end the payments automatic there's no false statement on the back and the false statements on the front and the question is if you have errors in admissions in your underwriting process for someone who relies on that process and uses use a substitute for that process is that a covered claim we submit that it is that's exactly what the policy covers it covers any two are sort of wrongful acts in professional services it covers errors admissions in underwriting loans and here we were doing that for hard in here hud made the claim and that's ron let's see we have to counsel shared time mr sterling may please the court scot sterling for illinois union church car company your honor i'd like to start with your question as to eliot because i think this case comes down to a pretty straightforward contract interpretation exercise in l a it was much like this case it was a mix and match theory as you say a lawyer was sued by another lawyer who referred a case to and but he had already allowed that case to prescribe but not following it on time the theory there was that the suit was covered under a professional services are professional liability policy because professional services in failing to file the claim on time was delivered to the client but the person bringing the claim the other lawyer was not  involved in the professional services that type of argument is the same argument that iberia baik is making here and it doesn't comport with louisiana law as to the perpetration of church contracts  one of the big principles of law here that we have to remember is that under louisiana civil code two thousand and fifty you have to read the entire policy holistically as a whole together and you can't separate its independent parts and at its core that's what i berate bank is trying to do they're trying to take that client in the ensuring clause and meet it one way then take the later professional services which is also in the the ensuring clause meet it another way and do away with the wrongful act requirement which is also in the insuring clause there mix match argument here i why did the insuring clause distinguish between clients and policyholders so a policyholder i think in the professional services definition that just submit that a policy holder is a client sometimes a bank issues insurance policies disability policies life insurance policies that are wealth transfer and financial investment tools and all that provision does is show that if a claim is brought by someone a policy holder this is that type of insurance as well it doesn't mean the client bringing the suit can be a different person than the policy holder and i think to read it that way is what not be calm compatible with louisiana law but the government you know it is delegating this underwriting services so they're looking to the banks to do some work for them and the argument is that there's a reasonable ambiguity to that right st i don't agree that i bierria bank is doing work for the government so what i bierria bank was doing they were underwriting the loans for iberia bay the government was not the mortgagee here i beare a bank was the mortgage g i bierria bank was able to obtain government mortgage insurance from the government by meeting the government's specific rules and regulations that allow it to speed up the process  you're interacted with and partnered with would you accept that characterization i would say that i bierria bankhead to follow the law to get the benefit of obtaining mortgage insurance the benefit here is to iberia bank it's not necessarily the government the government is just able to execute the laws that congress passed by providing mortgage insurance to people who they want and what happened here is that the lending program you would know the history better i thought the lending program was was a regime where the government is saving in the mets amount of effort it doesn't have to do any of this it's saying you banks do it for us well in exchange you get consideration no i think i think what it is is the government is able to insure loans right but the bank  is the one that's getting the benefit because it's their loans that are being insured and what happened here was iberia bank was providing false verifications that these loans were actually eligible for insurance when they were in fact not and therefore the government was having to pay out insurance claims on mortgages that it should have had so the government in this false claims act action and the key temp complaint and then the settlement came at came at iberia bank to  find that that they could get that money back or more likely for civil penalties if you look at the actual settlement agreement it cites the false claims act it cites th penalties section there they're exercising their and foresman authority and their authority under the false claims act and in that regard there's a slew of federal circuit court cases that say when you're looking at how to determine whether a false claims act claim is covered the relevant inquiry to look at is what is the conduct upon which liability can be based and that is the submission of false claims verifications certifications to the government it is not the conduct underlying the false claims so here it's not u nderwriting because that was iberia bank's business in the medicare cases it's not staffing and professional care standards of care because that's their business the relevant inquiry is regarding the false claims submitted to the government here that type of liability cannot trigger the insurance clause because there's no client there's no professional services and the false claims holistically that arguably the government could be a client but it's not a client with a contract paying consideration or would you say that the discourse independently held that under the ordinary meaning of client it's not a client regardless of whether there's a contract situation i think there's both a st even if you look at the word client at the very beginning of the insured clause even if the government could be considered a client you still have to look at the claim and the nature of the claim and if it meets the insured clause you still have to have a wrongful act in the remembering or failing the rinder professional services under a contract for consideration an ordering to the benefit of iberia bank the fact that they say they could get the consideration from the borrower is is when you say that's when you realize that's that's where i rely on eliot and also it's there are no allegations on behalf of any borrower there are no allegations that iberia bank did anything wrong any wrongful act in any borrower the only allegations were they were submitting false certifications to the government they didn't hurt any borrower and there's no claim they're up so to say that the professional services definition is met from their relationship with the borrower is  is i berate banks says they should be able to take discovery and develop the facts there's nothing else there to discover the proper inquiry and the only thing you can look at and to determine whether there's coverage or not is the policy complete underlying complaint and there's a settlement here they say the settlement agreements the claim if you want to look at that you can as well under either under all of this it's clear that the conduct the false claims to the government don't meet the insuring clauses requirements you mention just an oral argument to cases where false claims act conduct was cover ups you know those cases off the top your head yes i do so the gallop case was a case out of the district of massachusetts and that case is difficult to analyze because much of it is redacted i assume because the government  still had a false claims act or some other investigation and they mandated the pinion be redacted so the underlying facts there are not available but still that was not the type of policy we here have here it was dealing with a i'm sorry i'm talking about the end of what innovative case which was the one that was redacted out of the district of massachusetts but it was dealing with broad across currents definition and a c g i policy but i would submit that that case goes against the general principle that cited by all these circuit court opinions including the case in our twenty eight j letter that you have to look at the actions that liability can be held for under the false claims act not the underlying conduct so i do think there was a mistake with that case but with gallup which was a delaware trial court state court case that case was interesting because the court actually ruled that the conduct the professional services or the the false claims act claim was not professional services in the condit context of a professional services exclusion so that was a totally different policy but on the more specific issue it actually supports the insurers case here  but those two cases are grasping very difficult way to have anything and the st horizon case that case didn't at all deal with the issues here there was a one sentence statement by the district court that's when he was dealing with a different issue that says this appears to be the type of plane that's covered under the professional liability policy that's all there is that issue was never brief decided before the court and that case was ultimately decided on separate judgment regarding notice issues pressed in your brief for an argument the point i raised which is that d o j is the claimant not hud that hasn't travelers joins in the arguments made by illinois union seeking a firm and of the district court's well reasoned and well supported decision and i'm not going to say much more about that other than just very quickly that the documents the underlying documents on the record the settlement agreement that the false claims act complaint speak for themselves and the bank's characterization of those documents bears title to no difference and if you look for example at the settlement agreement and this is that record two hundred the one the st recitals in the agreement talks about the fact that what happened here is hud and this program creates the false x claims claim is that hud provided mortgage insurance to the back it's providing a benefit to the bank the bank is issuing loans as part of its business of the borrowers the bank wants a benefit from the government that they can obtain through regulations and a program and it attain those benefits much like medical providers who seek reimbursement for medicare in the horizon west case from the th circuit the medical providers certified that the quality of services comply with regulations  reimbursement and sought reimbursement but then was subject to false acts claims claims the court said that's not professional services rendered to the government you rendered professional services to the patient you made certifications about the quality of those services to the government to obtain a benefit from the government written medicare reimbursement and this is an analogous situation the government makes available mortgage insurance to bankers on loans they underwrite that comply with the regulations and we counsel for the bank has talked about the government assigned or retained the bank to perform underwriting services that's not true the government doesn't retain banks and say hey please come work for us and go on to write loans for us the banks have a commercial enterprise they underwrite loans the government has a program that enables the bank then to submit requests for coverage and if the loan defaults and the borrowers can't pay the bank can then obtain payment on the loan from the government and if you look at the settlement agreement the false claims act complain and lays that out yes underwriting was done and the allegation is that the underwriting did not match up with the certifications and claims that were made for benefits to the government so simply put as it can setting aside whether this is a client the government in this context was not the bank's client the bank sought an obtained insurance from the government the government provided  benefit to the bank and the well i'll just leave it at that that's your support of their argument did you want to bring up anything else or as one separate issue i want to bring up which the district court did which is under the traverse access policy travelers liability under the policy the liability to provide coverage does not occur until the underlying insurance is exhausted payment by the underlying insured iberia bank of responses cited a case where court said that's not necessary but in that case the language is much different the law only the last  the very language at issue here applying language from the st paul policy which is a travelers company the language is identical in the court enforce the language as written the hocks the payment by the actual underlying insure illinois union pays its limit and iberia bank comes to travelers and says illinois union has paid its limit what are you going to do travelers then we could have maybe a right dispute of traveler says no we're not going the liability here the settlement goes through child and up to traverse so there's no doubt there's a fix liability that goes above the attachment point they say even though they're going to say mark the same coverage even though they've said we don't get coverage for the same reasons that they can't get sued and there's just no case that holds that there's no case that says when you have a fixed limit and they denied coverage that the carrier shouldn't be in court and it doesn't make any sense because everybody needs when the excess says we will only pay if the primary pays the whole amount you're never going to get the excess of the excess can get go free here that we have and we don't have a settlement which we have we have a  obviously in the court will decide whether or not there is coverage but it's in their policy says that they're not liable to pay until there's a payment made but doesn't say that you can't contest coverage or that the there's not a case of controversy until that happens that's just a function of timing not you know is there a legal obligation so that's the travelers argument with respect to the other arguments i think that both counsel made very similar points and i think that sitting at counsel table sounds a lot more like a summary judgment argument than a motion to dismiss the question of what happens in the d e lender program has to be taken in our favor the allegations that we made and that the settlement had that are in the settlement agreement in the key tam case have to be drawn in favor of iberia bank it doesn't seem like the carriers want to do that they say for example the borrower didn't sue you will the policy is not limited to borrower coverage it doesn't say a borrower has to sue you it's as a client and for the reasons we discussed we believe it fits the plain meaning they also say that there is no that look what's going on here really isn't underwriting errors in mission that's the allegation that has to be traded is true and in fact the settlement agreement gives concrete examples on a long by loan basis of the errors and admissions that occurred it talks about not having documentation for a particular borrower not rectifying applications and that the discrepancies the applications that the underwriting that's you didn't do something right in underwriting that's exactly what professional services coverage covers and then the other point that i think is hammered really through the brief but also here in oregon today is this benefit n we will take a very quick break so students you can stay right there we're just going to step out and come back in about three minutes