court order the case dismissed this case arises of course from a universal life insurance policy that was issued by state farm back in the one thousand nine hundred and ninety s prior to st offering that policy to mr vote or to any other member of the class state farm's actuaries went through an actuarial pricing process to determine two different sets of rates the st was a set of maximum rates rates that would be listed in the policy rates that it would be expressly authorized to charge and rates that it would promise could never be exceeded the nd set of rates was a lower schedule of rates rates that state farm under its policy would have the discretion or the option to charge state farm made no promises in the policy about how those rates would be initially but they were developed in accordance with actuarial standards of practice and then sorted by three and only three variables the age of the policyholder sex of the policyholder and the rate class a policy that's important because when mr vo walked into his state farm agent's office back in  nine to apply for life insurance he was shown both the maximum set of rates that state farm could charge but was quoted a lower cost of insurance rate and that lower cost of insurance rate was from this lower discretionary rate schedule and it was based on his age which at the time was fifty four dollars is x mail his rate last which was described by him on his application to be standard health and nonsmoker he then went through as any of us who have applied for life insurance do a medical exam and underwriting process health issues were discovered and he was then quoted a slightly higher rate simply because his rate class changed its against that simple but important backdrop that three independent legal errors by the district court on the central legal issue in this appeal and be seen st district court erred in holding that the language on page ten of the policy which describes how the rates will be assigned to each policy holder somehow addresses how the c o i rates had to be developed prior to the time the policy st issued this case this case involves policy rate setting and not changes to rates after the policy second the district court independently here in concluding that this same language of the policy creates an exclusive list of factors that state farm could consider and developing its c o i rates again prior to the time issued and rd and finally the district court's construction of this policy language renders meaningless provision of the policy that allows state farm to charge a maximum rate it was higher than the rate that was charged to mr vote count so why should we go outside the four corners of the policy to find the components of the monthly  rate you don't need to go outside of the four corners of the policy or corners of the policy make clear what the what the maximum rates are there's only one rate that's quoted in this policy your honor and it's found on page four it starts at age fifty four for mr vote and it proceeds of base as years go on it's clear from the language of the policy exactly what those rates are they're organized by race class while there are many issues on appeal i believe the three that i have focused on here this morning are the most fundamental to the issues before the court and it's here that i would like to focus the remainder of my only one circuit court of appeal in the country has address the st two legal issues that i have frame and it's a interrupt you just for a minute here my recollection is the contract interpretation issues were resolved at summary judgment is that correct that's correct when i take a look at the record here i don't see that you've appealed the denial of summary judgment and i'm wondering and i don't see that addressed extensively in the briefs but i wonder if you to address that given some of our cases that suggest that we don't have jurisdiction to discuss or right to rule on an order from the district court that's not been included in the notice of appeal our appeal is from both the verdict itself and braces or is that summary judgment denial and from all orders of the district court pursuant there to case which was cited by the plaintiff's counsel in their brief as distinguishable because it didn't arise from a full appeal of a verdict and all orders relating there to we believe the issues that rose and arise from the court's denial of summary judgment are fully ripen before the court again only one circuit court of appeal in the country only one has addressed the st two legal issues in this case and as to each of them has squarely  rates cost of insurance rates that were developed using factors that were not specified in the policy and each was then sorted in accordance with age grade and rate class and sex in accordance with those policies language so as to the st issue the st issue here that the sentence in the policy addressing monthly cost of insurance rates serves to tell a policy holder factors that are unique to them that will inform their c e o i rate the th circuit is the only court in the country not just the only circuit court the only court in the country that has addressed this issue and it speaks to it quite forcefully critically for our analysis the court held is the fact that the characteristics that are a numerated in the policy age sex and rate class are precisely the characteristics that demonstrate how it is likely to vary from one policy holder to the next in other words a policy spells out those factors so that a policy holder will have a sense of the factors that are unique to them that will determine their ultimate rate and none of the cases not a single case cited by the plaintiffs in this record addresses that issue not the southern district of new york and fleischer not the central district of california in maine not the northern district of california valley you know the language in the policy in the norm case out of the th circuit significantly different than the policy here in norm the policy says the rates will be determined by us but they will never be more than the guaranteed rate towards this policy says such rates can be adjusted projected changes honor just quoted comes from a sentence that is several down from the at issue sentence in this case that governs how changes may be made in the future the rate in other words if an insured walks into a state farm agent's office there has to be some schedule of rates that already exists such that we can assign a rate to them looking at their age sex and rape class that's precisely the issue that was raised in the norm and cases and what the court said is it's simply a mechanism by which an insurance company assigns a rate to a policy holder it's really no different than for example a shipping company any of us who've walked into a u p s store or a federal express store to mail a package  understands that the way that is priced will be based on the size of the package the weight of the package and the destination we all understand of course that that shipping storable have had to make determinations long before we walked in about how to set it prices what does the airplanes cost what do we have to pay the pilots what is gasoline cost all of those things go into developing the underlying rates but when you walk into the store in the th circuit talks about this in the tao case the question becomes how we assigning a rate to you in the st instance a fundamentally different question and this is where the cases fundamentally divide is there after if a change is going to be made to that rate under what circumstance in this case in this case all state farm ever did with lower its rates and it did that in two thousand and two this is not a case that involves a change in rates thereafter on the undisputed record here it is clear that what state farm did a fine or eight to mr vote based on his age sex and rate class consistent with the plain language of the policy and on that basis alone the decision of the district court should be reversed in the case against state farm but even if this court were to analyze the term whether the term based on as used in that ad issue sentence somehow obligate state farm to calculate underlying rates with reference to the age sex and rate class the answer is still no again the only circuit court in the country that has addressed that question the th circuit has squarely rejected the notion that the term based on at least in this context the notes exclusivity consistent with missouri law the th circuit consulted dictionaries and look to the plain and ordinary use of that term as defined in the dictionary it's defined as a main ingredient or a supporting ingredient other dictionaries that have been cited to this court tell us that it's defined as a foundation to horse fits well here state farm's c o i rates were developed starting with its own internal mortality tables and from there they were sorted into tobacco and non tobacco and then pooled such that all policyholders of a particular age would pay the same rate regardless of how long the policy had been in and from their profits and expenses were then added but the foundation of the rates the starting point of the rates of state farm's mortality to the district court here ignoring missouri law which obligates the court to look to dictionary definitions and trying to ascertain plain meaning accord ignore dictionaries altogether instead it points to the old case from this court in from the mendenhall case from the missouri supreme court reportedly holding the phrase based on the notes an exclusive list of factors in either case addresses in the term at all neither case looks to dictionary definitions for that term and neither case we submit is remotely helpful to the court's decision or the district court also suggest that other c o i cases have addressed similar policy and concluded that the phrase based on somehow suggests an exclusive list that isn't correct either the southern district of new york in fleischer in the southern district of iowa and genes to your question judge grosse we're looking at the question of changes that happen in rates after the policy issues fundamentally different cases from the case those provisions don't address just as the policy language here doesn't address our rates were developed prior to policy issues nor did they provide a mechanism for assigning rates to a policy holder or after instead they addressed the question of after developing the rates and assigning them in the st instance to a policy holder under what circumstances made a change in many of these cases the changes are tied to mortality and so if a policyholder in an environment where mortality is improving people are living longer are raising their cost of insurance rates the question presented in these cases is how can you do that when changes in those policies are tied to  mortality those are the problems in those cases not a one of them addresses what happens in setting rates and mischel before a policyholder walks into their agency office before someone walks into a shipping store to ship a package to go back to the th circuit analogy there's only one case cited by the district court and by plaintiffs that addresses that and that's the caliph the central district california's decision in dean and all i will say on that case in the interest of time is that it's a bit of a curious holding because the court there as missouri law compels this court to do it starts with a dictionary definition it adopts the dish dictionary definition non exclusive term it agrees that it's a foundation it points to other courts the montana supreme court the washington supreme court each of which it's a non exclusive term and then the court simply jumps to a conclusion that there could be other definitions and decide that the policy there is ambiguous it's inconsistent with california law as we've noted in our brief but at bottom to the extent that that case is helpful here at all i believe it's helpful because the court goes to dictionaries and concludes that the only logical definition of that is a nonexclusive we have course also cited in our briefs because this isn't limited just to the th circuit and differentiating other cases the u s supreme court's recent decisions last year and the coons and hughes case i won't spend time unpacking those here in the interest of time but in those cases the supreme court consults with the dictionary refers to black's law dictionary and while those cases are factually dissimilar the analysis followed by the supreme court is very universal dictionary definitions reflected in courts opinions cited by the parties in their briefs in that distinguishable of authority from other courts that have addressed c o i cases in fundamentally different contexts state farm submits that the district court erred in holding that the phrase based on is used in state farm's policy reflected in some way an exclusive list actor finally and i'll be very brief on this point and reserve the remainder of my time for r the the other fundamental problem and it's an independent problem with what the district court did and that was to deny state farm its contractual right to charge maximum rates by finding that the policy somehow  in terms of how we specify our rates that holding we submit is particularly strange there is nothing in the language of state farm's policy on page ten or anywhere else that creates a requirement that state farm had to differentiate its rates based on the amount of time a policy had been in place all it does is refer to the age of the policy holder and use other terms so that you can determine on the policy anniversary and someone's birthday which may be a different points in a year we are calculating age if the anniversary of the policies and you were in the insurance birthdate is in august a question could arise as to how we calculate what their age is during the course of a farm's policy answers that question and says we look to the policy anniversary age on that date and that will be there or age for the for the rest of the year and if the court wants to look at other policy where duration is there i would refer the court to the dean case from supreme the central district of california that policy and it's quoted in the opinion has a durational requirement it's very different than the language in state farm's policy in that case the explicitly says a length of time the policy has been in force and won't find any of that language so for that independent reason we believe the district court erred and the lower court's holding should be lesser any further questions rate using eight factors that it did not put in the contract did not identify to the policy holder and was never disclosed policy council would opposing counsel says this case has nothing to do with rate increases it only has to do with the base rate why is it wrong it's not wrong that this case has to do with the initial rate setting what's wrong is that that distinction is one of relevance the rate increase cases if you look at them what they were doing were looking at what was the meaning of based on and just like here the insurer was coming in and saying even though this policy said we can adjust rates based on mortality expectations the insurance companies want to say well we can consider other factors  adjusting rates as well because based on does not imply exclusivity adjusting or initial adjusting they wanted to say that they could adjust rates because of factors that were not listed in the policy i thought they just told me that this will only have to do with the initial  just the today's case only has to do with the initial raid the other cases had to do with at a later time they want to change the rates but i do want to be clear that these rates are not disclosed to policyholders at any time prior there's no evidence in the record that these rates are ever disclosed to policyholders at any time was disclosed to policyholders is what their charge is going to be but an ordinary person is not able to look at the charge and figure out what cost of insurance rate a state farm set nor they are able to know that state farm use factors that they didn't list in the policy to set that rate even at the beginning of the pricing of the policy and the result of that was that twenty four thousand missouri policyholders were overcharged under the terms of this policy at times i think it's important to note at times the amount of the cost of insurance charge there was attributable to these unlisted factors was more than fifty percent of the total cost of insurance charge we in our brief schedule the shows for mr vote his charge at one point the st policy year seventy percent of the cost of insurance was determined not from the four dollars mortality factors that they said the charge was going to be based on but for things they had never told the policyholder about the result of these over charges is that it drains the savings account that is part of these life insurance policies and puts the policyholder at risk of losing the death benefit that they bought for their family council were the company's profit come from if they couldn't include that in the initial cost of insurance i think that's a really good question because that is really why we think one of but the fundamental reason why the one decision was was mistaken and should not be followed under missouri law here because the norm really rests on this idea that an ordinary person coming in to look at this policy would think state farm has to earn a profit and the profit has to come in the cost of insurance charge the district court disagreed and what the district court here said was yes and insured will expect state farm to make a profit but even though it expects it to make a profit nothing in the policy tells them that's go come in the cost of insurance charge importantly there are five different places five different charges in this policy that are separate and distinct there's the cost of insurance charge there's the surrender charge there is the part of the policy where you pay state farm eight percent if you need to take out a loan on your policy account there's the expense charge that sixty dollars a year that is taken out automatically and then on top of all those charges state farm takes five percent off the top of every premium that is paid into the policy that's before the cost of insurance charges to ducted that's before the surrender charges to ducks or the expense charge or any of these other things to a reasonable policy holder to look at that you can't tell me that a reasonable policy holder would look at that and necessarily assume that the profit is coming out of the cost of insurance charge and that's what the district court got correct here but on top of all that even if those charges were not enough were reasonable policyholder to believe that state farm is profiting from this policy state farm can earn money on the interest spread the policyholder deposits money into the account and they get back in interest rate ordinary people understand that when you get a for example a no fee checking or savings account the bank's not losing money on the fact they're offering that account to you they're taking your money they're investing it in other places and they're earning higher interest or they're hoping to earn higher interest than what you earned and that's part of the bargain and that's part of the way all of these policies make money these supplemental appendix that we've moved for leave to file which is a trial exhibit that was admitted at the trial here we think that conclusively shows that even state farm understood their earning profit on other parts of this policy besides the cost of insurance charge there were times when they set the cost of insurance charge below mortality rate for competitive business reasons because they want to sell more of these policies and make them more attractive in certain years but they understood they did that precisely because they understood profit was coming out of different places i do want to go back and make sure that we because we didn't hear about it in mr notably his argument but i want to make sure everyone understands what the controlling law here is the job of this court under principles of federalism and eerie is not to predict how the th circuit my construe this policy the job is to protect how the missouri supreme court would construe this policy that is the court's duty here and we would submit under missouri law it's clear that missouri would not allow state farm to charge policyholders for things that weren't disclosed in the policy and they're outside the four corners of the policy under missouri law the guiding principle is to look at how an ordinary person of average intelligence would understand this policy when they're purchasing insurance it's important for state farm to prevail here they have to prove not only that their interpretation of the policy is reasonable they have to prove not only that their interpretation is better than the district court's interpretation they have to prove that the district court's interpretation here is unreasonable and that's a high burden to me we think there are at least three reasons why the district court's interpretation is correct and let me st address the issue of policy language and the dictionary definitions that they cite the policy provision here and mr no to boom has argued that the pi think he said the policy expressly authorizes him to charge up to the maximum rates there is nothing in this policy that says there expression a charge expressly permitted to charge up to the maximum rates you look at the  the relevant policy language what it says about the maximum rates is this such rates can be adjusted for projected changes in mortality that's what he referred to as if we decide to raise the rates we can do that sometime during the life of the policy will be adjusted for projected changes in mortality but cannot exceed the maximum cost of insurance rates what that means is if mortality worsens if for some reason a particular class of insurance if their mortality gets worse during the twenty years they own this policy state farm is permitted to make those rates higher for those adjusted changes in projected future mortality but what they're not allowed to do is to exceed the table of maximum no where does the policy say and this would be a different case if the policy said and state farm had written into the policy we will set cost of insurance rates we have the discretion to set them at any level but they want to see the maximum or they could have said we may charge up to the maximum at any level we want they didn't put any of that language in the policy and missouri law is clear that if the language of the policy itself is uncertain if i whether there is a diversity of opinions out there with such th well mr know to boom has said that certain cases are distinguishable because they involve rate increases we would submit that that is not a relevant distinguishing fact because in each of those cases what the court was doing was exactly as state farm is arguing here is to say we don't have permission in the policy to increase the rates based using additional factors but what the state farm or what the other insurance companies were arguing was that based on a loan because it only requires something to be the starting point of the foundation allowed them to use unlisted factors and the courts rejected that reasoning for example in the all men case which we cite in our brief and the defendant here was state farm that case was a little differently postured because state farm at that time was arguing against an insured who said that state farm should have included tobacco use of mortality factor in setting his rate was a juvenile policy and the juvenile did not use tobacco and he thought he should get a lower rate for that and this is what the court said about the based on clause in that case by the plain language of the policies it is clear that the insurance agent sex those were the only two listed factors are the only mortality factors relevant to the rape that was at state farm's urging when it was to their benefit to argue that the listed factors were exclusive and now they're coming in and arguing that the listed factors are non exclusive that's an example of why the rule against ambiguities exists here because if ace insurance company is allowed to use indistinct language when they write a policy and not be clear in they can take contrary positions depending on how it benefits them and missouri law is clear that you're not permitted to do that i think it's important here that if state farm had wanted to do what it actually did here it could have easily written into the policy that the rates would be based on including but not limited to age sex and rating class but it didn't do that it could have said that the rates were going to be based on age sex and writing class and the other eight factors like interest and persistency and asset share that it has admitted that it consider it didn't do that either these were these would have been very easy ways for state farm to obtain the permission from these policyholders to do what it says now that it has done we know that state farm did calculate mortality rates using the four listed factors those were the rates that it submitted to the new jersey regulators when they asked what are your mortality assumptions and the record is clear here that that's the same way they price the policies here in missouri even though it was given to the new jersey regulators but state farm didn't stop with those rates instead it used the eight unlisted factors to increase them because they're unable to point to express consent in the policy no where did they say including but not limited to no where did they list the factors their entire argument hinges on a reasonable insurance understanding that by using the phrase based on what they really meant was sorted by or organized by the word sorted by don't appear anywhere in the policy even their definitions of based on don't show that base means sort or a range or organize and the decisions that have said well that's what they really meant that's not a permissible way to read the policy you can't substitute the words you wanted to use the words you did use the dicks trick the district court did not ignore generic definitions here in fact what the district court said was frequently based on is used to identify a specific thing from which something else has developed addendum at page forty three that's entirely consistent with how black's law dictionary defines the verb base and says that that base is typically used with the word on to use something as the thing from which something else is developed factors then it went a step further and did something it never told anyone it was going to do when it wrote the policy and it increased them now state farm's contention is we had to do something else because you can't get to  immortality rate from the four factors alone and we understand that but what a reasonable person would expect when making a calculation is that there is a formula and there what the state farm has done is they've told you what the elements of the formula are and then they apply the formula as the fleischer court said when you calculate a baseball player's batting average it's based on the number of hits and the number of times at bat those are the only two factors but then you have to apply the formula for calculating an average when you want to calculate the velocity of something you can do it's based on distance and speed those are the only two factors which you have to use the formula to get there this is exactly the same state farm calculated a mortality rate using this mortality formula now that's a more complex mathematical formula in an average or velocity but the principle holds true and an ordinary person could read this as saying that based on means the factors that are going to be included with the formula that's what the dean court found and the dean court said exactly that in that that's a plausible and reasonable meaning here think it's important to note that the shipping analogy i've never gone into a fed ex store or u p s store where they've told me that the price is going to be based on these different factors they just tell me what the prices and that's quite different here because no one told mr vote or the other policyholders how the rate was going to be calculated other than what's in the policy i think as a whole interpretation is important obviously and we believe that supports our interpretation because these charges are taken automatically this is not like state farm sends an invoice or ask for a premium and then the money comes out the money comes out of your count and if the money is not a not enough money in your count to do that you lose your insurance or you go into a lapse period state farm obtained permission to take these charges once when the policy was entered into that permission is supposed to la life time it's certainly reasonable for an ordinary person to look at that and say you're going to tell me everything you're doing to take money out of my account you're going to list all of the factors you're not expecting me to imply only from the way or words based on there's going to be all these factors that might double the charge or taking out of my account in some years in a way that i can't even figure that out or know about it and if someone did find and twenty years later at that point your only option is to surrender your policy and lose the death benefit at an age when you're unlikely to be able to get insurance for your family counsel help me understand this just a little bit more the policy says rates could only be adjusted per project to changes them or tell them so what other changes would there be over the lifetime well the changes that could happen is for example if ten years down the line state farm looks at this and they say you know people  are dying at a people are keeping these policies for a longer period of time one of one of the many back up one of the important things about these policies is although they're characterized as permanent life insurance most of them are surrendered before someone dies because the cost of the policy becomes too high or the policyholder to maintain them if state farm did not predict that sufficiently what they would say is that we can adjust the rate because we're losing money on the policies or they may adjust it because interest rates have gone down or they may have just because their expenses have gone up the house of fall within the category of projected changes in mortality it would not and we don't think they'll be permitted by the policy and that's why the policy tells the policyholder the only reason these rates will only be adjusted for changes with projected mortality and we contend that means nothing else but the policy also says that the rates for each year are based on the insurance age sex and rating class and we contend that is violated when state farm considers eight other factors to more than double the policy at times i do want to correct one thing that mr know to whom said he said that we didn't have any other federal or case that interpreted an initial rate setting case that disregards the fact that we actually have a case we submitted and twenty eight dollars j letter on august st the bally versus state farm case judge charles brier in california interpreted this same policy applied to california policyholders the exact same language here the exact same claims here it was challenging initial rate setting he looked at judge laurie's opinion he did an independent his own analysis and he concluded that the policy does not unambiguous lee permit state farm to use factors that are not in the four corners of the policy to set the rates so that is the most analogous case that we have could you briefly address damages in the interest rate and specifically i'd like to know whether the damages are readily ascertainable so as to be liquidated under missouri law so yes the answer is yes we believe it is readily ascertainable and here's why there was no dispute that state farm could have and the experts did perform the requisite mathematical calculations to determine damages it was it was simply as simple as taking what we said were the correct mortality rates and substituting those in for the rates that state farm charged and having a computer run that through the millions of lines of transactions that happened in these policies over the years there was a dispute about the underlying factual assumptions at trial about how we got which rates were the right race but in terms of determining the amount of the damages it was mathematical this wasn't a case for example where you're talking about lost profits or you're talking about emotional distress or you know the types of damages that are are more subjective and you don't get interest on them because how can the defendant know that that's what they need to pay i see my time is up may i finish the question yes for me personally and so that's why we believe that the damages are readily ascertainable with respect to your nd part of your question on the cross appeal the issue principally is that the district court away said that the experts awarded interest and she wasn't going to apply missouri statutory law to give further and dressed however what she failed to address and i think she just overlooked it is the fact that once the policy was surrendered mr vote surrendered his policy in two thousand and thirteen the expert didn't calculate interest for that because the policy account no longer existed he took his policy out he didn't get any of the statutory interest he's entitled to under missouri law from the time he surrendered the policy to the time of judgment and we think that was just a clear air we would ask that the court affirm everything about this case and  about two and a half minutes thank you also made a number of points let me hit just a few one of the points counsel said is that missouri law controls at least on that narrow issue we agree counsel talked about that being a difference from nor what counsel didn't say is that there is fundamentally no difference between underlying contract construction principles in illinois which is where norm came out of or wisconsin which is where tao came out we submit that a person of average intelligence would understand what the policy on its face makes clear a hypothetical might regard there's a lot of discussion in this case about a cake recipe sure seems to me maybe a better analogy would be an auto repair shop so you take your car in and they tell you your bill will be based on parts and labor based on parts and labor can they charge you for their lunch suggesting is where it's used here it simply does not it simply does not there's no suggestion here and if you go to dictionary definitions and i didn't hear anything otherwise from counsel this morning which of course is what missouri law compels this court to do there isn't any dictionary definition i've seen that uses the term exclusive there's nothing that just doesn't find any support in the dictionaries which is missouri lawson's and so we know counsel we've heard we've heard almost forty minutes of argument here about this about these terms but no one's talking about the statement that the district court made that at a minimum there's a big you again we've heard we've heard really good argument from both sides here and it's been briefed extensively with different different viewpoints is that a pretty good indicator that at the very least we have ambiguity here though it is it missouri law has been clear for decades three supreme court is there and ambiguity doesn't arise from the fact that different courts have reached different conclusions missouri law compels the court to go to dictionary definitions which are universally clear this term does not mean an exclusive term what the district court ignores what the district court ignores other than in footno when they walk into a state five i see my time is up and finish and we had when it went in a policyholder like mr boat walks in to a state farm office the rates have already been set that language in the policy simply is a mechanism to tell a policy holder how the rate will be assigned to them that's exactly what state farm did here it was based on mr votes age fifty four his sex male and his rating class thank you counsel before you conclude we have to uncertainty as to how that how that additional document was going to be used in an argument this morning now you've heard the argument there's still objection to this to the motion we do object to the motion because we think it reflects a new argument that wasn't raised by counsel below it was included in the appendix below of course which is why the issue is before the court we think that if this is going to be allowed as we said in our briefing would have to be entire document b on a clear law from the th circuit where something is brand new and on the eve of argument there's no basis here for having admitted we also don't think it bears much on the issues that are thank you thank you very much i thank you counsel been well argued this morning thank you for your argument to take the case under advisement you may stand aside