                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


ATTORNEYS LIABILITY                   Nos. 13-35115
PROTECTION SOCIETY, INC., a                13-35172
Risk Retention Group,
             Plaintiff-Appellant/         D.C. No.
                 Cross-Appellee,     3:11-cv-00187-SLG

                v.
                                           OPINION
INGALDSON FITZGERALD, P.C.,
FKA Ingaldson, Maassen &
Fitzgerald, P.C.,
             Defendant-Appellee/
                  Cross-Appellant.


      Appeal from the United States District Court
               for the District of Alaska
      Sharon L. Gleason, District Judge, Presiding

                Argued August 14, 2014
                Submitted June 10, 2016
                  Anchorage, Alaska

                Filed September 23, 2016

       Before: Jerome Farris, Dorothy W. Nelson,
       and Jacqueline H. Nguyen, Circuit Judges.

                Opinion by Judge Nelson
2               ALPS V. INGALDSON FITZGERALD

                            SUMMARY*


                      Diversity/Preemption

    The panel reversed the district court’s summary judgment
order precluding plaintiff, Attorneys Liability Protection
Society, from recovering defense fees and costs that it
incurred in underlying litigation; and affirmed the district
court’s conclusion that the underlying claims were not
covered by the insurance policy issued by plaintiff to a
defendant law firm.

    Plaintiff, a Risk Retention Group chartered in Montana,
provided malpractice insurance coverage to the defendant law
firm located in Alaska. The district court concluded that even
though plaintiff’s policy did not cover the claims in the
underlying suit involving the law firm, plaintiff was not
entitled to reimbursement of the expenses it incurred in
providing a defense because the insurance policy’s
reimbursement provision did not comply with Alaska
insurance law and was therefore unenforceable.

    The panel held that Alaska Statute § 21.96.100(d)’s
prohibition on reimbursements of fees and costs incurred by
an insurer defending a non-covered claim was preempted by
the Liability Risk Retention Act of 1986, 15 U.S.C. §§ 3901-
3906. The panel determined that the Alaska statute placed a
restriction on Alaska contracts that was not contemplated by
the Liability Risk Retention Act, and that was not precluded


    *
      This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
             ALPS V. INGALDSON FITZGERALD                   3

by all other states. The panel further determined that no
exception applied to save the Alaska law from preemption.

    The panel rejected defendant’s argument that plaintiff was
estopped from denying coverage because it failed to attend
settlement conferences. The panel determined that there was
no indication that defendant was prejudiced by plaintiff’s
failure to attend settlement sessions. Moreover, plaintiff
informed defendant from the outset that it intended to assert
coverage defenses, provided independent counsel to
defendant, and acted consistently with its view that coverage
did not exist.


                        COUNSEL

Kevin Hartzell (argued), Kutak Rock LLP, Omaha, Nebraska,
for Plaintiff-Appellant/Cross-Appellee.

William H. Ingaldson (argued) and Jim M. Boardman,
Ingaldson Fitzgerald P.C., Anchorage, Alaska, for Defendant-
Appellee/Cross-Appellant.


                         OPINION

NELSON, Circuit Judge:

    Attorneys Liability Protection Society (ALPS) appeals
from the district court’s grant of summary judgment to
Ingaldson Fitzgerald, P.C. (Ingaldson), which denied ALPS
reimbursement of defense fees expended in an underlying
insurance litigation. Ingaldson cross-appeals the district
court’s grant of summary judgment to ALPS that the claims
4               ALPS V. INGALDSON FITZGERALD

asserted in the underlying litigation were not covered by the
policy ALPS issued to Ingaldson. We REVERSE the district
court’s order denying ALPS reimbursement of defense fees,
AFFIRM the district court’s conclusion that the underlying
claims were not covered, and REMAND for proceedings
consistent with this opinion.

 FACTUAL BACKGROUND & PROCEDURAL HISTORY

   The facts underlying this litigation are not disputed.
ALPS is a Risk Retention Group (RRG)1 chartered in
Montana. Ingaldson is a law firm located in Alaska. ALPS
provided Ingaldson’s malpractice insurance coverage from
April 29, 2007, to April 29, 2008.

    Ingaldson’s policy with ALPS insured the firm against
claims arising from “an act, error or omission in professional
services that were or should have been rendered by
[Ingaldson].” The policy expressly excluded from coverage
any claims arising from conversion or disputes over fees.
The policy also required Ingaldson to reimburse ALPS for
fees and costs that ALPS incurred in defending non-covered
claims.

    In 2008, the bankruptcy trustee for the bankrupt estate of
a former client of Ingaldson, in conjunction with another
former client of the firm, brought a claim against Ingaldson
in the U.S. Bankruptcy Court for the District of Alaska. The


    1
       Under the Liability Risk Retention Act of 1986 (LRRA), 15 U.S.C.
§§ 3901–3906, an RRG is defined as “any corporation or other limited
liability association . . . whose primary activity consists of assuming, and
spreading all, or any portion, of the liability exposure of its group
members.” 15 U.S.C. § 3901(a)(4)(A).
              ALPS V. INGALDSON FITZGERALD                     5

suit concerned Ingaldson disbursing from and withdrawing
fees and costs against a $150,000 retainer. The former client
and the trustee sought recovery of that retainer, and asserted
claims against Ingaldson for, among other things, restitution,
disgorgement, and conversion.

    Ingaldson notified ALPS of the underlying suit. ALPS
accepted Ingaldson’s tender of the defense in the underlying
suit, but did so with the caveat that ALPS “reserved ‘all
rights.’” ALPS explained that the underlying suit alleged
activities that “d[id] not appear to implicate the provision of
service or activities by [Ingaldson] as an attorney in an
attorney-client relationship,” and thus “d[id] not appear to be
professional services within the Policy’s coverage.” ALPS
also asserted that the claims in the underlying suit sought
restitution that was not within the policy’s definition of
covered “damages” and that the policy did not cover claims
related to disputes over fees, dishonest or criminal acts, or the
conversion of funds in client trust accounts. ALPS
specifically reserved the right to reimbursement for the
portion of fees incurred in the defense of claims that were
deemed not covered under the policy.

   Ingaldson retained independent counsel to defend it in the
bankruptcy litigation, and ALPS paid the fees charged by that
counsel. The bankruptcy court twice granted partial summary
judgment against Ingaldson.

    On September 23, 2011, ALPS filed an action in federal
district court seeking a declaration that the ALPS policy did
not cover the claims against Ingaldson and that ALPS had no
obligation under the policy to provide an appeal bond in the
underlying suit. ALPS also sought to recover the expenses it
incurred providing a defense to Ingaldson.
6               ALPS V. INGALDSON FITZGERALD

    The district court determined that the policy did not cover
the claims in the underlying suit. It also concluded that ALPS
had no obligation to provide an appeal bond. Nevertheless,
the district court determined that ALPS was not entitled to
reimbursement of the expenses it incurred defending
Ingaldson in the underlying suit. The district court reasoned
that while the policy provided ALPS with a right to
reimbursement, the reimbursement provision did not comply
with Alaska insurance law and was therefore unenforceable.
Specifically, the district court concluded that the
reimbursement provision was inconsistent with Alaska
Statute § 21.96.100(d), which provides that in furnishing the
insured with independent counsel, an insurer “shall be
responsible only for the fees and costs to defend those
allegations for which the insurer either reserves its position as
to coverage or accepts coverage.” The district court
determined that “Alaska law prohibits the inclusion of a right
to reimbursement in insurance policies in the state and does
not allow ALPS to provide insurance policy coverage that
contradicts that prohibition.” The district court rejected
ALPS’s argument that the LRRA preempted Alaska Statute
21.96.100(d).2

    ALPS appealed. It argued that the district court erred for
three reasons: (1) Alaska law does not prohibit an insurer
from enforcing a contractual right to reimbursement of
defense costs for noncovered claims; (2) the underlying suit

    2
       The LRRA broadly preempts “any State law, rule, regulation, or
order to the extent that such law, rule, regulation, or order would . . . make
unlawful, or regulate, directly or indirectly, the operation of a risk
retention group.” 15 U.S.C. § 3902(a)(1). The district court
held—erroneously in our view as discussed infra—that the exception
contained in § 3905(c) saved Alaska Statute § 21.96.100(d) from
preemption.
             ALPS V. INGALDSON FITZGERALD                    7

was never potentially covered by the ALPS policy; and (3) an
interpretation of Alaska Statute § 21.96.100 that prohibited an
insurer from including a reimbursement provision in an
insurance policy would be preempted by the LRRA.

     Ingaldson cross-appealed the district court’s ruling that
the ALPS policy did not cover the claims against Ingaldson
in the underlying suit. Ingaldson argued that ALPS is
estopped from denying coverage under Alaska law because
it did not attend settlement sessions and therefore breached
the covenant of good faith and fair dealing.

   We certified two questions concerning interpretation of
Alaska law to the Alaska Supreme Court. Specifically, we
asked the Alaska Supreme Court:

       1. Does Alaska law prohibit enforcement of
          a policy provision entitling an insurer to
          reimbursement of fees and costs incurred
          by the insurer defending claims under a
          reservation of rights, where (1) the insurer
          explicitly reserved the right to seek such
          reimbursement in its offer to tender a
          defense provided by independent counsel,
          (2) the insured accepted the defense
          subject to the reservation of rights, and
          (3) the claims are later determined to be
          excluded from coverage under the policy?

       2. If the answer to Question 1 is “Yes,” does
          Alaska law prohibit enforcement of a
          policy provision entitling an insurer to
          reimbursement of fees and costs incurred
          by the insurer defending claims under a
8            ALPS V. INGALDSON FITZGERALD

           reservation of rights, where (1) the insurer
           explicitly reserved the right to seek such
           reimbursement in its offer to tender a
           defense provided by independent counsel,
           (2) the insured accepted the defense
           subject to the reservation of rights, and
           (3) it is later determined that the duty to
           defend never arose under the policy
           because there was no possibility of
           coverage?

    The Alaska Supreme Court answered “yes” to each
question, undermining the first and second bases for ALPS’s
appeal. Attorneys Liab. Prot. Soc’y, Inc. v. Ingaldson
Fitzgerald, P.C., 370 P.3d 1101, 1112 (Alaska 2016).

   In this opinion, we address ALPS’s third argument—that
the LRRA preempts § 21.96.100(d). We also address
Ingaldson’s cross-appeal.

                      JURISDICTION

    The district court had jurisdiction pursuant to 28 U.S.C.
§ 1332. We have jurisdiction pursuant to 28 U.S.C. § 1291.

                 STANDARD OF REVIEW

   We review the district court’s orders granting summary
judgment de novo. Walls v. Cent. Contra Costa Transit
Auth., 653 F.3d 963, 966 (9th Cir. 2011).
             ALPS V. INGALDSON FITZGERALD                    9

                         ANALYSIS

   1. The LRRA preempts Alaska Statute
      § 21.96.100(d)’s prohibition on reimbursement of
      fees and costs incurred by an insurer defending a
      non-covered claim.

    In ALPS’s chartering state, Montana, insurers are
permitted to seek reimbursement of fees expended defending
a non-covered claim pursuant to a reservation of rights.
Travelers Cas. & Sur. Co. v. Ribi Immonochem Research,
Inc., 108 P.3d 469, 480 (Mont. 2005). The district court held,
and the Alaska Supreme Court confirmed, that Alaska Statute
§ 21.96.100(d) prohibits such reimbursements. We must
decide whether the LRRA preempts Alaska’s prohibition.

    When considering whether the LRRA preempts a state
law, we first determine whether the challenged aspect of the
state law offends the LRRA’s broad preemption language.
See Alliance of Nonprofits for Ins., Risk Retention Grp. v.
Kipper, 712 F.3d 1316, 1321 (9th Cir. 2013). If so, we
consider whether one of the LRRA’s exceptions, which are
contained in §§ 3902(a)(1) and 3905, applies to save the state
law. See id. If no exception applies, the law is preempted.

    We conclude that § 21.96.100(d)’s prohibition on
reimbursement of fees and costs incurred by an insurer
defending a non-covered claim offends the LRRA’s broad
preemption language and that no exception applies to save the
law.

    The LRRA leaves regulation of an RRG to the state where
the RRG is chartered, and broadly preempts “any [non-
chartering] State law, rule, regulation, or order to the extent
10              ALPS V. INGALDSON FITZGERALD

that such law, rule, regulation, or order would . . . make
unlawful, or regulate, directly or indirectly, the operation of
a risk retention group.” 15 U.S.C. § 3902(a)(1).

    Section 21.96.100(d) places a restriction on Alaska
contracts that is “not contemplated by the LRRA, and that is
not [precluded] by all other states.” Wadsworth v. Allied
Prof’ls Ins. Co., 748 F.3d 100, 108 (2d Cir. 2014). Although
ALPS is permitted by its chartering state, Montana, to require
reimbursement of fees and costs incurred defending non-
covered claims, ALPS would not be permitted to include such
a provision in a contract issued in Alaska. Section
21.96.100(d) therefore “regulates” ALPS’s operations in
Alaska and impermissibly conflicts with the LRRA.3

    There is no exception that applies to save § 21.96.100(d)
from preemption. The exceptions announced in § 3902(a)(1)
concern unfair claim settlement laws, false practices laws,
taxes levied against other insurers, registration requirements,
and financial stability regulations. None of these permits the
regulation of the substantive terms of policies issued by an
RRG. The only substantive policy term a non-chartering state


     3
      One of our sister circuits applied a similar analysis in finding a state
statute preempted by the LRRA. In Wadsworth, the Second Circuit
considered a New York statute that permitted a tort victim with an
unsatisfied judgment to bring suit directly against a tortfeasor’s insurer.
748 F.2d at 101. The policy at issue was issued by an RRG domiciled in
Arizona to a chiropractor in New York. Id. A tort victim of the
chiropractor sued the RRG to enforce a judgment left unsatisfied by the
chiropractor. Id. at 102. The RRG argued that the direct-suit provision
was preempted by the LRRA. Id. The Second Circuit agreed, concluding
that the direct-suit provision was preempted by the LRRA because it
conflicted with the “any regulation” language in § 3902(a)(1). Id. at 107
(“A clearer prohibition would be hard to devise.”).
              ALPS V. INGALDSON FITZGERALD                    11

may require is a notice to the insured that RRGs are not
subject to all of the insurance laws of the non-chartering state.
See 15 U.S.C. § 3902(a)(1)(I).

     We disagree with the district court’s conclusion that
§ 3905(c) saves § 21.96.100(d) from preemption. Section
3905(c) prevents an RRG from providing insurance that is
otherwise prohibited in the state where the policy is insured.
It states:

        The terms of any insurance policy provided
        by a risk retention group or purchased by a
        purchasing group shall not provide or be
        construed to provide insurance policy
        coverage prohibited generally by [the] State
        . . . whose law applies to such policy.

15 U.S.C. § 3905(c). In our view, § 3905(c) allows non-
chartering states to restrict the types of insurance coverage,
such as for punitive damages or intentional conduct, that may
be provided in the state. See H.R. Rep. 99-865, at 19 (1986)
(“Possible examples include coverage for punitive damages,
or for intentional, fraudulent, or criminal conduct.”). It does
not allow non-chartering states to regulate general policy
terms. The district court’s interpretation of § 3905(c) would
permit that section to overtake § 3902’s broad preemption
scheme. If the district court’s interpretation were correct,
non-chartering states could simply “prohibit” coverage that
did not comply with every aspect of state insurance law. In
other words, if we were to accept the district court’s
interpretation, non-chartering states could fashion their
insurance laws in a way to ensure they fall into this exception,
thereby always avoiding preemption. We do not believe
Congress intended such a result. Estate of Magnin v. Comm’r
12             ALPS V. INGALDSON FITZGERALD

of Internal Revenue, 184 F.3d 1074, 1078 (9th Cir. 1999)
(“We must interpret [a] statute to give effect to all of its
parts.”).4

     2. ALPS did not breach the implied covenant of good
        faith and fair dealing.

    In its cross-appeal, Ingaldson argues that ALPS is
estopped from denying coverage because ALPS failed to
attend settlement conferences. According to Ingaldson,
ALPS thereby breached the implied covenant of good faith
and fair dealing. We disagree.

    Under Alaska law, estoppel has four elements: “(1) the
party to be estopped must know the facts; (2) he must intend
that his conduct shall be acted on or must so act that the party
asserting the estoppel has a right to believe it is so intended;
(3) the latter must be ignorant of the true facts; and (4) he
must rely on the former’s conduct to his injury.” O’Neill
Investigations, Inc. v Ill. Emp’rs. Ins. of Wausau, 636 P.2d
1170, 1178 (Alaska 1981) (internal quotation marks omitted).

     4
      We reject Ingaldson’s circular argument that its policy with ALPS
has a clause expressly conforming it to Alaska law, thereby incorporating
§ 21.96.100 even if it is otherwise preempted. Alaska law applies only
insofar as it is not preempted by federal law. So even if the policy
conforms to Alaska law, Alaska law must conform to the LRRA. The
policy’s clause providing for reimbursement of fees and costs to ALPS
remains valid.

     We also reject Ingaldson’s argument that the McCarran-Ferguson Act,
15 U.S.C. §§ 1011–12, saves § 21.96.100(d). We have squarely held that
even though the McCarran-Ferguson Act reserves insurance regulation to
the states, the LRRA was meant to be an exception for RRGs. Nat’l
Warranty Ins. Co. RRG v. Greenfield, 214 F.3d 1073, 1077 (9th Cir.
2000).
                ALPS V. INGALDSON FITZGERALD                            13

    In the insurance context, most cases turn on the last
element—whether the insured was prejudiced by the insurer’s
conduct. Generally, prejudice to an insured occurs when an
insurer obtains an unfair advantage by misleading, deceiving,
or withholding information from the insured. See, e.g.,
Progressive Cas. Ins. Co. v. Skin, 211 P.3d 1093, 1103
(Alaska 2009) (finding possible estoppel of excluded driver
defense when insurer contacted insured to ask which family
members were excluded from policy without sharing purpose
of inquiry); Lloyd’s & Inst. of London Underwriting Cos. v.
Fulton, 2 P.3d 1199, 1207–08 (Alaska 2000) (finding
estoppel where insurer gained full access to insured,
investigated a later-asserted coverage defense, and never
informed insured of right to independent counsel).

    Here, there is no indication that Ingaldson was prejudiced
by ALPS’s failure to attend settlement sessions. ALPS
informed Ingaldson from the outset that it intended to assert
coverage defenses, provided independent counsel to
Ingaldson, and acted consistently with its view that coverage
did not exist. Cf. Sauer v. Home Indem. Co., 841 P.2d 176,
182 (Alaska 1992) (finding estoppel where insurer failed to
give reasonable notice of coverage defense). We reject
Ingaldson’s argument that ALPS is estopped from denying
coverage.5


     5
       We note that this is not a case where ALPS could have tendered a
settlement to the policy limit, thereby avoiding an excess judgment against
Ingaldson. At no time did the amount in controversy in the underlying
dispute approach the policy’s $2 million limit. See Jackson v. Am. Equity
Ins. Co., 90 P.3d 136, 142 (Alaska 2004) (“When a plaintiff makes a
policy limits demand, the covenant of good faith and fair dealing places
a duty on an insurer to tender maximum policy limits to settle a plaintiff’s
demand when there is a substantial likelihood of an excess verdict against
the insured.”) (emphasis added).
14           ALPS V. INGALDSON FITZGERALD

                      CONCLUSION

    We REVERSE the district court’s order precluding
ALPS from recovering fees and costs incurred defending
Ingaldson in the underlying dispute, we AFFIRM the district
court’s holding that the claims in the underlying dispute were
not covered under the policy, and REMAND for further
proceedings consistent with this opinion.
