very good please seek counsel may please the court my name is william graham counsel for the appellants the palest senate he's i'd like to reserve three minutes for a bottle if i may ok i'll try to help you but please keep your eye on the clock ok yes court's decision in this case permitting night brooke insurance to shift on to pale as the entire cost of settling extra contractual claims for insurance bad faith and an eight million dollars stipulated damron judgment which were not even actionable against palest is reversible error for at least two principal reasons the first of those reasons is that it is settled under arizona law that act will and then that he is available also known as common law and that he only went to parties share a common tort liability to a third party in this case there was never any liability for insurance bad faith and for the dam or on judgment because these are remedies developed by the arizona supreme court to redress insurance company claims handling misfeasance and other forms of misconduct in handling a claim that's not what the district courts just the courts suggested that your client did not have any liability for the breach of contract because the payment by night broke nine hundred seventy thousand extinguished the breach of contract claims i guess your client i have to respond that the first is that the district court erroneous lee failed to recognize that equitable indemnity exists to ship liabilities and tort not to ship liabilities in content think that was even wrong and help the client i think i did i do think it's wrong he by definition is a fault based concept i understand what you're arguing i'm just trying to make sure that i understand your argument because it seems to me i'll ask you very straight if in fact the breach of contract was extinguished on the behalf of your client by the payment by night brooke i'm having a tough time understanding why the negligence would not have equally been extinguished while the negligence claims were time barred i understand but if they had not been time barred given the if you will the rationale the district court used then would have also been extinguished because it only came by way of being your insurer well in fact the nation's claims are independently barred by the economic loss doctrine because they were they were and i understand your arguments if you want to go that way and give me and a lot of other crosses there's a statute of limitations problem judges and economic injury problem judge i live alos i used them a lot when i was in your stead but the bottom line is the rationale of the district court in extinguishing the breach of contract claims if there were none of these additional things you're throwing at me would have also extinguished the negligence claim negative well because it was all because they were in fact your insurer and therefore being your insurer that if there was any claim under breach contract or if there was a claim under negligence it would also have been extinguished the district court to answer your question the district court found and nobody has appealed that the only contract answer my question lab trying to get to the second question if in fact there's any part of the claim which was made against your client which is appropriately extinguished by night brooke is there not some equitable if you will remedy indemnification remedy for night for no there is not because night brooke settled claims alleging i understand they felt the way mrs conway really way above they settled other kinds of things they settled all kinds of claims above but the claims were brought that as the claims brought if there were any of those for which they also extinguished your claim would not be equitable and in the for cation no because it's a settled principle of arizona  my question is not their settling their own claims i tried to put that out there this is not about the insurance bad faith claim this is about the breach of contract and the negligence claim which was yours if it was theirs that's what i'm asking you about the breach of contract claim was not ours because we're not an obligation under the s l i policy really insured under that policy your honor we have no as if you read the policy you'll see that the sole ababa were under that policy is night program were titled to the benefits as an insured under that policy we don't have obligations of good faith fair dealing to the policy we're not an insurance company and the negligence claims are nothing more than contract claims dressed up in the garb of tort law they're divorced from bodily injury or property damage what was actually saying and the mcgill's what they were saying your honor was you palest promised us a free lunch and you didn't deliver on the promise now that type of claim lies in contract it's not a fault based tort based claim and so if you if you if you say well as as a hatch case recently held that you have to prove that the party you're seeking damages from was negligent and proximately caused harm what was the harm that was proximately caused the bovver the answer is an economic loss he didn't suffer any bodily injury or property damage so the negligence claims against payless never had any legs to begin with they were they were substantively defective from the get go because there barred by the economic loss doctrine which is expansively applied as this court held in the apollo group case expansively applied by the arizona supreme court so there you know they were there the negligence claims were dressed up contract claims the real the only liability that pales really ever face was a claim you know which may be breach of the right of agreement but the district court found and nobody's appealed that there was no claim for breach of the run agreement in the case so you know getting back to what i said earlier there's three reasons why the just records judgment should be reversed one reason is the lack of any common or coextensive obligation between night broken palest with regard to the bad faith and damn on claims that's fatal under her stand and and other arizona cases to the fact that they were allowed by the district court to shift on the palest the cost of selling claims alleging their own misconduct that violates the settled arizona principle that a party cannot get equitable indemnity for the cost of settling its own misconduct and that a party seeking  be entirely not partly entirely free of fault negligence and couple misconduct and third let's not forget the recent hatch case which opposing counsel correctly sent in has a twenty ha authority it has and things in there are of interest to both sides and what's of interest to me is that hatch unequivocally rejects the district court's finding that it can rely on an attenuated chain of but for causation in order to pin liability on palest for the cost of their settlement of their own bad faith and damn run exposure the district court assumed your honor that because palest is desk agent and it's hotly disputed what occurred at that counter because the desk agent with the fuse by somehow confusing bova into thinking that he had free insurance coverage but for that nothing else would have happened he wouldn't made a claim  required that you show active negligence and proximate cause the district court in this case if you read the final order specifically declined to find either negligence or proximate cause for that reason alone the district court's ruling cannot survive i had and i would also suggest that even if this went back to the district court which the first time around on a fully developed trial record couldn't find any evidence of negligence by palest even if it went back to the district court you have to ask the question was there a breach of of legal duty and did it proximately cause of flawed factual arguments the briefing of the argument suggest that what happened below was that judge campbell exceeded his authority and granted summary judgment in our client's favor and that all they need to do is point out some fact questions in order to overturn the judge's ruling that's what happened this case went to trial these there are no questions of fact left the questions of fact were resolved by the finder of fact of the trial and so pointing out issues that were disputed below is no longer relevant but let's start with the flawed legal promise we have pages and pages of briefing and even argument today talking about whether or not the night and to t is sufficiently extinguished the liability of pallas whether they extinguished mt builders but it's now the law of the land in arizona from hatch there are two ways in which one can seek indemnity under the holding the judge campbell issued which has now been wholeheartedly embraced by the court of appeals and hatch cited with approval and embraced and sure there are there are two methods and one is the one of which counsel spoke extinguishing an obligation of a party but the other is simply about fault it is an equitable remedy the court in order to find the payless entity is what fault did not need to go through the legal standards of duty breach negligence he needed to find fault and he did he found fault at the play in our analysis about what is obviously an equitable remedy yes your honor i have two answers the first is that under hatch it doesn't matter under hatch the landowners the hunts had a contract with hatch who in turn sub contracted sincere linework line that line work was performed negligently litigation ensued when hatch settled the liability inside indemnity from solomon that wouldn't necessarily have been a coextensive liability in the court to discuss whether it was or not because it didn't matter but as a matter of general practice and principle the general contractor is going to have different liability and probably greater than a subcontractor didn't matter that it wasn't a coextensive liability that entire issue is out the window because the satisfaction of an obligation extinguishing of a liability is not part of the standard under the restatement section somebody did the indemnity defendant hatch argue actually considered that issue we don't know whether the specific question was raised but the court did say specially with specificity that the section seventy eight standard is a different one and it provides a different method through which a party can seek equitable indemnity and it has nothing to do with the extinguishing of the obligation it's a different remedy it's a different method and the court embraced that wholeheartedly so it kind of rejected its insanity other as in seventy eight a variance of seventy six because again as hatch rules these are different methods there's nothing in the opinion of the court of appeals and hatch to suggest that it would carry over it does word them as different remedies but the other answer i have for your honour's on this point is a factual one at the time the settlement was made there's a bit of a legal misnomer here that the night entities at that moment faced this eight million dollar exposure for bad faith there's been quite a lot of talk of that there's a finding at court there was an about face so let's let's dispense but let's talk about the legal issue there is nothing in the record to suggest that at the time of the settlement the night entities ever had been provided an opportunity to settle the claims against its putative insured bovary for an amount that would have been of the extent of the night entities obligations under rogan v are the owners more of the american family that say farm repeat peyton if you don't have an opportunity to settle for an amount within limits litigation came when the opportunity to settle for nine seventy presented itself so your position is that regardless of the bad faith claim which of course could not have applied to pay losses non insurance company which le arguing no eight million dollars you're saying that under arizona law the fact as you allege that your client had no opportunity to settle the matter before it was settled with your client paid the money but did not extinguish any claims against pay less for that factor and your e mails i'm going to answer easily could have ended the case and taken away all the claims against everybody for nine hundred seventy thousand if in fact that's what your argument really is i suppose it could have committed that that  findings at trial from judge campbell were that there was absolutely nothing about the suit against words that's afterwards i'm talking about what they sued for what payless was sued for  and your client yes by mcgill's were sued for breach of contract yes negligence insurance bad faith yes yes they were sued for those things and you know all you're saying is that the insurance bad faith can only arise because we can only arise because if we don't have a chance to settle for policy limits we should have no there are myriad ways in which one  that's then why does the nine seventy make any difference because the state farm versus painter case says that with respect to the specific question of the exposure once that's happened on the contract it has to be kept in nine seventy and the effort to collect the eight million dollars stipulated judgment was an effort to collect on the policy through the dam or on the sludge line of cases and so here the mcgill's attorney knew that they had this fatal problem in their claim that they hadn't given the opportunity to settle for limit so then that offer was presented tonight they needed to solve that problem and they gave the very time limited opportunity to settle for nine hundred seventy thousand dollars which you said of a glad to take it but you can sue pay less for anything you want and what would have happened than are insured who suggested it was bad faith to even ask that they pay half of the settlement we were supposed to leave them hanging and exposed to the to the mcgillis who were actually seeking additional damages beyond the nine seventy for tort damages emotional distress you took over their class we took over with a safety net we knew the damages now were capped at the nine seventy and insurance coverage that the payless entities led mr bovary to believe that he had there was no risk of punitive there was no risk of tort damage there was no risk of anything other than that contract amount because of the safety net the night entities provided the night entities knew when they were presented with the settlement opportunity that they had a chance to mitigate their damages which of course  requires that they do were they to reject it and roll the dice on the eight million dollar risk walking away for an opportunity to settle within the amount limits on me ask you this though take out insurance to cover from for and hope for unexpected liabilities what to pay less get out of hiring your people what pay less got was it commercial opportunity to sell insurance to renters from which they profited handsomely the only really weren't and there was an accident that resulted in both the renter and payless being sued for the auto liability for some reason for instance the renter was someone who had an unsafe record that they should have known about or was intoxicated or the accident was caused by a faulty maintenance problem there in that context payless would have had coverage for the auto claim because this is auto liability basically painless from your perspective is no more than your insurance agent from that perspective they are a licensed insurance and they were selling insurance your relationship with them from your perspective well here i don't i don't ignore the fact they are the name insured under the policy so they are but they are a dual situation they are named insured on the policy there are certain obligations that flow by and between both parties to that contract neither is to do anything that would impair the rights of the other but as as views of insurance know their insurance their insurer to whom they tendered this case and who defended them throughout the case was great american insurance and there's now reported decision from district court judge was the silver overall of that issue so great american insurance in another case was the carrier to whom they looked for protection against these claims i see so you're a new this here tonight brick was not insurance coming to him they look for this particular action absolutely correct they didn't tender the claim they never asked for protection in that why did you defend them we didn't create american history on it i apologize we were we were co defendants for a time and then the opportunity came to settle but night knew it hadn't done anything wrong it had to take the offer of nine seventy it had to mitigate the exposure ok so let's go i'm glad you returned to that and i think i'm not sure what your position is good night have any legitimate exposure or plausible exposure for the eight million dollar damron judgment for the bad faith if they had rejected the opportunity to settle with him you're not answering my question did not have any legitimate exposure to the eight million or was the only plausible exposure to the nine seven the only realistic exposure both actually and legally in arizona before that offer was to the nine seventy because of the state farm the painter case ok so that means that there was a the maximum amount of damages was nine hundred seventy thousand dollars and night brooke settled that claim for one hundred percent of the maximum amount of damages when does that ever happen on the contract claim it was cut they were not going to be able to collect the eight million dollars stipulated judgment as a breach of contract but they did allege tort claims as well and in a jurisdiction like arizona we can't forget the threat by some exposure tonight brooke of a judgment that exceeded nine hundred seventy thousand dollars as there was a pay less because there were tort claims asserted against them as well so i can see conceivably because there was exposure of greater than nine hundred seventy thousand dollars that night brooks liability might not have been coextensive with payless as live bill if you don't know whether it was we have reasons to believe it was very close but we also know that under the hutch's decision there was no requirement from section seventy six assuming it exists also carries over to section seventy i suppose knowing that under arizona law there is no arizona court which has in forced this coextensive liability requirement this is law from other jurisdictions what we know is that judge campbell has been an esteemed judge in this jurisdiction for years found it to be a separate standard the court of appeals has embraced that wholeheartedly with no discussion whatsoever and we know that the two parties to that case would not have had extensive liability the solomons were positioned very differently the hans hadn't even sued the solomons in that case the huns didn't have a contract with the solomons they were subcontractor but the court held that the general contractor settlement of its liability which was not coextensive and in that case the court held there overnight i'm so let me just ask my colleagues you have any additional questions ok we thank you very much for your liability the rule that you can't get indemnity for the cost of settling your own misconduct or fault and the requirement of proving negligence and proximate cause remain it doesn't matter whether you're under seventy six or seventy eight counts of what's your best argument against your opponent's view that the liability of potential liability both under contract i guess and tort law was coextensive park the the state farm the cleaner case was not cited in their briefs it was not cited below it's a brand new argument i've not even read the decision and it should be waived that's my first argument my second argument is the real world oh yeah ok my second argument is if you read nothing in the record read pages two forty one to two forty six of the e r which is the testimony of n jarvis who testified unequivocally that the reason he settled with the mcgill's was that night broke faced extra contractual liability on top of the nine seventy eight million dollars or more for tortious bad faith and for an eight million dollar damron judgment and that those extra contractual claims were the reason that he settled with the mcgill's and that but for that he wouldn't have settled that testimony is clear it's an rebutted and it shows exactly what they were doing but now seems but it seems as if by what councils jesting that she's saying she agrees with that because if they hadn't for the nine seventy they would have been subject to the eight million because the nine seventy was policy policy limits and if you don't settle within policy limits you can be responsible for the eight million that's or argue that that's not an argument that they've made before and it's sort of here for the first time but i will tell you that the the  claim for free insurance was weak they were willing to release their claims against my client until night did in and took an assignment in a collusive arrangement to foist liability for their settlement faith claim based on a legal error the assumption that you can have bad faith when you don't have a covered claim submitted read the d s case from one thousand nine hundred two and a whole series of court of appeals cases which show that it's independent the obligation of good faith and fair dealing in actual bad faith are independent of whether a covered claims middle under the policy and other questions thank you both for your arguments very helpful very knowledgeable in your area of law