Court Opinion

ID: 4677676
Source: CourtListenerOpinion
Date Created: 2021-04-15 17:01:03.248406+00
Date Added: 2024-06-11T08:03:39.842273
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

ADIR INTERNATIONAL, LLC, DBA             No. 19-56320
Curacao, FKA La Curacao, a
Delaware Limited Liability                 D.C. No.
Company; RON AZARKMAN, an               2:19-cv-04352-
individual,                                 R-PLA
      Plaintiffs-Counter-Defendants-
                         Appellants,
                                           OPINION
                 v.

STARR INDEMNITY AND LIABILITY
COMPANY, a Texas Corporation,
      Defendant-Counter-Claimant-
                        Appellee.

      Appeal from the United States District Court
         for the Central District of California
       Gary Klausner, District Judge, Presiding

       Argued and Submitted December 11, 2020
                 Pasadena, California

                 Filed April 15, 2021
2       ADIR INT’L V. STARR INDEMNITY & LIABILITY

    Before: N. Randy Smith and Kenneth K. Lee, Circuit
     Judges, and Matthew F. Kennelly, * District Judge.

                      Opinion by Judge Lee

                          SUMMARY **

                   California Insurance Law

    The panel affirmed the district court’s summary
judgment in favor of Starr Indemnity and Liability Company
in a diversity insurance-coverage action.

     California’s Attorney General sued Adir International,
LLC for violating state consumer protection laws. After
initially agreeing to provide coverage, Adir’s insurer, Starr
Indemnity, said it would no longer pay for Adir’s defense
pursuant to California Insurance Code § 533.5(b), which
forbids insurer coverage in certain consumer protection
cases brought by the state.

    The panel held Cal. Ins. Code § 533.5(b) did not facially
violate the due process right of insurance holders to fund and
retain the counsel of their choice in the civil context. The
panel also rejected Adir’s statutory argument that section
533.5 applied to actions involving only monetary relief. The
panel further held that under the plain text of the statute, it

    *
     The Honorable Matthew F. Kennelly, sitting by designation from
the Northern District of Illinois.
    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
      ADIR INT’L V. STARR INDEMNITY & LIABILITY         3

applied to actions that seek injunctive relief along with
monetary relief.

    Because Starr Indemnity had no duty to defend nor to
indemnify, the panel affirmed the district court’s
determination that Starr Indemnity was entitled to
reimbursement of defense costs under the explicit language
of the insurance policy.

                       COUNSEL

Joseph S. Klapach (argued), Klapach & Klapach P.C.,
Sherman Oaks, California, for Plaintiffs-Counter-
Defendants-Appellees.

Kevin F. Kieffer (argued) and Ryan C. Tuley, Troutman
Sanders LLP, Irvine, California, for Defendant-Counter-
Claimant-Appellee.

David L. Abney, Ahwatukee Legal Office P.C., Phoenix,
Arizona, for Amicus Curiae United Policyholders.

Xavier Becerra, Attorney General; Nicklas A. Akers, Senior
Assistant Attorney General; Michele Van Gelderen,
Supervising Deputy Attorney General; Michael Reynolds
and Rachel A. Foodman, Deputy Attorneys General; Office
of the Attorney General, San Francisco, California; for
Amicus Curiae State of California.
4      ADIR INT’L V. STARR INDEMNITY & LIABILITY

                          OPINION

LEE, Circuit Judge:

    This case raises the question of whether a party has a due
process right to retain and fund counsel through insurance
proceeds.     California’s Attorney General sued Adir
International for violating state consumer protection laws.
To defend itself, Adir asked its insurance carrier to pay its
legal fees. The insurer agreed, but the Attorney General
warned that California Insurance Code § 533.5(b) forbids it
from providing coverage in certain consumer protection
cases brought by the state. The insurer reversed itself and
said it would no longer pay for Adir’s legal defense. Adir
challenged the law’s constitutionality, arguing that the state
unfairly stripped it of insurance defense coverage based on
unproven allegations in the complaint.

    We affirm the district court’s dismissal of Adir’s
challenge. California Insurance Code § 533.5(b) — which
nullifies an insurance company’s duty to defend — does not
facially violate a party’s due process right to retain counsel.
In civil cases, courts have recognized a denial of due process
only if the government actively thwarts a party from
obtaining a lawyer or prevents it from communicating with
counsel. Adir has made no such allegation. While it cannot
tap into its insurance coverage, Adir has managed to obtain
and communicate with counsel. We also reject Adir’s
statutory argument that section 533.5 applies to actions
involving only monetary relief. Under the plain text of the
statute, it applies to actions that seek injunctive relief along
with monetary relief.
        ADIR INT’L V. STARR INDEMNITY & LIABILITY                        5

                          BACKGROUND

I. Factual Background

    Adir operates a retail chain called Curacao with stores in
California, Nevada, and Arizona. In 2017, the California
Attorney General sued Adir and its Chief Executive Officer,
Ron Azarkman, 1 for unfair and misleading business tactics
that allegedly exploit Curacao’s mainly low-income,
Spanish-speaking customer base. The complaint alleged
violations of California’s Unfair Competition Law (UCL)
and False Advertising Law (FAL), and sought restitution,
civil penalties, costs of suit, and other equitable relief.
Relevant for this appeal, the complaint sought injunctive
relief permanently enjoining Adir from making any false or
misleading statements in violation of the FAL and engaging
in unfair competition in violation of the UCL.

    Meanwhile, Adir had bought an insurance policy from
Starr Indemnity. The policy provided that Starr would
defend and indemnify Adir and its executives for losses
arising from certain claims alleging wrongful acts. When
the California Attorney General sued, Adir tendered the
complaint to Starr and asked it to defend Adir against the
lawsuit. Starr acknowledged that it would defend the action
under a reservation of rights, and then became actively
involved in the defense of that action.

    This all halted in March 2019 when Starr received a
written warning from the California Attorney General’s
Office. In the letter, the Attorney General’s Office explained
that Starr violated California Insurance Code § 533.5. (Adir

    1
      Technically, both Adir and Azarkman are appellants, but this
Opinion will refer to both appellants as “Adir” for the sake of simplicity.
6      ADIR INT’L V. STARR INDEMNITY & LIABILITY

also apparently received a copy of the same letter.) Section
533.5 provides:

       (a) No policy of insurance shall provide, or
       be construed to provide, any coverage or
       indemnity for the payment of any fine,
       penalty, or restitution in any criminal action
       or proceeding or in any action or proceeding
       brought pursuant to [the UCL or FAL] by the
       Attorney General . . . notwithstanding
       whether the exclusion or exception regarding
       this type of coverage or indemnity is
       expressly stated in the policy.

       (b) No policy of insurance shall provide, or
       be construed to provide, any duty to defend,
       as defined in subdivision (c), any claim in any
       criminal action or proceeding or in any action
       or proceeding brought pursuant to [the UCL
       or FAL] in which the recovery of a fine,
       penalty, or restitution is sought by the
       Attorney General . . . notwithstanding
       whether the exclusion or exception regarding
       the duty to defend this type of claim is
       expressly stated in the policy.

       (c) For the purpose of this section, “duty to
       defend” means the insurer’s right or
       obligation to investigate, contest, defend,
       control the defense of, compromise, settle,
       negotiate the compromise or settlement of, or
       indemnify for the cost of any aspect of
       defending any claim in any criminal action or
       proceeding or in any action or proceeding
       brought pursuant to [the UCL or FAL] in
       ADIR INT’L V. STARR INDEMNITY & LIABILITY            7

       which the insured expects or contends that
       (1) the insurer is liable or is potentially liable
       to make any payment on behalf of the insured
       or (2) the insurer will provide a defense for a
       claim even though the insurer is precluded by
       law from indemnifying that claim.

       (d) Any provision in a policy of insurance
       which is in violation of subdivision (a) or (b)
       is contrary to public policy and void.

Cal. Ins. Code § 533.5.

    A few weeks after receiving the letter from the Attorney
General’s Office, Starr informed Adir that it would “stop
making any payments for defense costs” and reserved “its
rights to seek reimbursement of all amounts paid to date.”

II. Procedural Background

    After several rounds of correspondence about whether
section 533.5 applied, Adir sued Starr in state court, and
Starr removed to federal court under 28 U.S.C. § 1332. In
August 2019, Starr filed a motion for summary judgment,
while Adir cross-moved for partial summary judgment.

    In September 2019, the district court granted Starr’s
motion for summary judgment and denied Adir’s motion for
partial summary judgment. The district court did not address
Adir’s constitutional challenge to the statute’s defense
prohibition, and instead focused on the statutory
construction issue. Addressing first the duty to defend, the
district court explained that subsection (b) — the defense
provision — “clearly and explicitly establishes that there
was no potential for coverage and, consequently, no duty to
defend in the underlying action.” Specifically, the district
8      ADIR INT’L V. STARR INDEMNITY & LIABILITY

court noted that subsection (b) “unambiguously precludes an
insurer’s duty to defend not only a UCL or FAL claim for
the recovery of a fine, penalty, or restitution, but also any
claim brought pursuant to the UCL or FAL in an action in
which the Attorney General or another state prosecuting
authority seeks such fine, penalty, or restitution.”

    As for the duty to indemnify under subsection (a), the
district court held that because “there is no duty to defend,
there can be no duty to indemnify.” The district court also
noted that subsection (a) “explicitly precludes
indemnification for any fine, penalty, or restitution in any
action brought under the UCL or FAL by the Attorney
General or another state prosecuting authority.” Finally, the
district court held that Starr was entitled to reimbursement
of defense costs because the insurance policy itself explicitly
provided for a right to reimbursement. Later that month, the
district court amended the final judgment to specify that Adir
owed Starr over $2 million in restitution. This appeal
followed.

                STANDARD OF REVIEW

    We review de novo the district court’s grant of summary
judgment. Baker v. Liberty Mut. Ins. Co., 143 F.3d 1260,
1263 (9th Cir. 1998). The court “must determine, viewing
the evidence in the light most favorable to the nonmoving
party, whether there are any genuine issues of material fact
and whether the district court correctly applied the relevant
substantive law.” Id. Similarly, we review de novo a
challenge to the constitutionality of a statute. Gray v. First
Winthrop Corp., 989 F.2d 1564, 1567 (9th Cir. 1993). The
same applies to the district court’s interpretation of a state
statute. Wetzel v. Lou Ehlers Cadillac Grp. Long Term
Disability Ins. Program, 222 F.3d 643, 646 (9th Cir. 2000).
       ADIR INT’L V. STARR INDEMNITY & LIABILITY            9

                        ANALYSIS

    On appeal, Adir challenges both the indemnification and
the defense provisions of California Insurance Code § 533.5.
(As a reminder, subsection (a) is the indemnity provision,
while subsection (b) is the defense provision). Adir
challenges subsection (b) on the basis that it violates an
insurance holder’s due process right to retain and fund the
counsel of its choice. Adir also asserts statutory challenges
to both subsection (a) and subsection (b), arguing that the
district court went beyond the bounds of the statute by
interpreting both subsections to prohibit coverage of the
injunctive relief (rather than monetary relief) portion of the
underlying action. To Adir’s way of thinking, the provisions
cover only “fines, penalties, and restitution” and thus do not
apply to injunctive relief. Finally, Adir challenges the
district court’s ruling on Starr’s right to reimbursement. We
affirm the grant of summary judgment for Starr.

I. California Insurance Code § 533.5(b) does not
   facially violate the due process right of insurance
   holders to fund and retain the counsel of their choice
   in the civil context.

    Adir challenges the constitutionality of California
Insurance Code § 533.5(b), which bars insurance companies
from paying legal defense fees for certain consumer
protection lawsuits brought by the state. Adir argues that it
violates the Due Process Clauses of the Fifth and Fourteenth
Amendments because it interferes with an insured’s ability
to fund and retain the counsel of its choice. As Adir points
out, California has stacked the deck against defendants
facing these lawsuits filed by the state: Although the
Attorney General has yet to prove any of the allegations in
his lawsuit, he has invoked the power of the state to deny
insurance coverage that Adir paid for to defend itself.
10       ADIR INT’L V. STARR INDEMNITY & LIABILITY

    In the civil context, courts have limited the reach of the
Due Process Clause to cases in which the government has
actively prevented hiring or communicating with counsel.
Adir has not alleged such impingements by the state. There
is also no allegation that Adir cannot afford competent
counsel absent coverage under the policy. We thus reject
Adir’s facial constitutional challenge to California Insurance
Code § 533.5(b). 2

     A. Courts have recognized a very limited due process
        right to retain and fund counsel in the civil
        context.

    To start, this court has long held that there is “no
constitutional right to counsel in a civil case.” United States
v. 30.64 Acres of Land, More or Less, Situated in Klickitat
Cty., Washington, 795 F.2d 796, 801 (9th Cir. 1986)
(cleaned up). Unlike in criminal cases that implicate the
Sixth Amendment right to counsel, civil litigants who cannot
afford counsel are not constitutionally guaranteed the
appointment of a lawyer.

     Adir, though, correctly points out that courts have
generally acknowledged a civil litigant’s Fifth Amendment
due process right to retain and fund the counsel of their
choice. See Potashnick v. Port City Const. Co., 609 F.2d
1101, 1117 (5th Cir. 1980) (explaining that “the right to
retain counsel in civil litigation is implicit in the concept of
fifth amendment due process”). “If in any case, civil or
criminal, a state or federal court were arbitrarily to refuse to

     2
      The district court did not address Adir’s constitutional arguments,
even though Adir raised it in its briefing. We can affirm the district
court’s ruling on any ground in the record. Atel Fin. Corp. v. Quaker
Coal Co., 321 F.3d 924, 926 (9th Cir. 2003) (per curiam).
       ADIR INT’L V. STARR INDEMNITY & LIABILITY               11

hear a party by counsel, employed by and appearing for him,
it reasonably may not be doubted that such a refusal would
be a denial of a hearing, and, therefore, of due process in the
constitutional sense.” Powell v. Alabama, 287 U.S. 45, 68
(1932). Put another way, “there is no right of subsidized
access” in civil cases like there is in the Sixth Amendment
context, but if a civil litigant “hires a lawyer,” then certain
protections kick in. Guajardo-Palma v. Martinson, 622 F.3d
801, 803 (7th Cir. 2010) (cleaned up).

     So, what are the contours of a civil litigant’s due process
right to retain counsel? For one, a court “may not refuse to
accept filings” from a civil litigant’s retained lawyer. Id. In
addition, the right to retain counsel might be violated if a trial
court prohibits a civil litigant from communicating with his
or her retained counsel during breaks and recesses during a
trial. Potashnick, 609 F.2d at 1119. A civil litigant also
probably cannot be denied the opportunity to consult with
retained counsel about settlement terms. Mosley v. St. Louis
Sw. Ry., 634 F.2d 942, 946 (5th Cir. 1981). And one sister
circuit held that a trial court erred in refusing to give a civil
litigant extra time to retain new counsel after the original
counsel withdrew before trial. Anderson v. Sheppard,
856 F.2d 741, 748 (6th Cir. 1988).

    Beyond that, though, courts have construed the due
process right to retain counsel very narrowly. For example,
our court has suggested that the right to retain counsel does
not require the release of frozen assets so that a civil
defendant can hire an attorney or otherwise defend his claim.
See CFTC v. Noble Metals Int’l, Inc., 67 F.3d 766, 775 (9th
Cir. 1995). “A district court may . . . forbid or limit payment
of attorney fees out of frozen assets.” Id. (recognizing,
however, that a district court must still exercise
“discretion”).
12     ADIR INT’L V. STARR INDEMNITY & LIABILITY

   Other circuits have similarly refused to adopt an
expansive reading of the due process right to retain counsel.
The Third Circuit, for instance, has held that the right
appears to go “no further than preventing arbitrary dismissal
of a chosen attorney.” Kentucky W. Virginia Gas Co. v.
Pennsylvania Pub. Util. Comm’n, 837 F.2d 600, 618 (3d Cir.
1988) (cleaned up). Along those lines, the First Circuit has
suggested that as long as a trial court does not affirmatively
prevent a civil litigant from retaining counsel, no
constitutional violation occurs, even if the civil litigant still
cannot hire a lawyer. Gray v. New England Tel. & Tel. Co.,
792 F.2d 251, 257 (1st Cir. 1986) (no violation of due
process right where court postponed trial to give civil litigant
time to retain counsel, but litigant was unable to do so).

    In sum, the due process right to retain counsel in civil
cases appears to apply only in extreme scenarios where the
government substantially interferes with a party’s ability to
communicate with his or her lawyer or actively prevents a
party who is willing and able to obtain counsel from doing
so. This narrow scope of the due process right to retain
counsel — as opposed to the much more robust Sixth
Amendment right to counsel — finds support in the original
public meaning of the term “due process.” As the Supreme
Court long ago explained, the Fifth Amendment Due Process
Clause is rooted in the Magna Carta. Murray’s Lessee v.
Hoboken Land & Improvement Co., 59 U.S. 272, 276
(1856). See also Edward J. Eberle, Procedural Due Process:
The Original Understanding, 4 Const. Comment. 339
(1987). At the time of the Fifth Amendment’s ratification,
the framers construed “due process of law” to mean the same
thing as “the law of the land,” which was traditionally
understood to impose a “restraint on the legislative as well
        ADIR INT’L V. STARR INDEMNITY & LIABILITY                      13

as on the executive and judicial powers of the government.” 3
Murray’s Lessee, 59 U.S. at 276. See also Daniels v.
Williams, 474 U.S. 327, 331–32 (1986) (discussing the
“traditional and common-sense notion that the Due Process
Clause, like its forebear in the Magna Carta, was ‘intended
to secure the individual from the arbitrary exercise of the
powers of government.’” (cleaned up)).

     Meanwhile, the Supreme Court has characterized “the
law of the land” as “a law which hears before it condemns.”
Powell, 287 U.S. at 68 (cleaned up). That makes sense
because “[t]he fundamental requisite of due process of law
is the opportunity to be heard.” Grannis v. Ordean, 234 U.S.
385, 394 (1914). This is where the right to counsel comes
into play. “Historically and in practice, [a hearing] has
always included the right to the aid of counsel when desired
and provided by the party asserting the right.” Powell,
287 U.S. at 68 (emphasis added). 4 Thus, due process
historically did not establish a broad or unfettered right to
counsel in civil cases, but rather provided limited protection

    3
       The Magna Carta provides that: “No freeman shall be taken, or
imprisoned, or be disseized of his freehold, or liberties, or free customs,
or be outlawed, or exiled, or any otherwise destroyed; nor will we not
pass upon him, nor condemn him, but by lawful judgment of his peers or
by the law of the land.” See 1 Edward Coke, The Second Part of the
Institutes of the Laws of England 45 (1797).
     4
       Indeed, as the Potashnick court noted, the English system had long
“recognized the right to retain civil counsel,” and it was only because the
English practice was to deny representation to felony defendants that the
framers “specifically provided for a right to retain counsel in criminal
prosecutions” by way of the Sixth Amendment. Potashnick, 609 F.2d
at 1117 (cleaned up). See also Powell, 287 U.S. at 60 (“Originally, in
England, a person charged with treason or felony was denied the aid of
counsel . . . . At the same time parties in civil cases and persons accused
of misdemeanors were entitled to the full assistance of counsel.”).
14     ADIR INT’L V. STARR INDEMNITY & LIABILITY

against the government preventing a party from being heard
in court. And as a practical matter, that means due process
bars the government from actively preventing a party from
obtaining counsel or communicating with his or her lawyer
in civil cases.

     B. The limited right to retain counsel does not
        include the indirect right to fund and retain
        counsel through an insurance policy.

    With this framework in mind, the question then
becomes: Is there any way to fit Adir’s proposed right —
which really boils down to an indirect right to fund and retain
the counsel through an insurance contract — into the
existing due process right? We see no reason to enlarge the
limited due process right to retain counsel to include a
constitutional right to use insurance proceeds to pay for legal
fees. While Adir complains that California Insurance Code
§ 533.5(b) is unfair, the statute does not actively prevent
Adir from obtaining counsel or communicating with its
lawyers.

    Adir relies heavily on United States v. Stein, 541 F.3d
130 (2d Cir. 2008) and Luis v. United States, 136 S. Ct. 1083
(2016). In Stein, the Second Circuit held that prosecutors
violated the criminal defendants’ Sixth Amendment right to
counsel — which encompasses a “right to use wholly
legitimate funds to hire the attorney of his choice” — when
they pressured the defendants’ lawyers to stop paying their
legal fees. Stein, 541 F.3d at 155 (cleaned up). Similarly, in
Luis, the Supreme Court articulated that “the pretrial
restraint of legitimate, untainted assets needed to retain
counsel of choice violates the Sixth Amendment.” Luis,
136 S. Ct. at 1088.
        ADIR INT’L V. STARR INDEMNITY & LIABILITY                  15

    But Stein and Luis were both criminal cases interpreting
the Sixth Amendment right to counsel. Adir, for its part,
argues that the Sixth Amendment at least offers “guidance”
for the scope of a civil litigant’s due process right to counsel.
But “guidance” does not mean that the two rights are
equivalent. The Sixth Amendment’s explicit guarantee of
counsel in criminal cases is broader than the judicially
constructed right under the Due Process Clause. And for
good reason: While a civil lawsuit may implicate large sums
of money or restrictions on business practices, a criminal
case may lead to the loss of liberty or life. See Potashnick,
609 F.2d at 1118 (stating that “an analogy can be drawn
between the criminal and civil litigants’ respective rights to
counsel” but also emphasizing that “[a] criminal defendant
faced with a potential loss of his personal liberty has much
more at stake than a civil litigant asserting or contesting a
claim for damages, and for this reason the law affords greater
protection to the criminal defendant's rights”).

    At the end of the day, California’s law only makes it
harder, though not necessarily impossible, for a civil litigant
to retain the counsel of their choice. Adir has not alleged
that the government actively thwarted it from obtaining
counsel, or that the law precluded it from communicating
with counsel. Indeed, Adir appears to have obtained an able
and competent counsel — without the use of insurance
proceeds — for this appeal. 5 We thus rule that California

    5
       Adir stated at oral argument that it was bringing both a facial
challenge and an as-applied challenge. But the briefing appears to set
forth a facial challenge only because Adir has not alleged how the law
has impaired its ability to retain counsel. We thus need not address
whether Adir can raise an as-applied challenge.
16      ADIR INT’L V. STARR INDEMNITY & LIABILITY

Insurance Code § 533.5(b) does not impinge on a due
process right to retain counsel.

II. California Insurance Code § 533.5(b) prohibits a
    duty to defend in an underlying action even if the
    attorney general seeks injunctive relief.

    We next address Adir’s statutory challenge to California
Insurance Code § 533.5(b). Adir argues that the statutory
language bars defense coverage for actions seeking damages
only and does not extend to claims seeking injunctive relief.
It maintains that district court adopted a too-broad
interpretation in ruling that the statute prohibits Starr from
defending the injunctive relief portion of the underlying
action. We reject Adir’s strained reading of subsection (b).

     A. The text of subsection (b) forecloses a duty to
        defend for actions in which monetary relief is
        sought, even if injunctive relief is also sought.

      We start, as we must, with the statutory text. Mt. Hawley
Ins. Co. v. Lopez, 156 Cal. Rptr. 3d 771, 779 (Ct. App. 2013).
Section 533.5(b) states that there can be no “duty to defend
. . . any claim . . . in any action or proceeding brought
pursuant to [the UCL or FAL] in which the recovery of a
fine, penalty, or restitution is sought by the Attorney General
. . . .” Cal. Ins. Code § 533.5(b). To begin, the parties
appear to agree that the phrase “duty to defend” attaches to
“any claim.” The key question posed here is whether “any
claim” encompasses (1) claims that only seek monetary
relief or (2) all claims that seek monetary relief, even if it
also demands injunctive relief.

    Adir argues the former, contending that “any claim” only
encompasses claims for monetary relief alone. To arrive at
that conclusion, Adir necessarily makes two unwarranted
        ADIR INT’L V. STARR INDEMNITY & LIABILITY                   17

assumptions about the text of the statute. First, Adir assumes
that the phrase “in which the recovery of a fine, penalty, or
restitution is sought” must be read to mean “in which only
the recovery of a fine, penalty, or restitution is sought.”
Second, Adir assumes that “any claim” can be bifurcated
into a claim for monetary relief and a claim for injunctive
relief. We disagree with both assumptions.

        1. The phrase “any claim . . . in which the
           recovery of a fine, penalty, or restitution is
           sought” is not limited to claims in which only
           monetary relief is sought.

    To start, there are plenty of textual clues that the phrase
“any claim . . . in which the recovery of a fine, penalty, or
restitution is sought” does not mean the same thing as the
phrase “any claim . . . in which only the recovery of a fine,
penalty, or restitution is sought.” Most obviously, the word
“only” is absent from this section of the statute. Adir’s
interpretation would require the court to impermissibly read
that extra word into the statute. See Lamie v. U.S. Trustee,
540 U.S. 526, 538 (2004) (declining to “read an absent word
into the statute”). Along those same lines, the phrase “in
which” merely communicates that the claim seeks monetary
relief, but beyond that, “in which” does not at all imply that
only monetary relief is sought. As Starr points out, Adir’s
interpretation essentially replaces “in which the recovery of
a fine, penalty, or restitution is sought” with the more
restrictive modifier “for the recovery of a fine, penalty, or
restitution.” That reading goes against the plain text of the
statute. 6

    6
     Additionally, the phrase “in which the recovery of a fine, penalty,
or restitution is sought,” also modifies “any criminal action or
18      ADIR INT’L V. STARR INDEMNITY & LIABILITY

         2. A “claim” cannot be bifurcated into a “claim”
            for monetary relief and a “claim” for
            injunctive relief for insurance defense
            purposes.

      Adir reads “claim” to mean “relief” or “remedy” to
contrive a UCL or FAL “claim” for monetary relief as
distinct from a UCL or FAL “claim” for injunctive relief.
But Adir does not offer any authority for that reading of the
word “claim.” Nor does Adir’s reading make sense given
the statute’s inclusion of the phrase “in any action or
proceeding,” which seems to refer to the entire lawsuit as a
whole. If “action or proceeding” refers to the entire lawsuit,
then it would follow that the word “claim” refers to the
individual causes of action within the lawsuit, which, in this
case, would be the UCL claim and the FAL claim. With that
framework in mind, the statute’s reference to “duty to defend
. . . any claim” seems to most naturally refer to coverage (or
not) for particular causes of action within a larger “action or
proceeding.”

    Further supporting this conclusion is the definition of
“duty to defend,” which precludes an insurer from
“indemnify[ing] for the cost of any aspect of defending any
claim . . . in any action or proceeding brought pursuant the
[UCL or FAL].” Cal. Ins. Code § 533.5(b), (c) (emphases
added). Subsection (c) makes it clear that an insurer is

proceeding.” Mt. Hawley, 156 Cal. Rptr. 3d at 794. Thus, an
interpretation limiting a claim to monetary relief would create an absurd
result. Jarman v. HCR ManorCare, Inc., 471 P.3d 1001, 1004 (Cal.
2020) (“If the language is clear, courts must generally follow its plain
meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend.”).
       ADIR INT’L V. STARR INDEMNITY & LIABILITY             19

precluded from defending any action brought under the UCL
or FAL regardless of the relief sought.

    But even so, Adir argues for bifurcating the UCL or FAL
claim into monetary and injunctive relief components. Adir
cites Broughton v. Cigna Healthplans of California,
988 P.2d 67 (Cal. 1999) for the proposition that the
injunctive relief “claim” can be severed from the broader
UCL or FAL claim. But Broughton’s holding is much more
limited than Adir makes it out to be. In that case, the
California Supreme Court explained that it was “concerned
not with distinct arbitrable and inarbitrable claims, but with
arbitrable and inarbitrable remedies derived from the same
statutory claim.” Broughton, 21 Cal. 4th at 1088 (emphases
added). The court then concluded that the damages action
should be sent to arbitration, while the injunctive relief
action could proceed in a judicial forum, citing “the strong
policy in both federal and state law for arbitrating private
disputes, and given the inherent unsuitability of arbitration
as a means of resolving plaintiffs’ action for injunctive relief
under the CLRA.” Id.

    There is nothing in Broughton’s reasoning to suggest that
UCL and FAL claims should likewise be bifurcated by
remedy for insurability purposes. Unlike in the arbitration
context, the “strong policy” in this case arguably cuts the
other way — that is, against insurability for UCL and FAL
claims. And even if the UCL or FAL claim could somehow
be severed into the injunctive relief and the monetary relief
components to determine insurability, the text does not
support doing so here; the statute refers only to “any claim,”
rather than “the portion of any claim.”

    Further, the statutory framework does not support a
bifurcation of injunctive relief and civil penalties.
Government officials may “seek redress through the
20      ADIR INT’L V. STARR INDEMNITY & LIABILITY

bringing of civil law enforcement cases seeking equitable
relief and civil penalties” for violations of the UCL and FAL.
Mt. Hawley, 156 Cal. Rptr. 3d at 794; see also Cal. Bus. &
Professions Code § 17206. Equitable remedies (injunctive
relief, restitution, and civil penalties) are the only remedies
available under California Business and Professions Code
§§ 17200–17210. See Nationwide Biweekly Admin., Inc. v.
Superior Ct. of Alameda Cty., 462 P.3d 461, 469 (Cal. 2020);
see also In re Tobacco II Cases, 207 P.3d 20, 29 (Cal. 2009)
(“To achieve its goal of deterring unfair business practices
in an expeditious manner, the Legislature limited the scope
of the remedies available under the UCL” to “equitable”
damages such as “injunctive relief and restitution.”). “The
primary form of relief available under the UCL to protect
consumers from unfair business practices is an injunction.”
McGill v. Citibank, N.A., 9 393 P.3d 85, 89 (Cal. 2017)
(cleaned up).

    In light of the statutory framework as a whole, it would
be illogical to conclude that the legislature intended to carve
out an exception to allow for the defense for the primary
form of equitable relief (injunctions) but not the others (fine,
restitution, or civil penalty). See Los Angeles Cty. Metro.
Transportation Auth. v. Alameda Produce Mkt., LLC,
264 P.3d 579, 583 (Cal. 2011) (“We must harmonize the
statute’s various parts by considering it in the context of the
statutory framework as a whole.”).

     B. Our interpretation of subsection (b) does not
        render the duty to defend narrower than the duty
        to indemnify.

    Alternatively, Adir urges the court to interpret
subsection (b) with an eye toward subsection (a), which
prohibits “coverage or indemnity for the payment of any
fine, penalty, or restitution . . . in any action or proceeding
          ADIR INT’L V. STARR INDEMNITY & LIABILITY                    21

brought pursuant to [the UCL or FAL].” Cal. Ins. Code
§ 533.5(a). The relationship between the two provisions
matters, Adir reminds us, because it is “well settled” under
California law that “the duty to defend is broader than the
duty to indemnify.” Certain Underwriters at Lloyd's of
London v. Superior Court, 16 P.3d 94, 103 (Cal. 2001). Adir
asserts that because subsection (a) does not bar indemnity
for the payment of injunctive relief costs, then it would make
no sense to read subsection (b) to prohibit defense coverage
in the same context. That would improperly render the duty
to indemnify broader than the duty to defend.

    We disagree. The insurance policy does not cover the
costs of injunctive relief in the first place. Nor do there
appear to be any real costs 7 associated with the injunctive
relief sought here.

     The text of the policy defines “claim” to encompass a
“written demand for monetary, non-monetary, or injunctive
relief.” But “claim” is not the same thing as “coverage.” We
know this because the policy also states that the insurer shall
pay “the Loss arising from a Claim . . . .” The word “Loss”
is in turn defined to include “damages” but to exclude “any
amounts paid or incurred in complying with a judgment or
settlement for non-monetary or injunctive relief, but solely
as respects the Company.” This indicates no coverage for
the costs of injunctive relief under the policy. To be fair, this
could still leave open the possibility of coverage for any
costs that Azarkman incurs in his individual capacity in
complying with the injunctive relief in this case. But it is not
clear what costs those would be, given the injunctive relief
being requested by the Attorney General.

    7
        Any defense costs would be precluded under section 533.5(c).
22     ADIR INT’L V. STARR INDEMNITY & LIABILITY

    Even if the insurance policy did cover the costs of
complying with injunctive relief, the injunctive relief sought
does not appear to impose any monetary costs. The
California Attorney General appears to seek only (1) an
order permanently enjoining Adir and its agents “from
making any false or misleading statements in violation of”
the FAL, and (2) an order enjoining Adir and its agents from
engaging in unfair competition in violation of the UCL. Adir
does not articulate how it will incur monetary costs to
comply with an order to make truthful representations.

    Thus, it is unnecessary to resolve on appeal whether
subsection (a) prohibits Starr from indemnifying the costs of
injunctive relief in the underlying action here. The insurance
policy itself makes clear that the answer is no. We are also
not persuaded that there even are any actual monetary costs
attached to the injunctive relief sought in this case. So we
leave the interpretation of subsection (a) for another day.

    In any event, given (1) the premise in California law that
the duty to defend is always broader than the duty to
indemnify and (2) because there is no duty to defend any
criminal or civil proceeding under the UCL or FAL
(including this action), there would be no reason to suggest
a duty to indemnify in this action under subsection (a) of the
statute.

    Lastly, because indemnity for restitution and indemnity
for an injunction are both equitable relief, there is no reason
for this court to construe the statute differently for one type
of equitable relief. As the California Court of Appeal held,

       When the law requires a wrongdoer to
       disgorge money or property acquired through
       a violation of the law, to permit the
       wrongdoer to transfer the cost of
       ADIR INT’L V. STARR INDEMNITY & LIABILITY            23

       disgorgement to an insurer would eliminate
       the incentive for obeying the law. Otherwise,
       the wrongdoer would retain the proceeds of
       his illegal acts, merely shifting his loss to an
       insurer.

Bank of the W. v. Superior Ct., 833 P.2d 545 (Cal. 1992).

                          * * * *

    To sum up, the plain meaning of the statutory text of
California Insurance Code § 533.5(b) forecloses defense
coverage for any claim in an UCL or FAL action in which
the state seeks monetary relief. Here, the state seeks (among
other things) monetary relief against Adir under the UCL
and FAL. The statute thus bars defense coverage for Adir.

III.   The text of the insurance policy explicitly
       provides for a right to reimbursement of defense
       costs.

    Finally, Adir challenges the district court’s ruling that
Starr has a right to the reimbursement of the defense costs
advanced in the underlying action. Unfortunately for Adir,
the insurance contract appears to contain an express
reservation of rights: “In the event and to the extent that the
Insureds shall not be entitled to payment of such Loss under
the terms and conditions of this policy, such payments by the
Insurer shall be repaid to the Insurer by the Insureds . . . .”
And the word “Loss” in turn includes defense costs.
Because it turns out that there is no duty to defend nor to
indemnify, we affirm the district court’s determination that
Starr is entitled to reimbursement under the explicit language
of the insurance policy.
24     ADIR INT’L V. STARR INDEMNITY & LIABILITY

    Adir makes several arguments in response, but none of
them can overcome this express contractual language. For
instance, Adir relies on Buss, but that case only says that an
implied right of reimbursement must be explicitly reserved.
Buss, 939 P.2d at 776 n.13. Buss does not apply when there
is already an express in-policy right to reimbursement; the
express language controls. Adir also argues that Starr,
“acting under a reservation of rights,” is entitled to
reimbursement only if it “prophylactically financed the
defense of claims as to which it owed no duty of defense.”
But all that requires is that an insurer continue to finance a
defense while acting under a reservation of rights. See
Scottsdale Ins. Co. v. MV Transp., 115 P.3d 460, 470 (Cal.
2005) (“The insurer should be free, in an abundance of
caution, to afford the insured a defense under a reservation
of rights, with the understanding that reimbursement is
available if it is later established, as a matter of law, that no
duty to defend ever arose.”). There does not seem to be any
requirement, as Adir suggests, that the insurer do anything
extra on top of acting under a reservation of rights. Indeed,
the whole idea seems to be to incentivize insurers to be
generous with the duty to defend. Id.

    Lastly, Adir’s estoppel argument also fails. The standard
here is whether Adir reasonably relied on Starr’s conduct to
Adir’s detriment. Chase v. Blue Cross of California, 50 Cal.
Rptr. 2d 178, 188 (Ct. App. 1996). But “failure to retain
separate counsel does not by itself show any detriment.”
State Farm Fire & Cas. Co. v. Jioras, 29 Cal. Rptr. 2d 840,
845 (Ct. App. 1994). More importantly, Adir does not
explain how its reliance could have been reasonable given
the insurance policy’s express reservation of rights, not to
mention the fact that Starr signaled its doubts about coverage
from the very beginning, when it at first denied coverage in
November 2017, before agreeing to provide coverage under
       ADIR INT’L V. STARR INDEMNITY & LIABILITY          25

a reservation of rights. Thus, we affirm the district court’s
ruling that Starr is entitled to a reimbursement of defense
costs.

                     CONCLUSION

    The district court’s order granting summary judgment
for Starr is AFFIRMED.