probably needed as i said the case involves two insurers each of which is issued insurance an insurance policy to target you trucking in a while my company my client carolina casualty issued an auto policy to coverage for injury arising out of the use of certain machinery or equipment including pumps and well services equipment mirroring that the burlington policy has an exception to it's all the exclusion that loaded connected hoses between the well site in his trailer he used a pump connected to his truck to pump water from the well site into his trailer he finished he loaded his hoses up this and gauge the  walked over to another vehicle to drop off a ticket walked around his trailer and then standing by itself on the ground side to light a cigarette and when he did that there was an explosion there is another version of the internet right correct that that's the testimony of mr metz and his the explosion occurred when he lit the cigarette and injured mr garza now mr garza's version is slightly different although it shouldn't affect the overall analysis but his version is that when he arrived mr metts voice quote loading up his truck now we don't know if he meant loading the water onto the truck or loading the hoses onto the truck but that's that's his testimony so that version is slightly different and i'll address both versions in my discussion today so mr garza was injured he filed a lawsuit against our to be trucking and jason metz and several other defendants mediation was scheduled inhaled carolina casualty and burlington attended dissipated in the mediation and entered into a settlement agreement whereby each contributed towards the global settlement for mr garza and each reserved their rights for the settlement why did you come into the settlement did you feel legally obligated to do so d did you feel that it was gratuitous three hundred and seventy five thousand dollars that you paid to get your client off the hook what representations did you make that could be reported as the st question the nd question is any representations that were made during the settlement conference itself are those admissible in evidence week record is all i want you to answer each insurer thought that they were correct on the coverage issue carolina casually thought it didn't rise out the use of it auto burlington thought it did and so it was it was evident that litigation would eventually and shoot ensued between the two insurers the better way to address that was to pay money upfront with the understanding that the two would resolve their disputes later which gave protection to the insured in the form of a release it funded the claim of the plaintiff and got them out of the case so that two insurers who were much more well equipped for the litigation process could resolve that issue later so i guess ultimately answer question  because both insurers thought they were right and the other was wrong both knew that that litigation was going to be necessary to resolve this so it was it was done clearly in contemplation that there would be litigation between the two insurance compan correct ok great but in the one of the insurance companies for all the costs of rounds up until the up until the mediation right that's right yes and the duty to defend is is another issue this appeal that doesn't necessarily impact the voluntary payment argument which is the st st issue we've taken up but yes burlington provided the defense come on the cavity did not participate in the fans and one of the issues on this appeal is whether we had a duty to defend which estimate we don't or did not could reach switchgear should for just one minute or two very short question the issue about what was happening just immediately before the as i read a district court thought that the gases fumes would have wingard in the air so really didn't make that much difference as to whether it was it was a media way after or  was a little bit later and i'm proud of the watering it is early evidence or record about the lingering fumes on those on the on the premises irrespective of the pumping there was no smoking out there are so i assume that there may have been some danger even if there was no pumping milling off is there is a record there on that at all i don't i don't recall any specific reference to that in the record i do know that there is evidence in the record expert testimony in the record that this pump would have emitted volatile fumes and vapors while it was operating ok and then there's the argument by burlington that those are the fumes that were not it ok so at the very least it would coverage to agree with obviously however the court then went on the whole that carolina has a recant recover its indemnity payment settlement payment because it paid as a volunteer and that's where we believe the district court erred  i think it violates clear precedent of the wyoming supreme court of this court and sound public policy in what way are you saying that the wyoming cases don't cover because there was a reservation dri disputes and a rule like this would discourage settlements because frankly that the insurance companies do this all the time they realize that they're going to have a coverage dispute and rather than drag the underlying plaintiff in the insured through it volunteer then it would it would discourage that that process and cases just wouldn't settle on that basis so early you argue that the wyoming sprint corps has ruled in the fashion or you're saying you're asking us to and said essentially the same thing the liability of an insurer need not be ironclad in order for it to settle a claim without a subsequent money but the payment to the insurer was voluntary so the rule is yes yes if you pay without an obligation you can be considered a volunteer but the exception is if it's a good faith discharge of a disputed obligation you're not a volunteer and that's exactly what happened here both carolina casually and burlington got together and in good faith chose to discharge their insureds obligation to the plaintiff and resolve their issues later and so that that that's what that i mean that's where the public policy comes in if insurance companies are not allowed to do that they're not would address next the standard is a good faith discharge of a disputed obligation burlington argues that carolina casualty did not act in good faith and not defending the insured and for a host of reasons i don't believe that's correct but more importantly this issue has nothing to do with the defense the standard is discharge a disputed obligation in good faith in other words make the settlement payment in good faith there's no there's no evidence casualty did not act in good faith when it paid money on behalf of this insured to settle this case both both insurers were acting in good faith so even if there were some a lack of good faith with regard to the fence that doesn't have any act on this voluntary payment argument and whether it would prohibit recovery of the dimity payments and that's the interesting thing is your your duty is stronger as an insurance company to defend than it is to pay so that isn't there some inconsistency in your position to say we do not have a duty to defend but somehow we're worried we may have a duty to pay and therefore we're going to sell i don't i don't think i'm zisha it would be that we're worried we may have a duty to pay it's that we know that early to him is going to contend that we have a duty to pay and this is going to require litigation and it's going to bring the insured and the underlying plaintiff through that process we did somebody's going to also worried that somebody was going to bring a claim that you should have had a duty to defend it sure that that was burlington's position and that wasn't enough to cause you to make any payments for the defense cost correct but that's i believe that there was not a request from the insured to make the payments or the fence costs making payments for defense calls would not have resolved the underlying case and that's why i think there is a stink from the defense nobody ever made a claim to you you're insured nobody made a claim for you to defend yes yes i'm just i'm speaking at the time of the at the at the mediation when party would go together try to resolve the case there wasn't insured they're saying we need for you to pay or if it's cost so that we can be released from this case i understand that's the distinction between the defense issues and the  please the court good morning thomas crouch on behalf of burlington i'm only going to have a couple comments kind of in in response to the appellate issues the voluntary issue the duty to defend issue and then i want to turn to my cross appeal on the duty to defend issue i think we're all aware and it and this is really true among virtually every state o country that where there is uncertainty in the allegations of the complaint and there's uncertainty on the information known to an insurer about whether their policy applies or not the duty to defend is broader i think will use the term stronger i might say broader in the sense that the duty to defend is triggered there and i think in this particular case this is a classic example of a situation where the defend under either the auto policy or a general liability policy and turning to the voluntary component here we had a carrier that did not act in good faith and when we say that we're talking about the voluntary principle is if a carrier has no obligation at all in the end then it's payment to an indemnity payment is voluntary but there is an exception to that where the carrier has to have acted in good faith in discharging a disputed obligation with the problem here is if it was a disputed obligation it's absolutely clear that the duty to defend existed but why is that any good why is that any concern to burlington burlington was not the client or the customer or the insurer of caroline occasionally so aren't you kind of just saying well they may have made a mistake st versus their insured and we're going to try to pounce on that and take advantage of a disease meter kind of an inner loop around that problem well i think the law is clear that one curious discharge of this duty to defend doesn't excuse that and knows that but if that question would be addressed in the context of a suit between that insurance company and its insured you're another insurance company with a different insurer and you're saying not a different different insurance company and you're saying hey other insurance company you're not fulfilling your obligations not to us but to your insured what difference does that make to you well it first of all the insurance we're tendering and we're requesting performance by both carriers and obviously if another carrier has an obligation that does my client or any other carrier that's performing it it's  its duty to defend has an interest in recouping and and equitably sharing that obligation so i think but it makes a big is that a claim in this case yes your honor all the duty to ensure of come down to you know you are out about your defense costs and maybe carolina ought to chip there and other that you major deal as to every case before this court is important i know every litigant says my case is really important ok this case is really important all right all right we can get all into the niceties of the duty to defend and such but i'm i promise appeal i am raising a choice of law question and i remember taking choice of law in law school a long time ago and it was one talking about the duty to defend and the consequences of a breach of the duty to offend and there really is not a body of case law or or really any case law diving into and doing a real performance of an end of a choice a law analysis on the duty to defend issues and of course i think this case is going to warrant you know assuming you're going to agree with my position on it in perhaps a published opinion that was a minor piece of humor the choice a law question here should have been resolved with reference to the specific issue at hand and i think that is where the district court went to right here i think the district court essentially applied just the aleck's loci kind of approach and said well the policy was issued in miami and all all the issues will be governed by wyoming law and it is very clear even under wyoming choice a lot of principles and we all agree that the the form state for the federal court their choice a law rule applies so we are talking about applying wyoming's to us a lot to determine which law applies to the duty to defend issue but why only connection to the particular issue at hand in and here the particular issue at hand is the duty to defend and there are several components of the duty to defend one of them is what are you what is a ensure or arguing for that matter for a duty to defend supposed to consider some states articulate a very clear four corners rule or are in texas they call it an equal as rule but at the same rule you can only look at what is in the pleading to make a determination that can't consider any extensive governance other states maybe i would say the the opposite extreme my home state arizona  says either party even the insured or the insurer must and can look to facts outside of the complaint and if those facts show either that the claim claim being made is one that is within coverage or without  the carrier has or has no duty to defend irrespective of the fact that the pleading appears to plead a claim within coverage and then there are in between versions of that some states say well you didn't defend starts with a complaint and then an insured can rely upon facts outside the complaint to establish a duty to defend but in the church cannot rely upon them to defeat all of these different laws are very important and they differ significantly but that's just one component another area is what does the insurer have to do doesn't insure have to perform an investigation or not states differ on that issue some come out and i was in new mexico is one of them that says you have to conduct abusable investigation when you get a tender to look for those files another area or component of the stud defend issue is what are you supposed to do if you think you don't have a duty to defend when the mexico has a very strong public policy saying in shirts this is the way you're going to do it you're going to defend and you're going to intervene in the toward action and you're going to seek a determination that you don't have a duty to defend while you defend on your reservation and then of course the th component of this is what happens if you don't do any of that well new mexico law says if you and they use the term unjustifiably but if you breach of duty defend or you unjustifiably refused to defend then you have essentially bought this a reasonable was in reference to reason in this but was in reference to a carrier who is unjustified lee failed to defend is foreclose from contesting coverage for a settlement it loses its ability to contest coverage  is that is that law that you are asserting here which you think arises in new mexico yes it is that law a political when the insurance carrier they didn't defend actively participated in a merits substantive settlement agreement yes your honor where they have failed to otherwise perform all of their obligations that that state imposes on them when  determining and discharging a duty to the found yeah absolutely i understand if you don't defend and somebody else makes a settlement that you were to participant in that you might be claimed that you don't have the right anymore to challenge that but my question to you is what is your best new mexico case where a person didn't defend but actively participated consensually in a settlement conference and paid settlement abounds but was of the case forever i wouldn't in defending i was unsettling but now i want to challenge settlement and would say hey you chose to stay out you can't come in there help but in this case they didn't choose to stay out forever they were very actively involved in the merits selma and their money was important to getting this case resolved they were certainly participating in the mediation but your honor i think the ultimate public policy basis for the rule of law in mexico that rule of law holding an insurer is for close from challenging coverage is predicated on the policy that we want to make sure and sure earth perform their obligations the way they're supposed to whether it is uncertainty they need to participate in and defend the insured they need to inform the insurer of their coverage position they need to draw the insureds attention to the applicable language upon which they believe coverage maybe maybe  use includes loading and unloading and that was the reason mr metz was there with the truck was loading and unloading operation so i couldn't disagree more that the truck doesn't have something to do with this as a the loading and unloading of that truck has everything to do with what happened here the loading and unloading of this truck i thought they were loading highly flammable material in a flammable environment and the operator of the truck and keep in mind use it's operational use and use is loading unloading is there for one reason and that's to load the truck and he lights a cigarette performs what's clearly a highly negligent act in the performance of that loading and unloading operation that is why this is an auto risk i think it's absolutely clear that it's not a risk obviously my colleague equally thinks it's obviously poor it's not an auto risk but where he's there in unloading unloading scenario and there are there really is only vague allegations in the complaint that's where the carrier must say hey what actually happened here in carolina did not do that what if the tank carried the undertook the hitch and it was loading and unloading when the explosion occurred with that still in your opinion be part of use of an auto yes because it has a trailer is defined as an auto even though is that a hook from the truck even though it's court was correct in ruling that they were they did not fall within the good faith exception of bronchial rule so if this court agrees with them that this isn't an auto risk i will just briefly address a couple of issues that were raised st of all it here's why this this injury didn't result from the use of an auto the standard while i'm in law is very clear the danger must have been the natural and reasonable injuries occur because mr metzler the cigarette well the accident he could live cigarettes all day long winter was a milk truck nothing would happen so you've got to say that this accident would not have would come together and settle the case just like we did we did here in our view the obvious purpose of the agreement on the part of the insurers was to avoid any contention of bad faith dealings with the insurers proper serving the right to litigate between them the issue of liability the full coverage does the settlement simply quote cleared the way for the declaratory judgment action to determine the ultimate legal responsibility for the patients it's exactly what's happened here what happened in that case and happens daily throughout the country