FILED
                                                       United States Court of Appeals
                                                               Tenth Circuit

                                                               May 13, 2013
                                     PUBLISH               Elisabeth A. Shumaker
                                                               Clerk of Court
                  UNITED STATES COURT OF APPEALS

                               TENTH CIRCUIT



 BRECEK & YOUNG ADVISORS,
 INC.,

             Plaintiff - Appellee,
       v.                                            No. 12-3011
 LLOYDS OF LONDON SYNDICATE
 2003,

             Defendant - Appellant.


        APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF KANSAS
                  (D.C. NO. 2:09-CV-02516-JAR)


John R. Mann, Kennedy Childs P.C., Denver, Colorado, for Defendant-Appellant.

Michael J. Abrams (R. Kent Sellers and Kimberly K. Winter with him on the
brief), Lathrop & Gage LLP, Kansas City, Missouri, for Plaintiff-Appellee.


Before HARTZ, MURPHY, and HOLMES, Circuit Judges.


MURPHY, Circuit Judge.
I.     Introduction

       Defendant-Appellant Lloyds of London Syndicate 2003 (“Lloyds”) appeals

the district court’s denial of its summary judgment motion and subsequent grant

of summary judgment in favor of Plaintiff-Appellee Brecek & Young Advisors,

Inc. (“BYA”) in an action arising out of a professional liability insurance

contract. The district court concluded Lloyds failed to pay sufficient indemnity to

BYA for claims brought against BYA in an arbitration before the National

Association of Securities Dealers alleging BYA agents mismanaged and

unlawfully “churned” the investment accounts of its clients. The court further

concluded the claims brought in the arbitration did not relate back to earlier

claims brought outside the policy period and, therefore, rejected Lloyds’

argument coverage was precluded altogether. Additionally, the court rejected

BYA’s argument that Lloyds was equitably estopped from denying coverage due

to its course of conduct in receiving and defending the claims. Exercising

jurisdiction pursuant to 28 U.S.C. § 1291, this court reverses the judgment of the

district court.

II.    Background

       A.     Policy

       Lloyds provided to BYA a “Broker/Dealer and Registered Representatives

Professional Liability Policy” (the “Policy”) for the period spanning December 1,

2006 to December 1, 2007. The Policy is a claims made and reported policy,

                                        -2-
which affords coverage for claims first made against BYA and reported to Lloyds

during the policy period:

      The Insurer shall pay, on behalf of an Insured, Damages which the
      Insured becomes legally obligated to pay because of a Claim that is
      both made against the Insured and reported to the Insurer in writing
      during the Policy Period . . . for a Wrongful Act committed solely in
      the rendering or failing to render Professional Services for a Client
      ....

The Policy also provides that Lloyds has a “duty to defend any civil litigations or

arbitrations against the Insureds that are covered by” the Policy. It includes a

$50,000 retention for Broker/Dealer insureds which provides that BYA must “pay

Damages and Defense Expenses up to the amount of the applicable Retention . . .

for each claim made against” it. Lloyds must “pay all Damages and Defense

Expenses incurred in each Claim that exceed the Retention.” The Policy defines a

“Claim” as “a written demand received by any Insureds for Damages (including

pleadings received in a civil litigation or arbitration) for an actual or alleged

Wrongful Act.” A “Wrongful Act” is defined as “a negligent Act or omission . . .

committed by an Insured in the rendering of Professional Services.” The Policy

also includes a provision addressing “Interrelated Wrongful Acts” which

provides:

      All Claims based upon or arising out of the same Wrongful Act or
      Interrelated Wrongful Acts shall be considered a single Claim and
      each such single Claim shall be deemed to have been made on the
      earlier of the following:




                                          -3-
            A.     when the earliest Claim arising out of such Wrongful
                   Act or Interrelated Wrongful Acts was first made; or

            B.     when notice was provided to the Insurer . . . concerning
                   a Wrongful Act giving rise to such Claim.

Interrelated Wrongful Acts are defined as follows:

      Interrelated Wrongful Acts means any Wrongful Acts that are:

            1.     similar, repeated or continuous; or

            2.     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.

The exclusions section of the Policy also addresses coverage for Interrelated

Wrongful Acts (the “Prior Notice Exclusion”):

      This Policy shall not apply to and the Insurer shall pay neither
      Damages nor Defense Expenses for any Claim:

            ....

            D.     arising out of, based upon or in consequence of, directly or
                   indirectly resulting from or in any way involving:
                   ....

                   2.    a.     any Wrongful Act alleged in any Claim which has
                                been reported, or any circumstance of which
                                notice has been given, prior to the Policy Period
                                under any other policy; or

                         b.     any other Wrongful Act whenever occurring,
                                which together with a Wrongful Act which has
                                been the subject of such claim or notice, would
                                constitute Interrelated Wrongful Acts




                                        -4-
The Policy therefore contains two provisions indicating Lloyds is not responsible

for indemnifying or defending BYA for claims made during the policy period

which are interrelated with claims made prior to the policy period. 1

      B.     Arbitrations

             1.    The Wahl Arbitration

      In May 2007, Paul and Marie Wahl, residents of northeastern Ohio, served

upon BYA a Statement of Claim filed with the National Association of Securities

Dealers, Inc. Department of Arbitration. 2 The Wahls received financial advice

from B&G Financial Network, Inc., a corporation which provided financial and

estate planning services and sold securities such as variable annuities and variable

life insurance policies. BYA acted as the broker-dealer through which B&G sold

several of its investment products. The complaint alleged the Wahls were sold

unsuitable investment products and B&G financial advisors engaged in the


      1
       BYA argues Lloyds did not rely on the Prior Notice Exclusion as a basis
for denying coverage before the district court, and, therefore, cannot now rely on
the clause before this court. Schwartz v. Booker, 

, 585 (10th Cir.
2012) (noting this court will not consider arguments raised for the first time on
appeal). We need not resolve this argument because either the insuring clause or
the Prior Notice Exclusion are sufficient to establish noncoverage in the event the
claims at issue in this action relate back to claims arising prior to the policy
period. See supra Part III.A.2.
      2
        NASD was succeeded by the Financial Industry Regulatory Authority,
Inc., in 2007. NASD and NYSE Member Regulation Combine to Form the
Financial Industry Regulatory Authority - FINRA (July 30, 2007),
http://www.finra.org/Newsroom/NewsReleases/2007/p036329 (last visited April
11, 2013).

                                         -5-
frequent replacement of annuities and other investment products to generate

commissions for themselves to the detriment of the Wahls, a practice referred to

as “flipping” or “churning.” The complaint also named as individual respondents

Frederick Brandt, Kevin Farrar, Daniel Gergel, Michael Snyder, Sr., and Michael

Snyder, Jr. BYA’s liability was predicated on various theories of agency liability

and failure to supervise. The allegations in the complaint spanned the time period

from 1999 to 2005.

      Approximately two months later, in July 2007, the Wahls amended their

complaint to add an additional twenty-five claimants, also from northeastern

Ohio, who similarly alleged respondents had sold them unsuitable investment

products and had engaged in the flipping and churning of annuities. BYA’s

liability was again predicated on vicarious liability and failure-to-supervise

theories. The Amended Statement of Claim also named two additional

respondents: Bruce Baxter and Fred Balser, Jr. It justified the styling of the

complaint as a multi-party proceeding by citing NASD Rule 12312(a), which

provides:

      One or more parties may join multiple claims together in the same
      arbitration if the claims contain common questions of law or fact
      and:

             • The claims assert any right to relief jointly and severally; or

             • The claims arise out of the same transaction or
             occurrence, or series of transactions or occurrences.


                                         -6-
The Amended Statement did not assert any right to relief jointly and severally.

Rather, it asserted NASD Rule 12312(a) justified the joinder of multiple

claimants because, inter alia: all claimants were former customers of B&G

Financial, virtually all were targeted because they were at or nearing retirement

age, all were sold unsuitable investment products and frequently encouraged to

replace those products in order to generate commissions for respondents, all were

subject to the same or similar misrepresentations, the majority of the claimants

interacted with either Baxter or Balser, and all of the relevant transactions

occurred during the same six-year span. Additionally, the Amended Statement

asserted, “B&G Financial employed a business model in which all of its

representatives worked together as a team with respect to each customer—i.e., all

B&G agent/brokers shared equal responsibility for servicing each Claimant’s

investment needs and a Claimant might meet with one or all of the individual

Respondents.” The Amended Statement also alleged that joinder of multiple

claimants and claims was necessary for it to be practicable for each claimant to

seek a remedy because of the relatively small size of the individual damage

claims.

      During the course of the proceedings in the Wahl arbitration, BYA filed a

motion to sever the claims into separate arbitrations. The motion asserted the

claims did not involve common questions of law and fact and the action involved

claims from twenty different groups of investors purchasing at least thirty

                                         -7-
different types of investment products from at least fourteen separate issuers.

Claimants responded to the motion, in part, by referring back to the Amended

Statement’s allegation that B&G utilized a team approach, in which all

representatives shared joint responsibility for each customer and account. The

arbitration panel denied the motion to sever without prejudice.

             2.    The Knotts Arbitration

      On September 22, 2005, Michael P. Knotts commenced a lawsuit in the

Court of Common Pleas for Summit County, Ohio, styled Michael P. Knotts v.

B&G Financial Network, Inc., et al. The allegations which formed the basis of

Knotts’ state court lawsuit formed the basis for a complaint before the NASD

Department of Arbitration approximately fifteen months later. On December 19,

2006, NASD Dispute Resolution notified BYA that it had been named as a

respondent in an arbitration proceeding brought by Knotts, styled Michael P.

Knotts v. Brecek & Young Advisors, Inc., et al. The Knotts Arbitration named as

respondents BYA, B&G Financial Network, Daniel Gergel, and Michael Snyder,

Jr. Knotts alleged the respondents fraudulently induced him to retire early to

obtain a lump sum settlement from his 401(k) plan, sold him unsuitable

investment products, churned his accounts, and failed to properly advise him as to

the effect the September 11, 2001 terrorist attacks would have on his financial

portfolio. Knotts alleged BYA was vicariously liable for the actions of the other

respondents and that it failed to appropriately supervise the other respondents.

                                         -8-
             3.      The Colaner Arbitration

      On June 13, 2006, attorneys for Pauline and Donald Colaner served notice

on BYA of their intent to bring a NASD arbitration proceeding against it. The

action named as claimants Pauline Colaner, Donald Colaner, The Donald R.

Colaner & Pauline F. Colaner Charitable Remainder Trust, and the Donald R.

Colaner Family Trust. Named respondents included BYA, B&G Financial

Network, Michael Snyder, Kevin Farrar, Frederick Brandt, and Daniel Gergel.

The Colaners alleged the respondents engaged in the churning of variable

annuities, provided unsuitable investment advice, and made fraudulent

misrepresentations regarding their investments. They further asserted BYA was

liable for negligently failing to supervise the other respondents in their dealings

with the Colaners.

      C.     Coverage

      After BYA timely provided notice to Lloyds of the Wahl Arbitration,

Lloyds agreed to defend BYA subject to a reservation of rights. By letter dated

October 29, 2007, Lloyds notified BYA that it had tendered the Wahl Arbitration

to BYA’s prior insurance carrier, Fireman’s Fund, to determine whether it was

interrelated to the Colaner Arbitration. By email sent November 20, 2007, Lloyds

notified BYA that coverage counsel for both Lloyds and Fireman’s Fund had

determined the Colaner claims were not interrelated with the Wahl claims. In

another letter dated December 12, 2007, regarding the then-pending motion to

                                         -9-
sever in the Wahl Arbitration, Lloyds notified BYA that it considered each of the

twenty-six individual Wahl claimants to be distinct from the others and therefore

subject to a separate $50,000 retention. The letter stated Lloyds would “consider

all claims based upon or arising out of the same Wrongful Act or Interrelated

Wrongful Acts as one claim.” Lloyds, however, took the position that “the

[Wahl] claimants are entirely unrelated except for the fact that they have retained

the same attorney to bring their claims.”

      BYA responded by letter dated October 20, 2008, stating it disagreed with

Lloyds’ analysis of the Wahl claims and, under the Policy’s definition of

Interrelated Wrongful Acts, the entire Wahl Arbitration should only be subject to

one $50,000 retention because the individual claims were all causally related and

arose out of a common event. BYA settled with each of the claimants in the Wahl

Arbitration in March 2009. Lloyds prorated the defense costs among all claims

and paid indemnity on those claims which exceeded the $50,000 retention. In

total, BYA incurred and paid approximately $932,000 in defense and settlement

of the Wahl Arbitration, while Lloyds paid approximately $385,000.

      D.     District Court Proceedings

      Following the allocation of defense and settlement costs, BYA sued Lloyds

in the District of Kansas, seeking declaratory relief and damages for Lloyds’

failure to defend and indemnify it for amounts above a single $50,000 retention.

The parties filed cross-motions for summary judgment setting forth their positions

                                          -10-
on the interpretation of the Policy’s $50,000 retention clause. Specifically, the

parties disputed whether the twenty-six Wahl claims constituted interrelated

wrongful acts under the Policy. BYA argued the claims were logically

interrelated by a common factual nexus. Lloyds argued there was not a sufficient

factual nexus between the claims, emphasizing differences in the investors,

investment products, issuers, representatives, and recoveries sought in each claim.

The district court agreed with BYA’s position and rejected the position advocated

by Lloyds. It therefore granted summary judgment in favor of BYA. In a

footnote in its first motion for summary judgment, however, Lloyds suggested an

alternative position. Lloyds argued that if each of the Wahl claims were found to

have arisen from interrelated wrongful acts, then all of the Wahl claims would

relate back to claims made in the Knotts and/or Colaner Arbitrations. Because

the Knotts and Colaner Arbitrations occurred outside of the Policy Period, Lloyds

argued, no coverage for any of the claims would exist. Over BYA’s objection,

the district court granted Lloyds leave to submit supplemental briefing on its new

relation-back defense.

      Consistent with the district court’s order, Lloyds filed a second motion for

summary judgment which fully set forth the bases for its relation-back defense.

In this motion, Lloyds asserted the Policy did not cover any of the Wahl claims

and requested the district court order BYA to reimburse it for all sums paid in

indemnity and defense of the Wahl Arbitration. In response, BYA argued Lloyds

                                        -11-
was barred from raising the relation-back defense under the doctrines of waiver

and/or estoppel and that, in the alternative, the Knotts and Colaner Arbitrations

were sufficiently factually distinguishable from the Wahl Arbitration that they

could not be deemed a single claim. The district court denied Lloyds’ second

summary judgment motion. The court rejected BYA’s waiver and estoppel

arguments, but concluded the Wahl, Knotts, and Colaner Arbitrations could not be

considered interrelated wrongful acts so as to constitute a single claim under the

Policy. The district court then entered judgment for BYA in the amount of

$1,155,541.73, inclusive of prejudgment interest.

       Before this court, Lloyds no longer advances the position it took in its first

summary judgment motion that the twenty-six Wahl claims were not interrelated

and therefore were subject to separate $50,000 retentions. Instead, Lloyds

confines its argument to the position it took in its second motion for summary

judgment: because the Wahl claims relate back to the Knotts and Colaner claims,

they are wholly outside the Policy coverage.

III.   Discussion

       A.    Relation-Back Defense

             1.     Standard of Review

       This court reviews the district court’s summary judgment decision de novo,

applying the same standard as the district court. Storey v. Taylor, 

,

992 (10th Cir. 2012). Summary judgment is appropriately granted “if the movant

                                         -12-
shows that there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The court views

the evidence and draws reasonable inferences in the light most favorable to the

nonmoving party. Storey, 696 F.3d at 992. The parties agree that New York law

applies to the resolution of the disputed claims. Summary judgment is

appropriate when the words of a contract convey a definite and precise meaning

without ambiguity. Seiden Assocs., Inc. v. ANC Holdings, Inc., 

, 428

(2d Cir. 1992). Under New York law, an insurer bears the burden to establish a

claim falls within the scope of a policy exclusion. Village of Sylvan Beach v.

Travelers Indem. Co., 

, 115 (2d Cir. 1995). To negate coverage,

exclusions must be stated in clear and unmistakable language, subject to no other

reasonable interpretation, and applicable in the particular case. Id.

             2.    Sufficient Factual Nexus

      The parties agree that none of the pertinent policy provisions are

ambiguous. The parties further agree that whether the Wahl, Knotts, and/or

Colaner Arbitrations constitute interrelated wrongful acts under the Policy

depends upon whether there exists a sufficient factual nexus between the Wahl

claims and the claims asserted in the Knotts and/or Colaner Arbitrations. 3 The


      3
       The so-called “sufficient factual nexus test” has been used by other courts
applying New York law to interpret similar “interrelated wrongful acts”
provisions in other insurance contracts. See, e.g., Seneca Ins. Co. v. Kemper Ins.
                                                                       (continued...)

                                        -13-
parties disagree, however, whether the Wahl, Knotts, and Colaner Arbitrations

share a sufficient factual nexus.

      Under the express terms of the Policy, wrongful acts are interrelated if they

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.”

(emphasis added). Several common facts connect the Wahl, Knotts, and Colaner

Arbitrations. All named as respondents BYA, B&G Financial Network, Gergel,

and Snyder. Further, both the Wahl and Colaner arbitrations included claims

against broker/agents Brandt and Farrar. All of the misconduct was alleged to

have taken place during roughly the same time period—from the late 1990s to the

mid 2000s. All claims allege the respondents sold unsuitable investment products

including various types of annuities. Further, all claims involved allegations of

churning or flipping of investment accounts in order to enrich the broker/agents at

the expense of account holders. Finally, BYA’s liability was predicated on

theories of vicarious liability and failure to supervise its broker/agents in each of

the claims.

      The district court concluded these commonalities were insufficient to

establish a sufficient factual nexus:


      3
       (...continued)
Co., 133 F. App’x 770, 772 (2d Cir. 2005) (unpublished).

                                         -14-
      Certainly, there is some overlap of the allegations and respondents.
      As BYA points out, however, one of the factors the Court focused on
      in determining the twenty-six Wahl claims are interrelated wrongful
      acts is that each claimant alleged that they were damaged during the
      same claims-made policy period by the same individual broker/agents
      in the same office, under an alleged business model in which all of
      its representatives worked together as a team with respect to each
      customer—that is, a common scheme or plan underlying the alleged
      “churning” and “flipping” of the accounts. By contrast, the Knotts
      and Colaner Arbitrations do not allege that the same individual
      respondents acted as a team or that there was any common scheme or
      plan. While Lloyds attempts to minimize this distinction, the Court
      finds it significant; otherwise, any claim involving the sale of
      unsuitable securities involving fraud, misrepresentation or failure to
      supervise that arose prior to the Lloyds’ Policy Period would be
      deemed interrelated. As noted when Lloyds accepted the Wahl
      Arbitration claim, there was nothing in the other Arbitrations to
      suggest to BYA that there were potential claims beyond those
      individual claims, that is, a scheme or pattern of wrongful acts.
      While the definition of Interrelated Wrongful Acts is broad, “a court
      must strictly and narrowly construe such provisions.”

Mem. Op. & Order at 16–17 (quoting Home Ins. Co. of Ill. v. Spectrum Info.

Tech., Inc., 

, 848 (E.D.N.Y. 1996)). On appeal, BYA stresses

these rationales and further argues that determining whether a sufficient factual

nexus exists requires “subtle, qualitative judgments” as to the nature of the

related claims.

      The emphasis placed by the district court and BYA on the “team”

allegation to differentiate the Wahl Arbitration from the Knotts and Colaner

Arbitrations is misplaced. As an initial matter, BYA overstates the significance

of the allegation in the Wahl Arbitration. As the Amended Statement of Claim

makes clear, the allegation justified bringing the proceeding on behalf of multiple

                                        -15-
claimants against a group of respondents. No claims in the Wahl Arbitration

assert a right to relief jointly and severally, nor does the allegation form the basis

of a separate cause of action for any of the Wahl claimants. Indeed, nothing in

the record indicates that, had they not brought their claims earlier, the Knotts or

Colaner claimants could not have joined the Wahl Arbitration.

      The additional rationale given by the district court for its conclusion that

the Wahl claims do not relate back to the Knotts and Colaner claims is similarly

unavailing. The district court relied on Home Insurance Company for the

proposition that “interrelated wrongful acts” provisions in insurance policies must

be strictly and narrowly construed. In Home Insurance Company, however, the

policy at issue did not define the term “Interrelated Wrongful Acts.” See 930 F.

Supp. at 847–48. Here, by contrast, not only is the term defined, but the parties

agree the definition in the Policy is unambiguous. BYA has not argued the plain

language of the Policy should be disregarded for equitable or public policy

reasons. 4 There is therefore no justification for reading the term “Interrelated

Wrongful Acts” narrowly at the expense of applying its plain language.




      4
       BYA does argue that none of the allegations in the Knotts or Colaner
Arbitrations would have put it on notice of the possibility that similar allegations
would be made in the Wahl Arbitration. Assuming arguendo the validity of this
argument, in light of the Policy’s broad definition of the term “Interrelated
Wrongful Acts,” it is insufficient to refute the existence of a sufficient factual
nexus between the claims.

                                         -16-
      Because, applying the plain language of the Policy, the Wahl, Knotts, and

Colaner Arbitrations were connected by common facts, circumstances, decisions,

and policies, the district court erred in concluding the claims asserted in the Wahl

Arbitration did not arise from wrongful acts interrelated to the wrongful acts

committed outside the Lloyds policy period.

      B.     Waiver and Estoppel

             1.     Jurisdiction and Standard of Review

      Under New York law, the doctrines of waiver and estoppel may operate to

prevent an insurer from denying coverage notwithstanding the terms of the policy.

See Albert J. Schiff Assocs., Inc. v. Flack, 

, 87 (N.Y. 1980). BYA

argues that, regardless of the how the Policy is interpreted, Lloyds is precluded

from denying coverage due to the actions it took in the course of receiving the

Wahl claim. Specifically, BYA argues Lloyds has either waived its right to assert

the relation-back defense or should be estopped from denying coverage under

New York law. This court reviews the district court’s exercise of its equitable

powers for abuse of discretion. Clark v. State Farm Mut. Auto. Ins. Co., 

, 709 (10th Cir. 2005). A district court abuses its discretion when its

judgment is arbitrary, capricious, whimsical, or manifestly unreasonable. Id. at

712. This court will not disturb a district court’s exercise of its discretion absent

a definite and firm conviction the district court has made a clear error in judgment

or exceeded the bounds of permissible choice under the circumstances. Id.

                                         -17-
      As a threshold matter, Lloyds argues BYA is precluded from raising its

waiver or estoppel arguments because it did not take a cross appeal. This

argument lacks merit. “[A]n appellee is generally permitted to defend the

judgment won below on any ground supported by the record without filing a cross

appeal.” Wyoming v. U.S. Dep’t of Agric., 

, 1254 n.33 (10th Cir.

2011) (quotations omitted). BYA prevailed fully on all of its claims before the

district court. It therefore “may, without filing a cross-appeal, urge in support of

a decree any matter appearing in the record, although [its] argument may involve

an attack upon the reasoning of the lower court.” Ute Distrib. Corp. v. Sec’y of

Interior, 

, 1282 (10th Cir. 2009) (quotations omitted).

             2.     Waiver

      BYA’s waiver argument is unpersuasive. New York law distinguishes

policy defenses, such as failure of the insured to give timely notice to the insurer,

from coverage defenses, such as those defenses based on an insuring clause or

exclusions. The former may be waived, whereas the latter may not. Schiff, 417

N.E.2d at 87 (“[W]here the issue is the existence or nonexistence of coverage . . .

the doctrine of waiver is simply inapplicable.”). Here, the underlying dispute

concerns whether the Policy provides coverage for the claims raised in the Wahl

Arbitration. The doctrine of waiver is therefore inapplicable.




                                         -18-
             3.    Estoppel

      Under New York law “[w]here an insurer defends an action on behalf of an

insured, with knowledge of a defense to the coverage of the policy, it thereafter is

estopped from asserting that the policy does not cover the claim.” Hartford Ins.

Group v. Mello, 

, 434 (2d Dep’t 1981). Further, contrary to

Lloyds’ position on appeal, unlike waiver, the doctrine of estoppel is not rendered

inapplicable simply because coverage is at issue. New York law specifically

distinguishes waiver from estoppel on that very basis:

      Distinguished from waiver . . . is the intervention of principles of
      equitable estoppel, in an appropriate case, such as where an insurer,
      though in fact not obligated to provide coverage, without asserting
      policy defenses or reserving the privilege to do so, undertakes the
      defense of the case, in reliance on which the insured suffers the
      detriment of losing the right to control its own defense. In such
      circumstances, though coverage as such does not exist, the insurer
      will not be heard to say so.

Schiff, 417 N.E.2d at 87 (emphasis added). 5


      5
        Lloyds’ reliance on Sena v. Nationwide Mutual Fire Insurance Co., 

, 486–87 (2d Dep’t 1996) and Neil Plumbing & Heating
Construction Corp. v. Providence Washington Insurance Co., 

,
582 (2d Dep’t 1986), does not alter this conclusion. These authorities, each from
the Appellate Division of the New York Supreme Court, contain substantially
similar language to the effect that the doctrines of waiver and estoppel may not be
used “to create coverage where none exists under the policy as written.” Sena,
637 N.Y.S.2d at 487; Neil, 508 N.Y.S.2d at 582. As the New York Court of
Appeals has made plain in Schiff, however, the doctrines of waiver and estoppel
are distinct; the inapplicability of one does not necessarily imply the
inapplicability of the other. See Albert J. Schiff Assocs., Inc. v. Flack, 

, 87 (N.Y. 1980). Schiff further makes clear that estoppel does not
                                                                        (continued...)

                                        -19-
The district court characterized BYA’s estoppel argument as limited to the

argument that Lloyds waited too long to assert its relation-back defense to

coverage, and further concluded BYA failed to demonstrate sufficient prejudice,

in the form of detrimental reliance, to invoke the defense:

      Here, BYA contends that, despite the numerous communications
      between the parties regarding whether the various arbitrations and
      claims were interrelated and Lloyds’ acceptance of coverage under
      the Policy for the Wahl Arbitration, subject to its reservation of
      rights, Lloyds should have explained the opposite result if the Court
      denied its position that the claims were not interrelated. Although it
      did not articulate its alternative single claim/relation back defense
      until the Pretrial Order, Lloyds did reserve its right to assert certain
      policy defenses and that the claims asserted against BYA were not
      covered under the Policy. Moreover, BYA cannot demonstrate that it
      detrimentally relied on Lloyds’ conduct. Delay in disclaiming
      coverage fails to establish prejudice. BYA does not assert that the
      conduct of its defense of the Wahl Arbitration claim, in terms of its
      character and strategy, was prejudiced.

Mem. Op. & Order at 15 (citations omitted). The court therefore concluded

Lloyds was not equitably estopped from raising the relation back defense.

      Before this court, BYA points to several facts in the record pertinent to its

estoppel claim. BYA notes Lloyds was aware of the Knotts claims at least as

early as March 14, 2007, when it denied coverage for that claim on the basis it


      5
       (...continued)
operate to “create coverage where none exists,” but rather to preclude an insurer
from belatedly disclaiming coverage when its representations and actions
materially prejudice its insured. Id. To the extent Lloyds relies on Sena and Neil
as authority contrary to Schiff, this court is bound to follow the latter because it
comes from New York’s highest court. See Commonwealth Prop. Advocates, LLC
v. Mortgage Elec. Registration Sys., Inc., 

, 1204 (10th Cir. 2011).

                                        -20-
was made prior to the Policy period. Lloyds was similarly aware of the Colaner

proceedings at least as early as October 29, 2007, when it tendered the Wahl

Arbitration to Fireman’s Fund to determine whether the Wahl Arbitration was

interrelated with the Colaner Arbitration. On November 20, 2007, Lloyds notified

BYA that coverage counsel for Lloyds and coverage counsel for Fireman’s Fund

had concluded the Colaner and Wahl Arbitrations were not interrelated. Lloyds

proceeded to appoint counsel and defend the Wahl Arbitration pursuant to its

reservation of rights. While the parties continued to dispute whether the Wahl

claims would be subject to a single retention or twenty-six separate retentions,

Lloyds’ appointed counsel entered into Settlement Agreements with each of the

claimants in the Wahl Arbitration. Of the approximately $1.3 million paid in

defense and settlement of the Wahl claims, BYA paid approximately $930,000

and Lloyds paid approximately $385,000. Of the sum paid by Lloyds, at least

$70,000 constituted indemnification, as BYA’s total defense costs were

approximately $312,000. Lloyds did not assert its relation-back defense in its

answer to BYA’s complaint, nor did it assert any counterclaims or set-off for

amounts it had already paid in connection with the Wahl Arbitration. In the

pretrial order completed after discovery, Lloyds took the position that the Wahl

claims were not covered by the Policy, but did not assert any claim for damages.

Lloyds’ first claim for damages was not made until its second motion for

summary judgment, filed on April 27, 2011, more than three years after it notified

                                        -21-
BYA that the Wahl and Colaner claims were not interrelated. Thus, BYA argues,

for three years Lloyds consistently acted as though the Wahl claims were covered

under the Policy, subject only to a dispute as to the amount of applicable

retentions. Lloyds reversed its position and attempted to disclaim coverage

altogether eighteen months after paying the Wahl settlement, relying on facts and

claims of which it had been aware since 2007.

      Against this factual backdrop, the conclusion of the district court that BYA

could not make an adequate showing of prejudice amounts to an abuse of

discretion. BYA has identified facts in the record which support the conclusion

that Lloyds controlled the defense of the Wahl Arbitration throughout its entirety

to its termination and contributed to the settlement. Such a showing is more than

adequate to establish prejudice under New York law. “Prejudice is established

only where the insurer’s control of the defense is such that the character and

strategy of the lawsuit can no longer be altered.” Federated Dep’t Stores, Inc. v.

Twin City Fire Ins. Co., 

, 68 (1st Dep’t 2006); see also Nat’l

Cas. Co. v. State Ins. Fund, 

, 668 (1st Dep’t 1996) (“National

defended John’s in the underlying action and paid $300,000 to settle the claim on

John’s behalf. Thus, National covered this claim on John’s behalf and is now

equitably estopped from denying coverage.”) 6 Here, it is axiomatic that the


      6
          There is conflicting authority as to whether prejudice is ever presumed for
                                                                          (continued...)

                                           -22-
character and strategy of the Wahl Arbitration can no longer be altered because it

was settled. Courts have found prejudice for purposes of estoppel in

circumstances in which the insurer’s control of the insured’s defense has been

significantly less extensive. See, e.g., Bluestein & Sander v. Chicago Ins. Co.,

, 123 (2d Cir. 2002) (concluding prejudice established when insurer

controlled defense “almost to the close of discovery”); Boston Old Colony Ins.

Co. v. Lumbermens Mut. Cas. Co., 

, 1248 (2d Cir. 1989) (“Even if

Lumbermans had disclaimed liability ten months earlier, on the morning of trial,

the disclaimer would still have been prejudicial . . . because the Bodians had

already taken actions that could not be undone.”). Under the district court’s

interpretation of New York law, it is difficult to conceive how any insured could

ever establish a valid claim for estoppel. We therefore conclude the district




      6
        (...continued)
purposes of an estoppel claim under New York law. Compare Bluestein & Sander
v. Chicago Ins. Co., 

, 122–23 (2d Cir. 2002) (stating prejudice is
presumed when insurer takes control of defense without reserving rights to assert
policy defenses and insured detrimentally relies on insurer) with Federated Dep’t
Stores, Inc. v. Twin City Fire Ins. Co., 

, 68 (1st Dep’t 2006)
(rejecting Bluestein and concluding prejudice is not “uniformly presumed” when
the insurer controls the defense in the underlying action); see also Touchette
Corp. v. Merchs. Mut. Ins. Co., 

, 955 (4th Dep’t 1980)
(“Prejudice to the insured must be established, but proof of prejudice may be
implied where the insurer has complete control of the defense.”). We need not
resolve this issue here, however, because we conclude BYA has made an adequate
showing of prejudice regardless of whether a presumption operates.

                                        -23-
court’s determination that BYA failed to establish prejudice is manifestly

unreasonable and amounts to a clear error of judgment. Clark, 433 F.3d at 712. 7

      Although the district court erred in concluding the defense of equitable

estoppel was unavailable to BYA, it does not necessarily follow that BYA is

entitled to recover the same damages awarded by the district court on the

(erroneous) basis that the Wahl claims did not relate back to the Knotts and

Colaner claims. Certainly, BYA has established prejudice as to Lloyds’ attempt

to recoup the approximately $385,000 it has already paid—at the time BYA

settled the Wahl Arbitration Lloyds had expressly promised to provide coverage

up to that amount. 8 In determining whether BYA is entitled to any additional

      7
        Lloyds’ reservation of rights letters to BYA do not alter our analysis.
Under New York law, “[t]he purpose of a reservation of rights is to prevent an
insured’s detrimental reliance on the defense provided by the insurer. The
reservation is a sufficient preventative to reliance even if the insurer later
disclaims on a basis different from the ground originally asserted in the
reservation of rights.” Federated Dep’t Stores, 807 N.Y.S.2d at 67. Here,
however, Lloyds omitted any reference to its relation back defense in its
reservation of rights letters. In fact, the only mention of the Policy’s Interrelated
Wrongful Acts provision in Lloyds’ correspondence occurred in a letter in which
Lloyds asserts that the individual Wahl claims are unrelated to each other. This
position, which Lloyds maintained throughout the Wahl Arbitration and much of
the present action, is fundamentally incompatible with its later position that those
claims are interrelated with claims asserted in earlier arbitrations. Further, as to
the Colaner claims, Lloyds went so far as to notify BYA that it had conferred
with its prior carrier and concluded the claims were not interrelated.
      8
        BYA makes passing reference to an additional obstacle to Lloyds’
assertion it is entitled to reimbursement for the amounts already paid in Wahl:
under New York law, “an insurer cannot be a subrogee against its insured on the
very claim for which the insured was covered.” Jefferson Ins. Co. of N.Y. v.
                                                                      (continued...)

                                        -24-
recovery, however, the district court must consider the extent to which BYA

detrimentally relied on Lloyds’ representations, if at all. Thus, the court must

consider whether Lloyds’ erroneous representation that the twenty-six Wahl

claims were not interrelated under the Policy negates any additional claim of

detrimental reliance on the part of BYA.

IV.   Conclusion

      For the foregoing reasons, the judgment of the district court is reversed

and the matter is remanded for further proceedings not inconsistent with this

opinion.




      8
       (...continued)
Travelers Indem. Co., 

, 1227 (N.Y. 1998). The district court did
not pass on this argument below, and our disposition of BYA’s estoppel claim
makes it unnecessary to consider it.

                                        -25-