morning rounders my name is patrick wilensky i represent satterfield and ponty case insurance company a construction company and ameri share insurance company may it please the court i don't see them very often but this seems to be a case of first impression and it's whether funds obtained by a contractor through alternative risk transfer means in this case a settlement based on  in that settlement based on the terms of their access policy so basically they want to go us fires want to go back and pick a part that's settled in real life what does this amount to  contractor sub contractor settlements based on indemnity are not insurance under the policy so that the so the us fire policy is not excess of that and i can explain that why it has an indemnity clause in its sub contract and the basic reason for that it's belt and suspenders they require their subs to provide additional insured coverage which names s and p as an insured on that policy but all of the sixteen seven suppliers that were involved did not and they probably had sixteen different reasons based upon the types of endorsements you see so that's why i can in construction you have a situation where the contractor will also rely on indemnity and the indemnity is not insured it's not insured for s and p the indemnity is insured for the sub contractors the sub contractors of insurance for that indemnity or they may and there was a award for eight million dollars before the award was entered we set s s and p settled with all the subcontractors for four point four nine two million dollars which looks like a really good thing and was a very good result at that time so once they were awarded came down s and p relied on that four point four million dollars four point five million dollars to satisfy the first amount of the judgment and because the the damages that were settled are not covered as admitted by us fire itself throughout this proceeding that two point eight million dollars for mold damages and one point five million dollars for the attorneys fees or they're just not covered under its policy if if the settlement money undisputedly had only gone for losses that work cover and then that had fully compensated them for those losses you wouldn't be saying th undisputedly went to losses that were covered by fire you wouldn't claim that fire would have to still pay on the insurance policy would you yes we would your honor because what would happen is it would go it would go up from the well i don't know how the numbers in front of me but it would go through the primary layer and then it would we would have and then i guess there would be a there'd be a there'd be the other insurance issues would enter into the into  the equation and they would have to divide the excess insurer but they would have to divide the other insurance decide which is access which is primary as they did in the us are case around which is excess which is primary and then it would still go up  i'm sure and us fire would still end up paying a portion of the loss because they once after those four point five million dollars paid there's still three and a half million dollars of an eight million dollars judgment will allocate them to cover losses unless you the insured segregate because that's the rule of thumb but so to avoid that here what's crucial for you is the policy term that this indemnity agreement isn't other insurance is that the position you're taking is that over simplifying it maybe even if it would start the way we avoid it your honor it's the fact that our us are other insurance then embraces any legal mess in this well leading to liability that would just seem to be very broad language that's what but that's not what the policy says your own read to me exactly what that we gave you a visual aid but what it says is other insurance means and if you look at sub to any type of self insurance not involved here are other mechanism by which an insured arranges for funding of legal liabilities for which this policy also provides cover and the public contract or indemnity agreement it's not that because the last clause says it has to be legal liabilities for which the policy also provides involved a long process that involves sixteen different entities with different with different agendas and none of them none of them would agree to do any type of allocation are any type of more specific any more specific type of language in the policy other than they supplied were labor and materials to the courthouse that was defined as alleged to be defective and they're paying x amount of dollars in connection with work on the with the defective work on the courthouse us fire it's less control about how to structure the settlements it's a party control principle yes it is a control principle the difference between this case if you look at our us are were there were two separate totally separate lawsuits is this settlement was made in the context of an arbitration an arbitration in which the defense counsel was fastidious in keeping the excess carrier involved distinction but they still never had control over the confection of the sun i think your and you had had what happened is they chose not to do that all they did is they responded and said we will honor reasonable settlements they had an opportunity to do that and they didn't take it and so how is that punishing them like eleanor that's that's our point on that issue  so we think that that in this time in this case we did have a type of the type of settlement and we have that the excess carrier could have had every  opportunity to participate but they did they stood on the sidelines and didn't do nothing and now they claim that they just didn't have an opportunity this is one of those one other issues i mean the the district court also had several statements in it and one was the s n p chose not to insure a substantial portion of the risk it carried as the general contractor for this large construction project that just doesn't accord with the reality the reality is it did carry the last sentence says that these obligations apply whether or not you have complied with any insurance requirements or you have and that's a fact of life in the construction business between general contractors and so me on many situations like you know you do you think well to be honest i think what happens is these cases get settled before they'll go into an arbitration or they'll go to the local jury where the building is that but the project was actually constructed in court they don't get here very often here and so there's really no issue with the double recovery cases and one satisfactions they just s and p paid four hundred forty thousand dollars of its own money in two of its profits to primary carriers egg that paid an extra seven hundred  seven an extra seven hundred thirty nine thousand and america sure who's trying to recover it back paid another nine hundred thousand dollars and i don't see under the circumstances how we can have how there can a the can be a double recovery or a windfall especially where u s fire admits that the major part just about all of the sub contractor segments are uncovered the only happen there's no way to allocate between the subcontractors among the subcontractors for how much actual work they paid for that was covered and what was not covered that's just not an issue that they're not going to deal with in settlements we had a very very aggressive plaintiff's lawyer and the plaintiff's lawyer that probably has six or seven more of these lawsuits on file i'm going to against others of my clients and the sub contractors and their insurance companies are very very hesitant to really to commit to anything any of the basis for what they're paying the money for they're paying their money for freedom is what the paying for to get out of these cases unfortunately for s and p they were able to enter into this settlement before the arbitration and they had they did have this pot of money if you will it allocated that was al a couple to the judgment it certainly was not eligible to margarita's in mexico or bonuses for the the bosses as was implicated in some of the briefing below if for some reason even judge rosenthal thought that somehow by some i think the worry was accounting trickery that s and p was getting away with something we viewed as s and fuse a conscientious contractor they made a very favorable settlement and that settlement carried through and ran the numbers would we maybe a would might be able to so as satterfield didn't have control of the settlements there were sixteen in there were the general yes they were seeking money but they just did not have control to force these sub contractors  whoever most likely their insurance companies who were paying who would be paying for the settlement to allocate between covered in non coverage losses that's just an issue that simply doesn't happen you put it in the settlement agreement i would think that how hard how hard these settlements are to negotiate i i can't represent that we tried to do that i don't think we did but if we tried it would have been successful substantial portion of the risk it carried her as a general contractor for a large construction project and that's what this case is about what you have submitted to the court systems ministry but a two page handout that's on the first page what we did is take the total arbitration award of the eight million dollars and break it down to the covered uncovered losses meaning covered in the us foreign policy not cover there's no dispute that four point three that was not covered s and p was able to recover from the water purchase of a contractor one point seven million which means their net uncovered last two and a half million now for the covered loss of three point seven six three million statement at the end factually that the majority or all of the settlements were for uncovered losses absolutely not and that was a big issue in front of judge rose thought we had had a hearing on january fourth of two thousand and seventeen one of the insurers i think was marisha said but there may be more settlements for uncovered losses like maybe the wallpaper subcontractor helped cause mold damage and she said well i'll give it a chance to prove that they never did intervene in the settlement process until the primary carers exhausted our obligation respond doesn't attach until there's exhaustion of primary layer over them and that's where i think there were any amount spotless but they didn't show a addressed this very well at the january fourth hearing but we consented to the amounts and still have no object in the amounts of the settlements we never asked to and never agreed that they could use that anyway the warning they didn't tell us they were going to  fire has no obligation to pay those uncovered losses assuming the opposite they had only covered losses the troggs of all that other stuff they got to pay they were over compensated for that so we always outside the risk i'm not sure that i really understand there are other insurance laws without same goes for other insurance the question is have they already been compensated for the lost that wouldn't be covered under a policy and the answer is clearly yes  what we're sorry we cause that last here's your average million dollars now where it was voluntary or through the indemnity agreement shouldn't matter the point is s and p has been paid for the terasa loss that can't then come to us and say now you paved roads are lost that's exactly the double recovery that they're asked to do with or any settlements that did describe i thought there was one related to where your client said that one we wouldn't count we said that one we wouldn't count against a covered loss because trying to be consistent if we're not going to pay for and cover losses we should get the benefit of settlements for and cover losses and that's one settlement where it was demarcated but actually it's losses because it comes back to the i r s our case it's their burden to allocate their debt they try to distinguish ours are saying that that involved insurance companies not so in that involved an insurer that had no was completely distant from instead of day to day involvement in when i heard mr once you say that his client s and p who was a party to the settlements had no control over them well they didn't we sure didn't whatever control they had we had less and your growth will point it out so it doesn't matter that it's an indemnity payment as opposed to an insurance payment the fact is it's payment for the same loss they want us to pay for when we take that bet it's payment for the same loss we agreed to pay for the now wants to pay for a different loss but if put aside the case for just looking at the four corners of the policy it's the other insured portion does say it has to be covered by your policy seven thirty three of the record and that says its vision called transfer of rights of recovery against others to us subrogation what says if the insured has rights to recover all  part of any payment we have made out of this policy those rights are transferred to us the insured must do nothing after a loss to impair these rights or the transfer of these rights to us now when they settle been compensated for it yes and it turns out we add all those together with the prime insurance payment in the supplemental payments the amount they got us more than a quarter million dollars more than the risk we agreed to because of the releases they have breached the contract by violating our separation rights section two would apply that it would be a policy that would provide coverage because you would have coverage under the summ it's the same principle that it is the basic concept of covered versus uncovered lost in the din to desegregate that completely goes away and the rest in peace there so they're trying to rewrite a long history of when some of the settlement building may be for x clearly excluded by the policy and that's what's happening here they have settled for some lab building that is covered by the policy some it isn't and they still want us to indemnify them so they get paid i think that the approach judge rosenthal to is consistent with three basic principles of texas insurance law number one and insurance not pay for cover losses number two the insured has an obligation to allocate between covered and covered losses and if they don't allocate it's presumptively all for cover payments that's clear and there are so our number three it's consistent the right that we have under our policy separation rights that are taken away when they settle and release the contractors if they're not released the contractors we've been if position because we would not have been damaged but the release of the subcontractors takes rights away from us you need all three or first two independent or you can do the first two you can do all three you can do any one of them i mean you can throw in some other reason i can with the list one day of six different reasons the share in more a hand case you can allow the insured to settle for some covered and some not covered damages that's really under the same insured same policy here again we have something different we have these sub contractors are settling under that we're settling with sub contractors who are not settling with our own insurers on that and again i'm not  belabor the other insurance issue again but based on where the policy reads that's not insurance and so i think there's a ton a case the side by us fire in their brief about one satisfaction to the question and as far as whether or which which sub contractors settled for what still comes down to the fact that we couldn't get that out that allocation was not gotten admittedly because we couldn't and all throughout this whole procedure this long procedure this case has been going on for quite a while u s fire has maintained that four million sub contracts rendered into we knew mold wasn't going to be covered under c g l or an excess policy attorneys fees i think it's very questionable still under texas law that may be decided by this court very soon whether or not those are actually attorneys fees awarded to a plaintiff whether those are actually insured damages under a policy that we took all that into account and we still had a situation where we  have a a situation where we were able to recover based on the indemnity clauses in the sub contracts and that's that's still the crux of this entire thing i mean judge i think this is this is this court should reverse the granting of the summary judgment to to us fire and render judgment in favor of in favor american are paid one hundred thousand dollars it did not have to pay because we didn't select their policy period even to cover us we selected the exit policy period because their insured was in grave straight dire straits some account of this this this judgment they they stepped up to the plate and made arrangements so that they could go after us fire after that and that's what we're doing here your honor and we also asked case for the day sixteen th