good morning and may it please the court here today on behalf of federal insurance company federal provided a first layer of access insurance coverage to donaldson in three of the five policy periods in which truck with donaldson air intake docks were physically damaged we're asking this court to reverse the district courts on reasonable interpretation of the underlying insurance policy is an interpretation that lumped that five years of property damage into a single policy period shifting millions of dollars of risk on to federal in a way that was not and could not have been anticipated during the underwriting process now today i'd like to focus on the issue of which policies are triggered by the damage trucks and if time permits also address why there are minimum of four lots of air intake resulting in four separate occurrence as always i'm happy to answer the court's questions on either topic at any time however so i'd like to start with the a r g policies and when i say i g m referring collectively to a pelleas national union and american home and before we talk about the bad clause indorsement i think it's important to start with the the risk of property damage in the ensuring agreements that out what two conditions apply in order for that risk to be covered well first and this is in section one b on page seven of our brief one be one's is a question of causation the property damage has to have been caused by an occurrence and then the second requirement is a question of timing the property damage has to actually happen during the policy period property damage is defined term in the policies and as is relevant to this case it means physical injury to property so the question in this case fundamentally is did the bats clause indorsement somehow change what it means to be property damage or when it has to happen in order to be covered by the policies excuse me on the council it's and reading the district courts first opinion which i think is really what's at issue here in this this case  maybe i'm wrong but it seems to me the district court read the last sentence of the bashing clause as though it said such such physical damage or such property damage will be and an occurrence and property damage can and often do happen in different policy periods but the occurrence the timing of the currency matters under the policy apart from it doesn't trigger coverage but it matters it matter is correct that is not at issue here that is not it's undisputed th  and more importantly because what matters is the plain text of the step of the contract there are different concepts in the contract itself it's clear that there is a cause a relation between the two the occurrence of separately defined as the accident and that accident has to cause property damage but they don't happen at the same time they are separate events both are necessary in order to trigger coverage but only one actually triggers coverage during the policy period and that the property damage or holding or do we need to just remind and start over well i believe that the court would reverse and remand with instructions to the district court to allocate the six million dollars settlement that issue across each policy very first case it didn't matter when the damage occurred so there is evidence in the record and let's just take an example of a specific policy period and so there is evidence on the record that there are forty eight trucks that are damaged by the defective air intake box in the state the two thousand and one two thousand and two policy period in that policy period there were there is evidence that there were fourteen trucks that were damaged let's say that each damaged truck or that that  there are two lots of goods that give rise to those fourteen damage trucks what it means is that in each separate policy period donaldson would pay one deductible per lot per occurrence but then all of the property damage that happens in that policy period is covered under the policy period so the damage to the fourteen trucks would all be covered during the two thousand and two thousand and one two thousand two policy period and then whatever is beyond the deductibles would be covered by the first layer of insurance coverage and i believe in that year or the first layer is provided by ai g and then if there is any additional recovery allocated to that year that would be attributed to the  and so what that means is that the policy holder pays one deductible per currents in each policy period that's triggered but each policy only covers the damage that actually happens during the policy period and that's what distribution of agent orange but it resulted in physical injury to service men and women over a period of years in the court said ok i'm quoting one to dr bill would be applied against the losses on each of the primary policies which were triggered so there's one deductible because there's one occurrence but that applies in each separate policy period and then the physical damage or physical injury is covered just for the policy period much the occurs if i may i'd like to also move on to the federal access policy unless the court has any other questions on our interpretation of the policies so if you look at the acce policy even if this court were to conclude that the batch clause indorsement somehow changes when property damage happened then we believe that there would be an express conflict between  the policies and federals access policy and federal policy it's clear that in the case of such an express conflict it is federal policy that would control and federal policy like the a g policies below only covers injury that happens during the policy period that period then there would be an extra conflict between the two and it would be a federal would only cover damage in excess of the one thousand nine hundred ninety two thousand policy period for trucks that were actually damaged during that year it like to briefly address the lot of schumann was the court has any other questions on which policies are triggered so i just want to be clear that we're not challenging the webster definition of a lot that the district court adopted  donaldson one instead we're challenging the district court's modification of that definition in donaldson two where the district court said that a change to base material otherwise would have constituted a unique product such that there is a different lot was not actually a change for purposes of there being a new lot because the change didn't matter for the purposes of this litigation and that's simply not what the lott definition says it doesn't batch products by defect it bachus products by production group bachus products based on whether the products are identical so we believe that there are a minimum of four lots because the district court concluded that there was a change in base materials and simply disregarded that change because the change wasn't relevant to the product defect litigation but that that is inconsistent with the district court's own definition of the term donaldson is the insured party in this insurance coverage case i want to start with the practical implications of this dispute because that is often lost federals briefing what is that issue for donaldson what's at issue in this case is the number of five hundred thousand dollars deductibles that donaldson was required to pay before its carriers would pay the remainder of a six million dollars settlement of a products liability case the product liability case underlies this insurance dispute related t products to air duct products that donaldson sold called parts three seventeen and three nineteen both of which donaldson first learned had caused damage to trucks logging trucks in the southeast in january two thousand the district court here reviewed a summary judgment record that was at that point five years in the making and held after review that record that the number of deductibles was too relating to two lots of products one for each part one for three seventeen one for three nineteen and that ties out to two occurrences under the policy we believe that decision should be affirmed now federalism clearly stated it's proves how many five hundred thousand dollars deductible is that things donaldson should pay but its argument for the trial court was that there were twenty two and twenty two occurrences and of course the playing of that is to make covering a loser here theoretically a covered claim after you pay twenty two thousand dollars deductible want to make three primary points one regarding the batch clause and the proper construction the district court gave it the second relating the excess policy issue in the third relating to a number of plots with respect to the bad clause indorsement going some point at the outset to realize that this is a limited indorsement that applies to a specific type of property damage that's in the first clause of the bass clause indorsement it applies to products completed operations hazard and that is a technical insurance term for what we all know of as products liability cases and that's all it applies do these products liability cases if you look at the definition of products completed operations hazard an underlying policy that's the import of it in with respect to that type of property damage which  under and they're both sentences donaldson wins the district court should be affirmed because what the first sentence does is it deems all property damage all property damage relating to a single law at a single out of goods as resulting from a single occurrence and that's whenever the damage occurs and that's important because one occurrence means one deductible under the plain language of the is not in that first sentence there's not a policy year limitation if one lot causes damage in three different years it's still one occurrence one deductible because there's no limitation there's no policy  honor minnesota follows the actual injury test for when an occurrence occurs ok and that actual injury test it's when the injury manifests itself when it causes harm so here the occurrence is causing the harm the occurrence occurs at well as are often separate right they can be separate and federal cites a number of cases where that it's typically i'll tell you in most cases in one cases out of ten the occurrence occurs at the exact time the injury nine out of ten cases the actual injury test means that the currents occurs at the exact point that the damage manifests itself so that's why you think these two remain the same thing here well in hundreds of damage or the same as that of well under the first cl was baked into the product and of a min under the minnesota actual injury test that's not the case if you look at the silicone cases from minnesota supreme court that both sides say the actions are confusing point it is but in one out of ten cases it's the manifestation of the injury that is the kind of the current that's helpful this is not a pollution case this is not a negligent supervision case those cases that they cite are the exceptions to the rule re dealing with something very complicated like pollution this isn't complicated the truck the engine stopped working we've got a definitive point and the minnesota supreme court says when you've got a definitive point of injury that's the point of your currents and left there be any confusion in this case the first  the batch class makes that crystal clear because it says all property damage relating to one law that shall be deemed result from a single occurrence and then in the second sense of the bat  the occurrence of property damage relating to one lot that's the theft occurrence that occurrence of property damage relating to that lot is deemed to occur with the first injury notified in the first injury notified the court found was during the ninety nine two thousand policy period and there's no there's no dispute about that and that's their saying to their success especially so as a for purposes of covers a doe's occurred during the policy period correct so where you have you have your first notice of injury here that was in january two thousand then if there is future injury that occurs in future years all that injury is so long as it's related to the same lot of good aggregated is aggregate it is deemed to have taken place in the first period because the that the purpose of a bash was or what a bass cause does is to lessen occurrences in trigger if you are policies when you have a product defect you have complains or a product manufacturing issue or for whatever reason your product going out of the market and caused harm rather than having one occurrence for each consumer complaint and then multiple years in a policy triggered their their group by the lot of the damage relating one lot of goods ok and it's deemed to be one occurrence and that occurrence then is deemed to occur the second sentence in the year that you received the first notice of injury with respect to the  excess policy these are follow form policies they literally stay on the first page in the introduction this is a policy foreign policy in the policy says it follows form in lester's a contr provision the only provision they pointed to is contrary to the provision that this policy that says property damage must take place in the policy period it's obviously not contrary and a federal council started by reading the g policy so you can't you can't hang your hat on the contrary provision that appears almost identically in the underlying policy which is why that the x the excess follow form argument just doesn't hold water on the final point your honor with respect to the number of lots that's really decided at the level of the definition in what the district court found that the definition that it applied was that  lat meant each type of unique product as a distinct group kind or sort unique product and there's no dispute in this case that there were two unique products three seventeen and three nineteen and we submit that the full of the summary judgment record supported the court's finding as the number of lots in this case with that i'd like to a turn over the rest of the time done a good job of explaining the corn address in the courts inquiries on most of the issues are raised by this case where there is one thing that i'm particularly i would like to explain let me ask you just a background question just to fully understand the factual background here is this a situation where the where these insurance companies when the settlement was reached just agreed to fund the settlement and then and then litigate the actual apportionment later yes that's correct its face value and assume make the same something that they are making there is no conflict between the excess federal fall for policy because what has happened is that definition of the  kurds has deemed property damage that's the exact assumption they're asking the court to make at that point in time the question of whether the federal policy applies to property damage during the policy period is still actively being enforced so if the court interprets the batch wasn't or spent to deem proper damage to be at x point in time the first notice of injury in this case that was found to be january of two thousand if that is accurate that is the deeming a property damage then the question becomes is the property damage during federal policy period once deemed that is that's final that's determined for purposes of that definition once deemed then the question is which federal policy which access policy applies is the ninety nine two thousand policy where the core placed it or is it the ninety eight ninety nine or the two thousand and two thousand and one to determine which one it applies to the court looks to the federal insurance says where's the property damage when did it take place and there the court has now deemed by the very assumption the policy the problems took place generally two thousand therefore that is the specific trigger policy it's not any more complicated than that it's a simple issue of one thing says when the property damage happened the other determines based on whatever the property damage was this is the policy that's in place again it's only under federal alternative argument that there is not a follow up on provision that that they are making this assumption and under that assumption that's how th period and that's because an occurrence under the batch closing doors meant could otherwise span many years and many policy periods because these defective docs were manufactured over a period of ten years so the  when for a specific one in a specific moment of time the occurrence happened for purposes of notice for purposes of loss of use and so that is when the district court concluded that the occurrence happened when he would have to worry about whatever curren of property damage that's not what it says it says that all property damage and then it defines what a batch occurrences shall be deemed to result from a single  indorsement again counsel for donaldson referred to an occurrence of damage that's not what the last sentence says it says such an occurrence will be deemed to occur with the first injury it doesn't say such an occurrence of damage and it's not i think it's important for the court understand that it's not just in complex environmental cases that there is a difference between an occurrence and property damage i mean even if you go back to things i asked one of the fundamental minnesota supreme court decision on th distinction between an underlying occurrence and property damage that triggers a policy in that case it was a defectively designed man left and it didn't fail until years later and that's when an individual was injured so again you have a discrete event the occurrence here the discrete event is theoretically the manufacturer of these defective paradox which are deemed to have occurred with the first injury notified to donal's and which is one thousand nine hundred ninety thousand policy period but it injury during at least five separate policy periods and that is when the trucks are damaged so this is a run of the mill i don't think it's nine times out of ten that the two overlap but to the extent that there are some cases where they overlap that might be why there  there is sometimes a lack of clarity when people are speaking about an occurrence as to whether it's the underlying event or the resulting property damage but it is clear in these policies what it is with that we ask that the court reversed the district court's interpretation of the policies and remain and with instructions to allocate the damage across each policy period in which which was triggered by property damage and with instructions to apply an objective definition of the term lot which results in a minimum of four  in recess until nine o'clock tomorrow morning