PUBLISH

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

_________________________________

JAMES MORDEN; JENALYN 

MORDEN; WADE MORDEN, 

 Plaintiffs - Appellants/CrossAppellees,

v.

XL SPECIALTY INSURANCE, 

 Defendant - Appellee/CrossAppellant.

–––––––––––––––––––––––––––––––––––

JAMES MORDEN; JENALYN 

MORDEN; WADE MORDEN, 

 Plaintiffs - Appellees,

v.

XL SPECIALTY INSURANCE, 

 Defendant - Appellant.

No. 17-4029

No. 17-4038

_________________________________

Appeal from the United States District Court 

for the District of Utah

(D.C. No. 2:15-CV-00862-RJS)

_________________________________

Erik A. Olson, Marshall Olson & Hull, P.C., Salt Lake City, Utah, for PlaintiffsAppellants/Cross-Appellees.

FILED

United States Court of Appeals

Tenth Circuit

September 10, 2018

Elisabeth A. Shumaker

Clerk of Court
2

David M. Gische, Clyde & Co US LLP, Washington, D.C. (Jennifer Mathis, Troutman 

Sanders LLP, San Francisco, CA on the briefs) for Defendant-Appellee/Cross-Appellant.

_________________________________

Before BRISCOE, HARTZ, and PHILLIPS, Circuit Judges.

_________________________________

HARTZ, Circuit Judge.

_________________________________

This appeal concerns an assigned claim on a liability-insurance policy. Belsen 

Getty, LLC, a registered investment adviser owned by Terry Deru, obtained a claimsmade financial-services-liability policy (the Policy) from XL Specialty Insurance 

Company covering Belsen Getty and its advisers for the period from October 9, 2010, to 

October 9, 2011. Under the policy, XL had no duty to defend. During the policy period

James, Jenalyn, and Wade Morden brought claims against Belsen Getty and Deru

alleging improper and misleading investment advice, but XL denied coverage. XL 

asserted that the Mordens’ claims and claims brought by the Securities and Exchange 

Commission (SEC) before the policy period concerned “Interrelated Wrongful Acts,” as 

defined by the Policy, and that the Policy therefore required treating the two claims as 

one claim made before the policy period.

Belsen Getty and Deru then settled with the Mordens, assigning their rights

against XL; and the Mordens sued XL in the United States District Court for the District 

of Utah, raising the assigned claims that XL breached its covenant of good faith and fair 

dealing and its fiduciary duties to Belsen Getty and Deru in denying coverage under the 

Policy. XL counterclaimed that the Policy’s Interrelated Wrongful Acts provision 

precluded coverage. The Mordens moved for partial summary judgment on the 
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counterclaim and on several of XL’s affirmative defenses, and XL moved for summary 

judgment under the Interrelated Wrongful Acts provision and for failure to prove bad 

faith or breach of fiduciary duty. Pertinent to this appeal, the district court denied XL’s 

counterclaim but granted it summary judgment anyway for lack of evidence supporting 

the bad-faith and fiduciary-duty claims. The court also denied the Mordens’ motion to 

amend their complaint to add a breach-of-contract claim. 

The Mordens appeal the summary judgment against them on their bad-faith and 

fiduciary-duty claims and the denial of their motion to amend their complaint to add a 

breach-of-contract claim. XL cross-appeals the summary judgment against it on its 

counterclaim that the Policy’s Interrelated Wrongful Acts provision bars all the Mordens’ 

claims. Exercising jurisdiction under 28 U.S.C. § 1291, we reverse the denial of XL’s 

motion for summary judgment on its counterclaim. This reversal undermines the 

Mordens’ challenges to the summary judgment against them and the denial of their 

motion to amend. We therefore affirm the summary judgment against the Mordens on 

their claims and the denial of their motion to amend.

I. BACKGROUND

We first describe the misconduct of Deru and Belsen Getty alleged by the SEC 

and the Mordens and then summarize the SEC proceedings and the Mordens’ lawsuit 

against the two before turning to the relevant provisions of the Policy and the Mordens’ 

claims against XL.
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A. Alleged Misconduct by Belsen Getty 

Belsen Getty, through Deru and other advisers, counseled clients regarding their 

investments. Sometimes it recommended the clients buy certain investments. 

Sometimes, exercising discretionary trading authority granted by clients, it made

investments before getting client approval, although clients later received statements 

showing the investments and could inquire about the propriety of the investments at that 

time. The misconduct alleged against Belsen Getty and Deru involved client investments 

in four ventures from 2005 to 2009. The investments and the ventures were quite varied 

in nature. But the allegations against Belsen Getty and Deru with respect to the 

investments share common threads. Clients were promised too much, not warned of 

risks, and not informed of conflicts of interest of their advisers, who had undisclosed 

stakes in the ventures. The ventures were Nine Mile Software, Inc. (Nine Mile); Axxess

Funding Group, LLC (Axxess); ProFire Energy, Inc. (ProFire); and Vermillion Holdings,

LTD (Vermillion). We discuss in turn the allegations regarding each venture. 

1. Nine Mile

In 2006, Deru, his son Damon (who was a Belsen Getty adviser), and Andrew

Limpert (another Belsen Getty adviser) founded Nine Mile, a software company. Damon

was its CEO and Limpert was the chairman of its board of directors. In 2007 the 

company issued 1,882,000 shares of restricted stock, three quarters of which was owned 

by the three men. Later that year Nine Mile commenced an initial public offering of its 

common stock, issuing 714,288 shares at $ 0.70 a share. Nine Mile was illiquid at the 

time. Yet more than 90% of the stock was sold to Belsen Getty clients, as Deru and 
5

Limpert recommended the stock or purchased it using their discretionary trading 

authority over investor accounts. Deru ignored the preferences of risk-averse clients and

invested their money without disclosing the risk, and he promised quick profits. He did 

not disclose to investors that Belsen Getty’s discretionary trading authority over client 

accounts gave it control over the great majority of the shares after the offering. 

After the initial offering Deru manipulated the market in Nine Mile stock by using 

his discretionary trading authority over client accounts to repeatedly buy and sell Nine 

Mile stock (still without informing clients of the risks or of his conflict of interest). This 

inflated the stock price by creating phony trading volume and making it appear that there 

was considerable investor interest.

2. Axxess

In 2005, Deru, Limpert, and Damon formed Axxess, a firm that loaned money 

secured by real estate. They raised money for the firm from Belsen Getty clients in

private offerings in 2005 and 2007–08, exercising their discretionary authority over client 

accounts and recommending the investment to clients. The private placement 

memoranda for the offerings said that Deru, Limpert, and Damon would manage the 

company and vote on decisions, and noted that all of them had extensive education and 

experience qualifying them for these posts. They also represented that compensation for 

the three would come from only a management fee and a share of profits. Contrary to 

these representations, however, Deru managed the company himself without input from 

the other two men, and he used his position to his family’s financial advantage. He paid 

his high-school-educated son $300,000 in 2007–08 (about 10% of what was raised in the 
6

private offerings) to do very little work (which should have been performed by the three 

founders anyway); and he loaned himself $500,000 of company funds without informing 

the members of the LLC or obtaining the required unanimous consent. 

3. ProFire

In 2008 Deru and Limpert bought restricted stock in a public shell company

through a private sale. After a merger they renamed the company ProFire, and Limpert 

became the firm’s chief financial officer. Belsen Getty controlled most of the 

unrestricted stock in the company. In 2009, Deru sold restricted ProFire stock, including 

some of his personal shares, to Belsen Getty clients, either touting the investment as 

providing a quick return or using his discretionary authority over client accounts to make 

the purchase for the client without prior consent. He did not disclose that unrestricted 

ProFire stock was available in the open market, that the stock he sold was not freely 

tradable, or that he had a significant interest in the company.

4. Vermillion

In March 2009 Deru advised the Mordens to be prudent with their investments. 

The next month he began pitching to them an investment in the Vermillion gold-mine 

project in Mexico. He persuaded them to eventually lend Vermillion $1 million by 

emphasizing that the loan was not risky and would be quickly repaid because the mine 

operation “was ready to go.” Aplt. App., Vol. 1 at A114. He claimed Vermillion had the 

rights to an operational gold-processing plant that would be able to generate a positive 

cash flow after the first year, that the operation was run by experienced personnel, that all 

the necessary permits had been obtained, and that extensive testing on samples indicated 
7

that the mine had profitable amounts of gold in it. But after investing, the Mordens 

learned that Deru had significantly misrepresented the project’s readiness. The required 

permits had not been obtained; Vermillion did not own the mining concessions; and the 

mining plant and necessary equipment still needed to be moved to the site. Although 

Deru told the Mordens that he had invested in the mine, he failed to disclose that 

Vermillion had no rights to the mine, which was actually owned by a Mexican company 

that was 99% owned by Deru, or that the plant purchased by Vermillion was transferred 

to Deru’s company.

B. The SEC Investigation

In February 2009, before the policy period, the SEC sent letters to Nine Mile, 

Belsen Getty, Deru, Damon, and Limpert saying that the SEC staff “intends to 

recommend that the [SEC] bring . . . civil injunctive action[s] against [each of them], 

alleging that [they] violated” various securities laws. Aplt. App., Vol. 2 at A377–A86. 

Although the investigation may initially have been limited to conduct relating to Nine 

Mile, the investigation broadened. The SEC issued a formal order of investigation on 

September 24, 2009 (which was given to Deru no later than August 17, 2010) stating that 

from at least May 2007, Belsen Getty and its officers, directors, and employees may have 

made “false statements of material fact or fail[ed] to disclose material facts concerning, 

among other things, the suitability of recommended investments, conflicts of interest, 

control of the common stock of Nine Mile, and the value of client portfolios.” Aplt. 

App., Vol. 3 at A567. The formal order commenced investigative proceedings through 

which the SEC was empowered to compel testimony and production of relevant records. 
8

See 15 U.S.C § 78u(b); SEC v. Blackfoot Bituminous, Inc., 622 F.2d 512, 514 (10th Cir. 

1980). In April 2010 the SEC deposed James Morden about his investments in 

Vermillion and Axxess, as well as Nine Mile. The agency deposed Limpert later that 

month, and Damon in June. In August it deposed Deru about his involvement in all four 

ventures. 

In May 2011, after the policy period began, the SEC issued an order instituting 

administrative cease-and-desist proceedings that alleged claims against Belsen Getty, 

Deru, and Limpert relating to the four ventures. For Nine Mile, the advisers were 

accused of failing to disclose to their clients the riskiness of the public offering and their 

significant interests in the company; and Deru was also accused of manipulating the 

market in Nine Mile stock by exercising his discretionary authority over client accounts. 

For Axxess, the advisers were accused of misrepresenting how the company was 

managed and failing to disclose highly excessive payments to Deru’s son and a $500,000 

loan to Deru. For ProFire, Deru was accused of exercising his discretionary authority to 

purchase for a client $50,000 of his personal restricted stock without obtaining prior 

permission or disclosing his interest in writing. He then exaggerated the potential rate of 

return, while failing to disclose that nonrestricted stock could be acquired, probably at a 

lower price. And for Vermillion, Deru was accused of misleading the Mordens about the 

safety of the investment in the gold-mine operation—failing to disclose that Vermillion 

had no rights to the mine and was in financial distress—and failing to disclose his 

financial interest. 
9

In July 2012 the SEC entered a cease-and-desist order and imposed remedial 

sanctions on Belsen Getty and Deru arising out of their conduct with respect to Nine 

Mile, Axxess, and ProFire. 

C. The Morden Action

In October 2011, a little more than four months after the SEC issued its order 

initiating administrative proceedings, the Mordens sued Belsen Getty and Deru in state 

court. Although the Mordens’ complaint raised a number of federal-law and state-law 

claims, the alleged factual basis of the claims (which were restricted to the Mordens’ 

investments in each of the ventures) tracked the allegations in the SEC order in 

describing the misconduct with respect to the investments in Nine Mile, Axxess, ProFire, 

and Vermillion.

1 Most notable is that two paragraphs in the complaint summarizing the 

misconduct are virtually identical to language in the SEC order:

88. Belsen Getty, through Deru, recommended high-risk, 

speculative, and illiquid investments to J. Morden and J.C. Morden, 

even though the investments did not match their investment 

objectives. These investments include Nine Mile, Axxess, ProFire 

and Vermillion.

89. Belsen Getty, through Deru, purchased investments for J. 

Morden and J.C. Morden using Belsen Getty’s discretionary 

 1 E.g., compare Aplt. App., Vol. 1 at A110 ¶ 18 (Complaint: “Deru did not disclose to 

the Mordens that Belsen Getty controlled the outstanding non-restricted stock of Nine 

Mile.”), with Aplt. App., Vol. 4 at A966 ¶ 2 (SEC order: “Belsen Getty, through Deru 

and Limpert, failed to disclose that Belsen Getty exercised discretionary trading authority 

over, and thus controlled, 92% of the outstanding non-restricted Nine Mile Stock.”); 

compare Aplt. App., Vol. 1 at A111 ¶ 22 (Complaint: “Deru hired his high-school 

educated son to perform functions that were supposed to be performed by Deru and other 

management.”), with Aplt. App., Vol. 4. at A967 ¶ 10 (SEC order: “Deru hired his highschool educated son to perform many of the functions that were supposed to be 

performed by the members and for which the members received compensation . . . .”).
10

authority and did not disclose material information about such

investments, including conflicts of interest, and financial interests in 

such investments by Deru. These investments included Nine Mile, 

Axxess, ProFire and Vermillion.

Aplt. App., Vol. 1 at A122 (emphasis added). The complaint did depart from the SEC 

order, however, in linking the other three ventures to Vermillion, which was not 

mentioned in the paragraph in the order.2 

D. The Policy

After being sued by the Mordens, Belsen Getty demanded that XL cover the 

claim. XL denied coverage. It argued that the Wrongful Acts alleged in the complaint 

and the misconduct alleged by the SEC were Interrelated Wrongful Acts, which are 

deemed to be a single claim made at the time of the earlier claim. According to XL, 

because the SEC claim predated the policy period, the complaint is deemed to also 

predate the period and therefore is not covered. The pertinent provisions of the Policy are 

as follows: 

 2 The SEC order stated:

Belsen Getty, through Deru, recommended high-risk, speculative, and illiquid 

investments to Belsen Getty clients, even though the investments did not match 

the clients’ investment objectives. Belsen Getty, through Deru, completed many 

purchases for clients using Belsen Getty’s discretionary authority and did not 

disclose material conflicts of interest, namely that Deru, Limpert, and/or Deru’s 

family members had a financial interest in these investments. These high risk 

investments included Nine Mile, Access, and ProFire.

Aplt. App., Vol. 4 at A968. 
11

The Policy was a “claims-made” policy that “only applie[d] to claims first made 

during the policy period,” which ran from October 9, 2010 to October 9, 2011. Id. at 

A50. The Policy defines a claim as: 

(1) any written notice received by an Insured that any person or entity 

intends to hold any Insured responsible for a Wrongful Act;

(2) any civil proceeding in a court of law or equity, or arbitration; or

(3) any criminal proceeding which is commenced by the return of an 

indictment.

Id. at A62 (emphasis omitted).

Wrongful Act is defined as actual or alleged defamation or:

any actual or alleged act, error, omission, misstatement, misleading 

statement or breach of fiduciary duty or other duty committed by any 

Insured in the performance of, or failure to perform, Professional Services.

Id. at A68 (emphasis omitted). If a claim was first made against Belsen Getty within the 

policy period, XL insured against the claim even if the underlying Wrongful Acts took 

place outside the policy period. 

When an insured has multiple claims against it, as Belsen Getty had here, the 

Policy’s “Interrelated Wrongful Acts” provision comes into play. In that circumstance:

All claims arising from Interrelated Wrongful Acts shall be deemed to 

constitute a single Claim and shall be deemed to have been made at the 

earliest time at which the earliest such Claim is made or deemed to have 

been made pursuant to [notice provisions of the Policy].

Id. at A65 (emphasis added). Interrelated Wrongful Acts are broadly defined as:

Wrongful Acts which are based on, arising out of, directly or indirectly 

resulting from, in consequence of, or in any way involving any of the same 

or related or series of related facts, circumstances, situations, transactions or 

events. 

Id. at A62. 
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E. Mordens’ Settlement with Belsen Getty and Suit Against XL 

In 2014 Belsen Getty and its advisers settled with the Mordens. Although the 

Mordens’ complaint raised claims about their investments in all four ventures, the 

settlement mentioned only the misconduct concerning the Vermillion deal. As part of the 

settlement, the Mordens were assigned Belsen Getty’s and Deru’s rights under the Policy, 

though Belsen Getty and Deru would receive a small percentage of any recovery the 

Mordens obtained from XL. The Mordens then sued XL but summary judgment was 

entered against them. That summary judgment and the district court’s denial of XL’s 

counterclaim based on the Interrelated Wrongful Acts provision are the subjects of this 

appeal. 

II. DISCUSSION

“We review a district court’s decision to grant summary judgment de novo, 

applying the same standard as the district court [should apply].” Llewellyn v. Allstate 

Home Loans, Inc., 711 F.3d 1173, 1178 (10th Cir. 2013) (internal quotation marks 

omitted). “Summary judgment is appropriate if ‘there is no genuine dispute as to any 

material fact and the movant is entitled to judgment as a matter of law.’” Id. (quoting 

Fed. R. Civ. P. 56(a)). 

The Mordens argue on appeal that the district court improperly granted summary 

judgment on their bad-faith and fiduciary-duty claims, and also erred by denying their 

motion to amend to add a breach-of-contract claim. XL cross-appeals the denial of its 

interrelated-wrongful-acts counterclaim. Because we conclude that the Interrelated
13

Wrongful Acts provision applies here and bars coverage, we can summarily dispose of 

the other issues on appeal. 

A. The Interrelated Wrongful Acts Provision

The Mordens do not dispute that the initial SEC notices to Nine Mile, Belsen 

Getty, Deru, Limpert, and Damon constituted a claim within the meaning of the Policy. 

Nor do they dispute that those notices encompassed at least the alleged misconduct 

relating to Nine Mile. Their argument is that the Wrongful Acts underlying their claims 

about Vermillion, which purportedly are the only ones that form the basis of their 

settlement with Belsen Getty, are too distinct from the misconduct relating to the other 

ventures to constitute Interrelated Wrongful Acts. We disagree. The Vermillion-based

Wrongful Acts in the Mordens’ claims and the Nine Mile-based Wrongful Acts in the 

initial SEC notices are interrelated. We therefore need not address whether the Mordens 

construe the notion of a claim too narrowly. In particular, we need not decide (1) 

whether a settlement can successfully circumvent policy provisions precluding coverage 

by declaring that the settlement is not based on claims in the operative complaint for 

which there was not coverage or (2) whether the SEC’s formal order of investigation

constituted a claim, or at least expanded the SEC’s original claim.

The Policy’s test for whether Wrongful Acts are interrelated is quite broad: the 

acts must merely be “based on, arising out of, directly or indirectly resulting from, in 

consequence of, or in any way involving any of the same or related or series of related 

facts, circumstances, situations, transactions or events.” Aplt. App., Vol. 1 at A62. That 

test is satisfied here because the Wrongful Acts relating to Vermillion were committed by 
14

the same entity (Belsen Getty), against the same victims (the Mordens and other clients), 

using the same techniques (understating risk, overstating upside potential, and concealing 

financial interests of the advisers), during the same time frame (2005–2009). To quote 

again two allegations from the Mordens’ complaint: 

88. Belsen Getty, through Deru, recommended high-risk, speculative, 

and illiquid investments to J. Morden and J.C. Morden, even though the 

investments did not match their investment objectives. These investments 

include Nine Mile, Axxess, ProFire and Vermillion.

89. Belsen Getty, through Deru, purchased investments for J. Morden 

and J.C. Morden using Belsen Getty’s discretionary authority and did not 

disclose material information about such investments, including conflicts of 

interest, and financial interests in such investments by Deru. These 

investments included Nine Mile, Axxess, ProFire and Vermillion.

Id. at A122 (emphasis added). 

In reaching this conclusion we are guided by precedent of this court construing 

similar language. In Brecek & Young Advisors, Inc. v. Lloyds of London Syndicate 2003, 

715 F.3d 1231, 1238 (10th Cir. 2013), we relied on the portion of the policy defining 

interrelated wrongful acts to include wrongful acts that are “connected by reason of any 

common fact, circumstance, situation, transaction, casualty, event, decision or policy or 

one or more series of facts, circumstances, situations, transactions, casualties, events, 

decisions or policies.” We held that the wrongful acts alleged in three separate 

arbitration proceedings were interrelated because of several common facts: the same 

alleged culprits, roughly the same time period (“from the late 1990s to the mid 2000s”), 

and similar alleged fraud—selling “unsuitable investment products including various 

types of annuities” and churning or flipping investment accounts. Id. at 1238. The minor 
15

variations in the arbitration claims were inconsequential. See id. at 1238–39; see also 

Kilcher v. Cont’l Cas. Co., 747 F.3d 983, 990 (8th Cir. 2014) (when construing broad 

“Interrelated Wrongful Acts” provision, court states that variations in the specifics of the 

fraud perpetuated against various clients were immaterial “micro-distinguishing” factors, 

particularly in light of the victims’ allegations of similarity).

The policy provision in this case is, if anything, broader than the one in Brecek. 

The language is comprehensive, treating Wrongful Acts as interrelated if they are “in any 

way involving any of the same or related or series of related facts, circumstances, 

situations, transactions or events.” Aplt. App., Vol. 1 at A62. The policy in Brecek

required “common” facts, etc., 715 F.3d at 1238, which strikes us as more restrictive 

language than merely “related” facts, etc. In our view, the Mordens’ complaint alleges a 

practice—a scheme—of defrauding investors over a period of several years by means of 

“related” misconduct. Belsen Getty, particularly Deru, obtained investors in ventures in 

which the defrauders had undisclosed financial stakes by misrepresenting the risks and 

rewards of the ventures.

The Mordens attempt to distinguish Brecek by pointing out that our decision in 

that case was applying New York law, whereas it is undisputed that Utah law governs 

this case. True, the source of the governing law is a different jurisdiction. But Brecek 

did not turn on any idiosyncrasy of New York law. Our reliance on decisions applying 

New York law was limited to the requirements that policy language be unambiguous, that 

the insurer bear the burden to establish that a claim falls within a policy exclusion, and 

that “[t]o negate coverage, exclusions must be stated in clear and unmistakable language, 
16

subject to no other reasonable interpretation, and applicable in the particular case.” Id. at 

1237–38. The Mordens have not directed us to any Utah law to the contrary or, more 

importantly, any Utah law that would call into question the application here of our 

analysis in Brecek. What we did in that case, like what we are doing here, is no more 

than providing the natural construction of policy language—that is, what it would mean

“to a person of ordinary intelligence and understanding, in accordance with the usual and 

natural meaning of the words, and in the light of existing circumstances, including the 

purpose of the policy.” Lopez v. United Auto. Ins. Co., 274 P.3d 897, 902 (Utah 2012)

(ellipsis and internal quotation marks omitted). 

B. Remaining Claims

Because the Mordens’ claims against Belsen Getty and Deru are not covered by 

the Policy, there is no basis for any bad-faith or breach-of-fiduciary-duty claim against 

XL. See S.W. Energy Corp. v. Cont’l Ins. Co., 974 P.2d 1239, 1243 (Utah 1999)

(“[G]iven that the insurer’s denial of coverage was proper, [the insured’s] claims for bad 

faith . . . [and] breach of fiduciary duty . . . were appropriately dismissed.”). And the 

Mordens’ challenge to the district court’s refusal to permit them to raise a claim of breach 

of contract is obviously foreclosed as well. 

III. CONCLUSION

We REVERSE the district court’s order dismissing XL’s counterclaim and

REMAND with instructions to grant summary judgment on the counterclaim, and we

AFFIRM the entry of summary judgment against the Mordens.