[00:00:02] Speaker 04: Good morning, Your Honors. [00:00:05] Speaker 04: My name is Steve Dawson, and I represent Jennifer Mojica and Julio Aranda, the insureds of State Farm. [00:00:13] Speaker 04: Plaintiffs below, appellants here. [00:00:15] Speaker 04: I'd like to attempt to reserve five minutes for rebuttal. [00:00:21] Speaker 04: On the issue of insurance coverage for these insureds, water loss, [00:00:28] Speaker 04: There are material facts in dispute over the loss that impacts whether there's coverage. [00:00:35] Speaker 04: And the parties also dispute the correct interpretation and application of the insurance policy exclusion that State Farm relied upon. [00:00:44] Speaker 04: And I'd like to start talking about the policy language before talking about some of the facts. [00:00:52] Speaker 04: So the policy for dwelling is considered all risk coverage. [00:00:58] Speaker 04: Meaning that if there's accidental direct fiscal loss to the property, it's covered unless there is an exclusion specifically addressing something that is going to be carved out of that. [00:01:14] Speaker 04: In that sense, section one, loss is not insured. [00:01:18] Speaker 04: So the exclusion that we're really [00:01:23] Speaker 04: debating about here is this continuous or repeated seepage or leakage exclusion and Though obviously your honors are fully aware of the rules of insurance construction I do think it's important to know that we're looking through the lens of exclusions are Narrowly construed when we're looking at these Addressing this exclusion [00:01:52] Speaker 04: State Farm argues in its brief, actually at page 15 in a note one, and I'm quoting, the length of time that the insurance pipe was leaking is the dispositive issue in this case. [00:02:08] Speaker 04: Well, this suggestion, this interpretation ignores that the exclusion applies to loss resulting from exposure over a period of time to continuous or repeated leakage of water. [00:02:23] Speaker 04: That is, even if leaking continued for, everybody agrees, a period of time, if the damage could have, if the facts are, the damage could have resulted early from the discharge volume of water, not from gradual accumulation over a period of time, then this exclusion doesn't apply. [00:02:49] Speaker 04: And in fact, [00:02:51] Speaker 04: We cite in our briefing a recent case, Central District of California, Moyeri versus State Farm General Insurance Company, primarily for the purpose that their State Farm, in that case, just to be clear, identical policy, identical exclusion, language, no different whatsoever, State Farm, their [00:03:16] Speaker 04: Conceded, it argued that the exclusion applies to damage from long-term water exposure. [00:03:24] Speaker 04: And the court, in saying that, cites to the party's joint brief. [00:03:30] Speaker 04: So State Farm acknowledges there, exclusion applies when there's long-term water exposure. [00:03:39] Speaker 02: So how does all this hook up to this case? [00:03:41] Speaker 02: I'm not seeing it. [00:03:42] Speaker 04: How's all this what, Your Honor? [00:03:43] Speaker 02: Hook up to this case. [00:03:45] Speaker 04: Well, so here we have State Farm hired an expert, actually after it denied the claim, Mr. Carnahan, and tasked him with one question. [00:03:58] Speaker 04: How long did the leak last? [00:04:02] Speaker 04: He did not consider, did not evaluate, did not attempt to evaluate. [00:04:08] Speaker 04: When did loss occur to the home? [00:04:14] Speaker 04: Consequently, I think that has put State Farm in the position to now make the argument it's making that length, duration of the leak is a dispositive issue without even facing or confronting when did loss occur from water exposure. [00:04:33] Speaker 04: So that's how it impacts this. [00:04:37] Speaker 02: I mean, here what you had was buckled floors, right? [00:04:41] Speaker 02: And at least that was part of it. [00:04:44] Speaker 02: Yes. [00:04:46] Speaker 02: It's going to occur sometime. [00:04:48] Speaker 02: In other words, if you have a leak for two years, there's going to be a time when the floor buckles. [00:04:57] Speaker 02: And so your argument is that as long as the floor buckles on a single day, that doesn't matter if it was leaking for two years. [00:05:09] Speaker 02: Is that what you're saying? [00:05:12] Speaker 04: If I'm understanding your question, I think not. [00:05:17] Speaker 04: What plaintiff's position is, is that the spraying of the pressurized hot water pipe directly under the subflooring resulted in damage, including to wood, within two days. [00:05:38] Speaker 04: And other damage, we, you know, staining on the walls, there's a term of art I'm forgetting now, but basically water coming from vents inside the house over three and four days. [00:05:53] Speaker 04: That's our position. [00:05:55] Speaker 02: And that the facts support that and that under... So is your point that that amount of time is not enough time to make it a stained period of time? [00:06:05] Speaker 02: Is that what you're saying? [00:06:06] Speaker 04: Yes. [00:06:07] Speaker 02: So in other words, if your expert is right and it's 3.3 days, I think that's what he says. [00:06:12] Speaker 02: No, 5.3 days. [00:06:15] Speaker 04: Well, that's a different matter, but I'll address that in a moment. [00:06:18] Speaker 04: But go ahead. [00:06:19] Speaker 02: Then we would make some judgment about how many days is enough time? [00:06:25] Speaker 02: Is that what you're saying? [00:06:26] Speaker 04: Well, that leads to another issue here, which is policy ambiguity. [00:06:36] Speaker 04: And of course, [00:06:38] Speaker 04: Looking at a contract revision to decide, is this ambiguous or is it not, is completely dependent or very dependent upon the particular facts of the matter that is before the court. [00:06:56] Speaker 04: State Farm has cited a couple of cases. [00:06:59] Speaker 04: Well, one case, Brown versus Mid Century, a Court of Appeal case. [00:07:04] Speaker 04: It relies upon very heavily, you see it cited, I think, about two different pages in its answering brief, for the proposition that a period of time is not ambiguous. [00:07:18] Speaker 04: But there the court said, merely because it's not defined, it's not ambiguous. [00:07:25] Speaker 04: And we're not arguing otherwise. [00:07:30] Speaker 04: but is much, much more relevant, salient, and important here is, what about these facts? [00:07:37] Speaker 04: So in Brown versus mid-century, first of all, it wasn't even an exclusion. [00:07:40] Speaker 04: It was the insured's burden to show that the water loss, or rather that the water was a sudden burst of water, which is not our policy language. [00:07:55] Speaker 04: And a period of time was, [00:08:00] Speaker 04: really didn't play in the contract, have the same position as our language does in our contract. [00:08:10] Speaker 04: And in Brown, both sides agreed. [00:08:12] Speaker 04: In fact, Brown's experts said, yes, this leak lasted a period of time. [00:08:16] Speaker 03: But we're trying to figure out what the California courts would think of this policy, which includes the period of time language. [00:08:28] Speaker 03: Brown lays out what seems on its face like a fairly intuitive understanding. [00:08:34] Speaker 03: They give the examples of the dishwasher hose and the toilet overflowing and the water heater bursting. [00:08:39] Speaker 03: Which are all cases where you have you know in a matter of minutes a large volume of water being released? [00:08:47] Speaker 03: Here we have you know taking your experts view water released over a period of multiple days [00:08:55] Speaker 03: Why, even if Brown isn't precisely controlling, why isn't Brown suggestive of the idea that the California courts would say that this is on the continuous, gradual, intermittent, slow side of the line, rather than the sort of sudden burst flood that would be covered? [00:09:17] Speaker 04: Well, for a few reasons, Your Honor. [00:09:21] Speaker 04: I think most importantly, [00:09:24] Speaker 04: The Brown case, when loss occurred, was not an issue, because the policy wasn't written that way. [00:09:31] Speaker 04: The policy first says there is no water loss damage, or rather coverage. [00:09:36] Speaker 04: And then it goes on to say, but under the extended additional coverage, there's limited coverage for water loss. [00:09:47] Speaker 04: This narrowly circumcised coverage says in Brown only if the water results from a sudden and accidental discharge So that was the issue Was it a sudden and accidental discharge or not? [00:10:02] Speaker 04: Which is not our issue in fact the state foreign policy here says the opposite [00:10:08] Speaker 03: Your issue is whether it occurred or developed over a period of time and was Continuous repeated gradual intermittent slower trickling right whether the loss did right and then so why isn't five and a half days a period of time and I mean I take it it was continuous over that time Yeah, and and again that that is the confusion here and [00:10:32] Speaker 04: Let's just go with the 5.8 days. [00:10:36] Speaker 03: Well, I mean, that's what your expert said, right? [00:10:40] Speaker 04: Yeah. [00:10:41] Speaker 04: I understand why you're saying that. [00:10:42] Speaker 04: And for purposes of, he did, yes. [00:10:46] Speaker 04: But I do have some more things to say about that. [00:10:48] Speaker 02: So to go back to your first point, which you just repeated about, that it's the loss of the property. [00:10:54] Speaker 02: I don't actually see that. [00:10:56] Speaker 02: It says we will not pay for any loss of the property described as cause [00:11:01] Speaker 02: that is caused by one or more of the items below. [00:11:04] Speaker 02: And then one of the items below is word or meaning and the seepage language. [00:11:09] Speaker 02: But that's a self-contained definition. [00:11:12] Speaker 02: It doesn't go back to the loss point as having to be sudden or not sudden. [00:11:22] Speaker 04: So I think this is responsive but please stop me if not. [00:11:29] Speaker 04: Under section one, loss is not insured, which begins at ER 679. [00:11:38] Speaker 04: Number one, by the way, does have some relevance this case, but we're not really, there's no center stage, has the wear, tear, decay exclusion. [00:11:49] Speaker 04: And number one says, [00:11:52] Speaker 04: that will not pay for any loss of the property described in Coverage A that is caused by one or more of the items below, regardless of whether the loss occurs abruptly or gradually. [00:12:02] Speaker 02: No, the event. [00:12:03] Speaker 02: Actually, it says the event. [00:12:04] Speaker 04: Well, I was reading number one. [00:12:06] Speaker 04: I see, right. [00:12:06] Speaker 04: Your Honor, to contrast it with number three. [00:12:10] Speaker 04: Okay. [00:12:10] Speaker 04: Yes, we get to number three, which applies to the seepage leakage, and it says we will not pay for any part of the loss. [00:12:19] Speaker 04: That's caused by one or more of the items below regardless of whether the event Occurs abruptly or not the loss the event not the loss the event I don't see your loss argument just seems wrong in terms of the language so going then to What comes under number three you get to see which is water and then underwater there are ten enumerated water sources and [00:12:50] Speaker 04: So you have loss caused by flood, loss caused by tides, waves. [00:12:56] Speaker 04: You get to number nine, loss caused by seepage or leakage of water, steam or sewage that occurs or develops over a period of time and is continuous repeating, gradual, slow or trickling. [00:13:11] Speaker 04: Now, this would seem to be contradictory to or regardless of whether the event occurs abruptly [00:13:19] Speaker 04: or gradually, if in fact the loss, the sewage or leakage has to occur over a period of time. [00:13:28] Speaker 04: Well, the only way it's not contradictory is that the first clause refers to the event, but occurring over a period of time refers to loss. [00:13:39] Speaker 04: So if the loss doesn't happen over a period of long-term water exposure, then this exclusion doesn't apply. [00:13:49] Speaker 04: It's a very factually intensive exclusion to tease all that out. [00:13:59] Speaker 03: I don't think I had appreciated that you were trying to draw a distinction from your briefing, that you were trying to draw this distinction. [00:14:05] Speaker 03: Suppose you have a gradual water trickle over the course of a year, but on day one the trickle is enough to destroy your full-sized replica of the Venus de Milo made entirely of sugar. [00:14:22] Speaker 03: So you would say, well, the loss occurred suddenly, and therefore it's not covered, even though the ultimate cause of the loss was this long-term trickle? [00:14:33] Speaker 03: Is that the distinction you're trying to draw here? [00:14:35] Speaker 04: Yeah. [00:14:36] Speaker 04: I mean, conceding that personal property is a different. [00:14:42] Speaker 04: But yes, I think I'm in agreement, essentially, with the way that you phrase that. [00:14:47] Speaker 04: So if you have an eruption of water, [00:14:52] Speaker 04: And let's say you have two parallel examples. [00:14:58] Speaker 04: Same water emission from the same source, the same amount of water. [00:15:04] Speaker 04: And on day one or two, whatever, everybody could agree, well, it hasn't been over a period of time. [00:15:11] Speaker 04: There's damage. [00:15:13] Speaker 04: There's loss to the property. [00:15:17] Speaker 04: In one example, the [00:15:20] Speaker 04: loss or I'm sorry the water mission is discovered and turned off in the other it's not and it continues but for purposes of our understanding the exclusion we're conceding but we know that loss happened on that day one or two would one be covered none not be covered I think the only way to reasonably interpret this is loss is covered [00:15:49] Speaker 04: Because in both examples, the loss was not due, was not caused by seepage or leakage of water that occurs or develops over a period of time. [00:16:01] Speaker 03: So you put in, you have, I mean we've discussed your expert and his assessment of how long the leak took. [00:16:11] Speaker 03: What is the evidence that the damage all happened right at the beginning in a day? [00:16:18] Speaker 04: Not in a day, but again, the evidence is over two, three, and four days. [00:16:25] Speaker 04: And Mr. Gardner is the expert in his report. [00:16:31] Speaker 04: He sets out, first of all, he does a very careful inspection of the house, the crawl space, and finds no evidence of long-term water damage. [00:16:43] Speaker 04: And going back to the Moriarty case at State Farms of Green, it's exposure long time to water. [00:16:51] Speaker 04: That loss is excluded under number nine. [00:16:55] Speaker 04: But if you have [00:16:57] Speaker 04: loss that is occurring sooner in the emission of the water. [00:17:01] Speaker 03: And he explains... But what counts as sooner and what counts as long-term are sort of legal questions of the interpretation of the contract that your expert can't opine on. [00:17:13] Speaker 03: I mean, he can tell us how long it took. [00:17:15] Speaker 03: Correct. [00:17:17] Speaker 03: And you're saying that his view is... His view... Multiple days. [00:17:24] Speaker 04: And he breaks these items down that I mentioned, that two days this loss occurs, three days or four days the loss to wood starts. [00:17:40] Speaker 01: You could divide the losses by when they occurred in the time frame of a leak. [00:17:47] Speaker 04: Divide the loss and would be covered someone not be covered In the hypothetical scenario that's true and that was kind of the situation more airy that you could have Loss immediate maybe if we used your painting example, your honor And then you'd have losses that if the water is continuing for another 30 days that develop We will not pay any loss that has caused by one or more of the items below and [00:18:17] Speaker 02: regardless of whether the event occurs abruptly or gradually involves isolated or widespread damage occurs on or off the residence premises, et cetera. [00:18:28] Speaker 02: So that seems to negate exactly what you're saying and saying that in terms of the loss, if that means the event, it doesn't matter whether it's abrupt or gradual. [00:18:40] Speaker 02: What matters is that the definition of water includes this limitation. [00:18:47] Speaker 02: So the seepage or leakage of water goes to the definition of water, not to the we will not pay language. [00:18:58] Speaker 02: So I just think it's clever, but I don't think it works. [00:19:02] Speaker 04: Well, let me point this out. [00:19:06] Speaker 04: As you read kind of the beginning of State Farm's answering brief, where it's explaining the policy language, policy coverage, [00:19:17] Speaker 04: It starts out quoting the exclusion number one under which wear and tear is found. [00:19:28] Speaker 04: And it quotes in the brief, regardless of whether the loss occurs abruptly or gradually. [00:19:36] Speaker 04: Then State Farmers' brief goes on to say, and there's a similar exclusion for, it goes to the water exclusion, [00:19:47] Speaker 04: not pointing out the change in language from, regardless of whether the event occurs abruptly or gradually. [00:20:00] Speaker 04: If this still said loss occurs abruptly or gradually, then what I'm saying would be wrong. [00:20:07] Speaker 04: It doesn't matter if the loss occurred sooner or later. [00:20:11] Speaker 01: So the event is the leak and the loss is the water damage. [00:20:15] Speaker 04: The loss is the water damage the event is the is the leak. [00:20:19] Speaker 04: The leak, correct. [00:20:20] Speaker 01: Okay, with that, while you're well over your time, why don't we hear what State Farm has to say and I'll give you some rebuttal time. [00:20:27] Speaker 04: All right, thank you. [00:20:47] Speaker 00: Good morning, Your Honors. [00:20:48] Speaker 00: Jennifer Hoffman on behalf of Appalee State Farm General Insurance Company in support of the judgment below, which should be affirmed. [00:20:56] Speaker 00: Mr. Dawson raised a number of issues today, but the case turns on a narrow one. [00:21:00] Speaker 00: Whether a pinhole leak and a crawlspace pipe that sprayed water on a bathroom subfloor long enough to soak all of the subflooring and all of the flooring throughout an entire three-bedroom house [00:21:16] Speaker 00: is a covered loss under plaintiff's policy. [00:21:19] Speaker 00: The district court correctly found that it was not. [00:21:23] Speaker 00: As in Friedman, application of the continuous leakage exclusion to the undisputed facts of this case is in no way unclear. [00:21:32] Speaker 00: There is no dispute that the water leaked from a hole in a crawl space pipe that was at its largest the size of a tip of a pen. [00:21:42] Speaker 00: There is no dispute [00:21:43] Speaker 00: that nearly 40,000 gallons of water escaped the pipe during the course of the leak. [00:21:49] Speaker 02: Seems incredible that you can get out of that hole. [00:21:56] Speaker 02: Either one or two gallons a minute. [00:22:00] Speaker 02: A minute, is that what they've said? [00:22:03] Speaker 00: I believe that is what the plumber said, Your Honor. [00:22:06] Speaker 00: The engineer also had an estimate that was more conservative than the plumber's estimate. [00:22:14] Speaker 00: And based on his estimate, he estimated that the leak lasted between 13.3 days and up to 42 days. [00:22:23] Speaker 02: But I thought the smallest estimate was a gallon a minute. [00:22:29] Speaker 02: And a gallon a minute seems strange. [00:22:32] Speaker 02: You can get a gallon a minute out of this size. [00:22:37] Speaker 00: That would suggest 40,000 minutes. [00:22:41] Speaker 00: And the leak did, the water did leak slowly enough that there was no pooling or flooding reported on the property. [00:22:50] Speaker 00: but that impacts also how fast the water was coming out. [00:22:54] Speaker 00: But the last undisputed fact is that there's no dispute that it soaked all of the subflooring and traveled up to soak all of the flooring throughout the entire house. [00:23:06] Speaker 00: And according to plaintiffs' own evidence, the house had absorbed so much water over the course of the leak that the floors in other rooms were buckling and the walls were crying. [00:23:18] Speaker 01: How did they not notice it before then, before the day that they noticed it, if that's all true? [00:23:25] Speaker 01: I don't know the answer to that, Your Honor. [00:23:28] Speaker 01: And what is the rationale for this exclusion? [00:23:32] Speaker 00: The rationale for this exclusion is that this is a homeowners policy and not a maintenance policy. [00:23:38] Speaker 00: Homeowners' policies cover fire. [00:23:40] Speaker 00: They do not cover water, except in very limited circumstances. [00:23:45] Speaker 00: So this continuous leakage exclusion at issue here is the ninth type of water loss excluded. [00:23:53] Speaker 00: The policy describes in great detail various types of water events that are not covered, which leave, as Judge Miller observed, the rather intuitive [00:24:05] Speaker 00: types of sudden, abrupt losses that would be covered, like a leaking or an overflowing toilet or a water hose that breaks mid-cycle in a dishwasher. [00:24:15] Speaker 00: Those types of sudden and abrupt losses that homeowners cannot protect for or anticipate, those would be covered under this policy. [00:24:25] Speaker 00: These types of continuous leak [00:24:27] Speaker 00: losses are not. [00:24:29] Speaker 00: And the court was correct to question the new claim about the exclusion applying depending on the length of damage and not how long the injury inducing event happened. [00:24:43] Speaker 00: The policy's plain language reflects the issue is not whether there was gradual water damage over time. [00:24:50] Speaker 00: The issue is whether the damage inducing event [00:24:53] Speaker 00: was a leak that lasted over a period of time and was continuous or gradual as opposed to sudden or abrupt. [00:25:01] Speaker 00: And that's from the plain language of the policy. [00:25:07] Speaker 00: The district court also properly exercised its discretion in denying plaintiff's rule 5060 request below. [00:25:14] Speaker 00: It could have properly done that outright because they failed to satisfy the rule, but the court gave them a second chance and explicit instructions and they still failed to comply. [00:25:23] Speaker 00: Instead, they used the opportunity to provide further briefing in support of the MSJ, which the district court also considered, even though it did not have to. [00:25:31] Speaker 00: And the two items of discovery argued in their briefing but not raised today would not have changed the summary judgment result in any event. [00:25:41] Speaker 00: The district court went far beyond what it had to do to give plaintiffs more than a fair opportunity to oppose summary judgment, and this court should affirm. [00:25:50] Speaker 00: I'd like to address, unless the court has questions, I'd like to address a few things raised on reply. [00:25:55] Speaker 00: First, on reply, Mr. Dawson argued that State Farm is attempting to impose a bright line rule and that the number of days here is dispositive. [00:26:07] Speaker 00: In fact, the opposite is true. [00:26:09] Speaker 00: plaintiffs are trying to impose an arbitrary bright line number of days rule. [00:26:14] Speaker 00: They mischaracterize the district court's reasoning as focused on the number of days. [00:26:19] Speaker 00: But the district court didn't focus on the number of days nor should it have. [00:26:23] Speaker 00: It focused on the type of loss, a consistent leak of this type. [00:26:28] Speaker 00: Type of loss or the type of what are? [00:26:32] Speaker 00: The type of injury inducing event that caused this loss. [00:26:38] Speaker 00: And like the Freedmen Court, [00:26:40] Speaker 00: found for a pen-tipped size leak to have caused the extent of damage here, to have soaked the house entirely. [00:26:50] Speaker 00: It was a continuous leak subject to the exclusion. [00:26:52] Speaker 00: And plaintiffs concede that the Friedman exclusion is analogous to that here. [00:26:58] Speaker 00: In Friedman, the damage at issue there was limited to a bathroom wall and the ceiling below. [00:27:04] Speaker 00: And the court there found it must have lasted [00:27:08] Speaker 00: a sufficiently long time to count as continuous or repeated under any reasonable construction of those terms. [00:27:14] Speaker 00: Here, it's undisputed that the entire house was soaked as a result of this leak. [00:27:26] Speaker 02: What about the argument he made here about loss? [00:27:30] Speaker 02: That's the loss that has to be said, not the order. [00:27:37] Speaker 00: The loss, if the loss results from an excluded event, it is not covered. [00:27:46] Speaker 00: And the excluded event here is under sub 9 of the water exclusion, the seepage or leakage of water, steam or sewage that occurs or develops over a period of time and is continuous, repeated, gradual, intermittent, slow or trickling. [00:28:03] Speaker 00: So if the loss reported results from that event, it is excluded. [00:28:09] Speaker 02: But there is sort of an internal contradiction because the introductory language says it doesn't matter whether it's gradual or sudden. [00:28:19] Speaker 00: The introductory language, yes, applies to a number of different exclusions. [00:28:23] Speaker 00: That's true. [00:28:23] Speaker 00: And a number of different situations. [00:28:25] Speaker 02: That's true, but it's generic and it covers all of them. [00:28:27] Speaker 02: And it says, it's the loss that is, regardless of whether the event occurs abruptly or gradually, [00:28:36] Speaker 02: involves isolated or widespread damage, et cetera. [00:28:40] Speaker 02: And then this event is apparently defined in terms as you're construing it as to whether it's sudden or gradual. [00:28:52] Speaker 02: So there does seem to be a contradiction there. [00:28:56] Speaker 00: The exclusion explains that what matters for coverage is [00:29:04] Speaker 00: not the length of time that the water took to damage the property, but it's the length of time that the water leaked. [00:29:11] Speaker 02: And what's the event? [00:29:12] Speaker 02: Is the event the leak? [00:29:14] Speaker 02: Yes. [00:29:15] Speaker 02: All right. [00:29:15] Speaker 02: So then it says the introduction length. [00:29:17] Speaker 02: It says regardless of whether the, let's put it leak, occurs abruptly or gradually. [00:29:25] Speaker 02: So that seems to contradict the notion that the leak has to be continuous, repeating, gradual, et cetera. [00:29:34] Speaker 02: and not abrupt. [00:29:41] Speaker 00: The introductory language, again, applies to a number of different excluded events. [00:29:46] Speaker 02: I know, but including this one. [00:29:48] Speaker 02: Including this one. [00:29:49] Speaker 00: Including this one. [00:29:50] Speaker 00: And that would say, if that would apply, Steve Irwin is not suggesting that a sudden water event would not be covered. [00:29:59] Speaker 00: And the loss [00:30:04] Speaker 00: The time that the water leaked is the important event here. [00:30:09] Speaker 00: But even disregarding that and focusing on the new claim that it's the time that the damage took to develop, according to plaintiff's own expert, which was in the record below, notwithstanding State Farm's objections, according to him, it took at least three to four days for the floors to buckle. [00:30:31] Speaker 00: That's still multiple days. [00:30:33] Speaker 03: That's still something resulting from a continuous or repeated seep is your leakage so if I mean sticking with plaintiffs experts Chronology of five days if the hole had been five times larger and so this all happened in one day Would that be would that be covered? [00:30:55] Speaker 00: It depends on the nature of the leak and the event and how long it occurred. [00:31:01] Speaker 03: Well, suppose everything is the same as in this case except the whole, you know, the flow rate is five times bigger. [00:31:06] Speaker 03: So same amount of water but over the space of one day and then they find it and turn it off. [00:31:11] Speaker 03: All the same damage. [00:31:13] Speaker 03: Which side is that on? [00:31:16] Speaker 00: In one day? [00:31:16] Speaker 03: Yeah. [00:31:18] Speaker 00: It could still apply depending on how that leak developed and occurred. [00:31:23] Speaker 01: Well, how do you define period of time? [00:31:26] Speaker 00: The period of time, you look to the Brown decision there, and the Brown decision said that it has a, in the context of running water, [00:31:36] Speaker 00: The policy's use of the term is plain and clear. [00:31:39] Speaker 00: It has a well-established meaning in the context of running water. [00:31:43] Speaker 00: So if you have a period of time here, at least three to four days is what the plaintiff's own expert is saying it took for the damage to manifest, 5.8 days for this leak to occur. [00:31:54] Speaker 00: That's certainly a period of time under any reasonable construction of those terms. [00:31:59] Speaker 02: Well, one second is a period of time, so it's not very informative. [00:32:03] Speaker 00: Well, and the Brown Court addressed that. [00:32:04] Speaker 00: The Brown Court has said that in, certainly, if you get down to quantum mechanics, there would be a nanosecond where at one point in time the pipe was not leaking and at another point in time it was. [00:32:19] Speaker 00: And with respect, there's nothing in the record that this lasted for one day or even two days. [00:32:26] Speaker 00: At the least, according to their experts' manifestation of law statements, [00:32:31] Speaker 00: It was three days. [00:32:32] Speaker 00: According to his duration opinion, it was 5.8 days. [00:32:35] Speaker 00: But on that record, that would certainly qualify as a period of time under any reasonable construction. [00:32:43] Speaker 01: Apparently, the insured didn't know until they saw the floor buckle. [00:32:48] Speaker 01: That's the claim. [00:32:50] Speaker 01: Right. [00:32:51] Speaker 01: So that is when they saw the loss. [00:32:54] Speaker 01: The loss manifested itself. [00:32:56] Speaker 00: The insured claims that they discovered it when the floor buckled, yes. [00:33:03] Speaker 02: And there's no reason to doubt that. [00:33:05] Speaker 02: I mean, they certainly got on it pretty quick. [00:33:08] Speaker 00: No, Your Honor, there's no reason to doubt that. [00:33:11] Speaker 00: That floor that buckled was in a different room from where the leak occurred. [00:33:16] Speaker 00: And so that water traveled from the pipe to the subfloor in the room where the leak occurred. [00:33:22] Speaker 00: onto the adjacent rooms, it traveled up through the flooring, and then buckled. [00:33:29] Speaker 00: All of those things had to happen for that damage to be manifest. [00:33:33] Speaker 00: So in the time it took for that to happen, that was a continuous or repeated sequence. [00:33:38] Speaker 02: And there was no water on the floor of the house? [00:33:41] Speaker 00: No, Your Honor. [00:33:41] Speaker 00: There was no water on the floor of the house, and there was no water observed as pooling or flooding underneath the house either. [00:33:49] Speaker 02: So it was all due to steam or something? [00:33:53] Speaker 00: It was due to either steam or to the water traveling from the point of the subfloor around to the rest of the home. [00:34:01] Speaker 00: But the water, the home had absorbed so much water, it is undisputed that the entire subflooring and the entire flooring throughout the house was soaked. [00:34:14] Speaker 00: The insured's own evidence shows that the walls were crying and the floors were buckling. [00:34:21] Speaker 00: And this is not the type of sudden abrupt event, as in brown, like an overflowing toilet or a water hose breaking mid-cycle that is covered under this type of policy. [00:34:36] Speaker 02: Well, you can have that kind of damage from a flood of a house, but there was no water on the floor here. [00:34:42] Speaker 02: But if there were, you could certainly have that kind of damage. [00:34:47] Speaker 00: This was not a flood of the house, correct, Your Honor? [00:34:54] Speaker 00: And I'd like to just point to two more points. [00:34:58] Speaker 00: Mr. Dawson conceded the estimated duration from their own expert was at least 5.8 days. [00:35:06] Speaker 00: And in their opening brief, they claimed that the only sign of long-term damage was the buckling of floors and that's at page 21 of their opening brief. [00:35:17] Speaker 00: So that would contrast this type of event with a sudden abrupt event that could potentially be covered. [00:35:25] Speaker 00: I'd also like to add that in their reply, they cite for the first time the Qualcomm case, that if policy language has been judicially construed, it's unambiguous. [00:35:36] Speaker 00: They cite that, I'm sorry, to urge departure from that rule. [00:35:40] Speaker 00: Qualcomm, in fact, rejected the ambiguity argument and applied the plain language of the policy there. [00:35:46] Speaker 00: It recounted an expectation of coverage cannot create ambiguity, which is what the plaintiffs are arguing here. [00:35:52] Speaker 00: And it recounted that policy language has to be [00:35:56] Speaker 00: assessed based on the nature of the policy, which here is a homeowner's policy, not a maintenance policy. [00:36:01] Speaker 00: It covers fire and largely excludes water. [00:36:06] Speaker 00: Qualcomm did not follow an out-of-state case that did not apply California rules of construction, but instead interpreted policy language based on policy considerations and not on the plain meaning of the policy issue. [00:36:20] Speaker 00: Your plaintiffs have offered no conflicting California authority on what a period of time or continuous means in the context of running water. [00:36:28] Speaker 00: To the contrary, their authority supports it as unambiguous. [00:36:32] Speaker 00: And I would point the court to the Gershkowitz case. [00:36:34] Speaker 02: Well, it certainly is ambiguous. [00:36:35] Speaker 02: I mean, you can't say it's unambiguous. [00:36:38] Speaker 02: We can't tell whether a period of time is one day, five days, 10 days, who knows? [00:36:46] Speaker 02: I don't know what the consequence of that is, but it certainly appears to be hard to pin down. [00:36:53] Speaker 00: That is correct. [00:36:54] Speaker 00: There is no bright line rule, Your Honor. [00:36:56] Speaker 00: That would be an arbitrary bright line rule in State Farm's view. [00:37:00] Speaker 00: The Gershkowitz case that plaintiffs rely on in their opening and reply brief recounted that the only reasonable construction of continuous or repeated, and the exclusion at issue there, is that the language is clearly intended to refer to the difference in coverage between a sudden and a gradual leak. [00:37:17] Speaker 00: And that's consistent with Brown, consistent with Friedman. [00:37:20] Speaker 00: On a different record, in that case... Even that doesn't make a lot of sense, because anything [00:37:27] Speaker 02: leak is sudden when it starts. [00:37:29] Speaker 02: I mean one minute it's there and the next minute it's not. [00:37:33] Speaker 02: So or the other way around. [00:37:36] Speaker 02: So it suddenly starts. [00:37:38] Speaker 00: Of course and if a leak is caught immediately it wouldn't cause damage or it certainly would not cause the extent of damage that was reported here. [00:37:46] Speaker 00: And finally I point the court to [00:37:55] Speaker 00: the undisputed evidence regarding the extent of the water in the home. [00:38:00] Speaker 00: At one point on reply, plaintiffs argued that Ms. [00:38:03] Speaker 00: Mojica suggested that meter readings were in the 20s. [00:38:06] Speaker 00: That's not correct. [00:38:07] Speaker 00: Ms. [00:38:07] Speaker 00: Mojica said that Mr. Rojas told them how the meter worked and that if it registered in the 20s that would show that there was moisture present. [00:38:16] Speaker 00: She said that he said there was moisture throughout the house. [00:38:19] Speaker 00: Mr. Aranda similarly said that Mr. Rojas told him [00:38:23] Speaker 00: that the readings were high in the walls of the house. [00:38:26] Speaker 00: And that's consistent with plaintiff's own evidence showing the walls crying. [00:38:32] Speaker 00: Mr. Rojas testified at two excerpts of record, 292 to 294. [00:38:37] Speaker 00: He initially said that the moisture readings were 99.9% and he reaffirmed that after additional questioning. [00:38:45] Speaker 00: If there are no further questions, Your Honor, I appreciate your time. [00:38:48] Speaker 01: All right. [00:38:48] Speaker 01: Thank you very much. [00:38:50] Speaker 01: Mr. Dawson, I'll give you [00:38:52] Speaker 04: In terms of factual disputes a very Waxy it shouldn't be a dispute, but an important fact that is in the record and We didn't address it in the brief State Farm says they talk a lot about [00:39:19] Speaker 04: The water saturated the entire house as evidence of therefore it went on for a long time The fact is the house is 1200 square feet and the crawl space goes under the entire house Pressurized hot water was spraying directly on the subflooring so the fact that you know it [00:39:46] Speaker 04: impacted the entire house is not all that shocking. [00:39:52] Speaker 04: State Farm says in its answering brief that the house was 2,000 square feet, citing Mr. Rojas from Service Master. [00:40:01] Speaker 04: But Mr. Rojas, and again these are in the excerpts of record looking at his deposition, he didn't measure the house. [00:40:09] Speaker 04: The only thing he had were photographs. [00:40:12] Speaker 04: He talks about he normally would use a software program or he does measurements, didn't use it. [00:40:17] Speaker 04: Whereas the 1,200 feet. [00:40:20] Speaker 02: So what difference does this make? [00:40:21] Speaker 04: I'm sorry? [00:40:22] Speaker 02: What difference does this make? [00:40:23] Speaker 04: Well, the implication is I'm reading State Farm's argument is, well, this leak must have gone on for quite some period of time because it affected every part of the house. [00:40:35] Speaker 02: Right. [00:40:36] Speaker 02: And a 1,200 square foot house is still [00:40:39] Speaker 02: A sizable house that would take some time to soak the floor. [00:40:42] Speaker 04: About half the size of what they're saying is what I'm pointing out. [00:40:46] Speaker 04: And again, this isn't a dripping water line. [00:40:52] Speaker 04: It's a pressurized hot water line that the plumber saw spraying directly onto the subfloor. [00:41:01] Speaker 04: Talking about Friedman versus State Farm, which does have the same policy language, [00:41:07] Speaker 04: For one thing, the Friedman Court pointed out that regardless of whether the event occurs suddenly or gradually, doesn't matter here. [00:41:17] Speaker 04: And that was in response to the plaintiff's argument that, well, the pipe didn't leak because of normal deterioration. [00:41:25] Speaker 04: And the court said, it doesn't matter. [00:41:26] Speaker 04: Read the policy language. [00:41:27] Speaker 04: What caused it? [00:41:30] Speaker 04: Also, in that case, there was a nail that went through a pipe years before. [00:41:36] Speaker 04: when houses being remodeled and your finger could go to the drywall and it affected every floor of the house. [00:41:42] Speaker 04: Factually, it was very, very distinct. [00:41:48] Speaker 04: In response to the question, what's the rationale, the council said, well, the policy only covers water in very limited circumstances. [00:42:00] Speaker 04: That's the mid-century policy. [00:42:03] Speaker 04: a very limited peril coverage. [00:42:07] Speaker 04: This policy is all risk, and water was not carved out from all risk. [00:42:14] Speaker 04: If you have only a narrowly circumscribed coverage, as the answer suggested, then you get out from under the California Supreme Court decision of McKinnon versus Truck Insurance Exchange of those rules of construction that are [00:42:33] Speaker 04: really very severe for the insurance carrier when evaluating an exclusion like this. [00:42:40] Speaker 04: So I just want to point that out. [00:42:42] Speaker 04: In terms of period of time, what does it mean? [00:42:46] Speaker 04: I mentioned in the reply brief that every other place in the policy where time is referenced, it's qualified, quantified, or specified, except for this one. [00:42:58] Speaker 04: In fact, under loss of use, [00:43:01] Speaker 04: is the only other place I could find the phrase period of time. [00:43:04] Speaker 04: And there, it was referenced in connection with 14 days. [00:43:12] Speaker 04: So looking at the legacy Vulcan case we cite, where there's a similar situation dealing with a duty to defend and what did underlying insurance mean. [00:43:28] Speaker 04: And the court said, well, in this part of the policy, you use the phrase, and you point to Schedule A, which mentions a very specific policy. [00:43:38] Speaker 04: But in this part of the policy, you use underlying insurance, and you don't reference it to anything else. [00:43:44] Speaker 04: So it has to be considered a generic term. [00:43:46] Speaker 04: We've got to decide what does underlying insurance mean. [00:43:50] Speaker 04: As a generic term, it could mean what? [00:43:52] Speaker 02: All right, so what is the consequence of this argument? [00:43:55] Speaker 04: So the consequence that the court reached there. [00:43:57] Speaker 02: Are you asking us to say that it's ambiguous and therefore invalid, or what? [00:44:04] Speaker 04: Well. [00:44:06] Speaker 01: Ambiguous, and then it would be construed in favor of the insured. [00:44:09] Speaker 01: Exactly. [00:44:09] Speaker 01: But what would that be here? [00:44:11] Speaker 01: Wouldn't necessarily mean coverage. [00:44:14] Speaker 04: That would mean? [00:44:17] Speaker 04: I've given this a lot of thought. [00:44:20] Speaker 04: And I feel I don't have a satisfactory answer to myself. [00:44:25] Speaker 04: If you read the case law, it is pretty clear if you decide, OK, this party says period of time can mean a day. [00:44:37] Speaker 04: OK, it could under period of time. [00:44:38] Speaker 04: It's not defined. [00:44:39] Speaker 04: It's not qualified. [00:44:41] Speaker 04: This party says, well, hold it. [00:44:43] Speaker 04: Period of time, start reading different editions. [00:44:45] Speaker 04: definition suggests some passage of time, that's reasonable too. [00:44:51] Speaker 04: Therefore it's ambiguous and therefore it's construed against the insured and consistent with the insured's reasonable objective expectations of coverage. [00:45:06] Speaker 04: Under McKinnon, the reasonable objective expectations of coverage [00:45:11] Speaker 01: What's in the insuring agreement the all risk agreement, which is water damage is covered I thought state farms answer would be when I asked what the rationale is In terms of the burden on the homeowner to discover the damage. [00:45:28] Speaker 01: I mean so the first day Something's damaged that would be covered because that's not a period of time but by we [00:45:39] Speaker 01: And by day 14, say, the homeowner should have a duty to discover, there should be a burden to discover the damage, a sort of a mitigation theory, and limit the damage. [00:45:53] Speaker 01: And so by that day, it would be a period of time. [00:45:57] Speaker 04: And that's similar to the facts of both Brown versus Mid-Century and Friedman versus State Farm. [00:46:02] Speaker 04: And in the Brown case, the insured said, well, we would notice condensation on our windows. [00:46:08] Speaker 04: We'd wipe them off, and the next day it was back. [00:46:11] Speaker 04: And we noticed water condensation on the walls. [00:46:13] Speaker 04: We'd wipe it off, and the next day it's back. [00:46:16] Speaker 04: 30 days later, they started trying to figure out, where's the water coming from? [00:46:22] Speaker 04: And eventually found, the insured's brother went into the crawlspace and found that there was water leaking. [00:46:30] Speaker 04: And so the insured, [00:46:34] Speaker 04: agreed that the water had been going at least one if not two months in the Brown case and in Friedman much longer. [00:46:50] Speaker 01: Any other questions? [00:46:52] Speaker 01: No? [00:46:53] Speaker 01: Okay. [00:46:53] Speaker 01: All right, thank you. [00:46:54] Speaker 01: You've reached your time, yes. [00:46:56] Speaker 01: Mojica versus State Farm will be submitted. [00:47:00] Speaker 01: We've previously submitted Seidel versus United States, and this session of the court is adjourned for today. [00:47:07] Speaker 01: Thank you, counsel. [00:47:31] Speaker 02: This court for this session stands adjourned.