the clock as the court knows there are two primary issues in this appeal the first is whether or not the insured taylor lieberman suffered a quote unquote direct loss under the terms of the policy with f i see the second is whether that loss was little unfortunately named but it gets to the question of direct loss and i think i may as well just dive directly into that issue your honor the alien trustee exception is a not so much an exception as it is a of how the policy language works so on these types of policies we have coverage for losses to property that are covered under the policy those are sometimes referred to  first party claims the policy do not provide coverage for what can only be described as liability to a third party so when we're talking about losses to covered property and we're looking at the ownership clause of the policy which is excerpts of record at page seventy five we see that cover property under the policy includes money securities and property that is either one owned by the insured to held by the insured in any capacity or three for which the insured is legally liable so when we're talking about the balian trustee exception i think what the courts have tried to do is resolve this issue with respect to property that's not owned by an what i consider to be undisclosed limitations i don't know what the limitations were do they bear in any way on their right to dispose of the money i believe the power of attorney does give the tailoring lieberman the right to dispose of the money in the account in the manner which it sees fit of course this the relationship between the parties is one of agency there is a fiduciary responsibility to class the case and they they thought oh well you know we got this instruction and we see fit to send it to limitations on the power of attorney such that even given the fraudulent nature of the instructions that were third party where they've nonetheless have had the right to send those off without liability i believe that that would be subject to their fiduciary duty to the client so if that happened then we may say that the liability in court by tailoring lieberman would be in the nature of third party but again i'm just trying to understand sir if if your client bought which it obviously did that it was receiving instructions from its clients  and it acted in compliance with those then you would like to weather the language in the power of attorney would have permitted them in good faith to do that even if they're wrong is their language i mean we're kind of blind blind here but i think it's important in terms of this trustee bailey exception but otherwise i don't see how you get around bon bons company well i think your honor i think vons is factually distinguishable there was no property in vons that was held or even you know had anything to do with the insured in that case the the transactions if she were were kind of fictitious diversion transactions but there was no property and i think that the relevant to all this was in your client's property there wasn't well it wasn't owned by my client but my client was legally liable for it and i think the distinction pressed by f i see and that was actually adopted by the district court was the issue of possession so there are cases in which for example the federal national financial case the alberts case the issue in these cases was possession the insured was possessing funds that belong to their client and in those cases the courts found that the possession of these funds made them legally liable to see that forgive me i what i'm struggling with is it's clear your client didn't have possession in the technical sense that the money was in your their client's bank account yes so then the question is how do they get access well they were either a trustee or of a leap presumably because otherwise they wouldn't have access right well that's that's another thing about the relations yes it's tantamount to being a trustee ok so it's their trustees then you examine exactly what the nature of that relationship is if you're a bank for example and you know if somebody true trust their account and you receive instruction for portably from them and you send it off and all the air marks of being real and let's just say that in structure and it said you are you are instructed to follow any written instructions you receive and if they did that would they be liable you well they like what they view liable for the property yes i think that would be liable for the law even if they followed the instructions given to them by in my example the owner of the account will if if they were following those instructions it would be no crime that the issue here is that there was a crime directed at taylor and lieberman right to that  tailoring lieberman thought that they were doing what the client wanted right yes they acted in good faith yes or no they didn't it wasn't a fraud they weren't connected in any way to the people in singapore and well you're right correct ok so one of the circumstances then they acted in good faith it wasn't their money they thought they were complying with the third part their their client's instructions under the circumstances how is that  a direct loss under the classification and bond well i think the cases instruct that covered property in this case would include the type of funds that are in this account and because they were covered property there would be a direct loss attributable to taylor and lieberman now they could also be carried the loss could also be characterized as a liability to a third party but i think in every one of these cases that if lost could be characterized as liability to a third party if it can also be characterized as a loss to cover property there is coverage just as does the record have any indication previous instructions received by taylor and lieberman from third parties that actually in keeping with their client's intentions i don't believe so i think the record reflects today this was a one off deal well there were two fraudulent e mails of the three fraudulent e mails two of which were acted upon and on the th to just curious know my client was not my client voluntarily reimbursed the client doesn't that undermine your claim though i mean i understand from a professional perspective why they would do that but if there had been a lawsuit to the terms of the power of attorney would they have been liable yes yes i believe they would have but the the issue again like i said th make clear that you know if the loss is to cover property which it was here then the fact that you may also characterize the losses as one of third party liability isn't dispositive for example infidel fidelity national financial there was actually as your honor indicated there was a lawsuit in that case fatality national financial settled the lawsuit and then sought coverage for their losses the court found that coverage was appropriate in that case given that the losses to cover property i think the distinction in this case that's that's maybe not dealt with in the case law is how do you deal with funds that are an account that belongs to a client but for which there is a fiduciary relationship by the insurer and i think the three cases probably most on point are the cedar lake case the district of oregon case the first defiance case which we submitted a supplemental authority last week and i apologize for the tardiness of that both those cases came out on the side of the insured there's also the lynch properties case which on similar facts came out in favor of the insurer i think that all those cases deal with funds that were in a cli account for which the insured exercise some sort of you know control over the account in cedar lake and in the first defiance of the court specifically noted that there was a fiduciary an agency relation didn't you are relying upon the trustee bailey exception to bonds are you not and those cases yes yes your honor so if you can't qualify for that then you lose under bonds right not a direct except for insurance policy in question up to this point when i was going through the various briefs i noticed that in their briefs they had not cited that even though we had and i think that is fundamental to this case because what they say in their brief which the court has alluded to this is a page nine of their reply of their original brief the opening brief the trial court ignored an important extension of the direct loss rule where the insured is a bailey or trustee of property because it has and then in quotes legal responsibility for the property now what i think i got the impression that the plaintiffs thought that this was some sort of exception created by the vons court and it is not and if i can quote the vaughn's court the vaughn's court said the problem with the argument is that it is founded on the interest clause of the policy insuring agreements by its plain language i'm sorry under the insuring clauses vaughn's is covered only for direct losses to bonds caused by its employees dishonesty the point is that it raised the ownership provision which is significant and council has now alluded to that the ownership provision says the covered property here is money securities were property but only money securities are property which is owned by the insured which is held by the insured and for which the insured is legally liable now owned by the insured is clearly out of the cards here it's not a question held by the insured is that capacity but that's what the bonds court was interpret and i believe that same ownership provision i'm not sure if it was exactly the same but it was a federal policy involved there that's however i think what the court was doing was giving it as counsel a set an of what we mean by health and the two cases cited by them the alberts case very simple example i go to a hotel i give my money to the clerk he puts it in the safe i come back it's gone they held the money there's coverage in that case for the hotel because it's gone the other case the that you brought the case which they cite aima securities firm i am holding bonds for my clients my employee makes off with those bonds i am responsible for that because i held those bonds i think the same thing is true in the fidelity national case in that case we have an escrow in the escrow situation i think it was chicago title took the funds and took title to the property kept it in their escrow account which was under the name of chicago title and the fiction of escrow of course is i'm giving you something you're going to hold it until the appropriate time if it disappears before that time yes you're going to be liable for that those all fit in here the trustee example i think is a good case where we talk about money that is for which you are legally liable in the trustee situation you have somebody giving you as a trustee money or property it is held in your name as trustee you have eight an obligation with respect to your filing counsel has conceded here which i did not frankly get in the briefs that he's entitled to relief his clients entitle to relief based upon the bailey slash trustee exception and only that if i understood correctly so if that's correct and he says the point is that his client would be legally liable what's the difference between the hotel example the old law school stencil authority situation and what happened here where you had somebody who was a con person that equivalent to the hotel desk and said hey that's mine i want you to give it to me once a different tween that and somebody sending an e mail saying send it to to to singapore well the the difference is of person in this case they don't actually have the account but they have the ability to direct the monies in the account and it's a fiduciary relationship is it not it may be a fiduciary relationship wants to hypothetically say that it is how do you get out from under that exception here well the exception well the the the the ownership provision requires that it be held in any capacity if you're saying it's held by taylor and lieberman and any form well but for legally when the gentleman at taylor and lieberman who has the power of attorney says to the bank please transfer that money to this account in singapore he is acting in the name because he has power of attorney he is acting in the name of the client he is not acting in the name of taylor and lieberman that's the difference have lockers and train stations in brooklyn i'm not sure and i give i give you the key for the  who is in possession key you could your you could do you could go to the locker and get i cope but you know you do not you don't have possession of a car and that seems to me is what's really happen i guess that would depend on the legal relationship i mean if i'm somebody off the street that you've given the key to well then i suppose that creates a problem but what you're saying is if if i'm somebody you and trust and you give me the key with yes here's the way i would handle that example if you give me the key in your coats in that locker and that locker is broken into and somebody takes your co am i responsible for that i don't think so i think what's going to have to happen is you're going to sue me saying that i'm responsible i'm going to defend myself saying ah ah my negligence may have been part of it but your negligence in leaving in a train station in a locker is part of it and therefore we're going to fight this out and eventually i mean win and i may lose that's the exact same thing here but if you have the kid and suppose we one of your employees takes the kid or is the fraud into giving somebody the kid who i mean it seems to me that what  strikes me about this is where is the is and sort of the artificial nature of the distinction that you're drawing about you know physical possession when you know you're talking about intangible property and pieces of paper that probably don't even exist i mean you know well these transaction go in my e mails i mean it just strikes me that the it's think you're drawing is sort of  things well be it then or not it is the exception i'm sorry it is the conditions set forth in the policy and courts of it here to that the case isn't the word of the critical word in the property held well no sure organization in any capacity and the word held is you're saying has to be physical yes i'm saying that yes and that's what that's where the case was to it was a stipulated set of facts it was a mutual cross summary judgments there was really no discovery taken in the case it's a very simple answer a question of how do you interpret this policy and i think bonds has already interpreted this policy and i think i'm for a if you will an opinion that will flesh out the meaning of this policy well it is a question of law course and the and that's the case an insurance company drafted the policy that we construe it strictly against the drafter well that's one of the rules of interpretation but it you have to find any ambiguity in there and i would say that the vons case shows that there is no ambiguity in the other cases have all held the same way if i could just discuss some of the cases i actually i have if i could just jump in here seems to me there's a whole nother reason why you're arguing you should win the case put put put the whole direct last debate aside why was this covered and this is really a question for opposing counsel your argument understand didn't know this was covered anyway right actually if you were to go back i think we would prevail in summary judgment on on all of the coverage but if it is a purely if it's a purely legal question as you describe a discovery and this is makes your pay attention here why can't we just the firm for a different reason and just say well it's not a computer violation is not forgery is not funds transfer fraud because they're not a financial institution that's what you're asking for your bri exactly this court can roll on any alternative basis and we have therefore briefed all of the coverage issues they're very simple there's three coverages none of them apply  and we think we've dealt with that and certainly this court could make that decision if i recall correctly from the record when this case was first teed up before the district court that was the issue that you were pursuing correct that more than more than the direct last issue we made the direct loss argument but yes our primary focus was on there's just no coverage right and so again as you describe the record if we were to agree with you on that issue you would get the relief that you're looking for of course ok i just wanna that we had a lot of argument about direct law which i understand that's what the district court ruled upon but originally on this case was teed up it was more of the coverage case as opposed to direct loss absolutely that's that is correct and if i could just then briefly because i'm running out of time the other cases cited by the plaintiff first defiance and cedar lake if you will look at those decisions those decisions involve similar policies but the language regarding the ownership provision is different and in cedar lake the count was actually held in the name of the insured so very different from this first defiance actually covered third monies that was in the ownership provision and i would just like this court for to a recent case texas association of school boards versus travelers which is two thousand and sixteen westlaw four to five seven seven four eight which distinguishes the first defines case and explains the difference between that case coverage for third party losses or for third party property or client property  versus actual coverage for first party losses and this case with all due respect to the other side this is the lynch case the fifth circuit has held this in that case you had a company that was had a had a felony policy one of their employees a bookkeeper stole money from the owner's mother's accounts they were responsible for handling the mother's accounts but the account was in a bank under the mother's name and the court said that is not a direct loss of the situation i don't see any difference between that and the situation here and you believe that there is no coverage under the what will call the bailey trustee exception here if you look at the coverage itself it requires somebody to break in or utilize steal if you will their their password and their code and then make that transfer in this case they did not the insured did not make the transfer the bank made the transfer and the insurer authorized that transfer they may have authorized on the basis of false pretenses but they authorized the transfer so the funds transfer fraud requires an actual kind of subterfuge somebody hijacking your account we got this e mail i thought i thought in the reply brief in this case the issue was teed up as whether or not taylor qualifies as a financial institution that with the and again i'll be asking your opposing counsel is but i thought they were saying that for them to prevail we have to view them as a financial situation and they were arguing as the reasons why they should be  your honor can i can start in on it or i don't know if you'd like me to answer please because i my financial situation has a lot of obligations and i'm not sure taylor and lieberman really would want to have all the legal obligations of financialization has for ninety thousand dollars case maybe they do but if you could just tell me why they would qualify under that policy as a financial situation well you're on a financial institution isn't defined in the policy it's not a defined term i agree with you that t lieberman probably doesn't want to be a bank that regulated yeah that's regulated by the o c c or something like that but that's not what financial institutions means in the concept context of this policy when you look at the policy it says insured organization that such institution isn't the the fraudulent e mail here even if it was directed towards taylor lieberman and you don't think that taylor lieberman is a financial institution you could also see it as the instructions going through the financial aid going through tailoring lieberman to in this we have to find taylor meant to be a financial institution well if if if that's all we said in our brief i can't recall and then that's what we said in our brief i do think that you know if you review the financial institution as being the ultimate recipient of these instructions and them flowing through us at least an argument can be made that that would work under the policy and if there's an ambiguity in reasonable interpretations on either side then that has to be construed what the argument you just made of you made that argument previously i don't recall your honor i'm just looking at your brief here and page twenty seven talks about the only disputes or whether tale even qualifies as a financial institution and whether a new ever fraudulence ructions so if we say that's it that's the only question and we disagree with you i think now you're saying well we may still prevail for this new reason i think that's what i'm saying but if i agree with you that if that's how it was teed up in our brief and you don't find us a financial institution then that would be it i would think the one thing that i did want to press and this is goes back to the issue of possession the direct loss under the policy be to property that is held in any capacity by the insured but to interpret that as requiring possession which which my opposing counsel stated is the case that would read the words legally liable entirely out of the policy legally liable has to expand upon held in any capacity otherwise there would be no point and i think the cases i again i'll cite back to the first defiance and cedar lake cases which i think stand for the proposition we're trying to make in this case and yes cedar lake was a case where the property was held in an account in the insurance name but if you read that opinion carefully the court says even in the absence of that we would find that the agency and fiduciary relationship causes to be