exclusion and i think the briefing to the court has certainly shown that we have a view of the matter that is completely different then does federal insurance and though whole thing comes down to the use of two words and that is liability or three words liability under contract versus whether a the exclusion applies to claims which arise under the contract what's in the explosion and i must admit that i've done the same because i've just taken arising out of liability under contract essentially arising out of is the important issue or the important language i don't intend to exclude the other language but i don't think that it's consequential when addressing the exclusion itself well actually with respect least for me in consequence of is important and based upon is important on some of these things because some of them like that the special trust relationship would not have existed there not been a contract so at least for my purposes i would be incident i what you think are stronge cases what which of your claims is least likely to be based upon or arise out of a contract which of the claims filler and five of the special relationship i don't think it matters which one is a better one because what's the best one conversion claim most likely is even better then the special relationship at a minimum what happens is that the people did allege that they special relationship existed because of the contract i'm here prayer paraphrasing i would hope the court would look specifically to the language of the biotech complaint but the conversion itself is alleged to be having having then occurring even during in fact both of both of these claims were allegedly occurring even prior to there was there being a terminations of the connected to the land that well that's why there's a significant difference between the parties here relating to the words arising under liability under the contract well i agree with you because there are some of these claims that matter of fact that these two parties never would have been in a lawsuit at all if there hadn't been a contract between the two of them that clearly would not have happened we would not have been sued for conversion if they had signed this technology but they were just conversion then let's take conversion why isn't why isn't that within the ambit of these three different phrases in connection with that i mean what he said out of that well the fact that it's not i own i get that i think that the three different phrases in the exclusion all relate to liability under the contract and so the issue really is what does liability under the i get that it doesn't relate to liability and what it says is that's the fundamental difference i think between you would have in those words with specific liability end of the contract correct yes the exclusion says that it excludes claims which arise out of or in consequence of liability under the contract yes and therefore we must look at each one of those words not just a portion of those words as federal has put together and it's briefing and when one considers whether you are dealing with a rising from or you are dealing with as a consequence of it still has to arise or be a consequence of liability under the contract well let me ask you this counsel the do you agree that the payments that you claim were converted came about as a result of consideration for the licenses right that's what the consideration was right they paid two hundred fifty thousand dollars a time licenses are contract right under the technology licensing agreement that's going well that's that's a contractor then the question is if the payment that was allegedly converted came about as a result of a contract is does not the exclusion of any actual alleged liability or i'd trade organization under any written or oral contract hard greenman well here you've got an agreement there is a payment made you claim it was converted there would have been no payment but for the contract right correct but there could have been payment but for the liability under the contract yes and there is no but for analysis in the washington law on duty to defend either i agree with that because american best foods says that there isn't they did not allow they analysis of the arising from exclude in the exclusionary language in american best food to apply you're reading you're reading the allegation of the complaint yes i know i'm sorry ok and they think you know x two thousand return the funds which constitutes separate in an additional conversion of the funds so i realize that you are trying to make a separate claim being the dictionary definitions of what we're dealing with the issue is what does it mean to have a liability under the contract and if there is imperfect knowledge about what that means courts in washington look to dictionary definitions and the dictionary definitions essentially point to there it must be an obligation in the contract that was breached that's what the liability under contract means that's why we gave the  there webster dictionary definitions probably from the on line i must say i've forgotten that part of it it's been a while since we did that briefing but then that point is though that this exclusion still needs to be addressed and interpreted narrowly while i recognize you're quoting from the complaint but under washington law there must be a liberal reading of the complaint and the issue really does get down to this is it conceivable that a court would determine that there is a liability it's going to be that this exclusion would not apply to these special relationship and these conversion cases claims and that's what the most recent washington case law for movie fireman's fund to american best foods to expedia versus stedfast van port homes that's what our court looks to to determine and there is no doubt that federal is honestly believing that they their position is correct but there are cases which we've cited which we do recognize that there is a distinction when the exclusion states that it excludes claims which arise from or are a consequence of the liability under contract verses arising from or a law or consequence of the contract there are many cases including what's really significant here is that there is a washington case despite its age  it is still the law and it's never been overruled and so the question is if you are an insurance carrier who has been given a complaint that has been tendered to you what are you obligated to do you are obligated to analyze the law and if there is any difference between the insurance company's position and the insureds position the cases american best food  and then you say well therefore these apply because the insured took a position that was in contravention of the insurance company so it doesn't literally mean any position that an insured would take would somehow get it out of your honor i think that a court looking at this decides whether or not a position proffered by the insured has a rational basis if it has no to give me that the carrier must show that there is no possibility of coverage yes and that's what our washington court does and when you look at the factual circumstances in cases such as american best food and for heaven's sakes even wound versus fireman's fund what happened is the carrier had not properly interpreted what was the practice of then history and the court said the practice of dentistry included even the type of operation where the dentist put the bore head purse inside of his employees mouth wrongfully received to retain vance royalty payments under the contract you are generally liable claim right that's what they claimed ok so you go back to your definition here again you've got potential liability rising out of a written contract i agree with what you said your honor but you have to have the liability under the contract and that's not what this claim is it arises from a contract yes but it doesn't arise from liability under the contract in fact that conversion was allegedly committed even before by tech says we breach the contract the conversion flows though from the alleged liability that you get out of the contract i don't see it i see that in a flows from the existence of the contract but the liability under the contract is specifically alleged in counts one two three and six of this complaint that by tech filed against ex two and there is not a claim of that those those claims four and five arise from or a consequence of any of the liability that a growing out of it cetera but you still are cabin by the word liability and he's arguing that with respect to version that it's actually unhinged from liability given the timing and the consequences when you respond to that two deals with a special conversion claim forty nine fifty to deal with the conversion klein you specifically asked about the conversion claim at paragraph forty nine ers forty one it says payments from a big quote because it reasonably believed that x to intended to fill all the terms of the agreement a those payments were based on the agreement and it goes on paragraph fifty two it says at the time of this demand by tech retained a property interest in the fund because they constituted an advance royalty payment under the agreement the conversion claim is inextricably imbedded into the contract and therefore there is no in the royalty thing correct a goner so there is no basis for the conversion claim there's no conceivable basis no way to get around the existence of the contract and the funds are the subject of the conversion claim the funds paid as advance royalties under that contract so this case really does just come down to those allegations that's all i submit that this panel needs to look to forty two forty nine and fifty two the language of the exclusion which federal griese washington law applies exclusions are to be read narrowly but in this case it's a pretty darn broad exclusion it says based upon arising from any consequence in from any actual or alleged liability for an insured organization let me just stop right there because a couple of cases they've cited for instance the foodtown case which they put a lot of stake on that did involve an insured organization that involved  fiduciary duty claim this is a restricted exclusion of an insured organizations a futon has no relevance whatsoever even though it's actually a positive also and then it is and it goes to the definition the contract says under any written or contract or agreement so it is very broadly written and covers exactly the types of allegations here if the allegations had been different this might be a different case but the allegations say what they say i think frankly illustrates how far x too is trying to go to find something to support their case as a first comment but second that case is it well reason well in that situation it was the massachusetts attorney general that stepped into that case after a settlement between the two principal contracting entities lifespan and e m c and the court there looked to the attorney general's actions and said that was not based upon arising from a consequence of the contract it's a separate matter that arises out of the attorney general's duties in the public interest to intervene and take a step and to take a stand about the validity of that contract or or the there are also some issues about some option arrangement there some credit swaps so i think that case simply has nothing to say has no bearing on what is alleged here as those allegations are applied to this very straightforward and clear exclusion has slightly different question the district court was musing on this contract and saying that in some instances language such as this has been found to be ambiguous but under these facts it's not but if the language is a cousin submarine but if let's look to the holding of cousin submarine which is involved a franchise or french franchisee dispute and there despite ruminations about its difficulty in reading the language it came down and applied the exclusion to bar the claims and exclusion so i think that those musings while interesting frankly have no real relevance here whatsoever and there isn't a published case out there that would say this exclusion is vegas and in fact i think every case out there which applies as we've seen from the third circuit the fifth circuit the eighth circuit all have no problem apply on this exclusion this language has been used in a lot of contra for the proposition that they would like to use it for it's also clearly distinguishable when you have a situation where there is a general point duty a general societal duty to effectuate car repair not negligently the contractor there simply had no over here first your honor the lifespan case dealt with and said that claims made by one of the parties against the other not just the attorney generals plame was a covered claim under identical exclusionary language as as in this case there are credible cases out there that we have cited that have also identified that claims are not excluded when they when they come with a breach of contract claim such as the special relationship or the conversion and perhaps i'd even modify after thinking about your question your honor maybe the special relationship  claim is even better than the conversion claim because those that type of claim has been identified by these courts that we cite to you in the briefing as something that either  was not arising from the liability or consequence of the liability under contract or it fit within the exception or the escape clause of the exclusion and those cases are sufficient under what we consider in the state of washington under american best food as credible out of state case law that would potentially influence a washington state court to provide that or to decide that these claims alleged by by tac are included as claims that should be defended under this policy thank you thank you and i like to thank you both for your argument this morning ok thanks to biosystems vs federal insurance