come to this court has doubled the was exposed to a loss that would have put them out of business and made a settlement with p q corporation was the party that stored their goods in the warehouse for the terms of that settlement  the record i don't i don't recall i think that is just the judgment from the consent decree in itself so you don't know how much money change of course is a document between shippers in the company or person you know requiring the shipping how can such a document  be considered to be a warehouse receipt in exchange between a storage facility and the company storing goods well i think that the extr evidence helps explain that the the the bill of lading and the process by which double duty except to goods had changed over the years and it no longer use warehouse receipts so and its electronic online inventory system became effectively its warehouse management receipt so the i think the point that we were making that that seemed to be missed by the district court was that by indicating on their application that they no longer use warehouse receipts and whether it's in artfully or or ambiguously noted they did indicate that these bills of lading for the warehouse received and so it's your position they were able to make that unilateral change and there was no problem with that i believe that in a company with the brokers understanding of the business practices and that the custom of practice in the warehouse industry is that they no longer use warehouse receipts and that this custom and practice went on for many years doing do we have evidence about the broader usages of the trade having abandoned warehouse receipts through the through the testimony of mr olson the manager of the warehouse he indicated that he had three hundred sixty five other clients that he delivered goods to through double the express and that not one of those customers used the warehouse for see now section one states that seem to will pay obligations for damage where and i'm going to quote a warehouse receipt or storage agreement that is issued by you or on your end quote and section roman numeral two for a says that the loss will not be covered without a quote signed warehouse receipt from the customer now you are claiming that this creates ambiguity i have two questions first did you raise this below and second doesn't it simply require that doubled the issue or warehouse receipt and the property owner sign well i think we definitely raise this below and especially every every argument started with the insuring agreement the clause referencing the section and that we believe that there's an ambiguity in in interpret in the subsequent section two  and the district court even in their analysis starts with that and then completely ignores it and doesn't try and reconcile that the difference between allowing a double duty to issue warehouse receipt or somebody on their behalf and so if if we were looking at the the bill of lading which was issued by d q and it was the effective equivalent of a warehouse receipt it would fall under that warehouse why not what i mean why not what it what would what what constituted the agreement for service between the parties in other words paid the online inventory system p q was able to after they had a delivery they could check the quantities that were that they shipped against what showed up in the inventory that doubled he had as well as double d then would ship out goods from from the warehouse to peak use customers and so on a pro rata basis it was very sophisticated they could calculate how many days six million pounds were in that in the warehouse and at the end the month they were invoice for the amount of goods that were there against the rate that was agreed and using the inventory practices and that's why they moved away from the paper because there were a lot of inefficiencies and then customers didn't want to wait to get receipts back to try and reconcile what was there so they came up with a barcode system and a much more sophisticated approach to tracking  what i think that the there's a reservation of rights is it is an option for that and the flat denial in this instance that the if you look at the language that they used when they we found no evidence that you complied with this other portion because you didn't have these these right documentation so absent finding a document that met the their standards who are finding that the no collusion of and they got denied twice you know the double the warehouse retained counsel after it got the first denial if you look at those denial letters the first point to steve olson the second went to scope of light as to kevin phillips who was retained specifically to argue about the pollution exclusion and the determination that was made it was to no avail they came back and said we we stick with our position that it's the pollution exclusion   lies and your failure to produce the necessary documents that meet section two four under the under the policy so i think in that instance it falls under the davis is most controlling the it would be futile for them to come back in and ask again without having one of the well and in fact the the the denial says pollution exclusion then the warehouse proceeds but hey if you do come up with a warehouse receipt or something that qualifies you know we're still denying you because of the pollution exclusion so the futility of the situation was they knew that with looking at the on the insuring agreement and they had the conflict between the two provisions we also think that the district court erred in not taking that into effect and not even attempting to apply that language because if you did look at that it started to do the analysis on when it looked at double d's inventory system and it said you know perhaps there's a chance that this that they had actually released to a warehouse receipt but then they said it wasn't signed by p q end of story but if you look at it under the ensuring clause there is no requirement that websters which required to be issued by the warehouse and then adopted the other provision not the first insuring but the exclusionary language requiring the subsequent signature what the policy really wants which is that in a loss a typical loss at a warehouse is it's a fire flood storm damage that the goods aren't there so you need some mechanism to be able to track and identify what was there there is no evidence that they looked at the substance of the bill of lading and the inventory system to determine whether or not it accomplished the precise task that these other things are set to accomplish and we believe that that needs to be reversed and remanded so that they can go back in analyze the true substance and not just the name bill of lading has a warehouse receipt to determine the the challenge number under stand what you're saying from a practical standpoint and surely there's nothing in the law intended to be more practical than the uniform commercial code but we do have a language in the in the insurance policy that may date from you know the late nineteenth century for all i know with with handwritten warehouse receipts but what do you think is your best doctrinal theory for ovoid ing that language in the statu in the policy well i think that the best trial theory on that on the u c c is that it does it says may had a warehouse receipt maybe issued from a warehouse it doesn't say it has to warehouse receipt maybe issued by any warehouse now both lexington and the district court then flip that around to say it has to be you know the requirement comes from the policy well not the statute ok and my argument on the policy to be court about this i thought you know since the argument is that the insurer it septa this in terms of course of dealing because of the somewhat ambiguous notations in the original application and the fact that that's how you did business and if that was disclosed right correct and that and it is and if it wasn't if it's not a course of dealing with it some form of waiver so right ok you asked me i think what was my best would any losses you've been given the way double d operated would any losses casualty losses to goods in their custody have been covered under under i don't have a problem with that because i don't think that the his knowledge of that obviously would have helped if it is programmed explained it but the policy wasn't built with that as a condition precedent these are they were these are  argue that he did in that his course of dealings established a very very clear i understand you know what the goods were accomplished exactly what the goal is to meet it this provision is here to prevent fraud it's not to be here to deny claims where the goods are clearly there and there's no question as to what was damaged or what wasn't damage  let me start by returning to to the undisputed facts in this case this is a contract that was entered into between double d and lexington and not p q and mr olson made clear that there was no ambiguity in the agreement he testified that he knew what a warehouse receipt was he said it was a receipt issued by a person engaged in the business of storing goods for hire to shoot by the warehouse he also said that he knows what a storage agreement was and he said that he did use storage agreements with certain customers just not with p q also he said he is not a warehouse receipt the owner of the business knew that when he entered into the why don't you use that definition that's where house receipt and where tips whatever that definition is come from but it can take any form but it has the terms and the underwriters indicated what they were really concerned about is they want to see what those terms are why because almost every warehouse receipt or storage agreement has a limitation of liability a price per pound and the there's no reason your policy doesn't require that though doesn't it doesn't require a limitation it just requires a warehouse receipt signed  by i'm sorry a warehouse receipt issued by double b sound signed by the person who's depositing the goods at the time they deposited the goods or lettuce in need or story why does it need to be signed by the customer because it it becomes a performance is the delivery of the goods and the agreement to pay right right so you need you need but you need peak use because of the express there's expressed terms in the warehouse receipt as in the storage agreement that lay out what the there is none of that about limitation liability or exculpation right now but it's in the it says of a warehouse receipt and that's what's typically in a warehouse receipt typically yes and can and as is typical to have the warehouse receipt signed by the customer yes what evidence do we have that from the underwriters that are in the business of underwriting this type of coverage and also although or mr olson did not testify as to what was industry customer practice our house he just talked about what is the business that while why does lexington care about the difference between the bills of lading and on line inventory system on the one hand and a signed warehouse receipt on the other because the internal inventory system of the insured is not a contract a bill of lading is not a contract either the bill of lading i'm sorry it is a contract but it's only a contract between p q and the shipper so why why does that what is the difference matter if you have a reliable indicator of what good were damaged or lost well you know statute of fries issue right you have to have a signed writing these are good setter far more than that the minimum amount that's why you need a written agreement either a receipt or storage agreement contract that passed and and in underwriting this risk lexington wants to see proof that the insurer is doing things in a commercially reasonable way and and that that they did not issue warehouse receipts we also know from his testimony that he did enter into storage agreements with customers considering the usage in the training of the term warehouse or so there's no evidence of course of dealing there the only court the only evidence that plaintiff offers is an application an application is not even an offer there was no contract at the time and the application is like a request for proposal here's the underwriting information that we're given you included in that underwriting information in answer to the question was please attach  warehouse receipt they said we use contract and then separately it said misspelled i have given them five for the dow bill of lading for trans or for delivery of goods and then there was a terms and conditions that were attached that's that's not even an offer what happened is lexington then offered and issued a quote for coverage based on the insurance contract terms and double d accepted it so that this is the only issue of course in dealing from two thousand and eight and word the insurance contract terms made it clear what lexington was willing to write coverage the district court judge ray said on his own and it was not pled and p q didn't argue it in his papers so there have to be played it yes to put us on notice but one because that is a theory of why they're trying to excuse exculpate themselves from relying on the ca they're just they're just alleging breach of contract right they don't need to plead waiver in your view cited to us illinois pleading requirements which do not apply at all in federal court no your honor i confess that i've looked at all the cases i'm not raising the an argument below and they're raising it for the first time on appeal in a court can decide pretty much what they want to do  to note that the application included the standard terms attached and it had what typically would be in a warehouse receipt limitation of liability defined the scope of  and also express lee limited consequential damages and then the court relied on the bird case which says and that's the the law that you need an intentional relinquishment of a known right there was no intentional relinquishment of a no right in fact after it got the application lexington made an offer if it is shoot a quote for coverage based on these terms and what is required double the accepted it and the policy was issued how can there be an intentional relinquishment of a known right in fact every case that's been cited about waiver in after the contract was issued after there was a loss and there was conduct on the part that was an intentional relinquishment the other really out of time was a premium payment and the premium payment was sent to the broker at the broker's request the policy holder got a notice  cancellation from the insurance company and he called up his broker the broker said don't worry i'll take care of it it's all i'm going to send in the checks and he didn't and the court found them found by the agency statement those are none of those facts are present none of those facts can exist here because there was no intentional relinquishment of the knowledge and i'm going to stop alicia and i just want to address that briefly that was not again it was not raised as an argument and and judge the district court did not address it separately the first time we're seen it is on appeal and we believe that it should not be considered by the court but if the court were to consider it they're still not going to stop will because there has been no evidence of any misleading statement by lexington about what its policy covered all of the cases on the stoppel are when the insurance company after the policy has been issued and there is a loss or during that the issuance of the policy side that we're going to do something different if they had any action whatsoever it probably lied in alleging reformation if they said that these terms should not have been here but that wasn't plaid it can't exist because there was no mutual mistake of fact they're trying to use an  on the issue of the denial of coverage mr canaris yes i'm i'm frankly troubled by your position on the district court's analysis of that what language do you think it would take to conclusively deny coverage if it didn't have the word even though that if you have any information that comes to light or that you want us to consider that we will consider it provided to us so you can put just an open ended we're willing we have to look after the complaint if the complaint because the duty to defend doesn't arise tell an actual lawsuit is filed we would have looked at the complaint and if the complaint said then why didn't you say that in the letter  this storage agreement could have been in the possession of p q and not double b they might not have got a copy i mean if there are there's information and documents that can come to light down the road case by and decided below it is directly on point is it let me put it this way what support from this is a question of illinois state law what indications from illinois courts do you have that your letter was not an effective denial of the only form of the case decided intention relinquishment of a known right he said that at best this language is ambiguous because it has a contract and then delivery of goods how could how could anybody have intentionally waved a right based on that language no reasonable mind could differ on that as with the district court said in the agreement that no reasonable mind could say that that statement those two statements side by side in an application now well before there's even been a contract or except and or an offer made constitutes a waiver of the terms of the policy  around the district court correctly decided the section one fifty five claim that there this is there is a part there was a bonafide dispute between the parties of the court and i concluded that since there was no coverage there can be a claim the fact that the district court based on the facts that were under spewed in front of them later that there was no coverage one warrants this part of firming up on the on the section one fifty five in the end your honor i think that here this was an agreement that was entered into between lexington and double be sure also and understood what the terms were warehouse receipt bill of lading he does that in his ordinary course of business all the time he knew what a storage of contract was p q is an absentee that came here and they're bound by what the policy holder what the contract was that was entered into they have no greater rights they cannot create any ambiguity where none exist and where the policy holder himself the owner of the business saw no ambiguity you have three minutes i will address the first issue that was news to me that the application is not part of the policy if you look at the application document twenty dash eighteen page one seventy eight it says in consideration of your payment and required of the required premium in reliance upon the declarations and application for this policy is subject to the aft limit any other terms and conditions we provide this coverage in almost all circumstances the application is a material part of the insurance policy but certain something the insurer can rely upon right well it's it's often in my experience of representing obligation to to insure agreed and i think that the but it informs the underwriter and just like the the council spent a lot of time talking about the one page that was attached that was allegedly attached to the application and yet they rely on that in the convoluted analysis to alternately say that that was evidence of the contract that was ultimately going to be used which had this limitation of liability but you accurately pointed out that that was just one mechanism that wasn't a requirement of the policy so they were able to rely on that one sheet and it was given a great deal of weight by the district court but  regarding to the custom and practice of business didn't even though they said it was at least ambiguous didn't rise to the level of him considering the custom and practices of double the warehouse in the way in which they actually conclusion we believe that under any theory of this case the there's at least a material issues of fact that should have been resolved by the district court looking at the ambiguity is the contract expressed language in the contract