NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FIRST ONE LENDING CORPORATION; 

JOHN VESCERA, 

Plaintiffs-Appellants, 

 v. 

THE HARTFORD CASUALTY 

INSURANCE COMPANY, 

Defendant-Appellee.

No. 20-55016 

D.C. No. 

8:13-cv-01500-AG-DFM 

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

Andrew J. Guilford, District Judge, Presiding

Argued and Submitted March 11, 2021

San Francisco, California

Before: McKEOWN, IKUTA, and BRESS, Circuit Judges.

First One Lending Corporation and John Vescera (collectively, “Appellants”)

appeal the district court’s grant of summary judgment to The Hartford Casualty 

Insurance Company. We review the district court’s ruling on a motion for summary 

judgment de novo. Branch Banking & Tr. Co. v. D.M.S.I., LLC, 871 F.3d 751, 759 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

MAR 19 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2 

(9th Cir. 2017). We have jurisdiction under 28 U.S.C. § 1291, and we affirm in part 

and reverse in part. 

1. The district court erred in granting summary judgment to Hartford on 

Appellants’ claim seeking $1.5 million in indemnification, the amount Appellants 

paid to settle a prior lawsuit that the Neighborhood Assistance Corporation of 

America (NACA) brought against Appellants. The district court should have instead 

granted Appellants’ cross-motion for summary judgment on this claim.

a. The parties agree that California law governs their insurance 

agreement. Under California law, Hartford must reimburse Appellants if (1) the 

policy covered the settlement, and (2) the settlement is reasonable. Isaacson v. 

California Ins. Guarantee Ass’n., 750 P.2d 297, 308 (Cal. 1988), as modified on 

denial of reh’g (Apr. 6, 1988). In two prior appeals, we held that Hartford breached 

its duty to defend Appellants in the NACA litigation. See First One Lending Corp. 

v. Hartford Cas. Ins. Co., 664 F. App’x 619, 621 (9th Cir. 2016) [First One Lending 

I]; First One Lending Corp. v. Hartford Cas. Ins. Co., 755 F. App’x 710, 710–11

(9th Cir. 2019) [First One Lending II]. Because Hartford failed to defend 

Appellants, it “has the burden of proving by a preponderance of the evidence that 

the settlement payments were allocable to claims not actually covered . . . .” 

Navigators Specialty Ins. Co. v. Moorefield Constr., Inc., 212 Cal. Rptr. 3d 231, 255 

(Ct. App. 2016) (quotations omitted); see also Pruyn v. Agric. Ins. Co., 42 Cal. Rptr. 
3 

2d 295, 302 n.15 (Ct. App. 1995), as modified (July 12, 1995), as modified on denial 

of reh’g (July 27, 1995).

Hartford does not dispute that the amount of the NACA settlement was 

reasonable. And while “California case law precludes indemnification and 

reimbursement of claims that seek the restitution of an ill-gotten gain,” Unified W. 

Grocers, Inc. v. Twin City Fire Ins. Co., 457 F.3d 1106, 1115 (9th Cir. 2006), 

Hartford has not shown that all or part of the NACA settlement was for non-covered 

restitution or otherwise excluded claims.

The NACA settlement agreement resolved NACA’s claims against 

Appellants under the Lanham Act and for harm to NACA’s reputation. These were 

covered claims under the insurance policy’s provision for “personal and advertising” 

injuries. While we are not limited to the terms of the NACA settlement agreement

in assessing whether the settlement was for covered claims, see id., Hartford has not 

created a genuine dispute of material fact in arguing that the NACA settlement 

included non-covered restitution. There is no suggestion that NACA itself received 

restitution from the settlement. And as we explained in First One Lending I, “[t]hat 

NACA’s requested monetary award was based on First One’s profits does not mean

the award would have been restitutionary in nature.” 664 F. App’x at 620–21.

Nor has Hartford shown that the NACA settlement included restitution for 

homeowners, which the insurance policy would not have covered. Homeowners 
4 

were not parties to NACA’s suit against Appellants, nor was there any “final 

adjudication” in the NACA litigation of Appellants’ alleged wrongs against 

homeowners. AXIS Reinsurance Co. v. Northrop Grumman Corp., 975 F.3d 840, 

848 (9th Cir. 2020). It is also undisputed that nothing required NACA to use its

settlement proceeds to reimburse homeowners, even as NACA may have chosen to 

do so. 

We disagree with Hartford that Vescera’s statements in his criminal 

proceedings require a different conclusion under the doctrine of judicial estoppel. 

Hartford has not explained how Vescera’s statements could estop First One, which 

was not a party to the criminal proceedings. See, e.g., Kobold v. Good Samaritan 

Reg’l Med. Ctr., 832 F.3d 1024, 1044–45 (9th Cir. 2016) (judicial estoppel did not 

apply to party who did not make prior statement). Nor has Hartford shown that 

Vescera’s statements in the criminal proceedings were “clearly inconsistent” with 

Appellants’ position here. Id. at 1045 (quotations omitted). In both instances, 

Vescera and Appellants maintained that NACA had no obligation to pay 

homeowners, even as they may have hoped that NACA would do so. 

b. Hartford’s alternate argument that California Insurance Code § 533 

precludes coverage similarly fails. Section 533 states that “[a]n insurer is not liable 

for a loss caused by the wilful act of the insured . . . .” Cal. Ins. Code § 533. We 

previously held that the claims in NACA’s complaint did not fall under § 533 
5 

because “the Lanham Act trademark infringement claim . . . did not require a 

showing of willfulness” and at least some claims in the complaint were not 

“‘inseparably intertwined’ with willful conduct.” First One Lending II, 755 F. 

App’x at 710–711 (quoting Unified W. Grocers, 457 F.3d at 1114). While this 

appeal involves the duty to indemnify, the NACA settlement included payment for 

the Lanham Act claims and Hartford has not shown that all or part of the $1.5 million 

settlement was for willful conduct, for the reasons we explained above.

c. Nor does the settlement fall within the policy’s exclusion of personal 

and advertising injury resulting from the rendering of, or the failure to render, 

financial services. We previously rejected Hartford’s argument that NACA’s 

lawsuit only included claims concerning financial services “because at least some of 

those claims bore an insufficient causal nexus with financial services.” First One 

Lending II, 755 F. App’x at 711. The NACA settlement agreement only included

covered claims and in arguing otherwise, Hartford points to the same evidence we

rejected in First One Lending II. 

2. The district court correctly granted summary judgment for Hartford on 

Appellants’ claims that Hartford denied insurance coverage in bad faith. To show a 

bad faith denial of coverage, a plaintiff must prove that “(1) benefits due under the 

policy were withheld; and (2) the reason for withholding benefits was unreasonable 

or without proper cause.” Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 
6 

2001). While we previously concluded that Hartford had to defend Appellants in 

the NACA litigation and now conclude Hartford must indemnify Appellants for the 

NACA settlement, Hartford did not act unreasonably in denying coverage, 

particularly given Vescera’s statements during his criminal trial.

3. The district court correctly granted summary judgment for Hartford on 

Appellants’ punitive damages claim. Because Appellants cannot show bad faith, 

they necessarily failed to meet the higher standard for punitive damages. See Tibbs 

v. Great Am. Ins. Co., 755 F.2d 1370, 1375 (9th Cir. 1985). 

* * *

We reverse the district court’s grant of summary judgment to Hartford on 

Appellants’ claim for $1.5 million in indemnification and direct the district court to 

enter judgment for Appellants on that claim. We affirm the district court’s grant of 

summary judgment to Hartford on Appellants’ bad faith and punitive damages 

claims. The matter is remanded for proceedings consistent with this decision. The 

parties shall bear their own costs on appeal. 

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.