morning ladies and gentlemen our first case for this morning will be telling on corporations against charter oak firing and others may please the court i have a turns on the proper application of indiana's particular rules of insurance policy construction for one hundred years our state has been developing rules that are really pretty unique to india in some ways and they revolve around a principle this that if it is it possible to save error was that the court looked for the best construction of certain exclusions in terms rather than to see if any reasonable construction saved coverage so i would like you to focus if you could on the traveler's wrath plus crime policy and i gather your argument really hinges on whether j star this company could be considered a labor of leasing arm yes exactly and certainly that's right because if it is to and it fits within the definition employ and not only that even though in many ways we need a burial and it had characteristics an independent contractor and that's what her agreement says she is even that fits within this with the definition of an employee under the travelers policy because there is an exception and part five for anybody that qualifies and sub par three which is the part that you just reference about right was not so the language in part five does seem to indicate that for this policy purpose independent contractors need fall under the word employee but your opponent has argued that if the term labor leasing firm really refers to something like a temp agency or someone who is in the business of furnishing employees to other company this is where the perspective becomes and the rules of construction become so important because you're supposed to see if there's a reasonable construction of labor leasing firm that saves coverage that is otherwise here things like insurance worker's comp all those sorts of things you're not so it's not it's not it is not a joint employment agreement i don't think i think it was this is a labor leasing from the that one of the colors of the rules of construction if you look at it from the standpoint of a policyholder ordinary policyholder of average intelligence and that person would look at this and say well if they went to the cases they find the only two cases saying it's where they provide somebody who p own there's no requirement in or that it would be a particular size if they wanted to say it was going to assume it applies to temporary help agencies or or employment employee leasing firms of a certain size so that at the least a multiple employers they could have said that but they didn't and we can't read words into what's essentially a limitation on coverage at the point of playing and so the so you've got i think you're reading that as as if it says a firm that leases a labor leader you lease one of them whether you least twenty five or whether you do other things apparently this farm also you know on on the up side of the downside of the l harmed also handled equipment that's correct that's correct and it doesn't again there's no restriction to doing other things that's one of the arguments or opponents of made but there isn't a restriction there it's simply it's and so you might say well maybe labor leasing firm the best definition if i was looking for one might be different but that's not the standard c the standard for insurance policy is just that reasonable is that a reasonable construction even if it's not the now not one you pick if you were voting sixty you know fifty one to forty nine and what it constituted it's not the find it could have defined it and it's and it's and as a result there's still should be covered and then there were limitations on the delegation with respect to tell a man's direction control him so i said there were limitations on barry in terms of what she it was authorized to do or not do oh there were there were indeed and that he brought that up because that's the next part of the definition after satisfy  subject to the direction in control of the of the employer that's the end of it it's an insurance direction control and if you look at a consulting agreement which all the parties agree defines her relationship now i'm not saying she stayed with an atom finds understand i'm not saying she stayed within the confines of that consulting services agreement that was to agreement by which she is leased by j starr to the to the company she obviously went outside and sold five point two million dollars but if you look at page if you look at paragraph six and seven of projects from telemann major client major accounts dictated by the duly doesn't it telling one contract that's the that's the section that's the sense that says what you are supposed to be doing all of those provisions give telamon authority direction and control now there's paragraph nine that says the belt that they appointed to that says that she is in the kind of contract in a sort of recites almost sort of rote fashion the kinds of things that independent contractors usually are usually are but it doesn't again the provision allows for what would otherwise be an independent contractor be covered under this provision of the policy you allow for that and even if the person passed this characteristic of an impending contract or so wind up with all of these arrangements maybe for tax reasons maybe for other business reasons but you know she's trying to be all things to all people she's trying to be an independent contractor she's they probably were very happy that they didn't have to pay her social security taxes and other sorts of things because this company which seems to be an alter ego of her was was doing that said but i guess your theory you really have cases a tourist case extracts from black's law dictionary the precise thing that i said gives a client the right to use the work or service for a period of time in exchange for a fee and that's what's now do so than any other examples of these kind of singular  acts of leasing out of labor can you think of any situations where that's happened any other cases you mean around the bases or you know why would somebody do that when would firm a say well we'll let you use employee number one more than two years after learning of the loss yes no question the here the that they waive our position first would be that they waived the kindness objection under under cuffy travelers and similar cases because they let the time be less time passed and discovery while they were still working on even getting back to us with a response in the end but little seemingly never ending investigation that investigation doesn't end until december on their you have to wait until that investigation is over you had notice you knew what had happened we didn't know what we know what their position was going to be we don't know you don't want to rush into litigation without without that's not that means maybe they're sticking their head sand but well she's been trying to tell them with documents this discovery of the last they must know it's an object most of the cases talk about an object in a subjective component and let's see looked i don't see how it could be more direct and specific november one hansen's documents a calendar hold such i'm sorry i'm sorry i don't see how it could be more clear there was no notice an understanding that there was a real problem because the one thing upon just sent an e mail and said i kind of suspect there's a problem with this billing but she senses documents to caleb hall were detailing the improper charges that's november  many had notice their couple responses additional what i told you about to receive hundreds another there were other explanations offered at that meeting of what the what the why the what the problem this the discrepancies may have resulted from including theft by other by install finally dig into it she steals another couple of million dollars worth of equipment and under your theory the insurance company is just stock covering all of this even though there was a very  hundred percent certainty is judge williams is saying a very good reason to adopt additional safeguards maybe to move her out that position to while they investigate they just blow it off and you expect the insurance typically an issue effect and it would allow the full development to see if if the response comment that she was convinced of this january eleventh that maybe she had been wrong which was a credible or not that's one way of that's not quite what she said i think she said something more to  effect of i've done what i can and nothing else i'm can do is going to make any difference she says for hands up in despair she said although what she said what i said to she said all those things and so what do you do at that point as they continue to look at investigated and eventually in june it discussed but you know to make sure i understand the argument in response to my question you said well policy was only a million dollars you know she had stolen millions before you know she continued to still steal millions but that's not a good basis for us to agree with your position because he because it would be then the insurance company could really decide in terms of the statute of limitations and you know when they sort of now laid their weight on their losses they notion that should have been doing something which in hindsight is twenty twenty i think they were all said should have been doing something to it didn't happen was that reasonable enough that's going to be that's a sure factor jury to decide was it reasonable given everything that they knew everything was happening the last to learn that there's a problem so there's a duty to notify that right consider some point and i guess the question is whether at a minimum by that january date it was it was in effect whether there was a duty to notify them well i think people came away from the general beating with and i'm sure waits more than two years i mean she could have sued you know in december of two thousand and twelve and still had a lengthy period of time to january twentieth eleven and they even actually know in july of twenty eleven everything they need to know why well heat until february twenty third teams because they were in it because they were they were don't know what to think it was but i but i know that with lawyers who are able lawyers i'm sure that it's out of those things and maybe they thought the better course was to continue to negotiate and i submit frankly that the insurance companies were were leading them to believe that was something that they should do i mean i think they were in a process of negotiation and exploration so since you kind of touched on bad faith has the indiana supreme court clearly for close the possibility that bad faith can extend to claims handling yes faith reaching a coverage decision but it's every way how you treat your policy well one of the four hitmen factors concerns an unfounded delay in making payment so are you saying this delay principle should extend to claims handling yes yes courts have not gone as far as you are arguing they might go and it's not up to us to tell them whether they should or shouldn't but i don't see where they've gone so far as to recognize a freestanding claims handling problem page forty three yes thank you yeah and that's just a sampling that's and in those cases good job describing and i think you have to go back to him and look what it said clearly hickman absolutely did not shut the door  that is that is a we've said a number of cases again from other jurisdictions that recognize and i think hickman when you look at it recognizes that that's has to do with whether or not you're punitive damage or not whether there's a there's a cause of action without right there at the end of that section well i realize that this case was removed from the state courts where you would have been in a better position to make these arguments about state laws it's not your fault that you're in front of a federal court that you are in front of the federal court and we only have so much flexibility to tell the state that it's getting its law wrong and your job your job as i understand it in the sea area is to predict what the state supreme court would do unless there's a state and states supreme court decision in which case you follow that obviously but but here we court i'm going to say where if there is no ill will requirement for your alleged claims handling you're asking the courts of indiana and to the extent they can involve the federal courts to micromanage claims handling if there's an ill will requirement at least you leave most of that alone you let it run through the business process and you have a tort only if there is ill will but if it's just we don't think you handled it reckless disregard gross negligence they may be things that that but well like this one for example not telling a policy or decision until allegedly to difference limitations really is wrong and that's the kind of thing that i was going to so the bottom line have described and i commend the court to the hatch case which lists a wide range sixteen different examples of of kinds of acts of bad faith that are in the claims hamley area it can be it can't be knocked timely processing a claim can be here's here there's a good example you have doesn't necessarily involve malice except it involves putting your financial interests ahead of ours the whole premise of good faith is that there's the insurance company is supposed to hold the interest of the policyholder in equal consideration with those of its own and that advantage its own financial interests over that the policy of it and the reason that so this isn't an equal relationship it's a right the policies they do a solid time and we at me require that that's the nature of the tort that's the duty we're asking for  so when they violate that whether for example by not telling insured that they have decided the claim but continue to defend or string that that that claimant along believing that they still are considering it good morning good morning your owners what we just heard from tell them i'm going to tell you i know he won't be able to hear you're going to have to speak up what we just heard from tell him on this morning and in this brief is that the attempt to completely turn on its head indiana standard for says actually i think that's not a fair characterization i think he's just saying to take this term labor leasing firm if there are a couple of rational ways it could be interpreted obviously not some fanciful crazy way but a couple of rational ways you've got to take the one that favors coverage now that's a very common rule actually it's not some indiana specific rule because people pay money for insurance they're hoping to get for in this instance insurance against employees theft  which of course is normally put into you know we'll talk to your co counsel normally excluded from commercial general liability policies and so he says there's a rational way to read this and that's how it ought to be understood well first of all your honor told want to grease what travelers about the proper definition for the term labor leasing firm it wasn't supplied in the policy but it has been supplied and at least four cases that cited in our briefs pacific employers torres case care about the trading and j n j logistics so pacific employers which is just from the middle district of florida i'm sure it's a fine court you know but it's it's a just record it's not a binding definition takes one of the approaches that seems possible to me takes the approach that you're in the big this of placing employees at client companies so i'm going to call that kind of the employment services model if you will temporary or permanent there is another model out there and i can think of plenty of commercial examples of it where for one reason or another maybe two firms are in a joint venture and so from number one loans one of its employees leases the employee out to work for a year and from number two so that they can accomplish the joint ventures purposes more effectively so then the first employee comes back so there are situations where a firm will lease out so to speak an employee without being in the primary business of that there are there are other business reasons and so the question that i have is given that fact and that is certainly a commercial fact is there does one have to read the term labor lease and firm exclusively as you think in from pacific employers in other places as being in the business or can you also read it as a firm that leases out labor  sometimes all the time but i usually i do think labor leasing firm has to be a firm in the business because why do you say why does this say that the n well it says labor leasing permit i understand what i'm telling you can mean two things it could mean sometimes  all the time well if you interpret it the way telamon has asked the court to interpret it it would mean any company it would mean any company that enters into a written contract for services that is provided by a human being well we have to be a labor leasing firm under  interpretation so with respect to that one employee so you know j star leases out the labor services of one need to bury and so barrie is somebody who is a least employee not a directly hired employee and would be covered if chase started leases you know winds up with two or three people unlike its present situation and it leases somebody else out to another firm then that's not somebody under your policy but but the point is to to bring in all people who are performing the function of an employee and you look at the breadth of this paragraph three  is any natural person who is least under written agreement subject of course we have the other things judge william says exploring direction and control performing services for the insured so i just don't know that that's your best argument well that's just  your honor is the definition the crime policy provides for any natural person who is leased to the insured under a written or printed between the insured and a labor leasing firm it doesn't say between the insurer and a company or any company and what you would or three or five consultants to the client's site to do work for any length of time total want to ask this court to believe that an ordinary policy holder of average intelligence would consider ernst and young a labor leasing firm why not i mean sometimes they last for it for a year i'm not sure that example helps you there are a firm who are in the business of leasing out particular expertise that may be the client firm doesn't have for a period of time for as long as is necessary sometimes it's i t services sometimes it's management organization services but if they are subject to the insured struction in control not to ernst and young control which might distinguish some of that and they're performing services for the insured you know they're rewriting their code or something well here you're on what if they turn out to be a thief you could have is not just a loney really i mean you know this is if this were a labor case just that she is as bad as independent you know as the you know staff help that you have in your law firm and that would have been information if if they obligations and the like but the insurance policy clearly takes a functional approach and that last paragraph is what nails it down well right and independent contractors are excluded from being employees within assessed under paragraphs one through five and if they match any of those then they're covered and if they don't they're not covered and when you bury didn't for a couple of reasons the second independent reason is because the conclusive evidence because she was a very highly placed employee and so i'm going to tell you that for example the chief operating officer of apple computers probably doesn't have his day to day activities controlled very much either because he's in a very responsible position but it doesn't mean he's not an employee of apple he is an employee of apple the people you know the further down the totem pole you go the more micromanaging of work you would expect that barry winds up as the vice president of major accounts in charge of the entire new york new jersey area that's a very high level spot i would think she assumed that role herself according to the j star and telemann were empowered to direct and control barry's work right you know actually because because you know if you read it that way the contract is somewhat ambiguous actually paragraph nine  contract say that the that the consultant which is barry and just are it's a one person consulting company operated by the same person barry it says that under this agreement a that the person performing under the agreement shall that quote shall at all times be under consultants exclusive direction control of that that's those are the words on the paper but the reality is that she operates under the supervision of one of the mr hope was a forget which one and she is doing the business of the company just as any highly placed executive would the relationship evolves over the years and you're basically saying that in indiana a court would give precedence to labels over substance and i'm not sure that's an accurate statement of indiana law it's not just labels your honor if you look at it i of her division she was only answerable to management for her financial results she wasn't answerable to that for how she dealt with the clients that's any different from the head of the you work for general motors you think they care about anything else that person does other than the financial results for buicks will tell man's own director or thing i said it did make a difference what she was she gave he gave testimony under  examination under oath during the claim investigation this is from just printing that telemann had asked barry to convert from a consultant to an employee but she declined and mr ranking testified that if she had been told months employee they could have run a background they would have expected more loyalty from her that's from his deposition which as tom on one docket number do you is really to just eighty two through eighty three that's tell months on director of risk management saying that it did make a difference  their face by that time so i guess it's not that surprising but the functional question is what work was she doing day to day who was controlling it who was the work for in the kinds of things she was doing were employee kinds of things she's controlled by caleb ho in the way that a high level executive would be with the chief stanley child c e o of tellme on testified that yes she started out in a sales role and that's reflected in the consulting agreements paragraph three that her responsibilities for sales and then if you go to exhibit a attached to the consulting agreements they state that her duties for work may change over time just due to the her role that was something to tell them on new well she mr chen testified that this was because she was the one who was supposed to bring and and grow sales especially what eighteen to so putting her in a supervisory role over eighteen  not micromanaging her as a judge would say it but they knew the scope of her responsibilities and they were fine with that because they wanted to keep eighteen teeth exactly but as mr king ranking testify you know there was a  second with respect to him stating that they couldn't file suit because we were conducting our investigation and somehow their filing of suit was reliant on  investigation the suit limitation defense and the crime policy turns on when discovery occurred and discovery was actually one of the issues under investigation so to say that he can file suit because we needed to investigate that was the issue we were investigating discovery and going to the appeal on that date i think you're eating into your co counsels time but if that's all right i'm going to be addressing about faith your honor  requires evidence of a state of mind reflecting dishonest purpose moral up liquidy for a design or ill will when it held that it didn't say anything about this element is only required for claims involving insured had you claimed that they matter of claims handling for the insurance insurers conduct leading up to and including the claims now they basically acknowledged covered claims and then went ahead and did not know if if that statement and that  know that you don't see cases where an insured when a first party insurer is right on coverage and it's held to be in bad faith for the way it handled its claim and it certainly has been rejected in the india by the indiana supreme court indiana does what about the conflict of interest situation your opponent raised the way the claim is being handled regardless of what the ultimate decision is on coverage might be done in bad faith because still i mean it's a persuasive example of some place where you might have bad faith in a way that we would be very concerned about in the insurance context well they've never all they've played here is that we did too much food as a matter  hypothetically you know why wouldn't that be an example that the bad faith claims handling theory is one that should and would be applied in indiana in some circumstances perhaps under a liability policy where there there is concerns about a different set of concerns about how insure reaches the coverage determination it has a whole different set of duties for coverage and please the court i want to go back for a moment to the rules of policy construction they're obviously very important to the issues involving my client rightly so because you're in the awkward position now that ms burgess told us for twenty minutes that under no circumstances can is very be considered employee you're here to tell us that she is an employee or not i'm here to tell you that she's not rise representative for anyone or anyone to whom they entrust the property for any purpose much broader it doesn't it doesn't necessarily turn on first pacific employment relationship but all the facts you've been talking about this morning and the questions that you've asked counsel simply underscore the fact that they put this woman in the position they gave her the keys to the castle they put her in a senior leadership in trust position and that's actually the language out of that narrative that was attached to the sworn statement approval os that they submitted to the crime insurer and then it went from there you know they put her in charge of the whole dating facility and all the personnel and hiring and firing and the removal program i mean they put her in charge of the property that she ultimately stole all of that feeds into the dishonest acts exclusion and just i know you know this but we issued a property policy not a crime policy property policy is very different than a crime policy now interestingly our property policy has a crime additional coverage indorsement which is docket to afford ash one that page fifty seven and the reason i raise that and not because they're making a claim under that because they're not and not that she fits in with the class of persons that are specifically defined in that crime additional endorsement but what's so important about that endorsement is if the dishonest acts exclusion was not as lot you have this little bitty ten thousand dollars i think that's why they didn't bother actually you know it's corrected her absolutely no i understand but but the but you but you see the frustration you know here they've thought they did the right thing they've got you know a general policy yours they've got a crime policy travelers and somehow they're told by everybody well you know she isn't authorized representative or somebody entrusted she's doing all these employment things that you just ticked off so we don't have to pay and they're saying oh oh but she's just this complete stranger least employee you know they barely knew her so we don't have to pay well i think actually telamon finds itself in the position that it is in because of tell a man's own actions because the fact that they took this woman who was an independent contractor and i'm not particularly travellers arguments that you know falls outside their policy but she is within this class of people that are not covered by our policy it's the way that they handled their relationship with ms berry that they find their self in the position that they're in and so going back to their their promise in analyzing this policy is that we've got to start off with the throwing the policy against the insurers and look at tell reasonable interpretation all of the cases that they cite to support they are construction are all cases where courts first found a provision to be ambiguous every single one of those cases the tiger case and so forth i think we're on the common ground there mean the question is is there an ambiguity that we should recognize not whether that's an important step right what with regard to the dishonest acts exclusion of the language itself i mean that indiana courts up hold their contracts they called insurance contracts under the same rules of construction of any other contract there's no special rules of construction for insurance policy and they will inforce the contracts based upon the written contract  and give undefined terms which are not automatically ambiguous they're plain in ordinary meaning so we look at the dishonest access solution it uses these very broad classes of persons authorized representative  or anyone to whom you can trust the property the case what they haven't they have not cited one case that holds or stands for the proposition that the term authorized representative is ambiguous not want every single case that we've cited and there are many in our brief had up held that undefined term as unambiguous and same thing with regard to the interesting part of it up held it as unambiguous and every court has gone to the dictionary and come up with dictionary definitions in the case of authorized representative the dictionary definition that they have applied to is that the person is has been empowered are permitted to represent another or act behalf that's ms berry in spades i mean we don't have to recount all the evidence again which they've never disputed below and they're not disputing in this court either and same thing with aren't you and you're your argument has to be that the scope of her responsibility we have a granularity level issue here right you know she's generally authorized to dispose of the property obviously nobody ever authorizes somebody to steal so you don't pacific but you your position has to be that the breadth of authority she was given is enough to encompass her abusive that authority in the way that she did abus and that's what all the cases both under authorized representative and trust me say it to your point that she doesn't have to be authorized to steal and their argument is sort of a shade of that they don't say that but they say it's a sheep in another clothing  but the milwaukee versus frontier case says no one's ever authorized to do the dishonest acts that they that someone's engaged in i mean if that were true that would abrogate the exclusion altogether so but you would agree you if she was responsible for you know advertising or something and she then somehow diverted property to her florida people that would be outside the scope of her business for for the company it would be factually specific but what i'd say is the term authorized representative doesn't have limitations or restrictions on it it just says authorized representative so if i tell him on board the the person that you're using in your hypothetical has been empowered in some way or permitted to represent a party in the advertising sense and that gives her access to take whatever it is that she's that person is taken she's an authorized representative i mean that's the situation or someone to whom they transfer the property that's a situation in the wagner vs indemnity case where an independent contractor disclose who is given the keys to someone's warehouse to clean it out and he goes ahead and steals everything he wasn't authorized to to do anything other then to let you know that that particular job so that's beyond that i mean and not of the cases have said that someone's scope of authority has to be only the job or activity for which that person is hired policy if someone falls within the terms of that policy is covered  with regard to i want to just briefly touch on the consolidated appeal on tell mine too and just in just to put it in procedural situation i think within the rule of the semtex decision the supreme court you know what the in which court number two needs to give a diversity judgment the same effect that the state would via borrowing it's a federal but it's a borrowed federal rules so the question is really whether indiana would apply this claim splitting rule when you have a different party and different policies and some differences although fundamentally the underlying theft well and in this case yes there's a different insurer that they added yes there are different policies that they've added but everything else is the same and what the district court looked at which is the privy rule and the fact that charter open st paul are affiliated companies all part of you know the same parent company travelers and in that situation with that pretty they're viewed essentially the same they they're being represented by the same parties and what what they're really doing is they're unhappy with the fact that they had their motion for leave to amend denied their end running yet they didn't appeal that interesting late which i think is very significant in this case and now they're they've come back with this second suit to try to get a second bite at the apple and they filled the law does not allow that i see my time so thank you aren't thank you very much anything further mr plu verdict on bad faith punitive damages at the same time reversed a summary judgment on coverage and send it back to trial court so yes you can have bad faith without necessarily showing as you're entitled to coverage that's exactly what happened make works that's the end result of that case the second thing i want to say about meg works is that it does not say that bad faith requires the ill will and so forth it has a sentence that says as a general proposition that faith requires some kind of sort of intent all those kinds of things but and interestingly both the district court and seen as travelers in their brief omit that section which is obviously says if it says as a general proposition th there are times when it's not what it when it's not the general proposition and therefore there can be bad faith without without those kinds of ill will and  there's a quotation liggett from appleman and quotation from professor keating to the same effect that often times about the law takes positions on meanings of particular coverage terms which wouldn't be those which would select if we were trying to benefit but you agreed and until you find an don't get into the contra proffer and him now will you have to find that ambiguity just to do that and it through to how you do it is also separate cases that is if it's more than one reasonable construction which brings me to the phrases authorized representative and an inch and you can trust that it is authorized representative can mean if you look at just look at it can mean you can be specific as authorized represented with respect to the specific property that's at issue in the claim or can authorize except of course on her own account meet selling and taking the money herself but that wasn't what she was supposed to do and that wasn't what she was authorized to do and you know i see my time so they aren't thank you very much thanks to all counsel we will take this case