the next case on calendar is american trucking versus west chester eighteen dash three thousand five hundred and forty one for each side will have fifteen minute my name is john hacker for appellate westchester under the plain terms of the westchester policy arbitration provision an arbitrator is supposed to decide all claims of breach under the westchester insurance contract the district court here whoever decided for itself that westchester breach is contractual duty to defend and then on the base on that basis it stopped westchester from in st saying the provision that required an arbitrator to decide that threshold question of breach that really is squarely contrary to both the federal arbitration act and to montana law will begin with some very liberal language and some of the month ten a cases toward remedies for breach of the duty to defend so why don't you address the language and show why those cases don't control in favor of your opposing party i'm happy to start with montana law because i don't think there's any problem there but i want to be clear that the f a a is completely dispositive of this you don't even need to get to the montana law question because the of controlling laws federal law which prohibits the approach the district court took but i will get i will start with montana law undermines and a lot of perfectly clear that a breach of a policy only a stops defenses to coverage i can use their own brief to establish the point of their response a breach of page thirteen they accurately describe atic accurately describes what montana law it is quote the montana supreme court is uniformly applied to stop a remedy for decades true enough regardless of whether the ensure asserts of the claim falls outside the scope of coverage or that exclusions apply or the defender is not insured pursuant to policy definitions or the policy conditions are not met all of those are reasons to deny coverage not one of them is a stop of a neutral forum selection clause that is supposed to resolve those threshold questions of whether or not the insurer properly denied coverage there is no case in suppose it would probably be a state supreme court maybe a federal circuit that holds that well that holds your way on on that point that despite an a stop all to the die coverage there's one or another version of that in many or most states and from a breach of the duty to defend the agreement to arbitrate nevertheless stans so on the defendant particular that was  the indiana appellate court not the indiana supreme court apply this widely accepted i mean literally uniformly accepted rule to this particular context of this court and i understand what you're saying i just want to know what the best authority for what you're saying is that's the most analogous and he says this is the look that's when i got as an intermediate appellate court from indiana on these exact facts the best you have from this court's decision in brown against dillard's which explicitly held under california law to be sure but california law do to defend provision but there's certainly no reason to think there's some special rule for duty to defend provisions no court has ever said that in my head now i don't remember for sure right now or any provisions of the arbitration agreement put issue here need to consider about whether there is an arbitration agreement and that's a slightly different question the answer that is no nothing for this court to consider because the court below rejected their arbitration specific argument that said it's a contract of adhesion and therefore can't be enforc montana law i'm not sure that therefore works there because we're reviewing de novo that's why i asked the question well but the other point is they didn't raise it in the brief they make a passing reference to the fact the court said it but you won't find a portent point heading i develop the argument that it's a contract  on correctly because i think everybody agrees that's just an ordering provision the st part says you can either arbitrate or mediate and then arbitrate and the insurer basically can veto the insurer selection and choose between those but at most what they would need to mediate st then arbitrate they haven't invoked any version of that because their position is the whole thing is categorically unenforceable you know under the montana law we've talked about where no montana court has ever said that they do have an additional argument focused on the arbitration agreement though and that's that it's an assignment that they didn't sign it and therefore they're not parties to it that's wrong under montana law and the law again every other jurisdiction including this court because when you are assigned a right under insurance contract like any other contract you take with it the remedy is that's what this court said in the comedy club case that's what all of the treatises say and it makes perfect sense you would just you can't circumvent an arbitration agreement by simply assigning it and changing the character of the rights so i'm sorry you were are making the argument i think you help me if i'm wrong because i don't mischaracterize your argument that you're making is i understand it the argument that the question billeted in this case is a question for the arbiters and not a question for the court there's been a lot of cases as you well know if you're following this area of want to announce and around on this but your is that in requires arbitration all busy claims on the contract so that to that extent it's based on the agreement the federal arbitration act on the other hand or in addition says an agreement like that has to be enforced every court is required force that except on grounds whatever it way around in the brief you could come out either way i think it's actually easier to come at it start with a federal arbitration act because that actually does apply the substantive law it has to be enforced under the for arbitration right act unless there's something in state law that says will we certainly could i mean their argument that we breached presumably the defend presumably would be the st thing they argue the arbitrator arbitrator could say the same thing that the district judge did that you're stopped from raising is decided and it's just like an agreement to litigate in new york it's an art it's a it's a form selection cause that's what the courts of called it the u s supreme court called a dispute resolution provision that's what i was listening about mechanism but i don't think anybody really disputes that it's a form selection clause they didn't come back and say no it's not a form selection clause they just tried to say that under montana law there is no contract right and you're stopped from raising any of your contract defenses to paying the money but they don't quite say that your honor what they say is your it stops invoking any provision of the contract including something that's not a contract offense but is a form selection clause that's their position so it's only disputed that the form selection clause that's what it is they take the position that the breach of the contract a material breach by an insurer prevents the insurer from any part of opposing count your opposing counsel is going to stand up and say form selection clause or not it's just part of the contract and they the every argument they could make that under that contract because they didn't defend that's what's going to be said so why don't you answer that right now instead of depending on the few seconds of rebuttal time you get i sort of meant to be arguing that earlier which is all of the montana cases that they cite don't none of them go that far they all talk about contract coverage defenses and people still and that's why i asked you do you have anything but silence that you can argue do you have a case that says in so many words right and case is one and then what i have beyond that your honor is not silence what is very clear about this is not silence it's the consistent holding of every court that's looked at this every single one of them that the breach of a separate matter of law look at the breach of a separate provision and say we're not going to enforce the arbitration agreement because the breach of a separate provision because it several now the prima paint case which didn't really establish that proposition says as a general if  of course you can repeat the eighty one other independent distinct provision and still enforce the arbitration agreement that's why they're incorrect to say from stances where you can't for example if the agreement was obtained by fraud then the arbitration then the greenman is void and the arbitration clause can't be enforced your honor that's with respect that's not correct that's the dead square holding prima pane if you're attacking the entire contract as induced by fraud you can still invoked arbitration agreement because the arbitrator gets to decide that threshold question that's that's what the holding prima it's seemed odd to the dissenting justices but that's been the rule but that's not what we're dealing with here we're dealing with the challenge to a separate provision of distinct provision and the courts have consistently said from the supreme court on down that you can't challenge a separate provision you have to challenge the making and for some of the arbitration agreement itself that's what this court said  e under the federal arbitration act so you're opposing counsel seems concerned that if it ends up in arbitration montana law won't apply and so then there's a stock will roll won't apply and i as i understand it you did take the position at some point the louisiana law would apply i don't understand that because it seems like you're arguing that it's a forum selection clause but wherever you're going to litigate this in arbitration in new york and they can apply the law anywhere i don't understand the argument that it's not montana law well the most litigated in louisiana or something about where something about has something happening in louisiana but nothing about louisiana i think it's just map location of choice of law principles you know you i suppose you'd start with whatever forum we're in we wouldn't be in the montana form anymore and so we have to think about which for a war and we  that forum's choice of law rules that set of choice of all rules will tell us which form of lies all of that is to be determined litigated before the arbitrator decided by the arbitrator none of it's relevant here and it hasn't been breached anywhere what choice of law applies here that including all of these issues that judge freelon just where are you about that's actually right but i want to be misunderstood there is a threshold question for court to decide whether the arbitration agreement itself is an forcible oh yeah that's that's right and they do have this please the court martha sheehan behalf of aduc just claim that you are right it is our position that every argument is waved under their duty to defend analysis and i were very lucky in this case while these concepts have been prevalent in montana law for decades the montana supreme court recently wrap this up with a tidy bow in the dragon why case i presented that case you want to twenty eight j there was no p f r it is now a final decision as of friday i'd like to walk you through dragon why as it applies directly to the facts of this case because it is just positive and dragon why the montana supreme court looked at the expanse and the nature of the breach of the duty to defend the a stop all that arises there under the montana supreme court said three very distinct things all of which ply here and i'm quoting if the insurer declines to provide a defense against the claims on behalf of the insured in the st instance the insurer ma not put on that defense for its own benefit in later proceeding if the thing that i'm struggling with is why is arbitration a defense i mean either side might want arbitration so it seems like montana has been very clear you can't use contract defenses once or under the stop over all but i don't understand why an arbitration clause is a defense because it's a bridge to nowhere if you revive the defenses that they have clearly waived by saying oh here's a forum for that but what the montana supreme court says the insurer may not put on a defense in later proceedings so maybe they go to arbitration and there and they're stopped and they get an award in arbitration which would a problem through i thought the defense to a contract means i don't have to pay the money because you breached this isn't that kind of thing this is more like will we have to litigate any disputes in new york because when they go to arbitration here if they go the arbitrator can say  you have no defense because you breach so you can invoke any of your contractual sensis you have to pay we agree we think the arbitrator will say that however it's important to note that as you continue that seems to be the only thing that the case in the twenty it is the failure to provided to finance that constitutes improper abandonment justifying an issue ensured to take steps limiting its personal liability through a settlement that the law recognizes as presumpti ely reasonable it is an undisputed facts in this case that westchester did not defend its in shirt it is that breach which is understood and what the case says is that the usual set up that you do for excess assignment of rights cover not to execute and so forth is fine in montana law but i don't see where it says anything about where reform selection clause or an arbitration agreement are not fine gone the insurer says we'd like you to show up at trial and we'd like you to give us an interview before trial all gone right in this case the cooperation clause which you find on excerpts of prior written consent of the insurer we didn't need the consent of westchester to settle this case and the settlement agreement is presumably reasonable the settlement agreement provides that montana law applies to any dispute arising out of the settlement agreement and the venue is in missoula montana so where you but that's the settlement agreement and that's not the contract that has the arbitration clause that's true however that's what was put in the issue westchester has clearly under dragon why raise waive the right to enforce the cooperation klos the cooperation clause allows the waiver of that right allows adek to settle the case including choosing the side they got to settle the case and then and then they may have to pay for the settlement but why don't you have to go to the arbitrator to say look they have to pay for the settlement we didn't need permission and montana lot applies and they can't argue any defenses i still don't understand why all of the things you're saying can't happen in arbitration because aduc in bringing its rd party or its complaint the amended complaint which has one claim the complaint against westchester is a declaratory relief seeking to enforce the settlement based on the breach of the duty to the fam so while there is a component of the breach it's a it's a claim to resolve the issues of the settlement that applies under montana law based on the settlement agreement which you can work on reaching agreement has nothing to do with the duty to cooperate i guess that's where i'm not following you except that the do you cooperate would have required us to obtain their consent their written consent and we didn't have to do that in order to enter into it well that's because this case that you cited in twenty a j blesses the usual set up in breach of the duty to defend cases yes and but but that's not this case takes it a little further because what insurance companies used to do on those set ups is invoke the cooperation clause and say it's one of the ways they try to avoid him invoke the cooperation clause and say you you settle the case you're not allowed to settle the case without our consent  and this new montana case yeah the insured can do that well what the district court said and appropriately so in this case is that it wasn't necessary for the district court to make a determination regarding coverage and whether the exclusion applies what is mandated by tie demands under the facts of this case is that westchester should have an initially offered at offense to its insurer it is that breach which is not in dispute that triggers the finding in the case they don't have to go to the breach of the duty to the defend in fact they're not allowed to as they said in tidy men's coverages off the table get all those all go low to the substantive provisions of the policy so called defenses that they're not allowed to raise i think what my the steam colleagues here have been talking to you about is not so much that but rather the collateral provision here that has nothing to do with coverage and his i think judge i think it was just kind filled mentioned it could be raised by either party we want to arbitra that that isn't a defense to any allegation in the complaining including the one for which they're seeking declaratory relief and as judge friedland quite i think correctly pointed out the various defenses that you say are gone and you may absolutely be right could easily be raised in front of the arbitrator so they're not necessarily off the hook because they're going to arbitration they just have the right to go to arbitration yet it's a futile act to acknowledge but that doesn't make any difference it's just another place to lose that's true however i mean i mean it does apply demon's is going to be the main argument in front of the arbitrator and if your interpretation of tidy means is correct then for the insurance company it's just another place to lose well except that it also plays in to the implicit delivery of the f a judge as right you were talking about the difference between enforceability and those concepts and this court has held that the f a s limitations are the court's involvement to determine whether a valid agreement exists the district court held there was a valid agreement with which i disagree but that's the whole thing and whether the agreement encompasses the disputed issue this court has also referenced this as has the united states supreme court  concepcion as whether it's in forcible that is something that the district court gets to decide and the district court decided that because there was an abandonment of all of these policy provisions then this arbitration clause is not enforceable where we're really sticking our neck out as far as the supreme court is concerned if we go your way on that i mean every time any anything's been raised before him in the last five or ten years they've said arbitrary and people give excuses and they say arbitrary i agree that there's a liberal interpretation at the supreme court at this time if you have any question about whether the montana supreme court believes that this i a requires arbitration so why don't you address that the f a a has a saving clause and the saving class provides that state law may be applied if that law arose to govern issues concerning the validity revocable it and enforcement of contracts generally the saving clause directly applies to this situation because this was an equitable remedy a state law remedy that talks about the enforcement of contracts well there's revocation of contract here and if the contract is revoked altogether then i don't think the insurance company has to pay any money because they're only on the hook because they made a contract of insurance in concepcion i was quoting which talked about the enforceability oh i was quoting from the statue you know we're in front purposes or the united states supreme court in concepcion talked about enforceability and it's important to note that the district court in this case focused on enforce ability they found that the district court found that this was a valid arbitration provision again i disagree but held that it wasn't in forcible because it had been waived under a state law doctrine that does not apply directly to arbitration that's the key under the saving clos is this a state law doctrine that applies only to arbitration that tries to impair arbitration now it's a state law doctrine widely in forest the montana supreme court just recently held it  precludes you from putting on a defense in a later proceeding that touches any proceeding including arbitration the argument you just made is an argument that you're opposing counsel made and that is that it doesn't apply if it doesn't apply it's not subsidy of and then it isn't fall within the ambit of the montana cases and my point is that the saving clive's has been interpreted by i was going back to the say so you can kind of make an argument on one side and say one thing and then go back but it's a little different in other words you're arguing for purposes of the f a a that it's really not a substantive contractual argument pursuing that has to do with coverage but for the purposes of the montana lawyer arguing that it is so i'm afraid no i'm not arguing that ok you make yourself clear that i'm arguing under montana law that all the provisions of the contract or waived and in particular the provision as to where this would be adjudicated is waived because you're saying that the savings provision in the f a a saves you from having to use arbitration why precisely because the district court specifically ruled on enforceability and it's within the district court's right to rule on in force ability this court applies a substantive law montana which was applied by the district court and it must take the facts that are made by the district court in making the arbitration determination as proven but what we might have to accept the facts but the given for the moment so even taking that as given though again that's whether that stops arbitration as opposed to substantive contract offenses in the traditional sense is a question that over that we have to figure out right yes  question apply in montana a lot to the effect of west chester is failing to show up the other thing i want to mention as my time winds down is that westchester is argument flies in the face of the purpose of the a the purpose is to accommodate quick dispute resolution and in this case west chester sat on its rights nobody tonights the head west chester when it still had a dispute against the gorm insurance as the a plurality of this contract could have arbitrated this dispute they chose not to do so isn't that the same argument as they breached their duty to defend yes it is it was when they breached their duty  it's important to look at what is actually at issue here they are trying to up and a judgment which montana law recognizes as reasonable and up and a settlement agreement in which the parties specifically agreed that montana law applies and the form is montana thank you thank you very quickly ron as i do think i understand the case dragon why is it relevant in the st instance because of the f a a which requires a challenger to look at the making and for some of the arbitration agreement itself not an independent provision the savings or clause analysis and say whether or not your challenge to the arbitration clause specifically is saved by the same as clause it's not relevant to the threshold question of severability which disposes of the district court's analysis counsel suggests the breach of duty is undisputed here that's absolutely  contract expired in june and the occurrence was in july the insurance company might well refuse to defend but that wouldn't mean that it was obligated for the full amount of the policy that terminated in jun that's right there are lots of reasons an insurer may not defend it because the expiration of the contract the contract may not cover the loss for example here there's a creditor exclusion which says if the claim is based on yours the fact that you are a a creditor i understand