the morning my name is timothy p lot of reads man i represent the appellant's specialty surfaces international inc doing business as print turf and empire and associates i will refer to them collectively a sprinter i would like to reserve three minutes for rebuttal that's created thank you this action was brought by sprint turf against continental casualty company alleging that when continental assume the defense of a california action brought by the shasta union school district of california school district in california continent over it failed to pay all of the defense costs owed for that action in particular continental refused to pay any defense costs for the time period prior to when continental agreed to assume the defense and refused to pay existing defense counsel his going rate instead replacing him with counts off he would work for less there are two issues on appeal the first is an issue of choice of law whether the district court airgun applying pennsylvania law rather than california law to the dispute the second issue is whether the district court erred in ruling as a matter of law that there was continental agrees i think that if california law applies that the matter must be remanded for application of california law and there are some key differences between california law and pennsylvania law both on the duty to defend and also on of the facts at issue and not just the underlying complaint so for example there was an amicus brief filed by the plaintiff in this action that explained a little bit more about its cause of action was california and pennsylvania is distinct both on what's considered in the duty to defend and also about how the issue of occurrence is approached the facts that matter i think primarily  was there damage beyond the work product and you can certainly interpret pennsylvania law in california law being consistent in instances where there is damages beyond the work product and i think the facts are undisputed here that there california the the occurrence vs the occurrence issue is treated a little bit differently in california there's the gettys case out of the california supreme court that treats the incidence of a construction defect itself as an occurrence whereas the kerner case out of pennsylvania treats treats a construction defect itself as not an occurrence here so when the truth of law is he for that reason yes if if in fact there were not damaged beyond the work product or if you were to find that that doesn't matter then the difference between california law and pennsylvania law is key if however you view california law and pennsylvania law consistently on the question of what is an occurrence when there is damage beyond the work product itself then there really doesn't make it half and so ultimately i think you can decide either one or other of the issues and if you decide either one in our favor you know that's enough to get us back to the district court for further proceedings when you describe what this case was about you describe it your complaint is though it were  asked for a declaration declaratory judgment as to duty to defend but your complaint is far broader than that your complaint as for declaratory judgment that  these claims of the shasta district are covered by the insurance policy so that the issue here is not duty to defend the issue is coverage of the policy unless you think there can be a t's a breach of contract count and at the point that we had brought our action continental had assumed the duty to defending california and the question was did they owed defense costs going back in time after they assume that defense and were they able to replace counsel and not pay for the full cost of counsel upon assumption of the defense they didn't raise a declaratory judgment count encounter clay neither and they didn't assert occurrence as a defen so the issue was not you know a typical insurance coverage duty to defang case or duty to indemnify case it was really very strictly limited to these duty defend issues the nitty gritty issues of duty to defend as applied in california with california counsel and that's why the performance in the place of performance in this case is so closely tied to california and why we believe california law would apply to th the key issue here is not the meaning of occurrence in this policy well that's certainly what the district court did with the case the district has where you for your yes your position that's not ninety percent at least ninety five percent of the briefs are devoted to the issue yeah all california would decide and how pennsylvania would decide how you interpret occurrence in this policy yes or so it's the issue is the coverage issue ultimately your honor that's what the what the case turned on in the district court the case got away from the original complain a little bit you don't maintain that even though pennsylvania law may cover the meaning of occurrence in this policy that nevertheless california law would govern the duty to different now your honor i believe that in in determining the duty to defend at the outset of a case you would look to the law  of the state where the duty to defend is to be performed now the duty to indemnify cannot be decided until after you've reached a judgment and in fact in this case there was no judgment it was ultimately any issues of indemnity now there are policy interpretation issues involved in determining whether there's a duty to defend i certainly concede that and certainly pennsylvania has an interest in  insurance policies negotiated and deliver here california however also has an interest in the duty to defend actions pending in california and i think if this were a matter of first impression it would be a very close case because there is interests are so strong in both states however it's not an issue of first impression and the third circuit has dealt with this issue before in american contract richly and that's binding precedent on this panel and the factors there so why did we how do we square them hammersmith case is just wrong no absolutely not the hammersmith case is distinct on place of performan you and one result could be to remain and for the district court to address the judicial stoppel issue however i think what happened here was there was an assumption the pennsylvania law applied in the beginning of the case and then as the case moved on the court asked for briefing on choice of law and when that issue was fully briefed there were distinct positions taken with continental urging pennsylvania law and sprint turf urging california law as well as the underlying late notice that was the only issue in the case much like in this case the only issue relates to the defense of an underlying action and the court there said the place of performance of the duty to defend is in i'm sorry the place of performance of providing notice and breach the insurance breach of a nudist provision is where the notice is to be provided and that's distinct here from the duty to defend issue with american contract ridgeley the duty to defend is to be performed where the litigation is pending the insurance company hires counsel and and performs that duty here in california but why would we we issue if we're trying to decide the issue of what occurrence means in this policy what was california to do with you're telling us that pennsylvania has a system where if you buy a liability insurance policy you don't know what the coverage is that the coverage will depend on where the liability arises if it's in saudi arabia we're going to have to apply to what saudi arabian judges would say occurrence means in this context well on the d v d is that what you think the supreme court of pennsylvania would say on w turns on the meaning of occurrence now you're saying the conflict of law issue is different on duty to defend rather than the meaning of occurrence well i think your honor the meaning of occurrences issue in this case only because the court said there was no duty to defend because as a matter of law there was no occurrence the issue of occurrence is not raised in the coverage just as claim if i don't think it has a designated cause of action number such and such which is limited to the want to go to earlier that's the gist of their breach of warrant the counts of breach of contract  their negligence count in the second the men the complaint the net effect would be a declaration because as mr law pointed out the case was not over so it was an ongoing case there and we have to be a first with is there a duty to the fan and if so down the road is there a duty to indemnify but judge they both and i agree with your comment and that is you never get to the duty to defend or the duty to indemnify unless you first have coverage under the definition of an occurrence and how that definition applies because you can even actually could in this case the trial court judge form said there was no occurrence therefore there was no duty to defend no duty to indemnify but the you could even find an occurrence but then look through the policy and not find a duty that the fent so i think it's this ingenuous when it's especially services says let's look at the duty to the fans and they just bypass occurrence indeed if you look at california law is that would be decided differently the question of her occurrence than i think it would be or there's a chance it would be that you could have an occurrence but california law seems to be more liberal in terms of allowing there to be or recognizing an occurrence if there is damage to a third party's property in other words it doesn't require a degree of ford who would be accident i think it still does but they wind up finding fortuity finding an accident if they find damage to a third party and indeed that's the gist of the the south carolina case the newman case that is relied on by and especially in their reply brief where they criticize us for not taking that into account but if but that's a perfect example of how two different courts can look at it an occurrence the newman case in south carolina the game bone case in  on if you don't have an accident that if you don't have a fortuitous event but you simply have faulty workmanship in the stucco then you never get beyond the occurrence you never get into the definition of property damage you never get into the issues such as the you are working your product exclusion and the exceptions to that exclusion for sub contractor work the analysis end when you make if you make a determination that there is no occurrence say well it wasn't an accident well it it it isn't ironic your honor that that's what the supreme court in a pennsylvania in reverse rainer is want to and that's what the superior court in game bonus balance that we're not going to convert a general i bill of the policy into a performance on into a vorlon t insurance type of document we're not going to expand the scope of exposure and have to be insured to in effect as well as the gist of the action doctrine which we've swe cycle eery insurance versus abbott where if you're not quite sure what analysis you applies a breach of contract or is a tort you look to the nature of the cause of action and if it arose out of a contractual arrangement between the parties then the just is a breach of contract and you can label a separate count as negligence but it's not going to overcome the basic tenant of damn bone that we're not going to cover pure and simple faulty workmanship unless we find a for to what is accident whereas if it's a tort if some third party has nothing to do with the contractual relationship between the parties at issue then you apply a different standard perhaps because then you imply a cause of action created by law as a matter of social policy we don't have that here we have shasta which was one of the contract in parties and the insured specialty empire and there was a direct warranty going from the insureds collectively known as sprinter from trading of such directly going to shafts that the school district and it was a school district that had the the damage property but for the the you know even though the we that the insured was a sub contractor to a general contractor which in turn had obligation on the insurer there are other ways to go about it and indeed if you look at the attachments to the complaint and second the member complaint one of the attachments is the warranty the goes from sprint turf not and that is we're not going to open up a general liability policy to be an all encompassing all ensuring provision there are other ways to protect the contract in part because we're being told however that we are bound not to apply that law that you've just been talking about for the last five minutes because we are bound american contract bridge are we not bound by american contract bridge no sir why not american contract ridge first of all did not involve a casualty policy you know volume did not involve a casualty policy it was a modified perel policy which was not the find in the opinion we don't know the types of perils that were encompassed in american bridge there by implication though they decided or they would not there decided there was a conflict or they would have gotten to the next step well and when they get to the next step it gets to be a sticky wicke court says there was a conflict but then went on to say not only did the individual parties that defendants in that case think the pennsylvania law should apply but one of the to ensure the fence in the case said yeah we agree we think pennsylvania law should apply but there's no this question whatsoever as to why what was the difference there we do know from the court's opinion in american bridge that there is no absolutely no discussion of section one ninety three and one eighty eight but we can  history to disagree if the holding is applicable here if the holding is applicable and you don't know whether the holding is applicable because it did that the a with a different type of policy there was absolutely no discussion of the restatement second of conflicts which hammersmith goes through in great that they'll and points out the need for uniformity which was another issue not even discussed in american bridge and that need for uniformity comes through very strongly in the restatement of complex as adopted by and expanded upon by hammersmith we don't want to case like this where you have a contractor insured who does business in forty states to have the risk of having case which but it's this thing which both again not the same just because the type of policy no not just because that's part of it the other part is we don't know what the issue was that was a power supposedly and conflict  was the same you know if it's a what they call in hammersmith boss conflict maybe tennessee law and pennsylvania law in effect were the same one and the same the courts not didn't in american bridge would not have to expound the great length upon the differences between the two maybe just said look we just want to apply pennsylvania law we don't see a material difference between that and tennessee law but there's no the scutcheon so we don't have to overrule american bridge you can just simply say that the record in this case was much better developed and we deal with an analysis of the restatement second of conflicts and this is the proper decision this is the way to go it's an evolving standard it's not an inconsistent standard that's being applied in hammersmith versus american bridge it is simply this thing which of all and you don't have to get beyond that point verna was decided this is a little  and is very persuasive now i recognize that if al qaida is the night that doesn't mean that the supreme court of pennsylvania gives its blessing the gamble ome however you can ignore the fact that the supreme court of pennsylvania if it felt that am bone went too far in extending to ban or could have granted alex or they did not i can't do anything more than that other than to say that was a very recent the poem so the south carolina precedence that and new hampshire precedents that specially surfaces is urging upon the court if there were merit to that the supreme court of pennsylvania could very well have taken a cambone and it chose not to and this court in terms of cambone being a sapir a court case you're not bound by it you're not you know free to just say this must be pennsylvania law that with their own product and suffer to harm the court of plied the conversion or and m bone rationales to say that for is no occurrence and indeed had the parties the underlying case in c p big had rexall done what shasta did in in an effort to try to get insurance coverage and fall then amend the complaint and included a negligence count which would do nothing more than say everything we say that you did which constitutes a breach of contract also with negligence that's where you would then get into the gist of the action rationale and say well wait a sec can they simply convert a breach of warrant the breach of contract account  convert but add to it a negligence account and simply by using the word negligence create coverage now and the wrong product that that the other psyche pump talking about and i believe judge laurie you said that you know you pointed out quite properly that you can't look to and amica strief as part of the record and the governor makes a very clear another has so many cases make it very clear when you're talking about coverage you look at the underlying complaint you look at the insurance policy if you can find coverage based on the four corners of those two documents fine if you can't and you don't have coverage they're relying on a topic about a wrong product and that language does not appear in the original shasta complaint or in the second amended where faulty workmanship caused bodily injury or damage to another property but not in cases where faulty workmanship damages the work product alone there's no dispute here that sprint work was to lay the turf and it would stall the airfield line there's no dispute that there was a problem with the airfield liner that damaged the base that was supplied by trent there's no dispute that sprint turf had nothing whatsoever to do with the base so that distinguishes our case from what was decided into verner and the distinction of how the game prone well and how about the fact that the j v or whatever it was we said game bone was what we predicted the supreme court of pennsylvania would decide yes run a campaign was a general contractor who built a house and there was no damage beyond the house so that's distinguishable from this case as well when the governor distinction between is it damage to your product alone were damage to something else in the end though it was damage only to the house only to gamble product here there is damage not talking about law that it is free itself to make in both of these cases in american contract bridge as in hammersmith the court was saying what would the supreme court of pennsylvania decide if they had this case now it strikes me that there is there is twenty two years of pennsylvania superior court a whole bunch of mccabe and hughes all these pennsylvania cases that said what we're interested here in looking at is the significant relationships with the contract of insurance so that we can fulfill the expectations of the parties and not to the significant relationships with the torque and the injury now can't american bri law pennsylvania superior court for all that was relied upon in hammersmith that leads to a different conclusion as to what the pennsylvania supreme court would decide in other words we have data relevant to what the stream court will apply that american contract bridge did not have is stronger that there is no intervening law in state court in pennsylvania that would affect american contract ridgeley hammersmith to the issues in dispute in the particular litigation and the connection of the states to that issue here the issues duty to defend as opposed to notice and that's the distinction between american contractor