one four dash four zero seven three eighth's european versus abercrombie and fitch come company at all and fourteen dash for zero seven for abercrombie and fitch company versus ace european group limited for argument good morning your honour's melissa murphy petros for the appellant is european group and i have reserved three minutes for a bottle if has no duty to defend abercrombie in the underlying actions for two reasons first the promotional gift cards that issue are coupons for purposes of the policies coupon exclusion and second they are contracts for purposes of the policies breach of contract exclusion turning first to the policies coupon the policy states specifically the coverage just because scuse me precluded for any damages or claim expenses which directly or indirectly arise out of or are attributable to coupons here at the policy does  the term coupon so under ohio law we look to see if it has a natural and commonly accepted meaning if so that meaning must control and here as we have set out in our brief merriam webster's dictionary provides us with the natural and commonly accepted meaning of the term coupon which is anything used to obtain a discount on something here in the promotional gift cards fall squarely within the staff initiation they are documents in titling the holder to a discount on the purchase of abercrombie merchandise they were not sold by abercrombie for any consideration but were given freely to customers who purchased a qualifying amount of merchandise they were not used by customers in any way different than a coupon you would clip out of a newspaper or magazine know they are as recently where you could interpret what the only way that we can interpret these promotional gift cards is as coupons they again allow one to get a discount on something and this is also discussed in the opinion of judge posner that we discussed redmond versus radio shack but in this case even abercrombie itself on its website treats these as different than a traditional gift card which one purchases for consideration these have expiration dates they are good for a limited time expiration i thought that was the whole issue in the well it is the issue yes i'm sorry i didn't give me a chance i thought the underlying papers was th abercrombie had not put expiration dates on half of these or some fraction of the others had written no expiration date so i'm a little bit confused by your description i apologize for the interruption  the expiration date certainly is what gave rise to all of the underlying actions abercrombie programmed these cards to have an expiration date of january thirtieth two thousand and ten they state that they informed consumers of this decorative sleeves that the handed out in as well as in signage and through employees instructing employees to tell consumers of this expiration date it is true they didn't print the expiration date on the cards and some cards did in fact say no expiration date regardless though it is undisputed that they had an expiration date like all coupons and that was january thirtieth of two thousand and ten when in fact they did all expire thus leading to against them or fraud claim is i think grounded on the feature that the consumer who received the card arguably in exchange for the sales contract of whatever they purchased that was there's a has to be an underlying purchase right there had to be an order to obtain the card yes i mean the gift card so it's so was the gift card itself a contract can you actually argue that that it's a contract rather than the consideration for the contract of sale of the goods yes the gift card was the contract for purposes of the policies contract breach of contract exclusion you know you say that yes i'm asking you does that truly fit i guess we believe that it does truly fit as we discussed in our brief when in consideration for a purchase of seventy five one hundred dollars worth of merchandise during a certain period of time at the christmas two thousand and nine shots being season in addition to the merchandise the customer was given a promotional gift card for twenty five dollars off a future projects i think you're saying that itself is a contract so let's examine that how can that be the contract the contract is that in consideration for purchasing a set amount of merchandise tracked has reasons that are every contract there's right there's consideration as part of it there's the underlying it can be the contract and the consideration i'm not sure i understand your question and i don't think the what's the contract the agreement if you say that this you say the coupon itself or the gift card itself is a contract between who abercrombie and the purchaser the contract is that if i win or yes if if i went to an abercrombie store injuring this period of time what does it promise it promise is that if i purchase seventy five dollars of merchandise today i will get my  which i did i will get my merchandise and i will also receive a promotional gift card for twenty five dollars off a future purchase of epson dies i can't get that promotional gift card any other way because they are not traditional gift cards that you would go with in the sales other then yes the only way i can get the promotional gift card is to purchase ever comedy's merchandise a qualifying amount during a particular date range in the first place through your your claiming the gift card constitutes a separate contract between abercrombie and the customer and therefore any liability that your insurance company is excluded from coverage because of the one of the exclusions in the contract of insurance is that right that is correct and in fact in one of the underlying actions the bound to say action which is currently pending in the northern district of illinois that court has already found that these promotional gift cards are coupons that court dismissed the consumer fraud claims with prejudice and certified a class to go forward only on a breach of contract claim finding that these are in fact tracks what did this district court that were reviewing say about your contract exclusion claim this district court in the initial opinion the first opinion of september two thousand and thirteen acknowledged that rely on looking at what the bound to score had done that these these are contracts and that there would not be indemnity for any breach of contract claim excuse me for any judgment or settlement that would arise out of a breach of contract claim if then cook the consumer fraud claim that would remain yes yes and this district court found that the duty to defend continued inbound is despite the dismissal of the breach of contract or excuse me of the consumer fraud claims which are you will be covered under the policy because it was a mixed action at the beginning which caused the duty to define to incept in the first place but certainly the sister court has recognized that all contract claims are excluded from coverage and that indemnity here there will be no indemnity here at least with respect to the bound us case because there are there's nothing left there other than breach of contract for some reason i thought that the district court in this case had felt that you had not r humans against coverage in a timely way and i mis remembering that the district court in its second decisions was referring to our argument with respect to the coupon exclusion as opposed to the breach  contract coupon exclusion has been at play in this case really since covered from the beginning since coverage of correspondence was issued we did raise a slightly more nuanced argument in a motion to reconsider before the district court and that was what the district court was referring to in the second decision when referring to a time when you're saying that with respect to the breach of contract with respect to the coverage issue that the district court ruled in your favor saying that the exclusion which i believe subsection age applies in this case yes that it applies the district court found that it applies to indemnity of course we argue that it applies also to the duty to defend because the exclusion specifically states that it precludes coverage for quote any damages or claim expenses claim expenses are defined in the policy as defense costs incurred in the underlying action so the exclusions in this policy apply to the duty to defend separately and apart from the established principle that where there is no duty to in time to fight there is no duty to  defend it is our position is the district courts correct the breach the breach of contract exclusion does preclude indemnity for the underlying actions but also that it precludes coverage for a duty to defend based on the language of the exclusion themselves if your honour's have no further questions i will rest on my proofs at this point thank you you thank  please the court my name is and i represent abercrombie and fitch in this matter there are three issues that i would like to address before the court today first abercrombie is entitled to coverage under the policy for the three underlying consumer fraud class actions second the exclusions cited by ace do not remove abercrombie's coverage and third based upon this court's two thousand and six decision of city of sandusky abercromby isn't title two of defense and bound as through policy and may i correct my opposing counsel the district court did not decide whether abercrombie was entitled to indemnification and bound as i refer you to page id to one ninety nine of the district court's opinion where the district court expressly stated that it was relieving resolution of the indemnification question for a later day that is the only issue that was before the district court was whether abercrombie was entitle to a defense for the three underlying consumer fraud class actions applying ohio law which the parties agree applies in this matter to determine whether is that there is defense as opposed to a duty to ind this court is to look at the policy and the underlying complaints a duty to defend exists if the claim arguably or potentially falls within the policy the district court aquinas analysis properly found that abercrombie was entitled to a defense for the three underlying consumer fraud class actions the first case found us please a claim for violation the ohio consumer fraud class actions and white there cause of action for the california consumer fraud statute and sieber it alleges and all about a violation of the how consumer sales practices act thus each of the three underlying class actions plead a cover claim and abercrombie is entitled to a defense why doesn't it fall within the contract exclusion as as argued here so what apes are you and the underlying matter is that both if that's the contract  argument here is that the gift card is indeed the contract and therefore it's excluded yes your honor what aides argued was that all of the claims that were brought in the underlying class action should be subsumed under the contract claim but that's not correct the claims are both factually and legally distinct they are legally distinct because a breach of a contract claim is not is the coverage come from the coverage comes from x paragraph j of the endorsement of the policy that provides coverage for consumer fraud it's a very similar fraud that that's correct you are that is the right place to hang it for you actually are and that's the hook for coverage and that even though even though there are claims that are outside that your argument is that once under sharon bill once once you're required to defend some of the claims there you buy them all that's exactly right your honor under sharon though once you're required to defend one of the claims in the case contract between abercrombie and the consumer that would be excluded under this exclusion in there is insurance policy it may be excluded if that were the only claim pled in the underlying case because there was a claim decided that had coverage had coverage which is the program but so you're not are you conceding or are you not conceding that a breach of contract claim if that were the only claim that were raised by the consumer would be excluded under the yes we do you can see that point in fact your honor there was a ladder to keep and that the gift card is a contract that is for the courts and the underlying class x hasn't been decided it hasn't been decided there is a new jersey case that was brought against abercrombie that was purely a breach of contract case and abercrombie did not seek coverage for that case the only reason they believe and correctly add that they are intended to cover it is because there are consumer fraud claims in each of the underlying class actions turning to the second exclusion cited by ace the coupon exclusion ace claims that a gift card is a coupon and in support of this they rely on several dictionary definitions of coupon that they are found on the internet if i urge you i urge the court to go to those internet sites and to look at those definitions ace claims that the definition and those sites is that a coupon is a discount on the price of something or discount off a particular project actually go to merriam webster's dot com or if you actually go to word central dot com the entire definition of coupon is as follows and that is a part of an advertisement to be cut off to obtain a discount on the price of something salient part of that definition which is a part of an advertisement to be cut off there was no advertisement coupon cut off in this matter are you saying that it wouldn't be a coupon if it was a separate piece of paper that came in the mailing according to the definition cited by ace it would not moreover exclusions are to be read narrowly and in favor of coverage so this and that when you finished that i thought that your argument was this forfeited yeah you know having been raised earlier that is our secondary argument that this was way because this argument was not brought up until motion for just reconsideration of the district court you're saying that the coupon must be part of a separate advertisement and you have to use a scissors to obtain that scissors for sale but they definitely have to be part of an advertisement according to the definitions cited by ace in the dictionary definitions that they support for the definition of coupon consequence you could have a freestanding kupang but certainly the promotional gift cards that abercrombie gave to its customers were not coupons they were gift cards well but we're talking about functionally of these things that you tear off say ten dollars offer for some other company you tear off it's good to hurt us you get a reward for you get some credit for that functionally equivalent to a gift card but when interpret ing a contract exclusion under ohio law you're supposed to interpret the term contract narrowly certainly we could think of multitude of incidents that cause discounts on the price of something purchased including have a relationship with a sales clerk but that doesn't mean my relationship with the sales clerk which gives me a discount is a coupon under ohio law exclusions are to be read nearly and in favor of the insured and if there a separate definition or a different way of defining something the most narrow definition should be interpreted and certainly gift cards are separate from coupons gift cards are a form of tender they're a form of payment that can walk into a store and purchase something with you can't just walk into a store and purchase something with a coupon and it actually requires an additional type of tender before you can complete that purchase gift cards as ace is well aware are heavily regulated by both the state and the federal government if a sonnet the word gift card to be included in their policy they could have used the word gift card and by not doing so it is not within the auspices of the coverage policy languages coupon price disco prizes awards or any other valuable consideration given in excess of the total contracted or expected  a gift cards don't come with and there that is correct your honor burt is correct your honor what this public school is meant to be if i may take a step aside right now is there is a separate policy that a sells that you can buy for a prize or a discount for example you go to golf and if you hit a hole in one you get a card and you win a car so a specific is a separate policy that if you get that home one which is  likely that they will pay for that card so this is an exclusion is called an over redemption exclusion so if the amount of coupons that are issued are over redeemed a merchant can buy coverage to protect them from this eventuality of having too much to pay out that they didn't expect but certainly if they wanted gift card to be in that they are well aware of gift cards there have you there why isn't giving girded any other valuable consideration given the excess of the total contracted or expected  nt because at the time of the purchase the customer expected to receive that gift card if they paid over one hundred dollars it was not in excess of what was expected at the time of the transaction they got the gift card if they if they paid one hundred dollars and therefore it was entirely expected when that when the part when the purchase was made if if we look at the universe of all these private insurance problems would we find one specifically included as an exclusion the words give courage i'm not purview to all the insurance policies that have been issued and i'm just you know i honestly have not made taken a service i apologize but i cannot answer that question and you run across any policies in your experience that do give cards i have not written causing policies that specifically list gift cards but is was well aware of gift cards they're heavily regulated and if they wanted to exclude them from the policy they were certainly intel to do that they had the power of the pen and going back to ohio law works luzhin are supposed to be right narrowly where you know if you as you think about it there are gift cards i can go to every grumpy and buy a gift card and send it to my grandson for a confirmation give so when he goes then stead of letting him make his choice and also but that's not the kind of card that was here were not sent after to asli they're only given to a customer upon the purchase of more than one hundred dollars these are waters known as promotional gift cards that that merchants use for example if i have a rewards card at a store and i spend a certain dollar amount the send out a promotional gift card and i will grant you that promotional gift cards are different than gift cards but they're still not coupons so i'm just curious did abercrombie give this gift card to the consumer when the consumer bought the hundred dollars of shirts exactly right at the time it is the time of sale exact at the time a sale is part of the transaction therefore the exclusion of when we are applying ohio law that the insurer bears the burden of demonstrating the appl and if this is the only interpretation of coupon that can be decided does the exclusion apply and since there are many more interpretations of includes a gift card and one includes a coupon including the very dictionary definitions that a site is that it must be a part of an advertisement that's to be cut off to include a coupon exclusion of does not apply you have a competing dictionary definition that you would like us to use for a misquote satisfy with aces dictionary definition facsimile i believe it is your honor i don't have the page site but i believe it's attached i believe it's attached to the complaint i don't have a page site for you though but there are still look at credit cards there small little or no real brick maybe maybe and as judge cook properly pointed out we believe that ace waved us coupon argument by not making it before the district court until the motion for reconsideration didn't they have some language in their original of these reasons exclusion of should not be applied to deny abercrombie coverage to give an excuse and said that's the argument that it's forfeited that way yes your honor i'm turning to my final point aces duty and to defend and bound us the underlying consumer fraud class action before the northern district of illinois should extend through final judgment as this court properly found and as your honor properly found prior and city of sandusky versus choragus the duty to defend should extend through final judgment and in this court found that we should look to the language of the contract to determine when the duty of defense and and under the policy here the duty to just fan only ends when the limits of a liability have been exhausted been paid abercromby a dime we asked this court to rule that the duty to defend extends until the final judgment and bound us for all these reasons we asked and heard that the court affirmed the decision of the district court thank you and said clear that this card is given a customer only or can charge her with a purchase an excess of one hundred dollars yes seventy five or one hundred dollars was the promotion depending on the store there are three different stores in the abercrombie family so in effect when i bought something wrong hundred dollars i got this card so actually i was getting a credit towards my next purchase of fifty dollars yes you were getting the card to be used to obtain a discount on your next purchase that's cracked a credit of my next purchase i get i'm not sure maybe how you're using the word credit but certainly i can as we discussed in our brief if you look at abercrombie's website only about five percent of all their products can be purchased for twenty five dollars or less so in all likelihood your purchase would exceed the twenty five dollar amount of the promotional gift card and you would receive twenty five dollars off your total purchase price whatever that is twenty five twenty five dollars yes let me five  county five dollars so i don't have to pay one hundred seventy five dollars exactly twenty five dollars off your total write right i would like to clarify the record on a few points that were raised by the panel with opposing counsel ever can be argued that the promotional gift cards are not traditional gift cards but they're not coupons either they have to be one of the other as council recognizes they have to be one of the other well counsel hasn't told us what a promotional gift card would be otherwise if it's a traditional gift card as judge cohen pointed out in his illustration you would you go to a store i could go to starbucks give them twenty five dollars they give me a gift card and give it to my brother for his birthday that's goes policy doesn't say anything about gift cards where they're promotional gift cards or any other kind of gift cards it's just silent on gift cards so it doesn't exclude any kind of gift cards i would say to the extent that gift cards are not listed that would again we have to look at traditional gift cards judge cohn's example those are heavily regulated and that's not what this is this this is an insurance policy right and  whether something is regulated by the federal government or by some state is really immaterial to whether your insurance policy covers abercrombie i would like you to respond to that yes yes exactly no and i realize that i didn't ask you the question right that is correct but again these are not traditional gift cards they are two pints and they had to loosen the gift cards well you know they call them promotional gift cards but i think we have to kind of look at functionality if it walks like a duck and talks like a duck it's probably a duck and as judge posner discussed in the radio shack case which we cited in our brief i mean you can call them postcards or vouchers or gift cards or whatever you want the reality is if the function is going to give you a discount on the price of a purchase of a good or service it is a coup pod and that's what this is here your opponent's argument that the definition that you picked out that a coupe is something that can be well i think that's one type of a coupon and i in my experience i use many coupons as i'm sure we all do when we shop and they're not all c scissors out of an ad they could be at the delicate tussin they could be handed out they could come in the mail i mean who knows i think that is a type of a coupon it's certainly again we have to look at functionality and functionality is not how whether i cut it off something with a pair of scissors what does this document do for me at the end of the day you know whether we're in the insurance company who basically wri the policies to draft draft i you know i am i'm sorry i can't answer that i did so you don't know whether in the universe of of the insurance policies of this those who are gift cards piers and any of this language has to have an order from some if you ever trace the origin of the exclusionary language in this policy under the sub zero to know where it came from how it was developed whether there are iterations of it it's it would seem to me if you really did trying to include gift cards in that sentence you would have really gone back to the actual underwriter the went to write the script or you know the one of us in the city and a desk with it which is where they used to call him on your show and your arms you know and sits there and  has a big book of phrases that he can include he or she can include and see what the origins of this coupon exclusion and whether some places if it does say coupons that's a gift card i mean if that's what you're really doing i would think you would go back to the first policy that ever had this kind of exclusionary language to see how how i interpreted historically where it comes from certainly i think that would be if this case it come up a motion for summary judgment and we did not do that here we are here for this case is before this court as a partial judgment on the pleadings so we're looking only at the pleadings which do include the policy as an exhibit but not looking beyond the policy to the underwriters intent and i have not done that research that you you'd have to because you came in and you said we covered these risks this is a risk we don't cover because of this language and we interpret this language to mean that a gift card is  writing policy you know i would think you would want to do that if you want to keep you can rely on that exclusion well i think in this case respectfully it is very clear that these promotional gift cards they are not traditional gift cards that would be a whole other and well they are they are coupons it's another it's a fancy word for coupon abercrombie's an excuse i don't know your fancy word for coupon until you give me the basis of that yes and we have taken both of you into interesting areas and the case will be submitted we thank you both for your argument and the court will take a brief recess thank you