first the issue of wausau as a breach results from a scheme was employed to extricate itself from the expense of defending its insured in a complex environmental of the game that it knew  cost hundreds of thousands dollars in defense dollars and possibly more than a million dollars in indemnity costs was a breach to defend by never reaching a covers dishes and not accepting tender not agreeing to defend not agreeing to pay and not paying even a single dollar of defense costs during the entire tenancy of the underlying action instead whilst i pretended to it did was expose the haskins its insurance to future litigation it would bankroll the insurance adversary it would cause its insurers to waive it rights under rule thirteen of compulsory counterclaims waive rest judicata waive collateral stop all there was nothing that was good faith about that saddam wasn't cherokee preparing to dismiss it action as part of the film it was only prepared to dismiss its past cause with prejudice but it reserved its future cos without prejudice it wasn't their representation that there were no foreseeable future cos there was no such representation even so if there were cost that were that became due in the future could also be tender to the insurance company for coverage if i understand your honor's question if the haskins were faced a later lawsuit by cherokee would have a complete different picture and new preparation for the second lawsuit nothing good it would just be for costs right because that was the only thing that was not covered in the settlement right your honor and environmental cases like this one it is often the case that a plaintiff will bring that a geisha in seeking reimbursement of a typically a smaller amount of response costs that have already been incurred but the real issue in any environmental case is usually the future response costs the declaratory relief aspect of circle that is incumbent upon a court under this scenario to decide in one action circle cases like this one really require the court to have all the issues decided at once and for ever future cos including absolutely future costs included that's usually the biggest part of the case environmental cases and environmental cleanup are expensive and among those environmental cleanup this is one where the estimates were between one point two million dollars one point three million dollars and more than two million dollars but cherokee was willing to settle for much less than that correct cherokee was willing to settle for less than that but that was only to resolve its past costs only for thirteen thousand dollars leaving everything in the future open maintaining all of its claims against  circular proceedings now have there been any additional costs and have been incurred the the underlying action was resolved and it was resolved in a way that this  proceeding is to go forward and determine what aspects of wausau as a breach of his duty to defend to stand by its insurance will be used to fund the judgment those issues are before the court and i understand that but i'm curious as to whether the future costs that were the subject of concern ever materialized they will materialize there has not been resolved there has not been any resolution of the contamination is still is in place and still needs to be resolved your honor rather then provide a coverage position gave empty platitudes it said we are continuing to investigate we are concerned about whether there is coverage we doubt that there is even a potential for coverage and they never made a coverage decision not not three months later when when the district court said that their willingness to participate in summer meant constituted their assumption of a duty to defend they never actually defended a reasonably diligent insurer all they have to do to make a timely decision under the california law that's what they regarded as then immediately they have it isn't that true if there is a proof of kla found no your honor it's not the california supreme court makes it quite clear that they can ensure under a liability policy just like these that are issue here has a duty to defend immediately and to defend entirely what case supports the argument that in a context outside a proof of claim context that the statute requires an immediate defense the bus is their decision is is one of the seminal cases in the california supreme court this is that an insurer has a duty to defend immediately and to defend immediately they have to defend entirely i think i was thinking about i thought you were talking about the forty day rule that's not what you're talking about honor our position is that there isn't a specific number of days of weeks or any period of time that falls within that bus ruling what our position is that what would a reasonably diligent insured do under the same set of circumstances and what how the decision is made on whether there's a duty to defend you take the complaint or the claim or the pleading you compare that to the policy and you decide is there a potential for coverage if there is any reasonable period of investigation built in to that timeframe from your point of view certainly there could be circumstances where for example the insurance policy wasn't readily available there was it was stored off site and they needed time to go collect it so they could then compare it or is it your position that the only investigation that the insurer is entitled to is comparing the policy against the compliant is that your argument that's my argument no outside investigation at all that's my argument for the immediate decision on the duty to defend they can continue to investigate they can reserve their rights that there ma me be no coverage of ventura lee and if that investigation results in a finding for which there is no potential for coverage then they can exercise those rights they reserve and say there is no more coverage can go to the court and seek declaratory relief they can do any number of things but the law the california supreme court says you have to defend immediately if the california supreme court say you have to brief that really sets forth what an insurer should do and happens to be one within and in environmental contacts is the house school kids that's a that's a court of appeals case there is supreme district court erred by concluding that was willingness to facilitate a settlement constituted an acceptance of the duty defend that's not the law and ensures right is entirely different from an insurer's duty to defend the duty to defend as far more than a willingness to fill silicates element was consistently said it had coverage concerns it never invoked as duty to defend it only invoked as right to subtle and ensure it can't be said to imply defend when it explicitly denies that as made a cover decision when it explicitly tells us i'm sure of that it's still one best to gaining whether there's coverage when it explicitly says there appears to be no potential for coverage how can ensure that does not make a coverage decision does not accept tender does not pay defense costs and does not even pay a single dollar in defense costs until after the district court ordered it to do so be said not to be in would not be timely in this circumstance when it already said it had all the policies and had the complaint in front of it but was also didn't research duties then by not defending entirely the subtle meant that it purported to have resolved its assumption of the duty to defend it was never consummated even if it was consummated it wasn't a complete settlement it was without prejudice it did not fully resolve any claim against the haskins and it did not provide a release or a covenant not to sue with that settlement wasaga everything it got out of any potential for paying further defense costs in what would be an extremely expensive environmental case and arguably cherokee benefited a great deal as well it would have been bankrolled for its case against haskins as it approached how did a bank ru house and excuse me how did it how did a bank rule cherokee it here's how it here's the here's the advantage that cherokee guy didn't get thirteen thousand dollars to put into its factory sure but it's more than just that your honor it also cut haskins insurance defense off and that's what cherokee was counting on cherokee will be counting only on that story haskins will be defending with his own money and in that such a circumstance that is all it would be changing the have to change the way necessarily of how to put on a stiff best defense would mean would have different experts would have less depositions what could afford to do when it was all by itself and cherokee was using that to its advantage and that's how cherokee benefited very quickly i want to also point out that haskins did not breach it cooperation clause first of all was a was in breach so it had no right to insist that haskins do anything under the contract because it was a breach and party in a breaching party certainly can insist on the other side's performance but even if house in the was in breach of that the cooperation clause was not substantially prejudice there is nothing in the record that talks about substantial prejudice and the fact that there is no case law to support what the district here is is interesting because the cooperation clause certainly has a purpose w hat is the purpose the first thing you need to do is look at the language of the contract in what its purpose was is to have an insurer would provide the documents and information that's necessary to defend the case in ultimately to make an appropriate or wise settlement it's not to make an insurer to sign onto an agreement affirmatively it's not to someone may please the court bryan barber for respondent wausau and nationwide the summary judgment motion and judgment that was entered by judge tiger should be affirmed was following cross motions for summary judgment wausau provided the best defense possible a counterclaim it settled it eliminated it took it out and it was a with prejudice for all the cost incurred been incurred and without prejudice for future that have not been incurred and likely won't be i mean this is been around for ten years maybe something will happen but it hasn't and if something does happen will the will  committed to providing coverage or considering coverage under the policy yes it would be another if you need a suit you would need to trigger the duty to defend or indemnity obligations that's correct that's not out of the picture but the important thing is we settled this one here and what is the claim here remember this was haskins chose to bring this lawsuit and it was originally sued for breach of an alleged worl contract over this property and had been ongoing clean up that had been going on and on going quite a bit had happened was to a win and looked there was a counter  to look at the counter claim it gathered its policies it asked specific questions it needed to know how the contamination happened when it happened what happened and what was the status of the ongoing discussion was it a breach of an oral contract was it an environmental claim in doing so during the course of the investigation wausau learned what was at the state and when and immediately settled the case originally haskins objected to wausau settling so taking the counter claim i think the course will get what they seem to be suggesting is that we owe it offense to the entire action that's not the case we only would defense to the counter claim the counter claim was added and there's some discussion in the record about why it was added by counsel that we were layer able to taint in our supplemental excerpts the record i believe about one forty were counsel said they to add account or clay well they did and we looked at the counter claim that's what we're obligated to take care of and that's what we did we settled it counseled your proposed settlement did it completely settle the counter claim or was there anything left counterclaim was done it was gone nothing left from the counterclaim to bring as they would have had to bring a separate action if they incurred future costs it was done how do we know that the original release said that your rigidly haskins lawyer did not object to that in was aware of it and fact mr mackay defense lawyer said you originally had no problem with the settlement and his concern on the without prejudice portion of the future was he didn't want to in effect his affirmative defenses in the case well and how do we also know that resolved that they filed a motion to dismiss the counter claim is they had to do one who forty one and guess what they did that not only the not settle it they wanted to keep the counter claim in the clase and they have fought that motion and that's a direct breach of the cooperation clause so what they're asking wausau to do defend the counter claim they'd fought to keep the counterclaim in the case and what's really interesting about this is big doll age and if you look at their mediation brief they've knowledge that he's wausau his right to it's our call it's our judgement call if you want the insurance company involved it's our goal and that's what the policy says the policy says we can do the investigation and settlement the we deem expedient it's our judgment call if you want surance and that's what you have to do and that's what blue ridge suggests and we've gone even further than blue ridge we said we'll settle this take it completely out we'll pay for it we're not going to seek a single dime back from you and not only that we said if you think you have defense costs if you've incurred costs and i don't know how they could have incurred hundreds of thousands dollars of cost to defend a thirteen thousand dollars counterclaim that was settled but we said send them to us in august to twenty we didn't even see a single bill into november of twenty thirteen when the case was already settled and they sent all of the bills for the case six hundred thousand dollars which involved separate parties separate attempts to cut through corporate walls deal with dissolve corporations that there's no way that would be a result of the parties settle that various manufacturing and it easy you could drive out and see the property all right was there an allegation that haskins tenants contaminated the property i don't recall there was a specific allegation that haskins who had really done anything at that point there's been earlier litigation because haskins was an owner of certain properties and haskins contended look at fuller o'brien's contaminated our properties well i just don't understand how we can come up with a one point two million dollar settlement or somewhere in there for haskins liability if they didn't contaminate the property neither do i and that's exactly it will not only that but share a kid who was in the process of dissolution basically cherokee bought fuller o'brien cleaned it up and sold the property then cherokees in the process is dissolving these are entities that are set up to handle the cleanup in the process it does a listen haskins brings a suit now haskins is not had to pay the in about ten years that's that's case because why even bring this litigation against this dissolved entities but not only that the dissolved entities agreed to settle the action for one hundred fifty thousand dollars in june of tw at the same time in their brief they acknowledged wausau as it exercised its right to resolve the counterclaim so haskins would have been sitting with one hundred fifty thousand in its pocket the counterclaim would have been done yet what do they decide to do it is cited to spend six hundred thousand dollars in attorney's fees and then take a judgment against themselves for one point seven million it wasn't even one point two and it was up during the mediation from one point three to one point seven and if you look at the their mediation brief which is that the are supplemental excerpts of records you could see to fit to fifty eight you can see why they did this this was a setup i don't believe they ever intended to  ccept wausau settlement they simply wanted to try and use this is a set up to attack insurance at assets and that's not appropriate that's not something the court should countenance in this case wausau went in and it's intitled to conduct an investigation and is your honour's indicate under california law you don't have to just look at the complaint and just look at the insurance policies that's clearly the starting opposing counsel says that haskell requires that the only that it does it could look at facts outside the complaint that you can get from your investigation and i believe that's in haskell but i would go back to montrose which is the original duty to defend case and also if you look at judge tiger's original order on the duty to defend we can look at facts we look at the complaint some some states like washington just look at the complaint you just look at the policies in california you can look both sides can look at facts outside and that's exactly what wausau did in analyzing whether there was a defense obligation and what it would do it looked at it it did make a coverage determination it's the best possible coverage determine if you're sued and your insurance company settles the case what more could you want and you don't have to pay anything back now did this settlement prejudiced the could still go on with the lawsuit data regionally decided to file they had and they could do that clean they would not have a claim against them during the pendency that lawsuit so we streamline it now they may have had strategic reasons to say well i'd like to keep that counter claim then i'd love to argue to the jury that these dissolve corporations are greedy how dare they make a claim against us for costs that are incurred years ago in they can make that decision and that may have been their correct strategic decision turned out it doesn't look like it was because they could i had under fifty thousand dollars not to spend six hundred and not get a judgment against it but if the time they made that decision but once you make that decision then you're on your own and that's what blue ridge suggest and the policies if you want an insurance policy to provide it you also at the same time have obligations obligations to cooperate in settlement settlement  obligations also to provide information and also you also give the right to the insurance company to settle that is it deems expediency it's our call and that's what the policy says and that's what california law says if you look at the herb it's case and i believe that's instructive it cites a line of cases that says look at the insured i may want to go to battle and battle for forever but if the insurer says soon enough and the settlement doesn't create additional liability which it did it didn't created it eliminated that infected they filed a motion to take it out of the case which has been stroh's to try and keep it  i think in some in looking at this this is exactly what you would want an insurance company to do you'd want them to gather the information investigate the cla you would want them to try and go in and settle the case in fact there's numerous cases that say insurance company has an obligation to settle it isn't just that we can settle under a policy it's insurers have an obligation to settle to explore settlement and we explored it and we resolved it very early in the case before you need to incur fees and that settlement would have eliminated which was the counter claim it was done at the same time the insured had the opportunity to get one hundred fifty thousand dollars credit than get one point seven million dollars judgment against  the the opportunity and several occasions for them to do the settlement and wausau warn them if you don't want to do this settlement then you run your own and you can keep the counterclaim and you may see an advantage to it but you can't ask us to pay for it that's a direct breach and that's prejudice because once the cooperation clause is breach and your obligation to cooperate if we can show prejudice we don't have obligations on the contract and that's exactly what happened here what was the prejudice what were involved in coverage litigation that certainly was unnecessary we were involved in this ongoing claim they prejudice was that's enough to forfeit their rights under the insurance policy it was a deliberate choice and maybe it was their best litigation choice because remember they were controlling the overall a geisha but it was their choice that means they're not have a right to recover under the wausau policy and that prejudice is another ground and that's exactly what judge tiger found that they had breached that and the cases that suggest prejudice can eliminate the coverage or the whole case that we've cited so in some unless there's any further questions  i just like to sum it up this is the kind of case that should be affirmed and should this behavior should not be encouraged litigate environmental litigation for profit is not appropriate it's not appropriate to file a geisha in an attempt to set up insurance companies and pay claims where they can be resolved quickly without the expenditure of attorneys fees and encouraging that and encouraging cooperation and settlement the point to reverse this is encourage the exact opposite in looking at the conduct i don't have anything further to add i want to thank you for your time thank you council your bottle let's put them in and on the clock fallen out of the on the cutting room floor your honor as we are squeezing in the word count so i apologize there are numerous other cases that follow along the same lines well what's the second best case because you said that was your best case for the is compare the allegations to the complete of the complaint to the policies and from there it can make a coverages it can continue to investigate and make a change but that's where the coverage ans this is exactly the kind of case that would encourage insurance companies if if you were to affirm to never make a coverages and never officially agree to defend never pay any defense cost nothing to further its insurers defense and reach settlements that are by definition bad faith because they don't provide a complete release and a firm as would be a mistake your honour's we encourage you to reverse thank you