good morning your honour's and may please the court brad garcia for a samaritan insurance company are brief detail for legal errors in the district court summary judgment ruling i'd like to begin today by focusing on the corrosion exclusion which disposes of the entire case and requires entry of judgment for race before addressing reformation and other issues the corrosion exclusion bars coverage here because the damage at issue is acid caused corrosion of the building the district court held that the exclusion does not apply because the acid that caused the corrosion is not also specifically excluded but as courts around the country have explained that approach nullifies the corrosion exclusion because corrosion is always caused to buy some it or some material instead it's a rule in every case involving a corrosion a solution that either party has identified is that if the damage is corrosion the exclusion applies if the catalyst does not also need to be excluded wasn't there some fair characterization of what caused that damage for example and it's the last thing that you said that i'm disagreeing with your honor the dictionary definition of corrode is to eat away or diminished by acid so when the acid is interacting with a material th chemical reaction is corrosion and that is supported by many of the cases that we cite there's simply no other way to characterize what acid does to a material then corrosion and i think that has actually never been disputed we relied in the district court on the undisputed factual record and and cited all of these same cases now want to appeal wattles is attempting to dispute that factual premise but the only argument they made below is the legal argument that i've already mentioned which is that because the acid is not also excluded the corrosion exclusion should not apply and so when you put aside that factual premise and i'm certainly happy to address more questions about that but in every single case the one i'll use as an example is the better goal case that we cite from massachusetts in that case chorus track d i sing salts over the years into a parking structure and that salt degraded attacked the parking structure and the insurer tried to avoid a corrosion exclusion by saying this was caused by the salt it's caused by the chloride ions that penetrate and contaminated the structure somewhere but the efficient proximate cause dot would suggest you have a vulnerability where you have something that causes a problem i mean where it less assume the pollution are not reforming the policy and that the cause here was the acid and other little argument we are making in every case is that that version of the efficient cause doctrine which i would just easier to call the dominant cause doctrine it cannot apply to a corrosion it was and because just as you describe your honor the catalyst of the corrosion will always look like the dominant cause it's the thing that sets other events in motion and if you allow that analysis to take place here you will never ever apply the corrosion actually in their brief actually confirms that they say in their brief that the corrosion exclusion will apply if the catalyst is also excluded but that just means that the throws actually in itself never does any work so you're sensually saying you're not trying at this point to reform the policy so you're simply saying you have a valid a policy  well it would separately exclude the policy and there's nothing it would separately exclude this last there's nothing unusual your honor about two different exclusions applying to the same law so yes this is a this is corrosion caused by a contaminant so it would be excluded because the contaminant is excluded by pollution exclusion and we certainly stand by that argument and i will address that but it is separately excluded when the damage at issue is corrosion and the dish of course share the concern about the efficient proximate cause and i just want to be very clear that there are still at least two situations where that doctrine applies when you have a corrosion exclusion the st is if you have corrosion like in this case on the way to some later damage if you have corrosion and then there is a windstor and that in the building collapses you would do an efficient cause dominant causing ousts to decide what should be treated as the cause and the nd situation your honor is if there are two parents which is not this case but imagine there was this corrosion there's also termites over the years and you will for whatever reason you can't tell the difference between those two then you would again do a dominant cause and elsa's the one situation where you never do that analysis in a corrosion exclusion is when you have one chain of events civil or commercial code applies due to loss or damage by peril as defined by such code a little bit of a mouthful but there are two fundamental problems here st is this does not why in the united states and if you look at the deposition fairly unusual that certainly in many of the policies in this case because they share the same form but there's no decision construing it either way and again that's why i started with corrosion because we do think that presents a legal issue that's resolved by all of the clear precedent that we where that would have the kind of code you're insisting on perhaps your honor so to answer is st i do think that the this is fairly red to an invasion a country by country analysis and so it's looking at countries in which a napoleonic or other similar commercial code applies read this language to me it would be if the liability was incurred due to that code do to me tell me where you can get coverage what country is it we can get coverage on that actually would meet th france italy germany any civil law country in the world in exide is a world wide operation and this was a world wide policy so in that the reasoning there your honor is civil law countries have far more limited freedom of contract and they do have code rent this place at any value with acid dripping everywhere and that that derives from building codes that talk about stability of underlying structures things that may be true in an atmosphere of you know explanatory way your honor but the liability incurred is due to the lease and lease provisions saying that it must be returned in good repair and they must repair structural damage and so all along so the lawsuit didn't side as a basis building what you're saying correct if you look at their underlying trial brief there is no mention of osha i believe the building code gets a footnote but it is one hundred percent clear that that's not the basis of liability the basis is the lease and that just brings me back to the st point your honor that could be different in a civil law country where there is a code that says not cause structural damage to a lot of weight on that that's eight hundred and thirty six thousand right yes and that well at least eight hundred and thirty six thousand either way that disposes of the case so the two issues that cleanly resolve this case in our favor  the corrosion exclusion which bars and the liability extension which bars at least that eight hundred and thirty dollars sets out and it also bar the post judgment interest it does so it bars the eight hundred and thirty six dollars and the post judgment interest and in fact your honor our position is that it bars everything because this is a liability judgment they're seeking coverage for but there was a dispute about whether the one million four hundred thousand could be recovered on the property coverage and we just we don't need to get into that but the short answer your honor is that most without the liability extension they can recover and which like you know address it seems to me we need not address either the does it still not enough that's exactly correct your honor and so either that or the napoleonic code issue or the corrosion exclusion would outright require the entry of judgment for race by one hundred percent agree if there's no other questions i'll reserve the rainer big to the defense cos pacifically yes your honor so the district court erred by essentially awarding wattles five hundred thousand dollars in excise defense costs that they had no legal authority to pursue and this basically does have a stipulation basically it just comes down to the stipulation they acquired a specific limited right to pursue recovery of the judgment it does not include the right to pursue cuts and they actually don't dispute that they have a separate argument about the policy language but the simple reason they can't recover the five hundred thousand dollars is because they can't recover for it no doubt about that but i think what the district killer was thinking and i agree that that is probably what the district court was thinking but it actually shows why this why the conclusion it reaches wrong because exide itself actually still has authority to request those five hundred thousand dollars it never claim and it just had not been paid yet so it provided notice of the loss in general i believe it is understood that they never made a formal demand for payment but in any event your honor that that money would and for judge anderson's question regarding the a j two so called napoleonic code exclusion it also addresses the issue of the lease raised by counsel these key facts are spalls exide the tenant brought in truck battery casings into the warehouse filled them with stop for gas it count on think we got there i mean what does that go to we have specific issues about the amounts and whether you got to deduct the left or not it goes directly to if you can it goes directly to the corrosion exclusion in the tissue proximate cause and less it wasn't clear in the new we're less concerned about the corrosion exclusion at least at this time than we are about the other amounts and it seems like you lose when we get through tally and subtracting in excluding because  stipulation problems now you can argue what you want to i'm just telling you that you can win on that corrosion and lose the game on the on the math your honor yeah all right let me explain the math i mean if the if the two items are excluded by the napoleonic code problem for example you got over millionaire i understand and just go down the line the all the just that you're on and one last point on the defense cost of women it only needs to be incurred and the evidence in the record is exide and credit it's included within the defense cost supplement and the deductible therefore the duckbill not been paid is that not the right it has been incurred but not it's not required to be paid whether it's paid or not is irrelevant what does the stipulation say specifically about incurred versus paid it says that exide incurred over five hundred thousand dollars in defense costs in the underlying matter and therefore supplement are included within and are not additional to the total amount of the loss so the bankruptcy state education said nothing about the effect of having incurred the five hundred one thousand dollars i'm sorry i thought you were speaking to the stipulation now that i understand your question all it said was is that my client wattles was entitle to prosecute its claim against exide and recover against the available insurance and the carriers had all available defenses period and you get let's say you get the five hundred thousand dollars you're representing the landlord the landlord didn't incur the money exide incurred the money who's alternately going to get the five hundred thousand dollars read the language carefully i know it's somewhat confusing but the deductible ing is inclusive of the defense cost defense which amount shall be included with a man and not additional to the total amount of the loss correct ok then it's as to which the palace's limits and deductible shall be applied he does not say that the defense costs shell count against the deductibles well with all due respect your honor it says that the included this particular phrase i think there's a good argument it all to be construed against you nobody has raised that and i'm not going to hold it so you don't need to worry about that but i guess that would be a complete it requires a narrow construction and the insurer has the duty to define limitations on coverage in a clear and explicit way with clear and explicit terms and it must be construed against a's unless the limitation is clear and unequivocal and we would also point out that in terminating whether there is an ambiguity the policy must be read as a layman not as an d counsel would turn this into a geographical limitation by country and there it is eight coverage territory set forth in the policy it said docket fifty four dollars dash nine at page fourteen and it's world wide and then it excludes specific name countries afghanistan cuba iran iraq libya north korea and countries to u s trade sanctions this shows that this insured knows how to specify coverage for countries for which coverage applies they didn't do so with a j and they hardly did so clearly we ought to construe and a layman would understand by reading the territorial coverage in the declarations page that he has coverage worldwide except for specified name countries and i three suspect to the tenant liability he would understand that he has coverage for tenet i believe for perils defined by a civil or commercial code for perils defined by civil or commercial code that's the language and that is what happened that exide is required to comply with all applicable statutes ordinances rules and regulations regarding use of the premises that is a term of the breach that's a t lek that the facts where i started off are that so ferd acid became airborne because they didn't contain an id to charging station the engineer report you can see the top of the trusses charred and they lose their structural integrity they had to be replaced under washington's version of the i p c which is the washington ministry of code that we cited that it rain down on the warehouse continually so your credits that back to what you're codes are your codes are an ocean and some other code fifty one dash fifty something and those codes preclude what those  the provision of the policy it were referring to the limitation a j to write that you're saying you've got to find somewhere a civil code where is your civil code that you're deriving your authority for for this provision and you say work place it was not able to be occupied for the use intended as a warehouse that's property damage it's apparel defined by a code and it's a breach likewise these would trusses they were charred they weren't corroded corrosion is the deterioration of metal that's the park's case that they say charring of these would trust us is a chemical reaction akin to a bird it's a breakdown of the cellulose it's not corrosion and because of that we had to remove all these beams from this building because it no longer met the code the building costs even even if this that you've been talking about is true if the terms civil a commercial code are to be read like their companions asserted that canon they'd have to be read like the napoleonic code so that in other words if we re this a j clause to me that the law referred to the civil or commercial code and they drafted it it has to be clear unambiguous unequivocal it's not the fact that our district court below judge cohn found that there were other plausible interpretation as a matter of law he did well he did do that but he jumps straight to the ambiguity clause and resolving that against the in charge company which number one i think is suspect because your client drafted that provision as well as the defense pretty is that not true no your honor the manuscript that your client i stand here today i do not know your honor and i don't think it's relevant it's not raised on appeal it's not a basis for decision as to whether x sides agent marsh somehow is responsible as a drafter for this  country in which this company operated would have some kind of civil code like a building code and if that is so question or comment which is is there any other country that wouldn't qualify and i'm not an expert on religious law or islamic law or shari'a law but those types of countries don't have civil or commercial codes they have religious codes and rules of tenet liability go back to biblical days as to how you treat your neighbors insurance company says we're not go that we want to be a reliable civil commercial code like louisiana you're on it which is a which is in the united states unlike washington that has a civil or commercial code and we have that situation here and remember the carrier had the opportunity to designate those countries that didn't want to have coverage and they listed in the declarations page and now we want to read another territorial coverage the shoes of excise that's correct your honor i think it is that is an argument that we could have made but i don't think we need to construe it against them to to win on this issue and i do think it appears the court understands our argument on liability extension because want to make a few points st is that they did not dispute judge anderson's mass which is our math which means this liability extension issue resolves the case  nd this is a geographical limitation they are correct this is a worldwide coverage for property and the liability coverage applies in a subset of countries they're saying that you at some point the policy exclude places like north korea and then in this particular provision it's a nice sort of geographical limitation that's going are going to make sense if you're excluding muslim countries or places that don't have those kinds of laws  common sense why osha seems like a civil case you know maybe not but a civil right and that's why the key is to read it all together and so one can it is read the words with its neighbors and the key one so your honor i'm not an expert on islamic countries and i actually don't know if that's true it was not briefed and i'm not prepared to address that certainly there is a well known distinction between common law countries and civil law countries and i would just direct the this deposition which is documentary fifty three dash wanted page twenty nine he did it testifies this provision is meant to apply in countries without the common law so there is not the average person just an insurance policy and i think good i'm not in north korea got this pretty in here but gees civil law napoleonic law countries then that that would be subject to this would be you say france and what some other european countries united states is that are not covered in about half of the developed world your honor is civil law countries and again any reasonable insured would know that this is primarily a property policy when you get towards the that is a debate the two reasons that is not a reasonable reading around are st the technical term canon which napoleonic certainly is a technical term that you would require knowledge about  and nd again reading it to be every country in the world again i not prepared to address islamic terrorists being asked as a matter of law sort i guess you have an expert as a matter of law the united states is not a country that would fit within this definition  and again even if the policy when you st read it is not the clearest they the insurance reading still needs to be a reasonable one and their reading of this is that it applies in essentially any country with any code even if the liability is not occurred due to