morning is fine lead against liberty mutual please the court my name is matt sits here and i represent liberty mutual in this appeal yours the issues before the court this morning in this case is what is the appropriate measure of damages not contain a monetary amount but the opinion did and it was very clear from the opinion what the what the and that's are just might be a good reason to tell the district court needs to enter a final  all all the parties agree that the lead to judgment was final because the amount in the opinion was fixed and i think the the case law you know there is the parties can agree about that till they're blue in the face but this is not a formal charge the question the technical question is whether this is the sort of case in which it is permissible to appeal under bankers trust against mel us even though the district court has never entered for judgment now you might want to discuss that but this thing is not a judgment well your honor that the the court determined that the that it's order was final and dispose of the case and in its in its opinion it monetized the amount that liberty mutual swore to pay and then entered a judgment on its opinion there after i've just invited you to make an argument based on bankers trust against mallard's do you want to do that case is whether there is subject matter jurisdiction in the district court given twenty eight u s c thirteen thirty two c one a which says that in any direct action against an insurer the citizenship includes the state of citizenship of the insured and that would be smith we don't have any information about smith sr direct action for purposes of thirteen thirty two c wanted a yes your  citizenship of the party's interest in the case one of which is ms highland which read received an assignment of the claim from ms smith is a is an illinois resident miss smith is an illinois resident liberty mutual fire is a then is a if i wanted smith or both citizens of illinois and that's the question citizens not resident if they're both citizens of illinois and this is a direct action then there is no subject matter jurisdiction in this if your do your honors suggesting then that there was no subject matter jurisdiction in the district court case hats what subject matter jurisdiction means we the parties percent of you based on have you given any thought to the effect of thirteen thirty two c one a it was never an issue below iran or in the pub and the district court didn't race at the parties and agreed that complete diversity the court of appeals has to raise on its own and decide without regard to what ortiz agree i think that it will be essential in this case to have supplemental jurisdictional briefs this is very disappointing given that the court has already directed supplemental jurisdictional filings which just haven't covered the waterfront here yes your honor and we and we certainly apologize for that we had no indication after the initial priests were filed by both sides  and the court and additional questions with regard to jurisdiction we proceeded with the appeal and the briefing of the people in that regard and i guess with all respect to your honor if there had been a jurisdictional concern after those initial briefs had been filed  er decision to actually proceed with a lawsuit to default to judgment would never have been made had liberty not defended liberties to fat lip liberties determination that a defense wasn't necessary here which admittedly was mistaken was not made until after the lawsuit had already been filed so that determination i think would not have been made at the outset right your honor that the issue if there is there would be an issue of fact b and there is nothing in the record to support highland and her lawyers argument that that she would have not proceeded with  the case or accepted the policy limits but there had been no attempt by plaintiff's lawyer to actually ask for limits there was no school settlement offer of any nature that had been measure of damages under illinois law when an insurer reaches its duty to defend what where no bad faith as alleged under illinois assurance code section one fifty five or where the insurer is not alleged breached any duty to settle or committed any other tort that is separate independent from its contractual obligations under the policy such as fraud here the district court erred when it permitted the policy holder or in this case an uninsured defendant who was claiming under liberty mutual's policy holders policy to to and then assign her claim to highly when it permitted that claimant to recover damages awarded against her that were nearly two hundred times more than the twenty five thousand dollars policy limits in the absence of any bad faith the subtle law in illinois for decades has been that absent a meritorious section one fifty five claim failure to properly consider a demand to settle within limits which is what your honor judge rosen rohner had asked or commission of a torque that is separate ind ependent from the insurers contractual obligations under the policy such as fraud none of which undisputedly were alleged in this case an insurance recovery for failing to defend is framed by the policy limits these are the only three exceptions recognized by the illinois legislature the section one fifty five and the illinois supreme court under which an insurer may be entitle to recover above  that the penalties for an insurer mistakenly declining to defend in the absence of any bad faith or tortuous conduct again none of which was alleged here is that it's it's it's penalty is that is a stopped from rely on its policy defenses and exclusions here that meant that by mistakenly declining to defend liberty lost the ability to rely on its policy exclusion to prove that the driver miss smith again not it's that the driver was never given permission by liberty mutual's policy to to use the vehicle but in this is the district court's error but being a stopped relying on those defenses does not extend to somehow waving the policy limits of the policy which is the essence of the insurance contract between liberty mutual and its policy holder no illinois case has ever hel that that that the stop a waiver rule applies to negate an insurance policy limits and the district court in rendering that to that decision and making that finding did not cite to any relevant authority in illinois or this circuit to support this holding an insurance policy is a contract to provide risk protection of a certain amount and it's subject to terms and conditions and exclusions all of which have to be settled in order to obtain the bargain for coverage but the fundamental essence of the insurance contract is the amount of the bargain for coverage to illustrate the seriousness and the depth of the court district courts or the district court granted damages in this case against liberty mutual that are orders of magnitude more than the illinois legislature has deemed would be had liberty actually committed bad faith under section one fifty five which again was never alleged this was pleaded as a strafe breach of contract case to further illustrate the error in reaching the severe result that it reached again a judgment that is when interest is counted more than two hundred times the limits of the policy and in arguing for affirmative that opinion here neither the district court or highland ever mentioned wants section one fifty five or the leading illinois supreme court on the ability a bit below ability of extra contractual damage the kramer case just cited in our brief let alone try to square those authorities and and in that argument with the i see my time is running a little slow i'd like to reserve the last minute your honors certainly counsel may it please the court and patrick o'shaughnessy on behalf of the plaintiff and happily in this case shannon highland from the beginning here i don't have a response to the jurisdictional questions asked by judge easterbrook either and would not be prepared to argue those today with for the same reason that it's it's a basic rule in litigation that the lawyers must be prepared on matters of subject matter and yes it is your duty the duty of mr sits or to research look this all have an opinion on it i mean not to read sections of the diversity jurisdiction statute applicable to insurance companies is well not consistent with your duty as a member of the bar i understand that comment and that judy it seems as though i did the same thing as mr spencer in preparing for this  review of the earlier jurisdictional submissions we had you had to look at this you had to look at thirteen thirty to see one a in the district court soon as this case began it is way cool hyland against liberty mutual how can you file this case without looking through what the diversity jurisdiction statute says about jurisdiction with respect to insurance companies hearing that the plaintiff in a case like this would be seeking the amount of damages in the verdicts that were put there because there wasn't a defense attorney darkie the other side ok i have in my mind that's a very gray murky area because the delatour a case that we've both cited actually goes to that issue it calls that the trick bag how could a plaintiff with what possible evidence could you prove that if we reset this game board did the whole trial over again but this time put a defense attorney there what difference would it have made now it likely would have made a difference just suggesting an alternative verdict to the judge or the jury cross examining any witness could do that but it's nearly impossible to calculate you couldn't do it without actually redoing everything but it's already been changed so that's why the approach that we think is more solid in this case is to make the argument we think it's very good here that the whole process would not have happened that there would not have been a default judgment against because there is no reasonable logical manner in which you could have gotten to that point if liberty mutual had not reached a duty to defend your confront i don't wonder you know why should it matter  the purposes of demonstrating the proximate cause analysis that is brought up by the conway case and the risk a spillover it because it's incumbent upon the plaintiffs in this case to show what damage was proximately caused by liberty mutual's breach especially when you're talking about the amounts over their policy limits of twenty five thousand dollars and our argument is that the entire judgment was  proximately caused by their breach because the judgment would not have happened now the lawsuit was already filed the lawsuit was filed before there was even communication between the parties before there was even a single statement made were taken by liberty mutual lawsuits filed quickly because of the magnitude just the manner in which our office handled these what we're saying is that through liberty mutual if they had done their job there's no reasonable permutation from that point the mcquaid just meth would have ever had a judgment against it and primarily it's because of the existence of this uninsured and under insured motorists coverage plaintive is is is has their eyes on the under insured coverage and liberty mutual case with its twenty thousand or twenty five thousand dollars policy really is just a speed bump in that approach there's never been a reason or a goal to seek a judgment against mcquay just myth because to do that you would actually have to have a belief you can collect it and if you got that judgment the first one hundred thousand dollars of its collection has to be handed back to progressive insurance now mcrae's a smith is a teenager she is now a convicted felon because of this accident  problem with something like that as i see it is how could it ever prove or quantify what that difference would be it would be entirely guessing that if we say if mr switzer would have showed up at the default hearing or defended her  trial what would a jury of awarded no one can come up with that number it's guessing even is speculative expert witnesses would be throwing numbers out because it didn't happen and you can't go back and make it happen to quantify that difference that's why in my opinion that issue is almost unprovable but what we can prove is even a simpler prospect not that the amount would have been higher or lower but it never would have happened because there's no point in it happening to dude to go after mccuaig just myth for a default judgment if liberty mutual had not breached their duty to defend you would actually have to be spending until highlands money he has a traumatic brain injury he has one hundred thousand dollars in uninsured or uninsured motorist protection and if we're going to go after mccuaig of smith you have to start spending that money with no belief that you'll ever see it again it's gone and you wouldn't waste his resources on that the the issue with the a stop well i really want to bring it to you because this is a fairly critical issue i think is being somewhat mists represented  judge shadid in his district court opinion did have the one sentence that mentioned a stop well with regard to the policy limits and liberty mutual puts a great deal of attention on that in their brief and they bring it up in their argument as well this is a day in my mind a mistaken sentence in the district court has been the sentence does not make sense contextually the next sentence that says for example doesn't even follow and most importantly at no point in his decision is judge shadid making this call based upon a stop will with regard to the policy limits the conclusion is quite clear the stop was referring to policy coverage and exclusion he never makes it for policy minutes so this is a harmless error and an argument from follow see the comes from the last major issue i want to get to is on the issue of the section one fifty five images and it is absolutely correct they were not pled because this isn't really the case for them to let the kramer case that's argued by liberty mutual here  is really not the point cramer talks about it in the context of a first person insurance mos where the loss has already occurred the first part of claim so in that case if a insured has a small loss for example mr cramer's case of about six thousand dollars and he presents it to his insurance company and they say no then his remedy under contract law is to sue as insurance company but contract law doesn't give you the remedies of attorneys fees or punitive damages so in small cases like that there is little economic incentive to bring the claim and it's kramer explains that is why the legislature pas the section one fifty five because it gives extra contractual damages to give the economic incentive to bring a claim like that and this is where i think it's being this is like first of all kramer never even uses the words duty to defend its entire reference is into its its arguments were becomes relevant is i believe liberty mutual is talking about creamers analysis where they talk about contractual remedies and what that means in the analysis is remedies under contract law and they're changing that to contractual limits meaning the limits of the policy involved tracked because the one thing that's clear under contract law is the rules don't change when you deal  with still contract law and what we're faced with here is i think the cases are clear i disagree a liberty mutual i believe this court disagrees with liberty mutual's arguments when it had the green vs j c penney's conway and reese both express borrowed from california law that the measure of damages is not an extremely imprisoned in the policy limits instead properly it is measured by the consequences caused by that breach so the application of contract law here would allow the question of smith to have a claim for all damages proximately caused by the breach that shown to be the judgment of the interest even though it goes beyond the policy limits because the proper evidence has been made to show that it was caused by the breach correct and that's what this comes down to the policy limits in a case like this act as a wall what is it stands in front of you is the damages under the policy limits what's on the other side of the wall are the damages in excess of the limits caused by the breach and this case i believe they have so for those reasons we pray that this court affirm the summary judgment or finality issue your honor we addressed by citing the excellent case the seventh circuit excellent case which holds that the final disposition disposition if the final disposition of the case can be a furred from the district court order rather than the judgment in the appeal may go forward despite technical shortcomings it is plain that we hear that the judgment had underlying judgement had minor underlying district court order and opinion had mon jurisdiction to hear the case with respect to liberty mutual it is that of liberty fire it is a wisconsin incorporate thank you council the court directs parties to file supplemental briefs within february nine in cook against jackson national life insurance company and the supreme court's holding and bankers trust against malice they portion of these briefs concerning subject matter jurisdiction should address twenty eight u s c thirteen thirty two c one a and when those things have been received the case will be taken under advisement or it will take a short recess before calling the third case