good morning your honors me a please the court let me get a class of water sure  jonathan growth representing appellant americans or concerns company i like to reserve approximately three minutes of time this case is fairly complicated when you get to the math but the core insurance principle is simple and the corn surance principle is this does an insurance builder's risk insurance policy pay for it contractors are voluntary and contractually obligated cost to performance contract that's the core principle respondents have changed it into a different argument they instead would like the argument to be or the issue to be does the contractor have is it required to complete the contract before he can make a claim and that's enough that's a false issue and the reason it's a false issue is because all builders risk policies have a terminations point when the con when the projects completed when the construction is completed the builders policy and and the owner has to then buy regular property insurance usually for higher premiums so by definition almost builders risk claims occur and happen before the construction is complete so the framing of the issue by respondents is really a trojan horse the real issue here is whether the builders risk insurance policy is going to pay for work that the contractor voluntarily and contractually is obligated to perform the risks in a construction project ject are fairly well established so at the beginning the owner in putting the project out for bid tells the contractors what is the work that has to be done from that scope of work the contractors have to figure out how much they want to bid and in this case that's what happened the owners put a lot of information out there including drawings to show how much gravel would be created specifications for additional gravel for settlement all kinds of additional information and each of the bidders each of the contractors had to decide how much they were going to b because the low bid won the contract the accuracy of the bid is the burden of is the risk of the contractor if the contractor underbids underestimate what it's going to cost to build the contract and puts in a bid that's too low that's their burden and that's what happened here immediately after winning that the contract with a lo of cubic yards short in our estimate and they tried to get the school district to increase the contract price the school district said no that is your responsibility that's the way things work what the owner of the school district is responsible for is paying for site conditions so for example one of the site conditions this being in alaska they can't work around he e they can only work in the short summer so they had to do phases another site condition which is the issue in this case is this project was being built on spongy tundra everybody knew it's going to contract under thousands and thousands tens of thousands of tons of gravel how much over what period of time well that's somewhat of a guess that the geotechnical consulting for the school district estimated but the school district is responsible for the site condition and the school district took responsibility for the psych indecision in the contract documents it took the school district told the bidders estimate about two inches  settlement for when you do phase one and we're going to put in for the rest of the settlement and the school district continuously took the position if there's more than two inches of settlement during phase one we will pay for it but you have to prove it ask a question because part of this to me sounds like a re arguing before the jury you have of these issues of of what's happening and so here on appeal we're focused of course on your appeal particularly on the breach of contract claim whether the jury's verdict should be reversed and there's you know pretty high threshold for that in terms of the sufficiency evidence in the record what is your best argument as to why the verdict should be reversed let me tie it in ok the insurance policy states that it will only pay for the actual cost of repairs insurance policy also states that it will not pay for cost of repairs that are done made by somebody else the jury wasn't instructed on those parts of instead the jury was told instructed it was a huge mishmash and they were given a juror a general verdict form to say was there a breach of contract and is there  a if so how much money but the core of it here is the there has to be steps in analysis is as far as the jury instructions i don't think you challenge those i know you challenge the verdict form but not the instructions no your honor we did challenge the instructions and we challenge the instructions on the insurance policy language so that the instructions the court gave on the requirements of the insurance it's in our brief but i know that i believe a twenty two and twenty three and i think there was one or two others that were challenge and those were the instructions on what the policy required and so the core of it here is the jury should've been instructed on the part of the bill is risk policies only paying for the actual cost of repairs and not for any repairs that are paid for by somebody else the jury wasn't instructed on that the jury instead was given a lot of concern a lot of language and told to figure it out what we asked the court to deliver when you have a jury form that is so complicated that you're going to end up with an appeal on the nature of the jury foreman seems to me that it's pretty hard to overturn the rejection a jury form let me be specific about you're a jury foreman should have been given where the jury did do specific factual decisions the jury form that was submitted was submitted to throw everything in front of the court because if something wasn't asked in the proposed jury form well we would be deemed to waive it but we're not the appeal here is that there should have been something more than a general verdict we're not saying that it was necessary an absolute pos you know require that the bird former pows be given but there should have been a verdict form that was specialized and did ask the pertinent questions and in our briefing we identify the pertinent questions right your honor did you have a question ok so what it comes down to is really the there was no substantial evidence at trial that m k b i did more than perform what i was contractually obligated to do counseled if i could interject this it would help me with the size of this record no where in the record does it show precisely the jury instruction that you may have checked it to that were given and many counter instruction had you proposed that was rejected on the question of what the contract required on on earth movement you're on or your question focused on just earth movement or is it overall because i don't i don't think that this case actually hinges upon earth movement by itself is that cost of repair language in the clause about earth movement no your honor the cost of repair is a special endorsement of its own i believe it's volume thirty one page six four three nine in the endorsement is changes in the brief  so i know it's twenty two and twenty three and  if i could with my reserve time respond i could look it up a bit later i'd hate to right now we're being helpful is just it is a huge record we've gone through it but we do rely on the parties to be familiar with the record so that we can flip back and forth between your argument and the record i appreciate that your honor and i apologize for not being con's i can tell you twenty two and twenty three definitely i think there's another one that i will refer you to when i get a chance so i won't go into details i think the briefs laid out fairly well but the record is there is no substantial evidence that in k b actually put more gravel on the pad than it was contractually obligated to risk to do the the record is is very clear on that and if the court has any questions about evidence cited by m k b i would be happy to address it but otherwise i'll move on to my next argument right getting to the regarding if if it has been held to be essentially the enhanced if the damages are punitive damages notice is required and if it is constitutional we're not challenging the constitutionality of  the contrary to in cavies position because if it does require notice it requires a twenty day letter that sets out the basis for the if the violation of the twenty day letter in this case did not set forth the if the violation that the court found ultimately was the violation here instead the twenty day letter was completely consumed with questions about the investigation of the claim now there is a lot of complaints about the way the claim was handled any one i could address and respond to but the real the fact is that there was nothing deficient in the investigation there was no facts that the investigation did not find the investigation by americans or it was thorough and complete and maybe a consultant made a mistake here and there there were some mistakes by consultants but there was nothing lacking in the investigation and the court record is voluminous partly because the in the claim file is huge the file of nino and more is enormous the consultant is hard so the invest this this  claim was thoroughly investigated and in fact a lot of the evidence that m k be relied upon comes from the investigation so there was no notice if you look at the twenty letter there is nothing in the twenty letter that says you're your client failing to pay all that you are wrongful in denying the claim instead of letters complaining about other things that are not supported by the evidence so there was no notice of the violation  also we would like to point out that the finding that of if the damages it's very clear that the damages that was claimed was the cost that him to be incurred to sue the school district to get paid under the contract that's not caused by anything the insurance company did the school district withheld one point four million dollars when it fired him k b and m k b took it to arbitration and in k b collected through the arbitration one point four million dollars in k v argues well if you paid our insurance claim we would have had to sue the school district well the insurance claim at the time included the one point four million dollars that the school district owed the district court ruled on some a partial summary judgment that the one point four million dollars owed by the school district which is school district paid is not covered by the insurance policy so therefore in k b was claiming from  payment of the other million dollars the other cost in the claims have nothing to do with him k b trying to collect and actually collecting one point four million dollars from the school district and i would like to reserve the rest of my time scuse me good morning may please the court my name is ken freedman i'm one of the attorneys for m k v with me today is richard dykstra another attorney representing them as well as mark jensen the president of m k b construct there are two distinct subject matters involved in this appeal one of them is very technical and factual complex which is the gravel issue in the breach of contract in the cost of repairing the damage to the engineered pad and  first the second issue is more a legal issue involves the insurance for conduct act and the standards there and what the jury did with enhanced damages and that's interesting legal issue but not factually complex and i want to start though before because i'm going to forget because it's not in my prepared notes address the one thing mr gross just said which is that judge roll bar to partial summary judgment ruled that the  one point four million dollars payment that was withheld by the school district was not covered under the policy that was not judge roberts ruling and judge in his post trial motion made that clear he said i didn't rule it wasn't covered i ruled that there was no doubt there was to be no double recovery and that's why they cannot recover it again he'd never rule if it wasn't covered and in fact we would argue it was covered under the policy so i just want to clear that one factual dispute this was a builder risk policy whether or not it covers voluntary and contractually obligated cost is not in dispute of course it doesn't and we've never argued that voluntarily assuming contractually obligated cost should be covered under this policy so there's not a legal question about that there's a factual dispute was was there enough gravel estimated  brought to the site to cover the contractually obligated cost and then was additional gravel necessary because of earth movement there was an earth movement endorsement of this policy those are the arguments that were both sides made the jury in the jury decided in favor as a factual matter there was enough gravel estimated by m k b and that amount of gravel was part of their b and when that gravel sank more than the estimated two inches up to additional nine and a half inches m k b was obligated to repair that damage to the pad and brought additional fill in to do it the cost  jury awarded was cost that the evidence shows was response was the responsibility of m k b because of the additional cost if not for the sinking the earth movement beyond two inches and k b would not have would have had sufficient gravel on the site to complete the project without needing additional shipments in spending additional money that why was that not the school district's obligation or it may have been  it was certainly zurich's obligation and once the school district paid the contract show damages the from the school district contract judge robot said well you recover that so you can't recover it again but the other evidence for the jury to reach that conclusion that there was additional that the additional gravel was an s s aided by earth movement and you know the factual record is dense on that and there it starts with m johnson's estimate of twenty three thousand cubic yards other estimates of twenty three thousand yards of cubic yards including by zurich's own expert mr johnson of nino and more other contractors and other people within m k be estimated between eighteen thousand and twenty two thousand cubic yards so the record is full of information from which a jury could say well they estimated twenty three thousand yards and that was adequate and therefore when they needed to bring in the additional the additional gravel it was because of the earth movement as judge robert had noted this is a factual dispute not a legal one and both sides were given ample  time and jury instructions from which they could argue their counsel if i could interject a question please so which particular jury instructions or instruction  is most pertinent on the question of whether the m k be estimated enough gravel to storch or whether it was caused by i think the instruction that would be most pertinent to that would be what the when the judge instructed the jury what we had to establish which is instruction twenty two what is your next record site that's at eight hundred ten of volume ten and in that instruction it says m k b constructors has the burden of proving each of the following propositions of his claim a breach of contract in a list for elements and then it goes on and list for well instructed on both what we would have to prove on our claim and what cirque would have to prove on their affirmative defenses and to answer a question the court asked of mr gross and this is at volume nine fifteen seventy nine i think the following pages well mr vasquez on behalf of zurich during the jury instruction conference said defendants will take exception to instructions twenty two twenty three twenty four for the following reasons the instructions instruct the jury to determine whether coverage exists under the policy this determination requires the jury to interpret provisions of the policy and went on to say that was mistaken as judg noted those that argument has not been briefed on appeal and is apparently abandoned so those three instructions were objected to the only objection to instructions on appeal is the verdict for the verdict form and then jury that's correct and on the verdict form issue mr vast quest said and this is a page fifteen seventy nine of volume nine defendants take exception to the verdict form for the same reasons that the verdict form requires the jury to determine whether coverage exist under the policy which is a determination of law and as you know judge wrote our thought it was not a determination of law i was a factual question about whether or not the policy was breached not a question of what the polic set of objections to a verdict form must be sufficiently specific informal to put the court on notice that it is committing an error of law or an abuse of discretion as united states versus parsons corp this objection to the verdict form at trial is not the objection that's being made here which is the verdict form should break down each of the five alleged breach of contract so we can have a separate ruling on each court did not tell the jury that they had to find all or nothing the jury could find and mr gross certainly argued in his closing argument through each of the five breaches of contract in each of the damages related to each of those theories and asked the jury not to award them so it was not confusing to the jury to ask them was there a breach of contract and then if so what are the damages because they were given including from the very first claim that was made following  this incident i breakdown of by category of each of the category of damages and that was in evidence as well so the jury would have had no trouble for example if they wanted to exclude the bargain expenses from making that mathematical calculation so i don't think the verdict form issue was preserved i don't think there is anything wrong with the verdict form i think there is adequate evidence for the jury to find that earth movement caused all the damages that the jury awarded and that was covered by the policy so i'd like to move to an issue that is of first impression to this court is the insurance fair conduct act and there are several issues commingled in the insurance for conduct conduct act arguments first is whether or not to award enhanced damages here requires dishonesty or malice and there are two issues that are confused here one is the standard for which punitive damages can be assessed are punitive damages appropriate or no and the second is the standard by which courts review the amount of damages assessed by the jury was it too large was it on constitution for some reason well in this case punitive damages can be assessed on insurance fair conduct act for unreasonable conduct other states have higher standards some states say you have to prove reckless disregard or malice washington does not and this is why we said they really arguing that it's unconstitutional because the statute says you can enhance damages under if for on reasonable conduct and they're arguing in their brief that's on constitution unconstitutional that you need a higher standard well they didn't argue that below and they didn't argue in their pilot rule forty four five point one of the civil rules that there's anything unconstitutional about unhandsome damages based on a standard of unreasonable so i think if you start from the that they're punitive and they need to be vacated as excessive and unconstitutional but you're saying that they didn't challenge the statute itself and it's standard a constitution it's right all right the statute allows for damages just danson it's a low standard it's the lowest one i think that i've seen for a man's damages but they didn't argue that there's anything wrong with that or that the statute is unconst so when you say that earlier you said that there was an issue of first impression here if that issue as to the statute was not raised in the blower wasn't raised in the opening brief then is that waived i think so then so we really wouldn't have to reach that that's correct issue you frame and i don't think you should with all respect i think when i was talking about the issue of first impression is whether or not the judge of the jury in answers the damages and i'll get to that in one moment so the second question on the issue of the amount is the amount of damage and it was eight hundred sixty roughly thousand dollars in this case which was less than the actual damages as you know the statute forty eight thirty zero one five allows somebody you the jury or the judge to award up tr don't really outline why or what the proper amount should be you know if for example in the campbell case one hundred forty five million dollars on one million dollars of actual damages they were arguing well what should be a million dollars in punitive damages should be the limit here where the punitive damages are less than the actual damages there's really no there's nothing to to hang your hat on and saying well it should be fifty thousand dollars it should be five hundred thousand dollars it should be five million dollars it's within the discretion of the finder of fact to determine what's the appropriate amount to achieve the standards of the statute and the judge instructed the jury that these enhanced damages are raw are discretionary with the jury that they are to serve the purposes of punishing zurich and deterring further conduct like this in the future and that they should not let sympathy or prejudice influence their decision and it should be a reasoned decision and we can assume that the jury did that since they didn't even ask they didn't even award the amount that we asked them to they awarded a lesser amount so the question then is is it constitutionally permissible in then you have to look at the cases where the court mostly the supreme court has ruled certain punitive damage award are unconstitutional because of the due process cla and as we go through this in pretty good detail in our brief the reason for all of that was toward to avoid arbitrary determinations by juries and totally unfettered discretion that without some kind of standards that there's a due process violation because a jury in one case could do one thing and something in another case could be one hundred forty five million on the same conduct and you're not really giving companies notice of what they're looking at well if it does give notice it says it's three to one and so they have notice the jury's discretion is limited by that same statute and there is no constitutional violation for anything that's within that statute because they have notice of  what what kind of conduct can support i would warn of enhanced damages and how much the penalty can be so given that notice there is no constitutional violation and you don't have to look at the campbell factors and the gore factors is zero given what the supreme court said in the b m w case about multiples and cautioning against double digits and given what we said and i think it was planned parenthood case that absent reprehensible conduct would normally not go beyond four times but what's the issue for us on the constitutionality of the state statute here i don't think you have an issue as all the crap what saves this statute is the limit of travel damages it can exceed that so anything within that has they're already on notice and so i have i could not find a court anywhere in the country that said an award that's less than a one to one ratio would fail cost t i ask you i mean it all of these relate to multiplier based on compensatory damages correct and the notice point he made though i thought was slightly different and that was not that the statute gives you notice that you have a cap of three but that the specific conduct that triggered the punitive damages was a disconnect between the so called notice under the statute and then when it went to the jury would you address that yes i will because that is a shift from their opening brief to their reply brief the notice required by the statute is listed in the statute as says you have to  allow twenty days prior to filing an action based on the section a first party claimant must provide written notice of the basis of the cause of action to the insured and office of the insurance commissioner so it doesn't really tell you too much about what you have to tell them and then they have twenty days to cure it and what they can do during those twenty days is more investigation they can ask for more time they can reverse their decision in this case they decided to reaffirm their decision and deny the claim again or at least  reaffirm their denial after the twenty day notice so the statute doesn't say exactly what notice and you have to understand that this notice has to be sent when the claim is denied and before any discovery takes place from the time of the twenty day notice to the time of trial there was all kinds of discovery and experts disclosed in reports so they knew exactly what our theory was way before the court trial what if you also look at our twenty day notice it is a lot more detail than mr gross a summary of it would lead you to believe in this is that volume thirty three page sixty six ninety two there is a one page form that the insurance commissioner has you use for your notice and then there is a cover letter in this case mr drugstore wrote it dated april fourth two thousand thirteen and it's six pages and it goes through in detail that misrepresented policy provisions by ignoring the dominant cause of the earth movement which damaged the building pad there's a whole section on refusing to pay the claim without conducting a reasonable investigation with six subsections outlining the different theories about why this claim should have been paid so if you look at that letter i think you will find that constitutionally they are on notice of what the complaints were and it certainly complied with the statute and there's unconstitutional about a jury holding them responsible for that which leads us to the maybe the last question which is whether or not the jury rather than the judge gets to decide that in the third circuit said yes on almost an identical pennsylvania statute that says the court should do it not the jury but district court in kansas that we cited said yes with almost identical kansas statute that says it's the statute said the judge should do it in the in the federal court in kansas said no under the seventh amendment that's a procedural question and jury should do it and then of course three three decisions from this district have all reached the same conclusion the only  only citation that always comes up in this argument is the total case and in total they said it's ok for the judge and not the jury to decide the award of penalties under the clean water act in tall has been  distinguished time and time again and it's very easily distinguished told specifically relies on the fact that it's a penalty to the government and not a dispute between private parties and they said when it's a penalty to the government congress could set the amount of the penalty so congress can delegate that to a federal judge so if treble damages are a form of punitive damages and that's a common law issue then it's think your honor you're right it's true that this court decides things that are legal and does not question what a jury decided as a matter of fact but when there is not substantial evidence for a jury verdict that's when it becomes a legal question and the legal question here the starting point is how much gravel was him k b required to place on that pad and did it place that amount of gravel all of the experts came up with about twenty six thousand six hundred cubic yards mr jensen came up with he actually came up with thirty thousand yards he said isn't he swore  certified as true to the school district that the initial estimate was false mr blake who they rely upon he sent a letter to the school district saying that i'm sorry e mail i believe it was certifying that they were actually four hundred forty seven hundred cubic yards short in their initial estimate everybody's says that their initial estimate was false their belief of what should be required is not the standard what the standard is what did the contract require there was only one in this is a area of expert testimony and there's only one expert witness at trial the talk about it and that was mr fortunato and he pointed out how all the experts came up to  the same conclusion more mr johnson they were an outlier and that's explained in undisputed ways why their estimate was difference because they were using an outdated auto cad program that was using twenty five foot grids contractors surveyor the school district experts they all came up with the same numbers roughly about twenty six thousand six hundred cubic yards m k t made no effort to really put into evidence at  but the evidence at trial was undisputed when you insert in our brief was less than twenty five thousand cubic yards they did not put in the amount of gravel required it's undisputed that the gravel that  the school district put in paid a lot more money to bring in a lot more gravel so whatever gravel settlement there was it was paid for by the school district is now becomes a legal question because there is no substantial evidence to the contrary that n k p was short in the gravel with their contractual down to put on the pad and the school district paid for the rest thank you thank you thank both of you for your