                    FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PAN PACIFIC RETAIL PROPERTIES,            
INC., a Maryland corporation;
WESTERN PROPERTIES TRUST, a real
estate trust,
               Plaintiffs-Appellants,            No. 04-56394
                 v.
                                                  D.C. No.
                                               CV-03-00679-WQH
GULF INSURANCE COMPANY, a
Connecticut corporation; TWIN                      OPINION
CITY FIRE INSURANCE COMPANY, a
Minnesota corporation; DOES,
1-50, inclusive.
              Defendants-Appellees.
                                          
         Appeal from the United States District Court
           for the Southern District of California
         William Q. Hayes, District Judge, Presiding

                    Argued and Submitted
              June 9, 2006—Pasadena, California

                     Filed October 26, 2006

Before: Alex Kozinski and Ronald M. Gould, Circuit Judges,
         and Ricardo S. Martinez,* District Judge.

                     Opinion by Judge Gould




   *The Honorable Ricardo S. Martinez, United States District Judge for
the Western District of Washington, sitting by designation.

                                17825
             PAN PACIFIC RETAIL v. GULF INSURANCE         17829


                         COUNSEL

Michael Bruce Abelson, Abelson Herron LLP, Los Angeles,
California, for plaintiffs-appellants Pan Pacific Retail Proper-
ties, Inc. and Western Properties Trust.

David T. DiBiase, Anderson, McPharlin & Connors LLP, Los
Angeles, California, for defendant-appellee Gulf Insurance
Company. Stephen H. Sutro, Duane Morris LLP, San Fran-
cisco, California, for defendant-appellee Twin City Fire Insur-
ance Company.


                          OPINION

GOULD, Circuit Judge:

   Appellants Pan Pacific Retail Properties, Inc. (“Pan Pacif-
ic”) and Western Properties Trust (“Western”) challenge their
insurers’ denial of coverage for an underlying shareholder
class action. Pan Pacific and Western were each insured under
a Directors’ and Officers’ Liability and Company Indemnifi-
cation Policy (“D&O Policy”). Pan Pacific was insured by
Appellee Gulf Insurance Company (“Gulf”). Western was
insured by Appellee Twin City Fire Insurance Company
(“Twin City”). Gulf and Twin City assert that all costs and
expenses arising out of the underlying shareholder lawsuit
were uninsurable as a matter of public policy because, accord-
ing to the insurers, the suit only sought and recovered the dis-
17830          PAN PACIFIC RETAIL v. GULF INSURANCE
gorgement of additional consideration that the shareholders
allege should have been paid by Pan Pacific to Western’s
shareholders in the merger of Pan Pacific and Western. Twin
City additionally contends that Western, its insured under the
Twin City policy, may not recover any insurance proceeds
because Pan Pacific had fully indemnified Western from any
claims resulting from the merger.

   We conclude that summary judgment was incorrect on the
issue of whether the settlement paid by Pan Pacific to West-
ern’s shareholders to settle the remaining claims was entirely
restitutionary relief, in light of the conflicting evidence as to
the nature of these claims, and we reverse summary judgment
on this ground. We affirm the grant of summary judgment to
Twin City on the ground that Western was fully compensated
from any loss by Pan Pacific’s payment of the settlement and
any other costs or expenses.

                                     I

  In October 2000, Pan Pacific and Western proposed a
merger transaction in a joint proxy statement and prospectus,
whereby all shares of Western would be acquired by Pan
Pacific with consideration paid in Pan Pacific stock. A class
action brought by shareholder Bryant Bennett on behalf of all
Western shareholders challenged many aspects of the merger.
The Bennett complaint, which was filed in the Superior Court
of California, Alameda County, alleged that Pan Pacific,
Western and their directors and officers were liable for
breaches of fiduciary duty, abuse of control, fraud and deceit,
negligent misrepresentation, constructive fraud, unjust enrich-
ment, and for four statutory violations under state law.1 The
  1
    These statutory provisions, California Corporations Code §§ 1101,
25400, 25401 and 25402, required specified disclosures for the approval
of a merger or the purchase or sale of stock and prohibited the use of false
or misleading statements or omissions to induce the purchase or sale of
securities.
               PAN PACIFIC RETAIL v. GULF INSURANCE                 17831
complaint alleged, inter alia, that the Bennett defendants
breached their fiduciary obligations to the shareholders by
failing to negotiate the highest possible price for the Western
shares, by engaging in related transactions between Pan
Pacific and Western that created a conflict of interest, and by
failing to disclose all material information to the shareholders
before they voted overwhelmingly to approve the merger.

   On November 9, 2000, Western tendered notice of the Ben-
nett lawsuit to Twin City which had issued a D&O Policy to
Western.2 The day after the merger closed on November 13,
2000, Pan Pacific tendered notice of the Bennett lawsuit to
Gulf which had issued a D&O Policy to Pan Pacific. Both
insurers denied coverage. Gulf’s reasons, as set forth in its
counsel’s letter of December 21, 2000, included that: “Loss
would not include . . . any award against or settlement by Pan
Pacific representing increased consideration for its acquisition
of [Western.]” Twin City stated in its letter of April 10, 2001,
that: “If additional consideration were paid in connection with
this matter, it would not constitute Loss.”

   On October 25, 2002, the state superior court issued an
order partially granting the Bennett defendants’ motion for
summary adjudication. Because Bennett had not made a prior
demand upon Western’s board of directors, the superior court
dismissed all derivative claims and allowed only direct claims
to go forward. All claims in the Bennett action were dismissed
except for the four claims based on violations of the Califor-
nia Corporations Code. The superior court stated that these
statutory duties “run to the plaintiffs and not to the corpora-
  2
    “Despite its name, [a D&O policy] insures not only officers and direc-
tors themselves but also their corporation if, as happened here, the corpo-
ration indemnifies them for their liability. This is known as ‘company
reimbursement coverage,’ as distinct from ‘direct’ coverage of the direc-
tors and officers.” Level 3 Commc’ns, Inc. v. Fed. Ins. Co., 272 F.3d 908,
909 (7th Cir. 2001). Both D&O Policies also included coverage for liabil-
ity by the company as a result of Securities Claims. Neither Policy obli-
gated the insurer to provide a defense for their insureds.
17832        PAN PACIFIC RETAIL v. GULF INSURANCE
tion.” The claim for breach of fiduciary duty relating to the
duty of disclosure was also permitted to go forward because
the superior court held that shareholders had an individual
“right to accurate information from their corporation.” The
Bennett action settled on February 7, 2003 for $975,000 plus
$15,000 for administrative and notice costs.

   On March 6, 2003, Pan Pacific and Western filed a com-
plaint against Gulf and Twin City in the Superior Court of
California, San Diego County. This complaint asserted claims
of breach of contract, declaratory relief, breach of the cove-
nant of good faith and fair dealing and unfair business prac-
tices, alleging that Gulf and Twin City unjustifiably refused
to recognize any insurance coverage for the Bennett litigation.
Gulf and Twin City removed the lawsuit to the United States
District Court for the Southern District of California under
diversity jurisdiction. On July 14, 2004, the district court
granted summary judgment to Gulf and Twin City, conclud-
ing that the Bennett settlement was, as a factual matter, resti-
tutionary relief that was uninsurable under California law.
The district court also concluded that Gulf and Twin City did
not breach their obligation to advance defense costs and
expenses and were not required to reimburse expenses for the
dismissed claims because these claims were also uninsurable
as only seeking restitutionary relief. Finally, the district court
held that Twin City was not obligated to pay any indemnifica-
tion or reimbursement because its insureds, Western and its
directors and officers, did not pay any damages, fees or costs
as part of the Bennett litigation based on an indemnification
agreement whereunder Pan Pacific agreed to pay all claims
arising from the merger.

                               II

  We review the district court’s grant of summary judgment
de novo. See Cornwell v. Electra Cent. Credit Union, 439
F.3d 1018, 1028 n.4 (9th Cir. 2006); see also Chevron USA,
Inc. v. Cayetano, 224 F.3d 1030, 1037 (9th Cir. 2000) (revers-
               PAN PACIFIC RETAIL v. GULF INSURANCE               17833
ing grant of summary judgment because genuine issues of
material fact remain “[n]otwithstanding the fact that both
sides moved for summary judgment and agreed that summary
judgment was appropriate one way or the other”). “Viewing
the evidence in the light most favorable to the nonmoving
party, we must determine whether there are genuine issues of
material fact and whether the district court correctly applied
the relevant substantive law.” Cornwell, 439 F.3d at 1027
(quoting Oliver v. Keller, 289 F.3d 623, 626 (9th Cir. 2002)).
“If a reasonable jury viewing the summary judgment record
could find by a preponderance of the evidence that [Appel-
lants are] entitled to a verdict in [their] favor, then summary
judgment was inappropriate.” Id.

                                  III

   In granting summary judgment for the insurers, the district
court decided that the settlement paid by Pan Pacific in the
Bennett action was uninsurable because the payment as a fac-
tual matter only reflected additional consideration that was
wrongfully withheld in the merger.

   “It is well established that one may not insure against the
risk of being ordered to return money or property that has
been wrongfully acquired.” Bank of the West v. Superior
Court, 2 Cal. 4th 1254, 1266, 833 P.2d 545, 10 Cal. Rptr. 2d
538 (1992). In AIU Insurance Co. v. Superior Court, 51 Cal.
3d 807, 799 P.2d 1253, 274 Cal. Rptr. 820 (1990), the Cali-
fornia Supreme Court provided guidance as to the types of
remedies that are considered uninsurable restitutionary relief.
The supreme court first interpreted the term “damages” in
comprehensive general liability policies as requiring “com-
pensation, in money, recovered by a party for loss or detri-
ment it has suffered through the acts of another.”3 Id. at 826
  3
   Under California law, policy language is interpreted in its “ordinary
and popular” sense unless the parties expressed an intent otherwise. See
AIU, 51 Cal. 3d at 826-27, 799 P.2d 1253, 274 Cal. Rptr. 820 (citing Cal.
17834          PAN PACIFIC RETAIL v. GULF INSURANCE
(footnote and internal quotation marks omitted). Based on this
interpretation, the supreme court held that the “agencies’
expenditure of federal funds to investigate and initiate cleanup
of hazardous waste constitutes ‘loss’ or ‘detriment’ ” and that
“reimbursement by responsible parties is monetary ‘compen-
sation’ for such loss.” Id. at 828. The court further held that
although the “reimbursement of response costs is restitutive in
that it attempts to restore to the agencies the value of a benefit
constructively conferred on [the insured],” it “is not restitutive
in the narrow sense identified by Jaffe as inappropriate for
insurance coverage.” Id. at 836 (citing Jaffe v. Cranford Ins.
Co., 168 Cal. App. 3d 930, 214 Cal. Rptr. 567 (1985)).4

   [1] The insurance companies here were required to cover
claims that sought compensation for a loss, even if the loss to
the victim could also be construed as an ill-gotten benefit to
the insured. See Jaffe, 168 Cal. App. 3d at 935, 214 Cal. Rptr.
567 (“Although the concept of ‘restitution’ may have a
broader meaning in other contexts, we limit our reference to
it here to situations in which the defendant is required to
restore to the plaintiff that which was wrongfully acquired.”).
In deciding whether a certain remedy is insurable, we must
look beyond the labels of the asserted claims or remedies. See
Bank of the West, 2 Cal. 4th at 1270, 833 P.2d 545, 10 Cal.
Rptr. 2d 538. An insurer is not required to provide coverage
for claims seeking the return of something wrongfully
received, but must still indemnify for claims that seek com-

Civ. Code § 1644). The analysis by the California Supreme Court of
“damages” was held to apply equally to other policies that covered “ulti-
mate net loss.” See id. at 842 n.19. We find no distinction for our analysis
between the phrase “ultimate net loss” and the word “Loss,” which was
used in the Policies of Gulf and Twin City.
   4
     In Jaffe v. Cranford Ins. Co., 168 Cal. App. 3d 930, 214 Cal. Rptr. 567
(1985), the appellate court held that the recovery of funds overpaid to
health care providers by Medi-Cal involved restitutionary relief outside
the scope of covered “damages.” Id. at 935.
             PAN PACIFIC RETAIL v. GULF INSURANCE          17835
pensation for injury suffered as a result of the insured’s con-
duct. Id. at 1268.

   In Level 3 Communications, Inc. v. Federal Insurance Co.,
272 F.3d 908 (7th Cir. 2001), the United States Court of
Appeals for the Seventh Circuit held that the settlement of a
claim alleging the purchase of stock under false pretenses was
restitutionary relief even though the plaintiffs did not recover
the actual shares allegedly acquired wrongfully, but only the
difference in value between the price of the shares at the time
of trial and the price the plaintiffs received for the stock from
the defendant. See id. at 910. The appellate court held that the
plaintiffs sought by this measure of damages “to deprive the
defendant of the net benefit of the unlawful act, the value of
the unlawfully obtained stock minus the cost to the defendant
of obtaining the stock.” Id. at 911.

   The district court here relied on Level 3 in holding that the
amount paid in the Bennett settlement reflected restitutionary
damages because the Bennett plaintiffs sought only the pay-
ment of additional consideration that was allegedly underpaid
to the shareholders in the merger. We must examine whether
any genuine issues of material fact remain as to the nature of
the claims reflected in the settlement and whether any of these
claims may have sought non-restitutionary compensation for
injuries suffered by the shareholders, which would be covered
under the insurers’ Policies.

   Before the settlement of the underlying Bennett class action
was approved, the state superior court had dismissed all deriv-
ative claims that sought relief on behalf of the corporation.
The superior court held that only certain claims alleging vio-
lations of the Appellants’ disclosure duties could proceed as
direct claims because each shareholder has an individual right
to accurate information from the corporation. The superior
court did not attempt to determine how a remedy or damages
could be determined from this breach, but only that these
claims alleged a direct injury to the shareholders. See Bennett
17836          PAN PACIFIC RETAIL v. GULF INSURANCE
v. Western Properties Trust, No. C-83307, Order—Mot. for
Summ. Adjudication—Partial Grant (Cal. Super. Ct., County
of Alameda, Oct. 25, 2002) (“The inquiry is not about the
nature of the remedy, but determining whether (a) the corpo-
ration has been injured and the shareholders have conse-
quently suffered loss in the value of their holdings (derivative
claim) or (b) the shareholders have suffered a direct injury.”).

   [2] Although the settlement occurred after the superior
court had dismissed all claims except the direct claims, which
removed all derivative claims from the pending state court
lawsuit, it cannot necessarily be said that the settlement pay-
ment was solely in consideration of the then-pending direct
claims. It is possible that a portion of the settlement, or even
most or all of the settlement, was motivated by concerns of
Appellants and their officers and directors about potential
exposure on appeal of the dismissed claims. It is conceivable
that the state court’s dismissal of the derivative claims could
have been reversed on appeal, and Appellants may have
wanted to eliminate any lingering exposure from the dis-
missed derivative claims.

   The derivative claims sought relief based on injuries to the
corporation and only indirectly to the shareholders, in particu-
lar the decreased consideration paid for the shareholders’
shares. See Jones v. H. F. Ahmanson & Co., 1 Cal. 3d 93, 106,
460 P.2d 464, 81 Cal. Rptr. 592 (1969). (“A shareholder’s
derivative suit seeks to recover for the benefit of the corpora-
tion and its whole body of shareholders when injury is caused
to the corporation that may not otherwise be redressed
because of failure of the corporation to act.”). Such derivative
claims would necessarily seek to divest money that was
improperly obtained or withheld by Appellants.5 Any pay-
  5
   Appellants argue that Pan Pacific could not have received an “ill-gotten
gain” that was returned in the settlement because Pan Pacific, as the
acquiring company, did not owe any fiduciary duty of disclosure to the
Bennett plaintiffs. The Bennett complaint alleged that Pan Pacific was
               PAN PACIFIC RETAIL v. GULF INSURANCE                17837
ments intended to settle these claims would be uninsurable as
seeking to recover the net benefit of the alleged wrongful acts
committed by the Appellants. See Level 3, 272 F.3d at 911.

   However, Appellants may have been motivated by an addi-
tional reason to obtain a settlement and a release of all claims
by the Bennett plaintiffs. Appellants produced declarations by
the attorneys who participated on both sides of the underlying
settlement negotiations stating the opinion that the derivative
claims seeking additional consideration were no longer “a via-
ble claim for relief” after the superior court’s order. Conceiv-
ably, Appellants may have settled the Bennett action to avoid
liability from the remaining direct claims in the on-going
class action.

   The insurers argue that the entire payment must be treated
as additional consideration regardless of the nature of the
claims reflected in the settlement, because there was no alter-
native source of damages offered by Appellants. However,
Appellants have argued that the remaining direct claims did
not reflect restitutionary relief based on the procedural history
of the underlying Bennett litigation and have offered an alter-
native theory of damages for the remaining direct claims.

   [3] California law provides that “a shareholder cannot bring
a direct action for damages against management on the theory
their alleged wrongdoing decreased the value of his or her
stock (e.g., by reducing corporate assets and net worth).”
Schuster v. Gardner, 127 Cal. App. 4th 305, 312, 25 Cal.
Rptr. 3d 468 (2005) (internal quotation marks and emphasis
omitted). We have held that “vague allegations about misrep-

complicit in the wrongful acts of nondisclosure committed by Western.
Regardless of whether Pan Pacific actually breached a fiduciary duty or
committed a wrongful act, if Pan Pacific made a payment to settle a claim
that sought the return of wrongfully acquired property as defined by Cali-
fornia law, such a payment would be on behalf of a claim that was unin-
surable as a matter of public policy and thus not covered by insurance.
17838        PAN PACIFIC RETAIL v. GULF INSURANCE
resentations that caused [the plaintiff shareholder] to support
the unsuccessful merger attempt and initiation of a receiver-
ship” were still derivative claims because “his only injury
from those misrepresentations was the devaluation of his
stock when Barbary Coast was taken over by the FDIC.”
Pareto v. F.D.I.C., 139 F.3d 696, 700 (9th Cir. 1998). A claim
based on the devaluation of stock was “clearly derivative”
because “that is an injury that fell on every stockholder,
majority and minority alike, and fell on each on a per share
basis.” Id. Applying this precedent to the case before us, the
settlement payments for the remaining direct claims could not
have been based on a decreased value given for the Western
stock, such as for a low share exchange ratio in a merger paid
for by Pan Pacific stock, because such a valuation would be
an injury that fell on every stockholder alike.

   Perhaps recognizing that the remaining direct claims of
non-disclosure could not provide damages based on the
amount underpaid for the shares of Western stock, Appellants
have provided an alternative theory of damages for the
remaining direct claims that would provide compensation for
the individualized harm of the shareholders and not for the
return of money wrongfully withheld by Appellants. After the
dismissal of the derivative claims, but before the settlement of
the Bennett action, Appellants advanced a damages theory for
the remaining claims based on the “value of the information”
allegedly withheld in the failure to disclose material facts. As
described by opposing counsel in the underlying Bennett
action:

    [Appellants’] “value of information” theory essen-
    tially argued that [the] damages awarded were
    required to reflect the intrinsic value of specific
    information withheld, as opposed to the impact of
    such information on the marketplace. For example,
    [Appellants] argued that the Bennett plaintiffs would
    only be able to recover $10,000 for the suppression
    of an analyst’s report which cost $10,000 to produce.
               PAN PACIFIC RETAIL v. GULF INSURANCE                 17839
     They would not be entitled to collect $100,000 even
     if expert evidence established that a $100,000 swing
     in the Company’s stock price would have resulted
     from the timely and proper release of such informa-
     tion withheld.

Decl. of Robert Retana in Supp. of Opp’n to Mot. for Summ.
J. ¶ 6 n.1.

   If the trier of fact accepted Appellants’ characterization of
the damages reflected in the settlement payments, then the
Bennett plaintiffs would have recovered compensation in the
settlement for the intrinsic value of the information withheld
from the shareholders. Although Appellants may have bene-
fitted from their failure to disclose material information, this
“value of information” theory resembles the type of insurable
damages allowed in AIU that sought compensation for a detri-
ment suffered by the shareholders.6 See AIU, 51 Cal. 3d at
836, 799 P.2d 1253, 274 Cal. Rptr. 820. Appellants’ “value of
information” theory provides an alternative source of dam-
ages based on the cost that it would take the shareholders as
a class to obtain the same amount of information which was
allegedly withheld by Appellants. Although it is possible that
this damages theory might only result in “a minimal economic
recovery,” see Retana Decl. ¶ 7, and possible also that it
might not account for the entire amount paid in settlement, the
submission of evidence supporting the “value of information”
theory does raise a genuine issue of fact as to whether the set-
tlement contained nonrestitutionary amounts.7
   6
     The insurers argue that this theory is insufficient to raise a genuine
issue of material fact as to the nature of the settlement payments because
there is no evidence that the Bennett plaintiffs advanced this theory for
themselves in the underlying litigation. However, the evidence offered by
Appellants is sufficient for a reasonable jury to conclude that the parties
contemplated that this theory would have been used to measure the plain-
tiffs’ damages at the upcoming trial in the Bennett action.
   7
     Appellants argue by analogy to Delaware law that they could recover
for non-disclosures that impair the economic interests or voting rights of
17840          PAN PACIFIC RETAIL v. GULF INSURANCE
   [4] Claims asserted by shareholders challenging the actions
of corporate participants in a merger need not only seek addi-
tional merger consideration. We conclude here that the record
contained material issues of fact, and thus the district court
erred in concluding that the entire settlement reached was for
uninsurable relief. There was no trial in the district court
regarding what was settled in the prior California state court
action. There was no expert testimony provided concerning
the exposures for defendants in the California state court case,
on both dismissed claims that might be reversed on appeal or
the pending claims that remained for state court trial. Based
on the current record, we conclude that summary judgment
was inappropriate: Factual findings relating to the nature of
the settlement and whether it settled in any part non-
restitutionary, direct claims of the shareholders are required
here. Giving all reasonable inferences to the non-moving
party, it cannot be said as a matter of law that the settlement
related entirely to restitutionary relief sought in derivative or
direct claims.

   [5] We are not persuaded that the claims and exposures set-
tled were entirely “of the narrow type identified by these
cases as not a proper subject of coverage by insurance.” AIU,
51 Cal. 3d at 836-37, 799 P.2d 1253, 274 Cal. Rptr. 820.
Accordingly, the district court erred in granting summary
judgment to the defendants, resolving that issue in light of the
disputed and conflicting evidence before it.

shareholders. See In re Walt Disney Co. Derivative Litigation, 731 A.2d
342, 371-72 (Del. Ct. Chan. 1998), aff’d in part and rev’d in part, Brehm
v. Eisner, 746 A.2d 244 (Del. 2000). However, other than the “value of
information” damages theory, Appellants do not describe any non-
restitutionary damages resulting from the alleged impairment of the share-
holders’ economic interests or voting rights. Because Appellants must
raise a genuine issue that the settlement reflected non-restitutionary dam-
ages, we express no opinion as to the existence of any other types of dam-
ages suffered directly by the Western shareholders that might have also
resulted in coverage.
                PAN PACIFIC RETAIL v. GULF INSURANCE                  17841
                                     IV

   Appellants also seek reimbursement of about $1.6 million
spent on defense costs.8 The insurers argue that defense costs
are only entitled to reimbursement if incurred while defending
covered claims and that the claims alleged in the Bennett
action were not covered claims because they sought only res-
titutionary remedies. “D&O policies generally do not obligate
the carrier to provide the insured with a defense.” Helfand v.
Nat’l Union Fire Ins. Co., 10 Cal. App. 4th 869, 879, 13 Cal.
Rptr. 2d 295 (1992). “More likely, they require the carrier to
reimburse the insured for defense costs as an ingredient of
‘loss,’ a defined term under the policy.” Id.

   The contractual language of the Policies issued by Gulf and
Twin City defines “Loss” as sums incurred as a result of
claims that were “covered” or “insured” by the Policies.9 This
contractual language limits reimbursement to costs incurred in
the defense of claims that would be insurable under the Poli-
cies. Appellants point to circuit precedent requiring the
advancement of defense costs for potentially covered claims.
See Gon v. First State Ins. Co., 871 F.2d 863 (9th Cir. 1989);
Okada v. MGIC Indem. Corp., 823 F.2d 276 (9th Cir. 1986).
Those cases, which involved an insurer’s duty to provide con-
temporaneous advancement of defense costs, Gon, 871 F.2d
at 868-69; Okada, 823 F.2d at 282-83, are not controlling
where the insureds only seek reimbursement of costs after the
underlying litigation has ended. In an insurance coverage
action, the insured has the burden to prove that the claim falls
within the basic scope of coverage. See Collin v. Am. Empire
  8
     The district court in this case discussed at length why the insurers were
not obligated to provide a defense for Appellants or to advance defense
costs to Appellants during the pendency of the Bennett litigation. Appel-
lants do not challenge this aspect of the district court’s ruling on appeal.
   9
     Although the Policies include additional provisions regarding the
advancement of defense costs, Appellants repeatedly insist that they do
not challenge the district court’s finding that the insurers were not required
to advance defense costs.
17842        PAN PACIFIC RETAIL v. GULF INSURANCE
Ins. Co., 21 Cal. App. 4th 787, 803, 26 Cal. Rptr. 2d 391,
398-99 (1994). Because Appellants seek reimbursement after
the underlying litigation has settled and no longer need to
worry about the assertion of new types of claims or damages,
Appellants must show that the expenses at issue were related
to claims that actually fell within the basic scope of coverage.
See Okada, 823 F.2d at 282 (“If an action against the directors
incorporates both covered and uncovered claims, the parties
must apportion the costs so that MGIC need only pay for
amounts generated in defense of covered claims.”).

   If a lawsuit only sought damages that were uninsurable
under the policy, then the insurer would not be liable to reim-
burse any defense costs spent defending these claims, even if
the claims were eventually determined to be meritless. In
State Farm Fire & Casualty Co. v. Drasin, 152 Cal. App. 3d
864, 199 Cal. Rptr. 749 (1984), the state appellate court held
that an insurer lacked any duty to defend or indemnify a mali-
cious prosecution claim because any recovery would neces-
sarily require proof of uninsurable willful conduct:

    The malicious prosecution complaint filed against
    the Drasins does not potentially seek damages that
    come within the coverage of the subject policy. If the
    Drasins’ original action against Covell is held to be
    without malice and therefore not wilful, then there is
    no liability under the policy. Similarly, if the Dra-
    sins’ original action against Covell is held to be wil-
    ful and with malice, again there is no liability under
    the policy.

Id. at 868. If the claims in the Bennett action only sought res-
titutionary relief that was uninsurable under California law,
then the insurers would have no obligation to reimburse
Appellants’ defense costs regardless of whether the Bennett
plaintiffs actually recovered on their claims or not.

  As discussed above, the district court’s grant of summary
judgment was incorrect on the issue whether the Bennett set-
             PAN PACIFIC RETAIL v. GULF INSURANCE          17843
tlement was in any part intended to settle direct claims that
fell within the scope of the Policies. If the trier of fact deter-
mines that the settlement should not be characterized in full
as reflecting uninsurable restitutionary relief and finds that the
insurers must reimburse Appellants for any part of the settle-
ment, then the defense costs reasonably related to these cov-
ered claims must also be reimbursed. See Safeway Stores, Inc.
v. Nat’l Union Fire Ins. Co., 64 F.3d 1282, 1289 (9th Cir.
1995) (holding “that Safeway’s defense costs are reasonably
related to the defense of its officers and directors in the class-
action suits and are therefore fully covered by the D & O poli-
cy”).

   [6] Because a genuine issue of material fact remains as to
the nature of the claims reflected in the settlement and the
extent that these settled claims sought restitutionary relief, we
cannot say that the district court’s denial of all reimbursement
for defense costs was appropriate. We reverse the district
court’s denial of reimbursement for defense costs and remand
for further consideration by the trier of fact on this issue.

                                V

   Twin City offered an alternative defense for its refusal to
indemnify or reimburse any amounts incurred as a result of
the Bennett action, and the district court gave relief to it on
this alternative theory. Twin City argued that neither Western
nor its officers and directors were required to pay any of the
expenses, defense costs or settlement payment at issue in this
coverage action and therefore no insured had suffered Loss as
defined by its Policy. Pan Pacific paid all amounts that West-
ern or its directors and officers were legally obligated to pay
as a result of the Bennett action based on an indemnification
provision included in the merger agreement.

  Western seeks coverage based on two different types of
coverage provided in the Twin City Policy. Insuring Agree-
ment B(1) provides “Company Reimbursement” coverage
17844        PAN PACIFIC RETAIL v. GULF INSURANCE
where the insurer agreed to “pay on behalf of the Company
Loss for . . . which the Company has, to the extent permitted
or required by law, indemnified the Directors and Officers,
and which the Directors and Officers have become legally
obligated to pay as a result of a Claim . . . where such Claim
is first made during the Policy Period . . . against the Directors
and Officers . . . for a Wrongful Act which takes place during
or prior to the Policy Period.” In Insuring Agreement C, under
the caption “Company Securities Claim Liability,” Twin City
agreed to “pay on behalf of the Company Loss . . . which the
Company shall become legally obligated to pay as a result of
a Securities Claim first made during the Policy Period . . .
against the Company for a Wrongful Act which takes place
during or prior to the Policy Period.”

   [7] An insurance policy may be either for liability or for
indemnity. “ ‘In a liability contract, the insurer agrees to cover
liability for damages. If the insured is liable, the insurance
company must pay the damages. In an indemnity contract, by
contrast, the insurer agrees to reimburse expenses to the
insured that the insure[d] is liable to pay and has paid.’ ”
Okada, 823 F.2d at 280 (quoting Continental Oil Co. v.
Bonanza Corp., 677 F.2d 455, 459 (5th Cir. 1982)).

   In Insuring Agreement B(1), Twin City agreed to reimburse
the Company for all Loss for which the Company has indem-
nified its directors and officers. The requirement that the
Company “has indemnified” its directors and officers appears
to require that the Company must in fact make payments on
behalf of its officers and directors. A requirement that the
Company make actual payments on behalf of its directors and
officers agrees with the caption “Company Reimbursement,”
which is typically considered to require an out-of-pocket loss
by the party seeking reimbursement.

  [8] The definition of “Loss” in the Twin City Policy also
anticipates that Insuring Agreement B(1) will not be treated
as a liability policy, which would only require that the
               PAN PACIFIC RETAIL v. GULF INSURANCE                  17845
insureds incur a legal obligation to pay damages or other
expenses for indemnification by the insurer. The Policy
defines “Loss” as “sums which the Directors and Officers or,
with respect to Insuring Agreements B(2), C and D, the Com-
pany, are legally liable to pay solely as a result of any Claim
insured by this Policy . . . .” The exclusion of Insuring Agree-
ment B(1) from the Policy’s definition of “Loss” implies that
something more than mere legal liability is required for reim-
bursement under Insuring Agreement B(1). In an indemnity
policy “ ‘the insurer agrees to reimburse expenses to the
insured that the insure[d] is liable to pay and has paid.’ ”
Okada, 823 F.2d at 280 (quoting Continental Oil, 677 F.2d at
459); see also William E. Knepper & Dan A. Bailey, 2 Liabil-
ity of Corporate Officers and Directors § 24.02 (7th ed. 2005)
(“The only protection afforded the corporation under [Com-
pany Reimbursement Coverage] is reimbursement for its
expenditures in indemnifying its director or officers.”).
Because Western has admitted that it made no payments on
behalf of its directors and officers as a result of the Bennett
action, Twin City is not required to reimburse Western under
Insuring Agreement B(1).

   [9] Western also sought coverage under Insuring Agree-
ment C for Securities Claims made against the company.10
Insuring Agreement C is a typical liability policy where the
insurer must pay damages or expenses if the insured is legally
liable as a result of a covered claim. Okada, 823 F.2d at 280.
Western was legally liable to pay any expenses or damages
incurred by Western as a result of the Bennett action, regard-
less of whether Pan Pacific had honored its indemnification
  10
     At oral argument, counsel for Twin City stressed Western’s attempted
coverage for the costs incurred in the defense of Western’s directors and
officers that were submitted to Twin City for reimbursement under Insur-
ing Agreement B(1). However, Twin City’s briefing asserted that Western
was not entitled to reimbursement or indemnification under either Insuring
Agreement B(1) or Insuring Agreement C in the Twin City Policy. The
district court also held that Western was not entitled to coverage under any
provision of the Twin City Policy.
17846        PAN PACIFIC RETAIL v. GULF INSURANCE
agreement. To the extent that Western is seeking coverage
under Insuring Agreement C, it has suffered a Loss and may
be entitled to indemnification by Twin City.

   [10] Despite Western’s legal liability for these expenses,
California law has been reluctant to allow an insured to obtain
double recovery based on its insurance contracts. See Bra-
malea Cal., Inc. v. Reliable Interiors, Inc., 119 Cal. App. 4th
468, 472-73, 14 Cal. Rptr. 3d 302 (2004). An injured party
“could recover twice for the same loss only if the ‘collateral
source’ rule applies.” Patent Scaffolding Co. v. William Simp-
son Constr. Co., 256 Cal. App. 2d 506, 510, 64 Cal. Rptr. 187
(1967). Under this rule, if “an injured party receives compen-
sation for his losses from a collateral source wholly indepen-
dent of the tortfeasor, such payment generally does not
preclude or reduce the damages to which it is entitled from
the wrongdoer.” Id. (internal quotation marks omitted).

   [11] The collateral source rule has been held inapplicable
to these types of insurance coverage disputes. After an insurer
was found liable for breach of contract and breach of the
implied covenant of good faith and fair dealing, the California
Court of Appeals allowed the insurer to adjust the damages
for its wrongful denial of coverage based on prior settlement
amounts paid to the insured from other parties. Plut v. Fire-
man’s Fund Ins. Co., 85 Cal. App. 4th 98, 103-04, 102 Cal.
Rptr. 2d 36 (2000). The appellate court rejected application of
the collateral source rule, stating that it had “found no case
expressly applying this rule in circumstances resembling
those before [them], and the overwhelming weight of author-
ity in California and other jurisdictions has rejected the exten-
sion of the collateral source rule to breach of contract.” Id. at
107. “The collateral source rule, if applied to an action based
on breach of contract, would violate the contractual damage
rule that no one shall profit more from the breach of an obli-
gation than from its full performance.” Patent Scaffolding,
256 Cal. App. 2d at 511, 64 Cal. Rptr. 187 (holding that the
               PAN PACIFIC RETAIL v. GULF INSURANCE                  17847
insured “suffered no uncompensated detriment caused by
Simpson’s breach of contract”).

   If Western was legally liable to pay damages or costs as a
result of the Bennett action, then Twin City’s failure to pay
would be a breach of its insurance contract with Western.
However, if Western was fully compensated by Pan Pacific’s
indemnification agreement and never made any payments
itself, then Western should not obtain double recovery from
Twin City based on its multiple agreements for indemnifica-
tion.11 California case law states that an insurer may offset its
contractual obligation to pay the insured against any previous
payments made by other parties that have already compen-
sated the insured for its loss:

     [W]here multiple insurers or indemnitors share equal
     contractual liability for the primary indemnification
     of a loss or the discharge of an obligation, the selec-
     tion of which indemnitor is to bear the loss should
     not be left to the often arbitrary choice of the loss
     claimant, and no indemnitor should have any incen-
     tive to avoid paying a just claim in the hope the
     claimant will obtain full payment from another
     coindemnitor . . . . The fact that several insurance
     policies may cover the same risk does not increase
     the insured’s right to recover for the loss, or give the
     insured the right to recover more than once. Rather,
   11
      Pan Pacific and Western have remained distinct legal entities for pur-
poses of this lawsuit despite the unifying effect of the merger. Appellants
briefly argued in their reply belief that Western became part of Pan Pacific
following the merger’s closing and that “the overall value of the merged
Pan Pacific-Western enterprise was materially diminished by Twin City’s
breach.” However, Western has not provided evidence to show that Pan
Pacific’s indemnification of Western did not have the effect of reimburs-
ing Western against loss. Given that Pan Pacific and Western are separate
legal entities for purposes of this lawsuit, Western has not shown why Pan
Pacific’s payment of all expenses and claims did not fully compensate
Western for any loss that Western now asserts against Twin City.
17848          PAN PACIFIC RETAIL v. GULF INSURANCE
       the insured’s right of recovery is restricted to the
       actual amount of the loss. Hence, where there are
       several policies of insurance on the same risk and the
       insured has recovered the full amount of its loss
       from one or more, but not all, of the insurance carri-
       ers, the insured has no further rights against the
       insurers who have not contributed to its recovery.
       Similarly, the liability of the remaining insurers to
       the insured ceases, even if they have done nothing to
       indemnify or defend the insured. They remain liable,
       however, for contribution to those insurers who have
       already paid on the loss or for the insured’s defense.

Fireman’s Fund Ins. Co. v. Md. Cas. Co., 65 Cal. App. 4th
1279, 1295, 77 Cal. Rptr. 2d 296 (1998) (emphasis in origi-
nal).

  [12] Western does not have a right to recover twice for the
same loss. While we express no opinion whether Twin City
could possibly be obligated to contribute to the party that has
paid for the loss,12 Twin City does not have any further obli-
gation to Western.

                                  VI

   We reverse the district court’s grant of summary judgment
to Gulf on the issue of whether the settlement, including any
defense costs or expenses reasonably related to the claims
incorporated therein, constituted matters entirely uninsurable
under California law. We affirm summary judgment for Twin
City on the determination that Twin City was not obligated to
  12
    Pan Pacific has not asserted in this action a claim directly against
Twin City for the recovery of Pan Pacific’s expenditures on behalf of
Western. Therefore, we need not determine whether Pan Pacific or Twin
City should be held primarily responsible for the expenses and damages
paid by Pan Pacific on behalf of Western. See Rossmoor Sanitation, Inc.
v. Pylon, Inc., 13 Cal. 3d 622, 634, 532 P.2d 97, 119 Cal. Rptr. 449
(1975).
             PAN PACIFIC RETAIL v. GULF INSURANCE         17849
indemnify or reimburse Western. We remand for further pro-
ceedings consistent with this opinion. Each party shall bear its
own costs.

 AFFIRMED in part, REVERSED in part, and
REMANDED.
