very well mr johns we'll hear from you st thank you your honor i would reserve five minutes of time for a rebuttal may please the court as counsel for phoenix in the recycling i would present the argument that this appeal presents issues regarding an insurance company's alleged reliance on its on its on the experts it hired and i think this case presents two interesting facts ariel's in that the issues for appeal involve in one case where the insurance company hallmark assert that it blindly relied on it the opinions of an accounting expert but then also we have a situation where a key when it came to the equipment evaluation and payments for the a quid meant for the fire damage suffered by phoenix in a july  of two thousand and seventeen last that the insurance company rejected or at least modify the expert's opinion so we have a i think a scope of what is  the basis or or to what extent an insurance company is entitled to judgment as a matter of law by relying on an expert or also in not relying on an expert and it regards to the accounting expert there's a timeline from december of two thousand and seventeen which i think is very important to understand st of all on december st of two thousand and seventeen i was counsel for phoenix submitted  financial statements to to mark and also to h s n o the accounting firm that whole market hired and then i also had cover letters to both hallmark and also accounting explaining our position regarding the business income claim that we were making using the financial statements that were enclosed which were post fire financial statements we had previously provided to hallmark pre fire financial statements including tax returns for for multiple years and the profit and loss statements for the st six months of two thousand and seventeen percent prior to the fire so the financial statements that we were providing to hallmark on december st were the financial statements that showed the continuing operating expenses normal operating expenses incurred by phoenix after the fire and that's covered by the policy and i think the fact that that the policy provides coverage for continuing normal operating expenses is reflected by the fact that homework did in fact if you  payment so they did issue a payment of just over twenty eight thousand dollars about in early january about a month after we submitted those financial statements but in addition to the december st date in this timeline are some significant events that happen later in that month including my letter or my email to the insurance adjuster at all mark his name is brian jones and i have not heard from brian jones for two weeks after i submitted the financial information so i ask him point blank is all mark refusing to pay for the continuing normal operating expenses including payroll and i think that the way this timeline plays out it becomes very important that the focus of the discussion turns to payroll and ironically unbeknownst to me the following day after my e mail on december th the adjuster hallmark it's an e mail from the accountant from the accounting expert and the accounting expert is asking for guidance from the adjuster at hallmark and he wants to know how to handle the payroll for the calculations of the continuing normal operating expenses that he is is calculating and some time goes by h s i no issues what it calls its preliminary numbers and the  preliminary numbers have some information which i think is a little confusing because they include that they're dividing up between continuing and now and continuing expenses so they're trying to divide up what's in the financial information of phoenix and they're trying to the county is categorizing it as a continuing expense which would be paid by the business income of the interim policy or not continue an expense which would not be paid by the business income and so if you look at his report which is included in the a dent in that i have filed the report as things like workers compensation is considered a continuing expense employee drug testing is considered a continuing expense and yet the payroll is not categorized as a continuing expense in fact it's what it's described as one hundred percent nine continuing so i think that's a real inconsistency is with these numbers that are in the preliminary report but by the time he had issued that report on december th two thousand and seventeen hallmark had not responded to the accountants inquiry and requests for guidance as to what to do with payroll finally the adjuster on december th says oh yeah you should include payroll because that's covered by the policy and i think this is really where you see both the the lack of an objective or reasonable basis for the payment that was issued by a home market twenty eight thousand dollars and also the nd prong of a bad faith claim and that is the knowledge of the insurance company that there's no reasonable basis because the insurance coverage or the insurance company which is certainly i mean these people are specialists in and adjusting claims they know how the policy works they've said that the policy includes payroll and yet they don't even wait for a response from the accountant as to to revise those diggers and provide the payroll that the insurance company in new should have been paid at that point in time based on the financial statements that were submitted by a hallmark or excuse me by phoenix and instead they issue the check with out the continuing payroll  and in fact there's really no follow up in the days and weeks after the december th e mail of brian jones there's no communications between the accountant and the insurance company to try to  add the the payroll figures from the accounting state or from the financial statements to the amount that the hallmark issued payment for on january th and i also want to talk quickly about the significance of the large loss report there's a large loss report that was prepared as an internal document of the insurance company we did not see it until this case ended up in litigation but it's a wealth of information it's a wealth of information and one thing that's significant i think in terms of the business income claim is that on october th they had already hired the accountant that the insurance company had already retained this this this accountant to analyze information because phoenix had already provided the financial information in the form of tax returns and the st half of the year profit and loss statements so so paul martin knew that phoenix was submitting a business income claim they had already taken the examinations under oath which are like depositions from the officers at at phoenix they're sitting on a wealth of information and in that large last report the phoenix or excuse me the hallmark adjuster brian jones the same guy who was asked about the payroll in december acknowledged that despite the fact that phoenix had been running at a loss in the financial statements it was still entitled to the ongoing expenses that it incurred after the loss so again this is further evidence that the insurance company knew that phoenix had incurred a business income loss d through its continuing normal operating expenses and it wasn't just the accountant that knew that it was the adjuster that knew that and in fact the adjuster as part of that that document that large last report actually estimates and i know it's just an estimate but he estimated using the documents he had in his possession at that time a loss of business income of a hundred and fifty thousand dollars there's also this issue of the equipment and this and the ironic thing is when it came to the equipment they disregarded their expert's opinion their expert valued replacement cost of the equipment at one thousand dollars deduct it took a seventy percent cut for a c v getting it down to three hundred sixty eight thousand dollars but they only paid phoenix to one hundred thousand dollars and timing was important because phoenix needed that money it was running out of that money timing was huge and the fact that the homework did not pay the amount promptly proved devastating to phoenix and i would reserve although i love i'm sorry  your honor is waiting for you to take a breath so i'm sorry i'm sorry on the payroll matter which seemed to be your primary focus at the beginning judge as i understood his ruling he said well yes they knew the pay roll was eligible the amount was an issue and it was reasonable for them to  not necessarily penny everything that was claimed at the beginning is that a correct understanding of his reasoning and if so why do you say that was there you know your honor i did not remember that as being part of the reasoning and i remember that  the primary and i think we see and judge darby's ruling that he repeatedly says that homework didn't have to disregard the h s in a report and i'm not saying that  to disregard the report but i say it and there is evidence in the record we had the deposition testimony of the adjuster who said he didn't question the amounts shown in the financial statements that phoenix submitted so i'm not a loss for why the insurance company would question the payroll figures from the post last period and in fact  you know they had conceded in their in their petition i believe it's pages excuse me complaint on pages twenty nine at the bottom twenty eight and continued over on page twenty nine i believe they can and so you know i just think this situation here and also the adjuster stated that he actually criticized the accountant for not including a seventy two hour waiting period so again we know from the facts that the adjuster read the report enough to criticize his calculations as being overly generous but issued the check knowing that it had little or no payroll included in that twenty eight thousand dollars all right you may see reserve the balance for a bottle thank you for your argument is wine right we'll hear from you mr jones you could put your claims on fact or legal issues and even if this ultimately wrong is irrelevant for purposes of the valuating fate so long as there was a debatable issue all of the items that mr jones argued comes with in coverage in the st place in order to be a viable business income clay phoenix has to have lost d money because of the fire here being accepted losing money for years if machinery had been way in it's made any money it had something like eighteen thousand tons of bio fuel on its property but no market to sell it it was being picked up the property because the do owner didn't want it there you know the one million dollars in back fairly debatable issue is the one that mr jones was just talking about which is your goal a payroll or the policy is not a free standing category in damages your role is a subset of continuing normal operating expense now what it was paying its crew to do was to break down and move its machinery and at least one of its buildings because it was getting kicked off the land because the new owner didn't want them there stipes from a lack of causation with the fire breaking out of everything you own and moving down the stream is not part of continuing normal operating expenses unless you're a mash unit or something it's a question yes or it's a business decides to move locations and part of what the employees have to do is undertake this that's not a normal to make money the way you have been making money and then we evaluate well what was what was your normal operating expenses and what was your payroll so you're saying the would have to be related to the fire yes sir yes sir they're not insured for the airport business practices that causes regulatory agencies to shut them down and bankruptcies and all that those are not insurable that those are those are  the work that they were doing say the buildings as they were here were personally damaged or machinery was partially damaged and they had to pay people to go and clean up the rubble to maybe move the machines to a different part of the building there haven't been disturbed so that they could get back to work that could potentially be covered but you heard the machines had been working for a year or two they had been used for anything for a long time leading up to the fire the fire had no effect on those machines and i think in the course the fire had no effect on whether they could continue to allow contractors to dump rubbish there because the regulatory agencies that ari told them they couldn't do that it all starts with it has to because some kind of property damage some kind of physical damage to the premises and then what happened so let me give it to the expert reports with mr jones talked about what because it's not that we accepted one and we ignored another or we pick cherry picked or did anything like that you know with the machinery expert see him see the numbers that mr jones i think  jones saying i'm entitled to three hundred and sixty eight thousand dollars because that's the a t p for all of the pieces of equipment this is a critical point some of that equipment could be repaired and the issue of versus a c v versus r c v is all in the policy and it is that the insurance company pays the higher amount if it can't be repaired but if it can be repaired it doesn't pay the higher amounts it pays to repair so what biomarkers is that look at the list of all the machinery in consultation with this experts figured out what can be repaired what can't be repaired and then add up the cost of either repair  time and had a minimal inspire leave debatable you could argue about whether this piece of machinery could be repaired or couldn't be repaired so forth but remember at the time and it didn't actually respond mr jones suggests that that wiring number is somehow part of the equipment and it isn't there completely separate what it cost to repair or replace the quitman that's the two hundred thousand dollars  that the st thing you do if there's a bunch of broken items in the put it sitting in the parking lot the st thing you do is not go out and spend a one hundred thousand dollars to rewire the broken stuff you wait for it to be repaired or replaced reinstall and then  under this plan in its argues that we did pay it fast enough so that right there are five fairly debatable issues and they cover the landscape ringback of everything mr jones has been complaining about that they're fairly debatable we don't even get jervis at the time of the clay if phoenix wanted to disagree with any of our expert reports it had to demonstrate that the experts were quote patently wrong again that's the language th or something mailed to get responded to that obviously a week and on the christmas holiday and just jervy commented usually bad faith complaints are about being paid and slowly being paid too quickly and here mr jones and phoenix have multiple times that you may cause thank you well we have here is at the front and we have a haystack another we have to cherry pick a name it says argument is we're not going to tell you where you're making mistakes  well thank you for your argument and jones we'll hear from you about thank you your honor several things st of all this idea that this equipment was was not being used for years they really wanted ted have that be true that was not true that there it is is at a minimum a disputed fact but there's plenty of evidence in the record that that was not the case and in fact i didn't side i don't think i included it in my appendix but i believe it is in relocation under the policy so that argument's wrong as far as these amounts this idea that they were you know that there wasn't any value to this property i would again cite to the large loss report  replacements of over a half one million dollars so they make these arguments they want to believe that the phoenix that the people were just terrible business people this is a case where you know this was a nd year that phoenix had coverage with or mark they didn't even file phoenix didn't file a single claim during the st year of the policy it got renewed hallmarked renewed it we filed one claim and then  i think the drag their feet i mean the st business income payment of twenty eight thousand dollars came more than six months after the fire and as i explained in my letter december st phoenix by that point in time was in in the position that it couldn't make it so it couldn't pay its employees it lost customers because it took so long to get back up and running and it lost its equipment that's all it pointed out to whole market and yet they continued to come up with additional reasons to try to delay this because they didn't want to replace this equipment because they have a financial benefit by not having if we don't are unable to replace the equipment