to play support for the bike on the shipyards the uncontested issue i believe here legally is the eight corner of it corner room looks at the four corners of the insurance policy and the four corners of the complaint if there is any possibility any allegation could be covered then that triggers the obligation to defend and as your honor noted in them are advertising that the policy needs to be actually the the policy and that and the complaint need to be viewed liberally need to be construed in a liberal fashion to encourage coverage let's talk about the specific allegations in wrong hole thickness and volunteer desire and the modulus wrong in the computer and got a bad result there's not even an hour geishas could even arguably be an allegation that there was any predetermine level of fitness the whole cracked right and based on that cracking the government decided that it could not be used and it didn't use frankly it sounded like something out of popeye the sailor man to me but what bother what bother s me about your allegations in your brief is your total failure to acknowledge all of the conversation back and forth between volunteer and the coast guard about the structural strength of of the extended oh well and i did point to judge vance's decision in the u s coast guard case munchen where judge vance said there on various places in that the specifically page eighteen among characteristics nothing happened in two thousand and that's part of what this case is about she says the complaint does not say which physical properties were changed or how the changes affected the vessel constructed so there is no put the wrongs plate things or that in the wrong characteristics of the modulus allegedly now mind you that this is a serious contention as to what was or what because there's allegations that volunteer was talking rally to allow a fact finder to infer it's important because reading the plain broadly reading the complaint broadly she said the united states didn't allege false claims intent when you get to the exclusion twenty eight twenty eight really talks about if you read it really talks about a warrant it's something that we promised in the way of a level of fitness a warrant there's no allegation was done by a number betters knowledge that i'm quoting to biology to do that and people were just for going to for kicks it was important to somebody i think is important i'm not suggesting it was an important one and nobody in the government has not even ledged as and what was the purpose of that and now the purpose of that analysis was to try to show that thirteen foot insertion in these holes could be done and the  allegation by the government as to what the correct figure should have been or as to where ballenger made a mistake but what we do know is something happened to to what end it could withstand whatever just a mouse a city could withstand is that right what it is we do know a crack occurred in the whole of matagorda what we don't know is whether the crack that occurred in the whole of matagorda because it was a construction defect or whether the crack occurred because of a design flaw or whether the calculations did or didn't make a difference what we so there are more than allegations at this point about what caused the whole failure so you're just telling us what's in the pleadings here i suppose and they call it a rule applies to the pleadings and i was not involved and am not involved involving the government my understanding however is that that case was dismissed on the pleadings or some marilee based upon judge vance's reading of the pleadings in which she found among other important facts that the government did not allege a specific level of performance so i mean she's reading the players she can't find in one case the exact same pleading side when you say i mean i'm more concerned about exclusion thirty two than to thirty two in f and i am about twenty eight but as far as predetermine level of fitness of performance i mean it's not very it doesn't take much of a stretch or sign knowledge to say that you're you're buying something that has to do with the whole of the vote and you expect a boat load your honor that's a pretty small level of pre determined if if you take that analogy with that says then you could never have any product insured by this policy because every product has some expectation performance if you get in a car your status or other and or guarantee of fitness or level of performance which seems to me very similar to the u c c standard but there is aren't implied warranty of proof that is for a particular purpose well but there is no requirement in the contract and there was no allegation in complaint well of course because this is a comprehensive general liability policy is and not if it is and it doesn't want to cover breaches of contract but there's no allegation of breach of contract in this policy at the very least paragraph fifty two says negotiate well i wouldn't say that either if i were the general firing the liability insurance or you know if i were your guys i wouldn't mention contract either if that's what the exclusion is about is no million exclusions can't be based about the with the final fact finder decides exclusions have to be based on what is alleged in the complaint i understand i'm not tired about the eight corners rule here i'm just hype about the insurance the purpose of general liability insurance jet is to cover accidents or occurrences it's not to cover breaches of contract and i took it maybe i'm wrong i took it that the point of this paragraph twenty eight was to exclude what would normally be a breach of first of all the overbroad nature of that is not specific and when you read the exclusions you have to be specific but the second thing is that it deals with specific intentional acts which by the way the intentional act she found no  act but the word we're talking about here is deceptive acts now the the what this court found and what the government planned in paragraph ten of its complaint i believe it is you can check but where they th definition of se a they mention reckless and this court when it reversed judge vance's decision you held that there are sufficient facts to allow the facts on to to infer reckless disregard so we have a a covered claim reckless is not excluded under the policy deception is reckless is not fine when we get to the pair i think we still need to get back to paragraph fifty two because putting aside the other stuff let me get back to that one more question thirty two actual or alleged liability arising out of or incidental to any alleged violations of any federal or state laws regulating deceptive facts no you didn't you don't deny that is categorically that the false claim that us false claims act is generally speaking a deceptive part of it can be but what i would say is this if you're going to if you're going to exclude government x in a policy you have to be specific now here their specific specificity was only using the word deceptive not using using the word reckless well but it says here deceptive acts and practices in ca in commerce including without limitation the sherman act the clayton act the robinson patent to i mean what you were what you would be requiring from what you're saying is that the exact let's say it's a conspiracy in restraint of trade under the sherman act and you'd have to you would say that this exclusion wouldn't apply unless they pled some sort of deceptive act in connection with the conspiracy to restrain trade but is an f i think f and and it really basically read together what they're trying to exclude is acts of  honesty and intentional fraud well that may be the case where that is dishonesty but on the up but the preface of b is liability arising out of alleged violations of that but part of the f c is reckless disregard regardless of whether you find certain paragraphs in the complaint allege fraud that's excluded and i don't say that it's alleged there but even if you find a paragraph or two in the complaint that alleges that if you find one paragraph that's all you need is one sentence in the complaint and what's your reasoning that you have to construe exclusions narrowly or that what the burden of proof is player in on a case law that it's up to the employer mc me up to the insurer to to prove and they have to be construed in favor of finding coverage now you have to prove you have the burden on exclusions no they have the burden solutions i have the burden on on coverage they have that that's all it sends so even if you found something else in the complaint and by the way for one through sixteen of the complaint don't even discuss fraud or negligence they just say we were with them she we don't discuss fraud they discussed errors in calculations they don't even they please the court this case present question whether allegations of fraud allegations of misrepresentation of the wife are covered under a general liability policy they are not for six different reasons those are that there was no print that there was a pre determined level of fitness exclusion the deceptive practices exclusion the dishonesty exclusion the claims were not because of an occurrence they were not because of property damage and because by own your breached the no action warranty clause so the first thing you want to do is that district court was rule that that two different exclusion supplied here because that's all she had to in order to deny coverage first one is she applied exclusion thirty two dishonesty for the allegations of false claims and false records and fraud because they were stipulated to be excluded by biology or to her in the in the arguments below now with respect to twenty eight she applied that the to the allegations of negligent misrepresentation and unjust enrichment so let's look at exclusion twenty eight and you have to look at exclusion twenty eight with its definition the failure of your work to meet any pre determined level of fitness and any consequential damages from that now your work is defined by age thirty one thirty of the record in the policy as including representations about the quality of the product so any representation of the product that did not meet a pre determined level of fitness is excluded and all consequential damages from that so all we have to find is a representation that violated a pre determined level of fitness so let's look at the allegations in the pleadings under the corners so the first one is paragraph eighteen and that is a required section three thousand one hundred thirteen inches in the country next paragraph twenty one the contract requires the some contractors which includes biology to provide the coastguard with the contractor data requirements document a whole load in strength analysis says contract required to verify that the design met program in contract requirements so part of the contract requirements is the three thousand and thirteen in the strength analysis they have to figure five it and certify that bolland you did submit the required contract in the contract form so it fits exactly the argument that was made today by boeing your research into pre determined level of fitness it's not true there is a pre determined level it's required to there be three it's required one if there be three thousand one hundred thirteen cubic inches number two that has to be certified by biology in the contract data requirements opposes suppose the actual modulus for whatever it was was three thousand and twelve instead of three thousand and thirteen you would be arguing that the that the exclusion is still prevents coverage if the government is suing for th i'm asking you to know there is a besar if it were if it were her theory ends up three thousand and twelve versus three thousand and thirteen would that require the application of the exclusion which is why this isn't claims act which is a different thing it's a different thing but the allegations are that you made a false claim for money under the f c a that's what the f c c there to allegations and if ca made false statements false representations required to give us three thousand and thirteen and that's what the government was suing for then they would be excluded and so what so what happened here that would make you know you can probably almost find any barry ation in a product as complex as ship building you can but the government's got decision for making end of the false claims act first and with the government it's the question is does the government make a claim the government's not can make a claim just because you missed but one key biggish the government's going to make a claim because of that but we don't know  know whether later claim but if the government seized him because they breached the contract in not providing the representative he represented reach a level contract or not actionable under the false claims act or at least that's a highly represented level i don't know i don't want you to characterize what the government is saying i need you to tell us exactly what the government saying falls under the exclusion for it and that is a problem i found in both your briefs here both characteriz you know hype for your own purposes the government thousand patients and we need to bear we need precision right and so eighteen there is a required section modulus three thousand and thirteen paragraph twenty one they have to provide their certification in the contract data requirements form the whole load and strength analysis to verify the design met the program fireman's they did that with a c of the contract data requirements form saying it was five thousand two hundred thirty two and that was not correct they misrepresented that in those of the government's allegations and that's why the government is suing at the same misrepresented or does it say not correct it says none of the vessels possess the launch a tube will strength represented by volunteer that's the crux in paragraph thirty seven that's pretty ok and so is the district court found there's a representation there's a contract requirement they're required to represent that they satisfied that they did not satisf that and so it it's it directly falls within the paragraph exclusion twenty eight and the last point support that the only cases that ballenger cites are cases where the exclusion in the policy like in the us could case in the tug shipyards case excludes liability for failure of the in church worker products to meet any warranty or representation and does not include the consequential damages whereas in our case there teeth reasons why those cases don't apply and one of them is because the consequential damages are included in ours and any consequential damages would include these types of damages those were not involved in the fifth circuit cases and secondly because your work is defined as the representations and so when they do when they talk about your work at work includes the representations and it's the representations in this particular case the representations are that the vessel as a whole would have a section modulus of three thousand one hundred thirteen represented to be five thousand two hundred thirty two and i wanted to i want to talk briefly about the exclusions of the deceptive trade practices and the dishonesty exclusions because in the district court those were conceded by volunteered to exclude the fraud and the  claims and now they want to raise them on appeal after the district judge who relied upon them well in her order i mean i don't i don't think it's unreasonable for them to say that the fifth circuit took a different tack on that issue well except for the fact that that was an issue in the government case in the original complaint in every motion everything throughout in this all the briefs to this court throughout the entire case have been about the reckless disregard standards that they knew all along that that was the standard and that's in the original complaint in one and eight corners analysis the question of coverage is to be argued so that it's reckless reckless disregard has been exactly geisha in from the beginning and so as a result riklis dishonesty is dishonesty in the united dishonesty in this is again it's a reckless misstatement is not necessarily dishonest right but with the alligator does arm i didn't say i can say you know i think someone's argument i think someone's eye color is green when it's really plainly light blue and i may be that i'm his hearing it in the wrong light or something like that at the time right but the allegations are making a false statement and they have to prove that it was false and yes the reckless standard is more than negligence it's more than gross negligence but it is less than it is less  intent to deceive as required for fraud right but all of the cases that have dealt with this is a perfect example is the general starvation ill case which we cite in the brief on page thirty five to thirty six the court ruled that  the allegations in that case were all levels of a f c a knowledge including reckless in the court ruled that all levels of bad conduct work skloot did and so the point is that reckless  still dishonest for well we're talking about insurance here and we're talking about what's covered and what's not covered and so i think you know again if there's an on clarity in the scope of an exclusion i think we can through it in  cured that's right but when they talk about record this is this is still a question about it's a question of law it's a question does reckless dishonesty town is dishonesty in the courts  the courts of all ruled that it does the necessarily count as dishonesty for purposes of construing and exclusion in a policy that's exactly right and so the i like the washington case that we cited the m a so washington case that briefly about property damage and about the condition preceding in my last few minutes up here we argued occurrence that there was no occurrence in our brief and wow and you did not respond to that  there is no argument from them opposing the fact that there was no occurrence so that the claims would not fall within the ensuring agreement with respect to property damage continental is going to argue that as well because the policy requires that they are that the damages alleged be because of property damage and they are not and the line on because it's a perfect example that's the seventh circuit case called health care industry versus moments meadows and in that seventh circuit case it was very similar to this case in that you had a claim by a nursing home that submitted false claims and medicaid they certified that the scanner to care had been met for their patients but the resident sustained injuries due to the fact that substandard care was given anyway well excuse me but this is you know the boat same or the boat wouldn't float or something like that it's hard for me to continue to believe that that other than property damage well it's not the point is that if ca allegation is not because the property damage it's because of false claims there their claim is used you said you were going to give us this and you didn't give us this it's not that they're claiming that they are entitled to damages because and the damages they see damages in f c a case or because of property damage and the because language is in your complaint it's in your insurance agreement is that what you're saying in the insurance agreement there has to be the damages sought have to be because of property damage and not because of false claims and the district court found that with respect to of continental but they didn't find that for us because they found that the judge vance found that the case was excluded under twenty eight and thirty stated so she didn't have to reach to first but she did have to reach out for continental and with respect to continental she found that the language in cases may please on him and on behalf of the continental insurance company it's our position that judge vance correctly found there is no possibility of coverage of the second third and fourth layer excess policies issue with respect to the past losses the only alleged past losses of for nine million dollars tentacles which is beneath the twenty six million dollars and under wine limits under knowing the continental policies so passed losses are clearly not covered as to future losses the only remaining claims in the underlying would a geisha are brought under the false claims act those claims are not covered a continental policy only ensures claims arising quote on account of bodily injury or property damage in the false claims suit the government is seeking the return of monies that it wrongfully paid to ballinger because of its misrepresentations about the strength of the ves is not seeking recovery for property damage this is the precise result that the seven circuit reached in the moments meadows case and the district court relied upon they were clearly personal injuries in the moments meadows case but that's not what the government was seeking recovery for seeking recovery for the false payments that it made based upon the false misrepresentations of the nursing on the same is true here that's what they want from b so there's no possibility of coverage in the continental policies for those claims no bodily injury no property damage now we also contend that even if there is some allegation of property damage or it could be construed that there is the dishonesty exclusion of the first layer excess policies that underlie the continental second third and fourth layer policies it's exclusion a one that policies in the record record document one forty six there seven clearly distinguishable employment practices liability policy that specifically insured the conduct alleged in the complaint and it didn't contain the on account of language of my policies but in connection with l so the causal connection was greatly reduced they speculate that future amendments to the pleadings may create coverage that speculative not for the court in any event simply not true any claims th e government may have now are clearly prescribed just as the negligent misrepresentation claim was found to be prescribe the will they suggest the losses make see twenty six million to be sure that's true but not covered losses and again they raise the reckless disregard standard is their salvation i submit the volunteer clearly waived that argument in the argument for the district court in response to a specific question conceding th what the underwriters would have you do in this case is ignore the eight corner rope and all the long line of cases that go along with that instead cherry pick one or two paragraphs in a complaint and say well we believe those aren't covered and therefore there's no coverage at all but the important thing about the eight corner rule is that if anything alleged in the complaint is potentially covered then there's an obligation to defen two of the complaint doesn't mention fraud doesn't mention the f c a doesn't mention anything about alleged fraud or or have to pay the government back the money it says defendants exercise reasonable care or competence in communicating information that is a strict negligence claim in effect the government even entitles that a negligent cause of action but but i realize how you label it a pleading does not necessarily mean that that's what you're alleging but clearly the government is alleging negligent behavior on volunteers part to tell the government that boundary wrenchingly use deal that was too thick and that they made a mistake the second thing is about property damage opponents talk about this being a case of not a case of property damage and that it's a case as you decide based upon the terms of the policy you look at the times of the policy in this case paragraph thirty seven of the complaint says they're claiming the vassals are not usable that's loss of use specifically the policy defines property damage not only to include tracks and and sinking of boats if but it also specifically includes loss of use separate definition that's in their definition not council says well gee fraud and dishonesty well you know we think that's covered with we think  that reckless disregard is covered you could have put it in your policy you could have a definition of your terms in your policy you didn't know where does the policy suggest and remember policies are strictly construed in favor of coverage no where does the policy say you're not covered for reckless measures you're not covered for reckless disregard they could have put them they did it w didn't you wait that argument if you read what i said and if you read what i said in my belief for a brief i did not waive that argument what the court asked me specifically was about common law for old ok and i said i agree that common law fraud is not covered intentional fraud is not covered by the policy and i do not stand here arguing to deny that intentional fraud is covered by the policy what i'm saying is that  includes reckless disregard and she never asked me about that and i never addressed that and reckless disregard i consider to be madam since and this court considers reckless disregard to be part of the f b i because long way away from dishonesty in fact if it was dishonesty it would have included as a fourth element of the f c s the fact that they specifically set it out as a fourth element means it's not dishonesty it's  as far as there's been a lot of discussion about pre determined level of fitness and i challenge the court judge base has already been through this in the government ruling there's no allegation of failure to meet a pre determined level of fitness  not that it doesn't appear so there's some discussion about what they expect what the government expected but the government has not alleged there was a pre determined level if it was me saying here in the earlier opinion in this case by the fifth circuit in august of two volunteer was notified that the coast guard would require ballinger to certify compliance with a b s structural standards yes but she found first the she found that when we did our calculations and before we entered into the contract there was no agreement to do anything i mean that at that point so that's the first case two thousand two thousand and one there is no predetermine level of fitness means warrant there is no allegation by the government well certifying compliance with s structural standards sounds like a warranty to me even if that paragraph is pre determined it's only one of fifty two paragraphs even if that one is excluded all i got to do is prove one's covered in the got to defend me and fifty two is clearly