CA's 'Genuine Dispute' Doctrine

Under California law, there is a covenant of good faith and fair dealing that is implied in every contract, including insurance contracts. This covenant of good faith and fair dealing has been held to impose certain “duties” upon insurers, such as the duty to investigate claims thoroughly; the duty not to deny coverage based on an unduly restrictive interpretation of the policy or by using improper standards; and the duty not to unreasonably delay in processing or paying claims. Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1148 (1990) (citing various cases). If an insurer breaches the covenant of good faith and fair dealing, an insured is entitled to seek tort damages for that breach ' but only if the insured can establish that the policy provided coverage in the first place. Id. at 1153. Thus, to prevail on such a claim, an insured bears the burden of proving that: 1) benefits due under the policy were withheld, and 2) the reasons for withholding benefits were unreasonable or without proper cause. Id. at 1151.

An insurer can successfully defend against an alleged breach of the duty of good faith and fair dealing, however, if it can show that there was a “genuine dispute” with the insured with respect to the existence of coverage liability or the amount of the claim. Under the “genuine dispute” doctrine, an insurer cannot be held liable for tort damages for “bad faith” when it mistakenly withholds policy benefits, so long as the mistake is objectively reasonable at the time that it was made. See, e.g., Morris v. Paul Revere Life Ins. Co., 109 Cal. App. 4th 966, 973, 977 (2003); Chateau Chamberay Homeowners Ass'n v. Assoc. Int'l Ins. Co., 90 Cal. App. 4th 335, 347 (2001). Because a court can conclude as a matter of law that an insurer has not breached the implied covenant of good faith and fair dealing due to the existence of a “genuine dispute” as to its coverage liability, insurers can generally raise the “genuine dispute” defense in several phases of litigation with the insured: 1) on a demurrer to or a motion to dismiss a complaint; 2) on a motion for summary adjudication or judgment; and 3) at trial before a jury, as a last resort.

Over the last couple of years, the “genuine dispute” doctrine has received some attention from California appellate courts ' including, for the first time, the California Supreme Court ' with the publication of several opinions that both reaffirm the basic principles and help to further refine the application of this doctrine in first- and third-party cases. This article provides a historical overview of the doctrine, a summary of the general principles applicable under the doctrine, and a discussion of the recent legal developments in the doctrine.

Origins of the 'Genuine Dispute' Doctrine in CA

California's “genuine dispute” doctrine was first recognized and coined by the Ninth Circuit in Safeco Insurance Co. of America v. Guyton, 692 F.2d 551 (1982). In that case, the “genuine dispute” between the insurer and the insured involved the application of California's concurrent causation doctrine. Although the Ninth Circuit ruled in favor of the insured's arguments on concurrent causation, the court nevertheless held that “there existed a genuine issue as to Safeco's liability under California law,” and therefore, affirmed the dismissal of the insured's bad faith cause of action. Id. at 557.

Following Guyton, the “genuine dispute” doctrine continued to find support in federal case law in cases like Hanson v. Prudential Insurance Co. of America, 783 F.2d 762, 766-67 (9th Cir. 1985), and Franchesi v. American Motorists Insurance Co., 852 F.2d 1217, 1220-21 (9th Cir. 1988). But it was not until 1991 that a California state appellate court finally adopted the “genuine dispute” doctrine. In Opsal v. United Services Automobile Association, 2 Cal. App. 4th 1197, 1205-06 (1991), the Court of Appeal held that the insurer's denial of coverage was not “unreasonable” where the insurer's reasoning found support in dicta by the California Supreme Court in a published opinion. Quoting Guyton, the Opsal court stated that “[c]learly there exists a 'genuine issue ' under California law' until the meaning of [the Supreme Court's dicta] is resolved.” Id. at 1206.

Legal vs. Factual 'Genuine Disputes'

In each of the above-mentioned “early” cases (Guyton, Hanson, Franchesi, and Opsal), the “genuine dispute” always involved a question of law ' e.g., the interpretation of applicable case law or an ambiguous policy term. Later, the doctrine was held to also be a viable defense for insurers where the “genuine dispute” related to questions of fact.

In Fraley v. Allstate Insurance Co., 81 Cal. App. 4th 1282, 1292-93 (2000), the California Court of Appeal affirmed the granting of summary judgment in the insurer's favor and held that the insured's bad faith claim failed “as a matter of law” because there existed a “genuine dispute” between the insurer and the insured relating to the scope and cost of repairs after a fire loss. In so holding, the court noted that the “doctrine may be applied where the insurer denies a claim based on the opinions of experts.” Id. In that case, the insurer had hired and relied upon several experts to prepare estimates on the alleged loss.

Citing Fraley, the Ninth Circuit was the first to expressly decline to “limit the genuine dispute doctrine to purely legal or contractual disputes,” holding instead that the doctrine should be applied on a “case-by-case basis.” Guebara v. Allstate Ins. Co., 237 F.3d 987, 994 (9th Cir. 2001). In that specific case, the Ninth Circuit deemed it proper to apply the “genuine dispute” doctrine to factual disputes relating to what specific contents were actually lost in the fire, and the court held that the insurer's refusal to pay the claim was not unreasonable and that its investigation was not “biased” where the insurer had relied on three different experts, the insured's own witnesses provided inconsistent stories as to the contents allegedly lost, and no evidence of any of the “big-ticket” items claimed by the insured was ever found in the rubble. Id. at 994-95. The court also rejected the insured's claim that the insurer's investigation was unreasonably long. Id. at 995-96.

Shortly thereafter, the California Court of Appeal followed suit and also held that the “genuine dispute” doctrine should not be limited only to legal disputes, but should instead be applied on a case-by-case basis. Chamberay Homeowners Ass'n v. Assoc. Int'l Ins. Co., 90 Cal. App. 4th 335, 347 (2001) (citing Guebara).

Most recently, the California Court of Appeal issued an opinion in Delgado v. Interinsurance Exchange of the Automobile Club, 152 Cal. App. 4th 671, 692-93 (2007), in which the court opined that in a third-party coverage case (as opposed to a first-party case), a genuine factual dispute cannot serve as a defense against an allegation of a bad faith breach of the duty to defend (as opposed to an allegation of a bad faith breach of the duty to indemnify), given that an unresolved question of fact in and of itself gives rise to a potential for coverage and, therefore, the duty to defend. The Court of Appeal's opinion in Delgado is, however, currently on review by the California Supreme Court, and the petitioner-insurer has requested that the Supreme Court depublish the Court of Appeal's opinion or, in the alternative, disapprove of that portion of the opinion relating to the “genuine dispute” doctrine on the grounds that the Court of Appeal had: 1) mischaracterized the coverage dispute as “factual” (i.e., whether the violent act involved was intentional or negligent) rather than “legal” (i.e., “whether the violent act, even if performed under an unreasonable belief in self-defense, constituted an 'accident'”), and 2) “improperly issued an opinion based on the genuine dispute doctrine without affording the parties an opportunity to brief the doctrine's applicability to the case.” (Pet. for Review filed Aug. 3, 2007.)

Therefore, it remains to be seen whether the Court of Appeal's opinion in Delgado on the applicability of the “genuine dispute” doctrine in third-party cases involving an allegation of bad faith breach of the duty to defend will stand. Cf. Century Surety Co. v. Polisso, 139 Cal. App. 4th 922, 951 (2006) (opining, but declining to hold, that the doctrine is inapplicable to factual disputes in third-party bad faith duty to defend cases).

Reliance on Experts Not a Per Se Defense Against Bad Faith

As noted above, in Guebara, the Ninth Circuit cited, among other factors, the insurer's reliance on three experts in affirming the granting of summary judgment in favor of the insurer on the bad faith claim. The Ninth Circuit warned, however, that “[e]xpert testimony does not automatically insulate insurers from bad faith claims based on biased investigations.” 237 F.3d at 996. The court went on to provide a non-exhaustive list of circumstances under which bad faith claims based on an allegation of a biased investigation could still survive summary judgment and go before a jury:

(1) where the insurer is guilty of misrepresenting the nature of the investigatory proceedings;

(2) where the insurer's employees lie to the insured or during a deposition;

(3) where the insurer dishonestly selects its experts;

(4) where the insurer's experts are unreasonable; and

(5) where the insurer fails to conduct a thorough investigation.

Id. In Chateau Chamberay, the California Court of Appeal adopted the Ninth Circuit's caveats. 90 Cal. App. 4th 349-50.

Thus, for example, in Tomaselli v. Transamerica Insurance Co., 25 Cal. App. 4th 1269, 1281 (1994) (which was also cited as an example in Guebara and Chateau Chamberay), the court upheld a bad faith jury verdict where the insurer required an insured to submit to an examination under oath, discouraged the insured from having an attorney present, and misled the insured about the purpose of the examination, even though there had been no evidence of fraud. As another example, in Hangarter v. Provident Life & Accident Insurance Co., 373 F.3d 998, 1010-11 (9th Cir. 2004), the Ninth Circuit also upheld a jury's finding of bad faith where the insurer sent a misleading letter that incorrectly advised the insured about her rights under the policy, predisposed its retained expert to find in the insurer's favor, and systematically denied the insured's claim without reviewing it on a case-by-case basis.

More recently, in Brehm v. 21st Insurance Co., 166 Cal. App. 4th 1225, 1240 (2008), the Court of Appeal reversed an order granting an insurer's demurrer on a bad faith claim simply because the insured had alleged in his complaint that the examination performed by the insurer's expert was a “sham” because the insurer had retained its expert “with the intention that he prepare a report that falsely minimized the seriousness of [the insured's] injury precisely so that [the insurer] could argue there was a 'genuine dispute' as to the value of the claim.” Interestingly, the court also expressed “some skepticism as to the nature of the competent and credible proof [the insured] will be able to offer in support of these allegations,” thereby suggesting that the insurer might be able to successfully raise the “genuine dispute” defense at a later stage of the litigation. Id. 1239-40.

Retention of an Expert Is Nevertheless Well-Advised

Although reliance on an expert's opinion does not automatically shield an insurer from bad faith liability, it may nevertheless be important for insurers to consult with experts when evaluating claims, particularly where the insured is relying upon an expert's opinions to make its case. California courts have made this clear in a couple of recently published opinions. For example, in Jordan v. Allstate Insurance Co., 148 Cal. App. 4th 1062, 1075-76 (2007), the Court of Appeal reversed an order granting summary judgment in favor of the insurer on a bad faith claim where, among other things, the insurer had failed to retain a structural engineer to inspect the property in question despite receiving recommendations to do so by its own and the insured's experts, and where the insurer had left it completely up to its adjuster to determine whether a “collapse” had occurred even though the adjuster had no credentials or background in structural engineering.

Similarly, in Wilson v. 21st Century Insurance Co., 42 Cal. 4th 713, 721-22 (2007), the California Supreme Court held that the insurer was not entitled to summary judgment on a bad faith claim where the insurer's adjuster had, without consulting a medical expert, simply disregarded the opinions offered by the insured's treating physician as to the cause of the insured's spinal disc injuries, and there was no evidence that the adjuster had sufficient medical expertise to make a different diagnosis. Indeed, the dissenting opinion in Wilson even criticized the majority's holding as being likely to drive up insurance costs by requiring the hiring of more experts. See Id. at 728-29.

Above All, an Adequate Investigation Is Required

The Wilson opinion is important in other respects as well. For starters, it was the first time that the California Supreme Court has addressed the “genuine dispute” doctrine. Also significant is the court's reiteration of the rule that the “genuine dispute” doctrine “does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured's claim,” and that “a genuine dispute exists only where the insurer's position is maintained in good faith and on reasonable grounds.” Id. at 723 (emphasis in original).

Given the Wilson court's focus on evaluating an insurer's good or bad faith “in light of the totality of the circumstances surrounding its actions,” and the long line of state and federal cases that emphasize the reasonableness of an insurer's investigation and the coverage positions that an insurer takes ' whether it be a legal interpretation or a determination of fact ' it would seem fair to conclude that when distilled down to its essence, the “genuine dispute” doctrine is nothing more than a different expression of the traditional rule in California insurance law that so long as an insurer's denial of a claim is supported by reasonable conduct, it cannot be held liable for a claim of bad faith. See generally Austero v. Nat'l Cas. Co., 84 Cal. App. 3d 1, 35 (1978).

Queena Mewers is an associate in Crowell & Moring LLP's Orange County office. She specializes in representing insurance companies in coverage litigation, and has expertise in issues involving bad faith and asbestos liabilities.

Under California law, there is a covenant of good faith and fair dealing that is implied in every contract, including insurance contracts. This covenant of good faith and fair dealing has been held to impose certain “duties” upon insurers, such as the duty to investigate claims thoroughly; the duty not to deny coverage based on an unduly restrictive interpretation of the policy or by using improper standards; and the duty not to unreasonably delay in processing or paying claims. Love v. Fire Ins. Exch. , 221 Cal. App. 3d 1136, 1148 (1990) (citing various cases). If an insurer breaches the covenant of good faith and fair dealing, an insured is entitled to seek tort damages for that breach ' but only if the insured can establish that the policy provided coverage in the first place. Id. at 1153. Thus, to prevail on such a claim, an insured bears the burden of proving that: 1) benefits due under the policy were withheld, and 2) the reasons for withholding benefits were unreasonable or without proper cause. Id. at 1151.

An insurer can successfully defend against an alleged breach of the duty of good faith and fair dealing, however, if it can show that there was a “genuine dispute” with the insured with respect to the existence of coverage liability or the amount of the claim. Under the “genuine dispute” doctrine, an insurer cannot be held liable for tort damages for “bad faith” when it mistakenly withholds policy benefits, so long as the mistake is objectively reasonable at the time that it was made. See, e.g., Morris v. Paul Revere Life Ins. Co. , 109 Cal. App. 4th 966, 973, 977 (2003); Chateau Chamberay Homeowners Ass'n v. Assoc. Int'l Ins. Co. , 90 Cal. App. 4th 335, 347 (2001). Because a court can conclude as a matter of law that an insurer has not breached the implied covenant of good faith and fair dealing due to the existence of a “genuine dispute” as to its coverage liability, insurers can generally raise the “genuine dispute” defense in several phases of litigation with the insured: 1) on a demurrer to or a motion to dismiss a complaint; 2) on a motion for summary adjudication or judgment; and 3) at trial before a jury, as a last resort.

Over the last couple of years, the “genuine dispute” doctrine has received some attention from California appellate courts ' including, for the first time, the California Supreme Court ' with the publication of several opinions that both reaffirm the basic principles and help to further refine the application of this doctrine in first- and third-party cases. This article provides a historical overview of the doctrine, a summary of the general principles applicable under the doctrine, and a discussion of the recent legal developments in the doctrine.

Origins of the 'Genuine Dispute' Doctrine in CA

California's “genuine dispute” doctrine was first recognized and coined by the Ninth Circuit in Safeco Insurance Co. of America v. Guyton, 692 F.2d 551 (1982). In that case, the “genuine dispute” between the insurer and the insured involved the application of California's concurrent causation doctrine. Although the Ninth Circuit ruled in favor of the insured's arguments on concurrent causation, the court nevertheless held that “there existed a genuine issue as to Safeco's liability under California law,” and therefore, affirmed the dismissal of the insured's bad faith cause of action. Id. at 557.

Following Guyton, the “genuine dispute” doctrine continued to find support in federal case law in cases like Hanson v. Prudential Insurance Co. of America, 783 F.2d 762, 766-67 (9th Cir. 1985), and Franchesi v. American Motorists Insurance Co., 852 F.2d 1217, 1220-21 (9th Cir. 1988). But it was not until 1991 that a California state appellate court finally adopted the “genuine dispute” doctrine. In Opsal v. United Services Automobile Association, 2 Cal. App. 4th 1197, 1205-06 (1991), the Court of Appeal held that the insurer's denial of coverage was not “unreasonable” where the insurer's reasoning found support in dicta by the California Supreme Court in a published opinion. Quoting Guyton, the Opsal court stated that “[c]learly there exists a 'genuine issue ' under California law' until the meaning of [the Supreme Court's dicta] is resolved.” Id. at 1206.

Legal vs. Factual 'Genuine Disputes'

In each of the above-mentioned “early” cases (Guyton, Hanson, Franchesi, and Opsal), the “genuine dispute” always involved a question of law ' e.g., the interpretation of applicable case law or an ambiguous policy term. Later, the doctrine was held to also be a viable defense for insurers where the “genuine dispute” related to questions of fact.

In Fraley v. Allstate Insurance Co., 81 Cal. App. 4th 1282, 1292-93 (2000), the California Court of Appeal affirmed the granting of summary judgment in the insurer's favor and held that the insured's bad faith claim failed “as a matter of law” because there existed a “genuine dispute” between the insurer and the insured relating to the scope and cost of repairs after a fire loss. In so holding, the court noted that the “doctrine may be applied where the insurer denies a claim based on the opinions of experts.” Id. In that case, the insurer had hired and relied upon several experts to prepare estimates on the alleged loss.

Citing Fraley, the Ninth Circuit was the first to expressly decline to “limit the genuine dispute doctrine to purely legal or contractual disputes,” holding instead that the doctrine should be applied on a “case-by-case basis.” Guebara v. Allstate Ins. Co., 237 F.3d 987, 994 (9th Cir. 2001). In that specific case, the Ninth Circuit deemed it proper to apply the “genuine dispute” doctrine to factual disputes relating to what specific contents were actually lost in the fire, and the court held that the insurer's refusal to pay the claim was not unreasonable and that its investigation was not “biased” where the insurer had relied on three different experts, the insured's own witnesses provided inconsistent stories as to the contents allegedly lost, and no evidence of any of the “big-ticket” items claimed by the insured was ever found in the rubble. Id. at 994-95. The court also rejected the insured's claim that the insurer's investigation was unreasonably long. Id. at 995-96.

Shortly thereafter, the California Court of Appeal followed suit and also held that the “genuine dispute” doctrine should not be limited only to legal disputes, but should instead be applied on a case-by-case basis. Chamberay Homeowners Ass'n v. Assoc. Int'l Ins. Co., 90 Cal. App. 4th 335, 347 (2001) (citing Guebara ).

Most recently, the California Court of Appeal issued an opinion in Delgado v. Interinsurance Exchange of the Automobile Club, 152 Cal. App. 4th 671, 692-93 (2007), in which the court opined that in a third-party coverage case (as opposed to a first-party case), a genuine factual dispute cannot serve as a defense against an allegation of a bad faith breach of the duty to defend (as opposed to an allegation of a bad faith breach of the duty to indemnify), given that an unresolved question of fact in and of itself gives rise to a potential for coverage and, therefore, the duty to defend. The Court of Appeal's opinion in Delgado is, however, currently on review by the California Supreme Court, and the petitioner-insurer has requested that the Supreme Court depublish the Court of Appeal's opinion or, in the alternative, disapprove of that portion of the opinion relating to the “genuine dispute” doctrine on the grounds that the Court of Appeal had: 1) mischaracterized the coverage dispute as “factual” (i.e., whether the violent act involved was intentional or negligent) rather than “legal” (i.e., “whether the violent act, even if performed under an unreasonable belief in self-defense, constituted an 'accident'”), and 2) “improperly issued an opinion based on the genuine dispute doctrine without affording the parties an opportunity to brief the doctrine's applicability to the case.” (Pet. for Review filed Aug. 3, 2007.)

Therefore, it remains to be seen whether the Court of Appeal's opinion in Delgado on the applicability of the “genuine dispute” doctrine in third-party cases involving an allegation of bad faith breach of the duty to defend will stand. Cf. Century Surety Co. v. Polisso, 139 Cal. App. 4th 922, 951 (2006) (opining, but declining to hold, that the doctrine is inapplicable to factual disputes in third-party bad faith duty to defend cases).

Reliance on Experts Not a Per Se Defense Against Bad Faith

As noted above, in Guebara, the Ninth Circuit cited, among other factors, the insurer's reliance on three experts in affirming the granting of summary judgment in favor of the insurer on the bad faith claim. The Ninth Circuit warned, however, that “[e]xpert testimony does not automatically insulate insurers from bad faith claims based on biased investigations.” 237 F.3d at 996. The court went on to provide a non-exhaustive list of circumstances under which bad faith claims based on an allegation of a biased investigation could still survive summary judgment and go before a jury:

(1) where the insurer is guilty of misrepresenting the nature of the investigatory proceedings;

(2) where the insurer's employees lie to the insured or during a deposition;

(3) where the insurer dishonestly selects its experts;

(4) where the insurer's experts are unreasonable; and

(5) where the insurer fails to conduct a thorough investigation.

Id. In Chateau Chamberay, the California Court of Appeal adopted the Ninth Circuit's caveats. 90 Cal. App. 4th 349-50.

Thus, for example, in Tomaselli v. Transamerica Insurance Co., 25 Cal. App. 4th 1269, 1281 (1994) (which was also cited as an example in Guebara and Chateau Chamberay ), the court upheld a bad faith jury verdict where the insurer required an insured to submit to an examination under oath, discouraged the insured from having an attorney present, and misled the insured about the purpose of the examination, even though there had been no evidence of fraud. As another example, in Hangarter v. Provident Life & Accident Insurance Co., 373 F.3d 998, 1010-11 (9th Cir. 2004), the Ninth Circuit also upheld a jury's finding of bad faith where the insurer sent a misleading letter that incorrectly advised the insured about her rights under the policy, predisposed its retained expert to find in the insurer's favor, and systematically denied the insured's claim without reviewing it on a case-by-case basis.

More recently, in Brehm v. 21st Insurance Co., 166 Cal. App. 4th 1225, 1240 (2008), the Court of Appeal reversed an order granting an insurer's demurrer on a bad faith claim simply because the insured had alleged in his complaint that the examination performed by the insurer's expert was a “sham” because the insurer had retained its expert “with the intention that he prepare a report that falsely minimized the seriousness of [the insured's] injury precisely so that [the insurer] could argue there was a 'genuine dispute' as to the value of the claim.” Interestingly, the court also expressed “some skepticism as to the nature of the competent and credible proof [the insured] will be able to offer in support of these allegations,” thereby suggesting that the insurer might be able to successfully raise the “genuine dispute” defense at a later stage of the litigation. Id. 1239-40.

Retention of an Expert Is Nevertheless Well-Advised

Although reliance on an expert's opinion does not automatically shield an insurer from bad faith liability, it may nevertheless be important for insurers to consult with experts when evaluating claims, particularly where the insured is relying upon an expert's opinions to make its case. California courts have made this clear in a couple of recently published opinions. For example, in Jordan v. Allstate Insurance Co., 148 Cal. App. 4th 1062, 1075-76 (2007), the Court of Appeal reversed an order granting summary judgment in favor of the insurer on a bad faith claim where, among other things, the insurer had failed to retain a structural engineer to inspect the property in question despite receiving recommendations to do so by its own and the insured's experts, and where the insurer had left it completely up to its adjuster to determine whether a “collapse” had occurred even though the adjuster had no credentials or background in structural engineering.

Similarly, in Wilson v. 21st Century Insurance Co., 42 Cal. 4th 713, 721-22 (2007), the California Supreme Court held that the insurer was not entitled to summary judgment on a bad faith claim where the insurer's adjuster had, without consulting a medical expert, simply disregarded the opinions offered by the insured's treating physician as to the cause of the insured's spinal disc injuries, and there was no evidence that the adjuster had sufficient medical expertise to make a different diagnosis. Indeed, the dissenting opinion in Wilson even criticized the majority's holding as being likely to drive up insurance costs by requiring the hiring of more experts. See Id. at 728-29.

Above All, an Adequate Investigation Is Required

The Wilson opinion is important in other respects as well. For starters, it was the first time that the California Supreme Court has addressed the “genuine dispute” doctrine. Also significant is the court's reiteration of the rule that the “genuine dispute” doctrine “does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured's claim,” and that “a genuine dispute exists only where the insurer's position is maintained in good faith and on reasonable grounds.” Id. at 723 (emphasis in original).

Given the Wilson court's focus on evaluating an insurer's good or bad faith “in light of the totality of the circumstances surrounding its actions,” and the long line of state and federal cases that emphasize the reasonableness of an insurer's investigation and the coverage positions that an insurer takes ' whether it be a legal interpretation or a determination of fact ' it would seem fair to conclude that when distilled down to its essence, the “genuine dispute” doctrine is nothing more than a different expression of the traditional rule in California insurance law that so long as an insurer's denial of a claim is supported by reasonable conduct, it cannot be held liable for a claim of bad faith. See generally Austero v. Nat'l Cas. Co., 84 Cal. App. 3d 1, 35 (1978).

Queena Mewers is an associate in Crowell & Moring LLP's Orange County office. She specializes in representing insurance companies in coverage litigation, and has expertise in issues involving bad faith and asbestos liabilities.