sixteen dash to a four six five associated or national insurance company versus scottsdale insurance company  to please the court good morning your honour's my name is chris mckinney i represent a socio did international insurance company individual individually and as sever give its insured alpha barnes real estate services  issue before the court today is standing particularly does associated have standing to seek reformation of scottsdale policy while associated is standing in the shoes of scott insured in the very simple answer to that question is yes this court has a risky this because there's one argument that the it's always interesting when insurance companies to each other because they're making law they may or may not ultimately like but that's fine i'm sure scottsdale has been a suburb in the past has but that that's fine and coming back to the issue at hand they are one of the arguments they make is ok you stand in the shoes but now you're asserting something for your insured that goes beyond this case in which you're not just walking into the shoes to say this other guy caused the car wreck that i finished paying for and he should reimburse me for the medical bills that i paid you're walking in and trying to redo an insurance policy that then has premium consequences and other consequences for the you are insured how do you address that question there's probably two part answer to that question so first with respect to how broad associated rights are under the notion of subrogation we we can look to the contractual language which says the insured has rights to recover all or part of any payment have made under this policy those rights are transferred to us now what scottsdale suggests is that those rights include only a claim for breach of contract that associated can sue only on the contract as it was eventually reduced to writing when the scottsdale policy was bound and i submit to the court that that's not the case that segregation is as articulated by this court a transfer of any cause of action as articulated by texas courts a transfer of all rights and remedies so when associated is subrogated to the rights of its insured its sever gated to all the rights that are necessary to recover the amounts paid by associated that should have been paid by scottsdale so this that's the first part of that the second part to answer your question about how this my effect premiums were just simply not to that stage and i say that because if we get into this case and the evidence is that there was no mutual mistake that it was a unilateral mistake scott still had no idea in the world then the court should not should not reform the policy in there's no detrimental effect on scottsdale scottsdale charge the premiums it intended to charge which would not have included this property we're not there yet there's been no disney over if you do prevail here and go back and find out this mutual mistake if you were ultimately able to show a mutual mistake that would only be saying we're reforming the contract to what the insured meant at the time that's absolutely commit your not you're not creating a new contract under that theory it's bringing the contract back to what was originally agreed to that's correct we maintain associated maintains that the contract is the agreement between alfa barn and scottsdale the mutual mistake caused the policy to be bound without the the property that's at issue and the underlying well maybe maybe for strategic reasons the insured likes this mistake that happened let's assume it is a mistake a you know what it might not give us coverage in this case where the insurance company wants it but it's keeping our premiums a lot lower so let's just way low and not bring this mistake to anyone's attention what why doesn't it have that right or a put is put another way why do you have the right to to make that decision instead of the insured associated has that right because out of barnes's rights against scottsdale have been transferred they were transferred at the time that associated made  that party has to be in privity with one of the original parties to the contract here associated is in privity to that contract through alpha barnes texas law is clear and i believe the of almost in any jurisdiction is clear that an assignment creates privity here as here alpha barnes the insured alpha barnes's rights were transferred they were assigned to associated and that policy as ultimately written did not include this property it's the position of scottsdale that the parties intended for that policy to cover the property but as written it did not even associated property and then didn't because mutual stake in scottsdale says policy is as written and that's the debate that you want to have in the district court that you haven't yet because of this whole standing issue and that's where this whole subrogation slash just under texas law doesn't scottsdale have a requirement to be subject to this it's the contention of associated that these facts were not known to scottsdale that it was the mutual intent of scottsdale and the insured to include the property at issue in the underlying suit now ok i apologize if i did answer that directly because i may have misunderstood you but we're not here today asking the court if you get to the merits on remained the debate's going to be did barnes and scottsdale insurance have a mistake made both make a mistake that will be the inquiry even though you're bringing the case it will be focused on the two parties to the contract that's correct the only involvement of associated would be the fact that associated has paid amounts on behalf of the alpha barnes and in those would be the amounts that are sought by way of recovery and let me ask you as someone i think surprising about this case is judge really said there's tons of subrogation cases out there there's tons of insurance cases out there and yet neither party i've been able to find one cites a case under texas law ever addressing whether a subrogate can bring a reformation action either you know i can find a case either way rejecting it or accepting it so i don't know which way that cuts but it just seems surprising to me if this is i take it your argument this is pretty simple this subrogation is a form of assignment the texas supreme court says a suburb stands in the shoes so we're standing in the shoes why isn't there a case at all out there on this or i can answer that question i can tell you that i have researched this issue exhaustedly my associate is research and i assume scott stills attorney has and we have not found a case on point under texas law or under fifty circuit law at all i will say when i used to do insurance cases that insurance companies amongst themselves often had intercompany arbitration agreements and they would try to settle up with you know a plaintiff an injured plaintiff or whatever and then go fight it out in arbitration proceedings so that that may not be the answer to the question the judge cost to ask but there is a lot of insurance stuff there seems to be there should have been cases on it and there weren't and i think some of it is because this world of intercompany arbitration resolve some of these enter insurance company debates in disputes when the insured is no longer personally claiming something or the injured plaintiffs say in a car accident or or whatever i think that's true i think a lot of times these get worked out out of court in this case and this is not necessarily part of the record but to give some context this suit was filed before the underlying lawsuit was resolved and the suit initially was just sought to determine coverage under the scottsdale policy and to determine a priority of coverage as between scottsdale and associated after the law after this lawsuit was  filed and after scott still had answered the underlying lawsuit was settled there was in a minute complaint filed and that's how we got into this subrogation interest in rico and i just want to be clear when we're the procedure of this the trial judge did not actually make findings of fact hold any kind of hearing consider any evidence it was simply on the pleadings a finding of no standing so we have to look at the four corners of the pleadings to say is there standing or is there not based upon the allegation the allegation plus law that's correct or are there there was no extraneous evidence considered this was entirely on there's no facts we need to defer to you know because in the subject matter jurisdiction cases the judge can find can make findings of fact necessary to determine subject matters dixon i didn't see that that was done here ok so while we're looking at is just what's in the pleading and is that enough to get you over this standing hump to get into the we have the policy we just have your quote from it that's correct ok policy language quoted in associated complaint but the policy was not attached as an exhibit ok your honor as we respectfully request that the judgment of the trial court be reversed in the case be remanded for further proceedings and i respectfully reserve the remainder of my time ok guess you say time for a bottle now here counsel opposite if you can pronounce your name for me i don't want to get it wrong interesting to me i love insurance cases because i used to do and that makes me very nerdy and very strange so please go ahead and i have been saying for a long time this is an argument only an insurance nerd lawyer can look so you've got one so at least one here  amount of money paid doesn't transfer any equitable rights ok i mean that the point is so let's take the typical case where this comes up which is my health carrier pays for all of my auto accident surgeries and problems which i didn't happen i'm just a hypo so all of that and then they want to sue the negligent driver that hit me ok they can't recover more than they paid me so if they paid me one hundred thousand dollars paid my medical bills whatever one hundred thousand dollars and i have damages of a million i get the nine hundred thousand ok that's what those cases are about that you can't as the insurance company get more than you paid out on the claim so it isn't a complete assignment of all damages of like my million that i should recover i have to give one hundred thousand to the insurance company but the other nine hundred thousand come to me because they didn't pay more than one hundred thousand and that's what that's talking about and that's wore them out your honor because those same cases hold you can't get punitive damages you can't get statutory damages you cannot get remedies other than the amount of money and the remedy meant to get to the money ok so that's what they're trying to do they want to reform the policy to say that it would cover this and get their money and no more if there's something else out there they're not trying to get it they just want the money they paid alpha barnes but but how is that different from any of these other weird situations that arise because there's this court has pointed out the ramifications of amending the contract have affects beyond just their recovery you care why isn't that the insureds problem then sure to intervene and go i don't want the reformation or this upsets me here i'm going to file an insurance code five fifty four forty one violation for messing with me or whatever i mean why isn't that something you aren't in charge of worrying about what the insured thinks on this in this case among other things we're concerned about is this case was brought many years after the policy was more than four years after the policy was issued by a party who is a complete stranger who doesn't know the facts and intent of the formation of the policy the insured chose not to pursue this mutual mistake the underlying primary carrier chose not to pursue this mutual mistake this was not raised until well after four years after our policy was even issue about four years after sounds like limitations which is a merits argument i mean you're here on a very narrow narrow narrow narrow point you may have fifty million great defenses to this reformation claim and they ultimately win it but you're saying they don't even get in the door and that's all we're looking at do they get in the door now once you get in the door they may be wide on to the floor but do they get in the door that's all we're dealing with and the question about whether they get in the door the court is correct there is no texas case particularly specifically on point but the quick courts have said for seeking reformation you have to be the contract the closest case on point is this merrimack case it's been so both parties and by the judge in that case an insurance company had tied how much it had to pay under the insurance policy to a contract between a mortgage or a party that was buying a house there was during the course of the sale a fire the contract for sale was post of been amended according to the two parties to the contract to say that it really was just for the post value of the house and that it would be over the amount of the insurance was what they're going to pay not the full value of the house though those two parties went to reform the contract the court in that case said the insurance company while it had a substantial interest in the outcome of that case had no right to either enforce that underlying contract or object to the reformation and that's the closest texas law we have on here so what are you mean here is today is what  right of server geisha in constitutes a substantial interest not privity in texas law says it has to be pretty and not the case law says you stand in the shoes are there any other examples you can think of where a suburb rights are assert the case law addresses things like statutory damages that even if the insured would be entitled to either bad faith or in statutory damages the insurance company can't pursue those they've gone so far as to say that in the case of americans or curses barker rufin insurance company tried to bring a claim on behalf of its insured for its uninsured losses saying that it had a provision in its policy to reimburse the insured and the court said no ok so that's what gives him city ending and if and i don't remember the amount or i don't know if that's in the record but if it's fifty thousand dollars let's say and that's all they could get out of this reformation case and all that kind of stuff and that's all they're asking for they're not asking for something else something on behalf of the insured or something on behalf of someone else or anything so how can you say i mean to me this is a really hard case for me to understand how you're the apollyon it because this is so fundamental that us the insured give up your right to say i don't want to sue my doctor i love him well i paid damages based on your doctor's malpractise i'm sorry i'm going to go see your doctor that's just kind of how that goes and if you as the insurer don't want something to happen you've got to pay for it yourself so i'm having a lot of trouble understanding how you can prevail on standing i think you have a lot of merits defenses that sound pretty good but that's for another day and i don't know the answer to all of those so i'm not prejudging it but how can you say they can't stand in the shoes and try to recover the money they got from a different insurance company that allegedly mutually mistakenly failed to list this property well you our way were saying that one that's what the court said is this is the substantial interest in under texas law the who has a right to actually bring a right cause of action for reformation which is an equitable remedy is more limited then other potential causes of action and it's people with substantial interest as do not have any of contract is parties and so the the party you under your theory you could never sue on any other and contract but the idea of privity income of contract is associated is in privity with alpha barnes who is a contract in party with scottsdale that's the him that and now there may be other facts other stuff in the policy we don't know about none of that was put before the district court so we can't touch it we know that what was plan gives them to stand in the shoes right and that's all they're asking for and they have that contractually in our what i would say to that is under texas law there is nothing that has said several patients equals privity in fact it's up not the same as an assignment there's a whole body of case law that basically creates an e right a separation or contractual rights of a geisha that prevent things like i'm just in richmond and other problems where the insured has no incentive to have brought the clay here they ensure that every incident brought the claim this was a big case that every possible exposure to excess exposure be on the policy even though associated paid if they were looking for additional insurance they could have tried to bring this claim they did not the case law the case they cited for example out of new jersey which is one of the few get your rights that sounds like pretty to me that is what privity is pretty is a matter of parties that's when you say well this is this judgement in this case will be binding only on parties and their privies who's a pretty it's a person or a company well it's not a piece of paper the privity that was assigned though was a limited privilege or rather limited right i would not call it pretty the right was only to the payment it's a monetary right not an act of war it doesn't give them right to seek other equitable remedies reformation is an equitable remedy here they're trying to change a contract and leave scottsdale and alpha barnes with the change contract and they that has effects far beyond them just aggregate limit affects the premiums charged effects but those are really merits arguments that there was because what if the facts show which we don't know what they show we don't even have the policy in the record we have that evidence because guess is final it's in it's in yours and they haven't been able to develop that because they were thrown out on standing so i'm just saying that they they are really at a very and almost before the beginning of the football game and this is the everybody stand around doing the coin flip before we've ever even gotten to the games that we don't know how the game's going to turn out i guess you're not even being allowed to stand there at the coin flip that's really the argument that they're making and again i mean i want to continue to keep an open mind to your argument certainly to my colleagues viewpoints which may be very different from mine but just as someone who's sort of lived insurance law and actually tried an insurance case in this building almost exactly thirty years ago i'm struggling with that and you are there is no texas case law on it the texas case law that says there's a distinction as to what the standing is for reformation versus other types of standing says it cannot just be a substantial interest there's case law  jurisdictions that says it is a substantial interest here our argument falls on the issue that this has ramifications be on their payment there's not a lot more to it quite frankly if you have anything else you want to lose i don't want to cut you off your arguments about this problem that the other insurance company would be able to result in this reform contract that needed your client nor the insured wants isn't the problem with that that they'll only be able to get reformation if they can prove to the court that this is what your client and the insured understood when they created the contract so there is no one no no they're not going to offer any evidence no one cares what associated thinks about what the contract should have been if we actually get to merits of this case at some point it's going to be what a jerk why understand what did the insured understand and now they are taking actions that put them in conflict with their own insured by asking them questions about their intent to a pop contract they are not a party to a complete stranger to who the insured may or may not remember or know what their intent is what sort of financial burden will say what the insurance going to say they might not like it you might i mean in some ways you can analogize to in the anti segregation doctrine where here they're trying to recover money at the expense of the insureds other coverage where the contract as written does not give that coverage i think of the last point as we said this is not there's one is year there's not a lot your honor if enjoying insurance law makes you nerdy and stranger in good company i'm sure you just address a couple of the issues brought up during scott's still's argument the the  texas law which does hold that privity is required to maintain a claim for reformation that case did not involve subrogation in fact it did not involve an assignment of claims at all in this case the assignment is what creates the privity and i think that's been addressed be the other issue i wanted to share with the court the lumbermen's case which i didn't have a chance to reference earlier but was referenced by scottsdale of all of our exhaustive research that is the closest case actually that we could find to the case at hand ascot's tails attorney explained in that case the court found the suing insurer had a substantial interest in the policy it sought to reform and that in that case was enough for the new jersey court to find standing we recognize that that is not entirely consistent with texas law texas law specifically requires privity as substantial interest is not on its own sufficient now the new jersey court didn't say there is no privity the new jersey court just never got there so it's not inconsistent with texas law in this case while yes associated does have a substantial interest associated also has pretty which we've already discussed and i wanted to raise just a couple of issues from that lumbermen's case which i think  the policy considerations which support a finding of the right for associated to at least pursue a claim for affirmation here in that case the court said if a member of a burden bearing group who carries more than his share is entitled to contribution from each shirking member i'm not going to be calling names here but intitled contribution then it should follow that the true contract which imposes the basic obligation controls and if reformation is called for to establish the correct terms that remedy should be available to a claim for contribution and that's what we're asking for here we're asking for the claim for contribution the claim to recover the amount paid by associated to be decided under the true terms of the alpha barnes scottsdale policy and the only way to get there is through a claim for reformation because the policy as bound did not include that property and that's what we're asking from the court today is they remain so that we can develop those facts  and obtain a finding one where the other on the issue of mutual mistake thank you both for giving me a chance to read insurance cases and your case is under submission as are all the cases argued today and we will resume tomorrow morning