it please the court josh mcdaniels behalf of pro builder specialty insurance company would like to request five minutes for a bottle the insurance policies in this case do not depart from the well settled general rule that in a indorsement which policy is that this is the first policy and other than the doctor the amount being four thousand dollars in this case in this policy and ten thousand dollars in the other policy is that the endorsement of this is the same in each policy and specifically there's two provisions in this claim to ductile indorsement that that clarify things here there's there's first in that prefatory paragraph where it says fourth four thousand dollar deducted from each and every claim under this policy irrespective of the number of claims which may be joined in any one suit several courts have interpreted similar language to mean that per claim means per damaged property you haven't the case no you just said that when you started out in answer to judge question you said she asked you to point to the specific language in the policy that said house her damaged property i'm looking for that in the right it doesn't the so the policy is written in more general terms and that it doesn't say for damaged house so there's nothing in the policy that's for damage property or per damaged house is that correct that's correct it doesn't say house or property and the other the other key paragraph here is paragraph five of that per claimed ductile endorsement it says as respects coverage is a b and c and when i would point out there is coverage a would be the coverage for property damage which is the relevant coverage in this case so as concerns the coverage for property damage the deductible plays equally to all damages sustained by any one person or organization as a result of any one claim so when i looked at damages in the insuring clause it refers to  damages so refers to tort damages for bodily injury or property damage and so when i see applies equally to all damages it sounds like it's referring to the insuring clause which refers to sustained by any one person and so my question is why isn't there an x the reason why it's not linux is because linux did not sustain any covered property damages or or even any damages in this case as as you pointed out the insuring clause refers to the tort damages the and the property damage and that that was only sustained by the six hundred thirty six homeowners they say read to me walk me through this five share and explain to me what what that means or how you interpret it sure and so you're really homed in on the on the key question in this case which is what it says person or organization as it were for what it in this case would be referring to lennox holmes a little bit with to all the damage is sustained by any one person or organization and so you're saying that the tort damages were not sustained by linux no they were not sustained by by complaint makes very clear that it was passing through the liability that of these claims that were raised by the six hundred thirty six homeowners it was passing through these claims right but there's no pass through liability in the insurance contract  damages so so the homeowners didn't get did they have any claim against them i would just say that the homeowners here each had just one claim right they didn't raise a multiple claim the damage to the person as a result of a claim and so the homeowners were not didn't receive any claim so i don't see how this applies to the homeowners at all the reason why the language is drafted that way is in some situations one person or organization will have multiple did not sustain any covered property damages in this case and i guess one thing we could look to as we could look to the definition in short contract because i think it really ducktails with the language that's in this paragraph five the one where you know let me find that really quick so it would be on page sixty eight of the excerpts of record is that which policy is that this is the same policy the first policy the july yes and and the way we got here is there's that insurance insuring clause it's written very broadly it says we cover tor damage it was cut because of property damage that there's a contractual liability exclusion but the contractual liability exclusion says we carve out insured contracts and  party to pay for bodily injury or property and property damage to a third person or organization so you just told me that lennox didn't have tort damages it doesn't and here it's more fun if you have tort liability but  what the end of the contract your honor again i would point out that here it says it's tort liability to pay for property damage to a third person organization so so when it's going to reverse the damage it's referring to the third person organization and in that situation it would be the homeowners in that case so so you assume the tort liability of lenox in that contract or did to pay for the property damage to pay for property damage to a third person which was the homeowner and so how does that so the the tort liability was from the claim that linux made could have tendered the claims from the six hundred thirty six homeowners directly to pro builders but that's not what it did right but again i would also go back to the cases that we've cite in our brief there's the miles case  cited there's the atlas case we've cited there's the current case that we've decided in each of those cases there was in especially the miles case there was a remarkably similar language in that policy to the policy that we have here and in those cases the court said they had didn't interpret the contract miles and miles well the court specifically discussed the property damage sustained by one person language and and as a matter of policy we think it should be all of those claims and i was shocked but it was reading the concerns was when i looked at the the lawsuit and the underlying lawsuit it wasn't clear which of those claims apply to yarborough's work or how much any one of those claims would have were allowable and how much that it would be for each of those claims i would expect they did do some analysis but i don't know the specifics on that and it's not on the record that it was a de facto poll for each claim then they have to analyze each of the six hundred thirty six claims they don't have to because it's the redoubt roofing case that we've said in our reply brief explains that the insurance company has the right to settle claims even if it even if that's going to end up meaning that the insured has to pay the full settlement i'll give you an extra minute or so good morning i'm william alexander represent the yarbrough parties in this action welcome to justice seiler from kentucky and thank you for the opportunity to be here i haven't been here before even though i'm kind of up there in age  glance this looks like it's a simple issue as the court has already discerned based upon the questions i've heard this morning the court has found out that it is not so significant or so simple for example in this particular case we need to not simply look at the question of how many deductibles can pro builders collect as a result of its indemnification claim for breach of contract under the single construction project we have to go bet a bit be behind that and again in this particular case what we're looking at is it would be helpful just for a couple moments to explain we're looking at a general contractor who's to constructing a residential subdivision yarbrough is a subcontractor that provides plastering work for that general contractor the contract between linux and yarbrough mandated that yarbrough procurer an insurance policy that named linux as an additional insure right exactly all of this claim language could certainly refer to the claims that the homebuilders are bringing to linux could that it isn't equally susceptible to that interpretation it is and in fact linux as an an additional insured had a right as an insured to pursue pro builders for the very claims that it chose not to pursue so why should it make a difference i think they could have tendered the claims the original class complaint to i assume it is a little difficult to tell them the contract why should it make a difference that they brought they did exactly the same thing by bringing across a complaint naming yarbrough and i think that goes back to why they took the action they did looking at the insurance contract itself it is essentially a risk free cost free insurance policy issued by pro builders and what i mean by that is by pro builders controlling the litigation settling it without consent yarbrough by choosing the actions it chose to take in essence it can recover every penny that it spent both on settlement for legal fees and costs and other by virtue of the deductibles every penny now pro builders position has softened somewhat saying we're not looking to recover all of our legal defense costs in fact we're not looking to cut to recover our entire amount of deductibles which of course would result in a huge profit to them but we only want to return receive the amount of the settlement paid well that's a convenient argument but in viewing the policy as a whole we have to look at what does it mean and here what it means is that pro builder has the absolute right at the end of the day to collect two hundred seventy five thousand dollars in premiums and receive a one hundred percent reimbursement for every penny that it spent on settlement and legal defense costs well not every case will be like this one so presumably there could have been damage to the entire community and i can't imagine what it is but there's a million somebody dies because the wall falls in and there are millions of dollars in damages so in that case the insuring agreement would have  builders on the hook and the beauty is that certainly there are conceivable alternative factual scenarios that exist but that's not what happened here and in this case remember that has not been pointed out by pro builders is that even their premium cost was adjustable in other words if the dollars received by yarbrough were greater than the amount set forth in the in the policy then the premiums are increased but they're never decreased there's always a minimum that's a do so in this particular policy and part of what yarbrough is arguing is that there was no benefit conferred to yarbrough under this policy or that policy concerns claims are you saying that if there had been six hundred thirty six separate claims against contractor that it would be different or same  i believe that's correct your honor and specifically the homeowners what could you answer it would be different or the same thing was the question i'm an interest in the answer to well i'm not sure i think if it was six hundred or so so the six hundred  thousand or ten thousand deductible for each of those six hundred thirty six claim i believe if the homeowners directly sued yarbrough then yes there would be six hundred thirty six claims and with a deductible for each one so the same because what happened in fact was that linux was sued by six hundred thirty six homeowners rather than taking other action linux cross claimed not for the tort damages they cross claim for  and for breach of contract they did it in three subdivisions and filed three cross complaints under the definition of claim which includes the words because of property damage that each one of those three cross complaint r c c counter claims was a claim one claim but let's suppose that you had the six hundred thirty six homeowners sued the primary contractor that's lennox and separate cases then it in turn so your claim is that six hundred thirty six separate claims are three again a great question and i believe we've answered in the paperwork but here's the answer i think that it could be but it still subject to the fact that the insurance policy does not provide any benefit to  insured at bottom i'm sorry on the end i mean that's right at the end of the day at the end of the day at the end of the day the carrier would still collect two hundred seventy five thousand dollars in premiums and not be out of pocket and not have provided any coverage now we don't know whether this type of policy was a blip in the history of the construction industry but what we do know is that there aren't any other cases out there that talk about it and the pro they've gone to great lengths to say we're not really an insurance carrier or risk rejection company it doesn't matter because at the end of the day the policy is an insurance policy subject to all of california's protections for an insured and  this particular case claim a claim as the find in the policy means the claim brought by linux so the opposing counsel cites these eighth circuit cases primarily which say regardless of the language of the contract or we interpret the language of the contract to to mean not just the single claim but all of the claims that were brought against the third party common understanding what's your response to that these the painting or the the drift spray cases i think we call them are certainly unique for the reasons we've described in our brief but more importantly i think looking at the  case gives us a bit more education as to why in this case that type of logic doesn't apply and again we have to look at what the contract was between the insurance company and the insured and focus on that issue this regulated pain and cases are interesting but i don't think the applicable for the reasons that we have outlined in some detail in the in the brief the judge scotney it if that's what it is it is depending upon this case what's the difference between that and in our case here well in miles first of all i think that as we pointed out the definition of a claim was property damage to one person what do you make of the language and endorsement too i am five that opposing counsel focuses on can you explain to me what that means i found it very confusing i did as well your honor and when you look at five you have to read it perhaps in the context of four and if we look at number four it's specifically references what i suggested earlier and that is that the insurance company has the right to not make a claim for all of the money due under the deductible and so as we're in i'll go back to five in a moment but as we're examining the insurance contract you have to ask yourself why was number four put in there when a company can certainly left without any language whatsoever to take less than their owed the only logical inclusion of four was to make this contract appear to have some substance in other words to make it appear that the insurance company has some risk because if you read the policy literally the insurance company can collect all of the money under the deductibles all of it and even profit from your pro so looking at five when it is says applies equally i don't know how to argue that except to say it's confusing it's ambiguous i'm not certain what it means and if that's the provision upon which is relying is probably the more ambiguous of all of the provisions in the contract and again focusing back on one person or one claim wh is a claim this policy of insurance was designed for linux to take advantage of an additional insured status and it was designed for linux to pursue a claim directly as an ai they didn't and it was designed to comply with a contractual obligation to provide indemnity to linux which is exactly what occurred here in three separate actions now it's worth just a moment to if the court will indulge me to talk about why it's important that linux builders did what they did had the claims been filed directly against yarbrough in one of these mass subdivision cases yarbrough would not have had a defense and that is because of the your work or own work exclusion which says that be compensated to redo the work it did poorly do you know what i was wondering about that the analysis of the claims it wasn't clear from the complaint that all of the claims that the all the homeowners had a beef with his work and also it seemed like those claims were many of them were not covered that's correct and that's one of the fatal mistakes in this case on the part of the insurance company and i know the company relies upon another case but but going back just for one moment your hono if the claims have been made against yarbrough the insurance company would have declined to defend under their own work your work coverage or season exclusion yarbrough then would have had the opportunity to control the litigation to decide whether or not it wanted to pay pennies on the dollar to a homeowner to get rid of a claim to to decide whether or not to offer to redo the work and the economic result of that situation would have been and could have been far better for yarbrough than in this case because there was no incentive we don't know it because we don't know how much their attorneys fees because well conveniently your honor what the pro builders has done is said no we don't recover those but they have a right to do so under the contract and the reason they're not is because it makes the contract look less illusory it looks like there is some value being conveyed that's the only reason they're not pursuing fees if had defended the case it would have had the opportunity to assess each of the claims and decide which of those had no merit whatsoever let's however they didn't have that opportunity a probie others represented yarber at the litigation pro pro builders was tendered the defense and stepped in to represent linux in essence and remember the settlement was made by pro builders contributing money to settle the case against linux so pro builders paid money to settle the homeowners case against linux and so based on your interpretation of their interpretation they had no incentive to settle for less than what they could recover from the arbor in fact the real incentive is for programmers to settle the cases and not be concerned whatsoever as to the amount because they knew they had the right to recover every penny under the contract there was no incentive for pope pro builders to settle the claims for low amount because of the rights under the insurance contract thank you thank you very much explains that the insured has options they can they can take that they can take it away from the insurance company before the claims are settled they can get a declaratory relief action they have options going back to our main point in that in that case that we said in our brief we spoke in that it's appropriate for this court to look to the decisions of other jurisdictions when deciding how california would decide an issue of california insurance law every single case that has a d this type of situation where you have a bunch of property damage claims that are then bundled by one entity and then pass through to the to the insured every single case has addressed that type of situation any real response to the kent case the atlas case or the myles case the kent case and the myles case both had very similar language to the per person organization language that we have in our and in our endorsement and the atlas case did not have that language it only had the each and every claim language and it did not even define the term claim and yet the court in that case still concluded that the part that the endorsement was unambiguous in that case with those primarily eight second cases i was looking there were three different jurisdictions was a circuit florida district court of appeal and the virginia sort of supreme court finally that even if this court room clip concluded the policies were ambiguous then we go to the objectively reasonable expectations of  the policyholder and here there is no dispute that yarbrough seriously misrepresented the nature of his work he represented that he did no work on large tract of elements that makes a tremendous impact on whether a current currents deductible is appropriate or a per claim as appropriate he checked the box for per claim to dr bill if you've chosen the per occurrence deductible we wouldn't be here because there would be three deductibles owed because there were three occurrences in this case on the definition of construction project so based on that i would i would ask the court to reverse the district court in this case thank you thank you for sharing your arguments an interesting case and the matter is submitted at this time and that is our session for this morning