[00:00:00] Speaker 03:
We'll move on to the second case set for argument, which is Richard Harris Law Firm versus State Farm Fire and Casualty Company case number 24-2047.

[00:00:39] Speaker 04:
Good morning, may it please the court.

[00:00:41] Speaker 04:
My name is David Clark and I'm here representing the appellant, Harris Law Firm.

[00:00:45] Speaker 04:
This is my act to reserve two minutes of my time for rebuttal.

[00:00:49] Speaker 04:
This is a contract coverage dispute of insurance policy, a liability insurance policy that has an exclusion for property damage, stating that property damage will not be covered for personal property that is within the custody, care, and control of the insurer.

[00:01:06] Speaker 04:
I think the word is or.

[00:01:08] Speaker 04:
or control, correct?

[00:01:10] Speaker 04:
And if it were and that would, this would be a different case.

[00:01:13] Speaker 04:
Certainly, your honor.

[00:01:16] Speaker 04:
Um, and we submit that the issue here is whether or not that exclusion is triggered, uh, custody care or control when there was no custody care or control by the insured prior to the tort that caused the injury.

[00:01:32] Speaker 03:
Tell us how I mean, how was there not control?

[00:01:34] Speaker 03:
How was there not control in this case?

[00:01:36] Speaker 03:
They moved the plane.

[00:01:38] Speaker 03:
They had, they'd lifted up the garage door that ultimately came down on it.

[00:01:43] Speaker 03:
They had the garage door opener to lift back up the garage door.

[00:01:49] Speaker 03:
How is that not control?

[00:01:52] Speaker 04:
There was no entrustment by 702PC, the owner of the aircraft.

[00:01:56] Speaker 04:
There was no course of dealing between the two parties that they could move it.

[00:02:00] Speaker 04:
The bright line undisputed evidence

[00:02:03] Speaker 04:
for a year is that they had nothing to do with the plane.

[00:02:06] Speaker 01:
They had nothing to do with it all.

[00:02:08] Speaker 01:
When you say they, what do you mean, who's they?

[00:02:11] Speaker 01:
They had no control.

[00:02:11] Speaker 01:
Harris Law Firm.

[00:02:13] Speaker 01:
And these were not employees of the firm?

[00:02:15] Speaker 04:
The two were employees of Harris Law Firm, correct.

[00:02:17] Speaker 01:
So how do you say they had no control over them?

[00:02:19] Speaker 01:
I mean, they were employees.

[00:02:21] Speaker 01:
They were employees of the firm.

[00:02:22] Speaker 01:
They moved the airplane.

[00:02:23] Speaker 01:
Yes, but... I don't understand your argument.

[00:02:26] Speaker 04:
Let me explain.

[00:02:26] Speaker 04:
I apologize.

[00:02:28] Speaker 04:
The plane was owned by 702 PC.

[00:02:30] Speaker 04:
It's a separate entity.

[00:02:32] Speaker 04:
It owns the plane.

[00:02:33] Speaker 04:
It operates the plane.

[00:02:35] Speaker 04:
It has complete and solitary control over the plane.

[00:02:38] Speaker 04:
It pays for the hangar.

[00:02:39] Speaker 04:
It hired the pilot.

[00:02:42] Speaker 04:
The Brightline agreement between the parties is that Harris Law Firm or its personnel would have nothing to do with the plane at all.

[00:02:51] Speaker 04:
They wouldn't touch it.

[00:02:52] Speaker 04:
They wouldn't move it.

[00:02:53] Speaker 04:
They wouldn't care for it.

[00:02:55] Speaker 04:
And here, they violated that agreed standard of care when they moved it.

[00:02:59] Speaker 03:
So why did the Harris employees move it then?

[00:03:02] Speaker 03:
I mean, that's a pretty big deal.

[00:03:04] Speaker 03:
If you don't feel like you have implied right to move it, moving an airplane is no small measure.

[00:03:11] Speaker 03:
But they did it, right?

[00:03:13] Speaker 03:
I would agree, Your Honor.

[00:03:13] Speaker 04:
They did do it.

[00:03:15] Speaker 04:
But it was the act of touching it and moving it that was the tort.

[00:03:20] Speaker 04:
And the case law talks about the sequence that the property

[00:03:25] Speaker 04:
acquired is subsequently damaged, meaning that the case law talks about, I agree to take custody, care, or control of the property, or we agree that I have a right to do so, and in so doing, I then damage it.

[00:03:39] Speaker 04:
Here, there was no agreement that I could touch it, that my employees could touch it.

[00:03:43] Speaker 01:
As I read the policy, it doesn't say legal authority to control, it just says control.

[00:03:49] Speaker 01:
And they controlled the aircraft, that is to say they moved it.

[00:03:53] Speaker 04:
If I'm driving my car and I run into another vehicle and drive into a ditch, I've certainly controlled it.

[00:03:58] Speaker 04:
I've certainly moved it.

[00:04:00] Speaker 04:
Yeah.

[00:04:00] Speaker 04:
But I did that in the course of committing a tort.

[00:04:03] Speaker 04:
And they did that here.

[00:04:04] Speaker 01:
Yeah.

[00:04:05] Speaker 01:
That doesn't mean they didn't control it.

[00:04:06] Speaker 01:
And this is not an accident.

[00:04:07] Speaker 01:
They did it on purpose.

[00:04:10] Speaker 04:
They did.

[00:04:10] Speaker 04:
They breached the standards of care by doing so.

[00:04:13] Speaker 01:
They deliberately moved the airplane.

[00:04:15] Speaker 01:
They did it on purpose.

[00:04:16] Speaker 01:
They knew what they were doing.

[00:04:17] Speaker 01:
And it seems to me that under any ordinary understanding of the word control, they exercised control.

[00:04:22] Speaker 01:
Now, they might have not been allowed to do it.

[00:04:25] Speaker 01:
They may have done it improperly.

[00:04:27] Speaker 01:
But they exercised actual control.

[00:04:30] Speaker 04:
They exercised actual control as part of the tort of damaging it.

[00:04:35] Speaker 04:
And I would submit that the case law, and the case law that the court relies upon, the global case, the Essex case,

[00:04:43] Speaker 04:
talk about there's a prior right of access.

[00:04:45] Speaker 04:
There's a prior right of control.

[00:04:48] Speaker 04:
And that was not present here.

[00:04:50] Speaker 04:
There was no prior control.

[00:04:51] Speaker 04:
It's a liability policy, as counsel points out.

[00:04:54] Speaker 04:
It's a liability policy.

[00:04:56] Speaker 04:
So it's third party facing.

[00:04:57] Speaker 04:
It's my liability to a third party.

[00:05:00] Speaker 04:
That coverage does not apply if it's something that I have personal control over or custody.

[00:05:06] Speaker 04:
In this case, up until the point when they touched it, Harris-Lawson had no personal control over it.

[00:05:13] Speaker 04:
It was the act of moving it and touching it that was the torch and it was the breach of the duty.

[00:05:18] Speaker 01:
That was, that was the control, right?

[00:05:21] Speaker 02:
Yes.

[00:05:21] Speaker 02:
I mean, to follow up on Judge Butcher's question, I mean, how can you say with the plane being in the law firm's hangar, even though there's an agreement, I understand there's an agreement that they didn't control, have control over the plan.

[00:05:38] Speaker 04:
Again, the case law, there was a lot of talk about the court, and we cited in our brief, talks about prior right to control, prior agreements to control.

[00:05:47] Speaker 04:
There was none of that here.

[00:05:50] Speaker 04:
Their control was the tort.

[00:05:53] Speaker 04:
And in the end, it comes down to... But it was their hanger.

[00:05:56] Speaker 02:
It was not their hanger.

[00:05:59] Speaker 02:
Whose hanger was it?

[00:05:59] Speaker 02:
The hanger was leased by the law firm.

[00:06:03] Speaker 02:
The hanger was leased by 702 PC.

[00:06:08] Speaker 03:
Harris law firm started the process, but then for a year... But Harris law firm had documents in the hanger.

[00:06:17] Speaker 03:
Correct.

[00:06:18] Speaker 03:
So, I mean, there's some duality here.

[00:06:22] Speaker 03:
I mean, you're sort of making a very formalistic argument and yet there wasn't actually any formalism that was honored in this.

[00:06:32] Speaker 03:
I mean, did the law firm pay?

[00:06:34] Speaker 03:
702 for the space that they were using?

[00:06:42] Speaker 03:
I don't have an answer to that question.

[00:06:45] Speaker 03:
Here's the problem.

[00:06:46] Speaker 03:
You might have a better case if they had entered something that was truly just owned and operated by 702, but that's not the case here.

[00:06:56] Speaker 03:
There was a commingling of space and property, and I don't think they would have moved it

[00:07:05] Speaker 03:
if they didn't think they had an implied authority to do so.

[00:07:09] Speaker 04:
Your Honor, I don't think there's anything in the evidence or the record that supports that.

[00:07:13] Speaker 04:
The undisputed facts are that they had an implied.

[00:07:14] Speaker 03:
The evidence is that they moved it.

[00:07:16] Speaker 03:
I mean, my heavens.

[00:07:17] Speaker 03:
Were these lawyers or paralegals?

[00:07:21] Speaker 03:
They were not paralegal staff.

[00:07:23] Speaker 03:
They were paralegal staff.

[00:07:24] Speaker 03:
No, they were staff.

[00:07:24] Speaker 02:
I want to go back to the question.

[00:07:26] Speaker 02:
Richard Harris, partner in the Harris law firm, correct?

[00:07:31] Speaker 02:
Correct.

[00:07:32] Speaker 02:
Leased the hangar.

[00:07:34] Speaker 04:
Originally, yes, to get the project started.

[00:07:37] Speaker 02:
Okay.

[00:07:38] Speaker 04:
Just understand it.

[00:07:39] Speaker 04:
He released the hanger.

[00:07:40] Speaker 04:
But 702 took over the lease payments and was responsible for them.

[00:07:43] Speaker 03:
But who was on the actual lease?

[00:07:46] Speaker 04:
702 PC.

[00:07:49] Speaker 04:
I take that back.

[00:07:50] Speaker 04:
It may have been Richard Harris, but 702 PC took it over.

[00:07:53] Speaker 02:
So they had an agreement with 702 PC, which was also the LLC formed by Mr. Harris.

[00:08:02] Speaker 02:
Was it not?

[00:08:04] Speaker 04:
He was part of the all seed that yes.

[00:08:06] Speaker 02:
Okay.

[00:08:08] Speaker 02:
It seems to me as judge Nelson has said, there's a lot of commingling here that the Harris law firm who had the insurance with state form had control.

[00:08:19] Speaker 04:
There was separate legal entities and they had separate defined scope of authority and duties.

[00:08:26] Speaker 04:
And that is undisputed.

[00:08:28] Speaker 04:
There was no, there was no commingling of interaction between Harris law firm and the plane.

[00:08:34] Speaker 04:
The policy was hands off the plane.

[00:08:36] Speaker 04:
The agreement was hands off the plane.

[00:08:38] Speaker 04:
And they were bona fide separate legal entities that each got insurance from State Farm that gave each of them the policy.

[00:08:45] Speaker 03:
But the problem is it wasn't honored as carefully as you're trying to pitch it.

[00:08:49] Speaker 03:
I mean, the law firm put their property in there and they didn't pay them for it.

[00:08:53] Speaker 03:
So they treated it.

[00:08:54] Speaker 03:
I mean, the standard of how it was being treated doesn't

[00:09:02] Speaker 03:
doesn't fit the model that you're now saying.

[00:09:05] Speaker 03:
I mean, I understand why you're saying it.

[00:09:06] Speaker 03:
$750,000 is on the line and it's an argument, but it doesn't, it doesn't go with, you know, how this was actually operated.

[00:09:16] Speaker 03:
It seems.

[00:09:18] Speaker 04:
In fact, it did go with how it was operated because the uncontested evidence is that 702 PC handled the plane.

[00:09:26] Speaker 04:
Harris law firm handled the files.

[00:09:28] Speaker 04:
Richard Harris handled his personal property.

[00:09:31] Speaker 04:
There was no overlap.

[00:09:32] Speaker 04:
There was no commingling of those responsibilities, duties, or activities.

[00:09:37] Speaker 04:
There was a separate and a part.

[00:09:39] Speaker 04:
And the case law talks about the right of access.

[00:09:41] Speaker 04:
The case law talks about picking a possession of the equipment.

[00:09:47] Speaker 04:
But it doesn't support that.

[00:09:48] Speaker 04:
It says there must be some custody, control, or care prior to the damage being inflicted.

[00:09:55] Speaker 04:
And in this case, yes.

[00:09:57] Speaker 04:
They took control and they damaged the property.

[00:09:59] Speaker 04:
But that's the only time they took control.

[00:10:01] Speaker 03:
It wasn't legally authorized.

[00:10:02] Speaker 03:
I mean, you're not contesting that they had control over the property, the plane.

[00:10:07] Speaker 03:
You're saying that control was not authorized.

[00:10:11] Speaker 03:
That's why it doesn't count.

[00:10:12] Speaker 04:
Correct.

[00:10:12] Speaker 04:
That control was the torch.

[00:10:15] Speaker 04:
And I would submit your answer that at least an absurd result.

[00:10:19] Speaker 04:
If I buy property insurance, liability property insurance for third parties,

[00:10:26] Speaker 04:
And if it's my tort of damaging the property that triggers the exclusion, what have I purchased?

[00:10:35] Speaker 04:
Everybody asserts control over a property that they damage.

[00:10:39] Speaker 02:
Okay, that's a good place.

[00:10:40] Speaker 02:
Let me ask you this.

[00:10:41] Speaker 02:
Under Nevada law, which controls here, do we begin our analysis of the insurance policy

[00:10:49] Speaker 02:
by looking at the text of the policy, or do we look at the party's reasonable expectations regarding coverage?

[00:10:58] Speaker 04:
Insurance policies are adhesion contracts, so they're interpreted broadly to afford coverage.

[00:11:02] Speaker 04:
Exclusions are narrowly interpreted.

[00:11:07] Speaker 04:
Must be unambiguous to a lay person.

[00:11:10] Speaker 04:
All right, what about the reasonable expectations of the parties?

[00:11:13] Speaker 04:
The court will not rewrite a policy.

[00:11:17] Speaker 04:
to the regional expectations of the parties.

[00:11:19] Speaker 04:
And in this case, Harris Law Firm sought third-party liability protection for its own torts of property damage.

[00:11:29] Speaker 04:
For personal property, it did not care, control, care for, or had custody of.

[00:11:35] Speaker 04:
And that's exactly what this case is.

[00:11:36] Speaker 04:
They did not have any custody, care, or control prior to when they damaged it.

[00:11:44] Speaker 04:
There was no course of dealing in that regard.

[00:11:46] Speaker 01:
But you don't dispute that they had actual control, that they actually moved the airplane.

[00:11:51] Speaker 04:
They moved it without authority.

[00:11:53] Speaker 01:
I understand that, but I'm asking the question of actual, not authoritative.

[00:11:57] Speaker 01:
They had actual control of the airplane.

[00:11:59] Speaker 01:
They physically moved it.

[00:12:00] Speaker 01:
You don't contest that.

[00:12:02] Speaker 04:
They did physically move, but that was the tort.

[00:12:03] Speaker 04:
That was the breach of the duty of care.

[00:12:05] Speaker 04:
Well, yeah, but that wasn't actually the tort.

[00:12:07] Speaker 03:
The tort happened later.

[00:12:10] Speaker 03:
I mean, that's an interesting question whether

[00:12:13] Speaker 03:
If they had done it in the moving process, would that have changed it?

[00:12:17] Speaker 03:
Or if they didn't intend to touch the property, but somehow they drop a file box on the airplane and cause damage, then I think you'd have more of a case.

[00:12:31] Speaker 03:
But here, they actually exercise control before the damage was done.

[00:12:36] Speaker 04:
I think the courts, the district court's order talks about that fact that they had control.

[00:12:41] Speaker 04:
But the district court's order also talks about the fact that they exercised their right to access the airplane.

[00:12:46] Speaker 04:
And they had no right to do that.

[00:12:47] Speaker 04:
If you want to call it a trespassing challenge, you can do that as well.

[00:12:51] Speaker 01:
But, you know, if the policy had said and instead of or,

[00:12:55] Speaker 01:
I might agree with you.

[00:12:57] Speaker 01:
And if the policy said control exercise pursuant to a right to control, I might agree with you.

[00:13:03] Speaker 01:
But the word is control without any particular qualification.

[00:13:07] Speaker 01:
And it seems to me the word control under the reasonable expectation is physical control.

[00:13:13] Speaker 01:
Why is that the wrong interpretation of the policy?

[00:13:16] Speaker 04:
Thank you for that question.

[00:13:18] Speaker 04:
Because the case law talks about possessory control that's been granted or

[00:13:24] Speaker 04:
Asserted and they had no possessory control.

[00:13:26] Speaker 04:
They had no authorization to do so.

[00:13:28] Speaker 04:
That's the control.

[00:13:29] Speaker 04:
That's the possessory control.

[00:13:31] Speaker 04:
It was in there.

[00:13:31] Speaker 04:
It was in their control in their possession by agreement of the parties or in the scope of their business.

[00:13:38] Speaker 04:
Yeah, I hear that was not the case.

[00:13:39] Speaker 01:
Yeah, I just don't read the policy is saying this is has to be authorized control instead of just control.

[00:13:45] Speaker 04:
Yeah, OK, those are my other questions.

[00:13:47] Speaker 03:
Those might you could reserve time.

[00:13:49] Speaker 04:
I'll reserve the remainder of my time.

[00:13:51] Speaker 04:
Thank you.

[00:13:59] Speaker 00:
Good morning.

[00:13:59] Speaker 00:
May it please the court?

[00:14:01] Speaker 00:
Gina Winsper on behalf of State Farm Fire and Casualty Company.

[00:14:04] Speaker 00:
State Farm requests that the court affirm the district court's order on summary judgment that State Farm owes no liability coverage obligation to Harris Law Firm for damage to the aircraft because of the applicability of the care, custody, or control exclusion clearly stated in the business liability policy.

[00:14:21] Speaker 00:
The undisputed facts, clear and unambiguous policy exclusion, and common law require affirmance for the following reasons.

[00:14:29] Speaker 00:
It's undisputed that Harris Law Firm employees exercise intentional, knowing, and exclusive possessory control over the aircraft when the incident happened.

[00:14:39] Speaker 00:
It's undisputed that Harris Law Firm employees had a right of unrestricted and unsupervised access to the hangar and all of its contents, including the aircraft, when the incident happened.

[00:14:51] Speaker 03:
Tell me about that undisputed part because that's not what we're hearing today.

[00:14:55] Speaker 03:
They're saying it is disputed at that point.

[00:14:57] Speaker 00:
Well, the argument for the Harris Law Firm is that there was some unwritten bright line agreement that these facility employees would not go near the plane.

[00:15:10] Speaker 00:
But what we know from the facts is that these employees took it upon themselves and had the knowledge and expertise and ability to remove wheel chucks, to hook up an electric dolly to a $5 million plane,

[00:15:25] Speaker 03:
And is there evidence they've done that before?

[00:15:28] Speaker 00:
The employee's depositions were not taken.

[00:15:31] Speaker 00:
What we know from Mr. Harris is that as far as he knows, it was not done before.

[00:15:34] Speaker 00:
But we also know from Mr. Harris that it was done and moved multiple times on that one occasion.

[00:15:40] Speaker 00:
Mr. Harris' own testimony is that

[00:15:45] Speaker 00:
And this is in the record volume two at 99.

[00:15:49] Speaker 00:
The aircraft was dollied out onto the taxiway in between two rows of hangars.

[00:15:53] Speaker 00:
It would have been pulled out 20 to 40 feet to clear the hangar at lunch.

[00:15:57] Speaker 00:
Mr Rasmussen decided to get it out of the way of the other hangars and he decided to pull back into the hangar.

[00:16:03] Speaker 00:
But Mr Mendoza said if he did that, he couldn't Mr Mendoza couldn't continue to remove all the items that would block his ability to move items from the hangar.

[00:16:12] Speaker 00:
And so they came to the agreement to move it partly back in so Mr. Mendoza could continue to remove things like an RV, ATVs.

[00:16:21] Speaker 00:
Truck as well as the law firm file materials.

[00:16:24] Speaker 03:
Oh, they were also moving those other things correct.

[00:16:26] Speaker 00:
They were that's right They were those other things owned the RV and that were those owned by the law firm were those owned by mr. Harris mr. Harris personally, so this was the blurring of the lines was significant here this was a hangar that was Leased originally by mr. Harris personally the lease agreement continued in his name through the incident and

[00:16:48] Speaker 00:
Mr. Harris initially paid the lease payments through Harris Law Firm, but he stored personal items.

[00:16:56] Speaker 00:
His testimony is it included a truck and an RV, ATVs, as well as law firm files there.

[00:17:03] Speaker 00:
And then during the course, about six months after the airplane was acquired, then the lease payments began to be paid by the LLC.

[00:17:15] Speaker 00:
But there was no change in the contractual lease agreement or ownership.

[00:17:20] Speaker 00:
But Mr. Harris had acquired a new hanger and was moving everything into the new hanger.

[00:17:25] Speaker 00:
Interestingly, the new hanger wasn't acquired by 702PC either.

[00:17:29] Speaker 00:
It was acquired by another LLC of Mr. Harris's.

[00:17:33] Speaker 00:
So the blurring of the lines is very significant.

[00:17:35] Speaker 03:
But also significant is that these employees, these... The plane was titled, I guess, in the PLC.

[00:17:43] Speaker 00:
Also very interesting, the plane was owned by 702 PC LLC.

[00:17:48] Speaker 00:
The only members of 702 PC were Richard Harris, personally, Richard Harris Law Firm, and Mr. Harris's two other principal partners, his son, Joshua Harris, through his professional corporation and another partner, Benjamin Cloward.

[00:18:06] Speaker 02:
Who was the policy issued to?

[00:18:08] Speaker 00:
the policy was issued so the state farm fire and company was issued to Richard to Harris law firm and additional insurers on that policy included Mr. Harris personally and obviously his employees under these circumstances but the control issue is such an since Harris was on the policy personally Harris well he was considered an additional insured and I do believe his name was specifically indicated in

[00:18:38] Speaker 00:
the policy, but the policy ultimately was issued to Richard Harris' law firm.

[00:18:43] Speaker 02:
So you issued the policy to the Harris law firm.

[00:18:47] Speaker 02:
What's your argument that the Harris law firm had control of the hanger when the hanger was Mr. Harris'?

[00:18:54] Speaker 00:
Well, because it is that blurring of the lines, right, that Mr. Harris had his own personal items there.

[00:19:01] Speaker 00:
The law firm had their files.

[00:19:03] Speaker 00:
And Mr. Harris used his facility employees to move both his personal items and his law firm items.

[00:19:10] Speaker 03:
His facility employee.

[00:19:12] Speaker 03:
What does that mean?

[00:19:12] Speaker 03:
Were these law firm employees?

[00:19:14] Speaker 00:
These were law firm employees.

[00:19:16] Speaker 00:
That's right.

[00:19:16] Speaker 00:
And that's why Mr. Harris

[00:19:18] Speaker 00:
has brought this claim against State Farm under his business liability policy is his allegation is that his employees were negligent to something to a third party's property.

[00:19:29] Speaker 00:
Correct.

[00:19:30] Speaker 00:
Caused harm to a third party's property, which uniquely Mr. Harris was the managing member of that third party.

[00:19:36] Speaker 03:
One of the employees had gone, you know, they were going out on lunch.

[00:19:42] Speaker 03:
They wanted access to a car.

[00:19:44] Speaker 03:
They didn't have one.

[00:19:44] Speaker 03:
They steal a car.

[00:19:47] Speaker 03:
steal a car in front of the law firm and they drive and they wreck the car.

[00:19:51] Speaker 03:
You would not cover that, I take it, because you would say that employee had custody or control over that car.

[00:19:59] Speaker 00:
Correct.

[00:20:00] Speaker 00:
Correct.

[00:20:01] Speaker 00:
Under these circumstances, Mr. Harris

[00:20:04] Speaker 00:
tasked his employees to go and clear out the hangar.

[00:20:09] Speaker 00:
In order to clear out the hangar, the employees had the knowledge and the ability to move the plane and the necessity of moving that plane in order to move these large objects.

[00:20:18] Speaker 00:
We know from his own testimony.

[00:20:19] Speaker 03:
But my point is, I mean, they seem to be saying, well, this was a negligent act, which sounds like

[00:20:25] Speaker 03:
I mean, it was a negligent act, but that's not part, that doesn't get them out of the exclusion because, I mean, the hypothetical I gave, and I guess I'd be interested in hearing about this on rebuttal, you could have the employees commit a negligent act, but that doesn't, I mean, in the hypo that I gave where they steal a car and they wreck the car, they also didn't have legal custody.

[00:20:48] Speaker 03:
Well, no, they did have control.

[00:20:49] Speaker 03:
They didn't have legal control, but they had control, and you're saying you wouldn't cover it.

[00:20:55] Speaker 00:
Sure, under these circumstances, so I actually thought about your particular hypothetical a lot as I was preparing because under what circumstances would there be coverage for negligent acts potentially of the employees?

[00:21:07] Speaker 00:
As I was thinking about it, the employees driving that RV and accidentally running into the plane is a very different circumstance and separate and apart from them

[00:21:17] Speaker 00:
That the damage came from their control of the plane, from their taking care, custody, or control of that plane.

[00:21:24] Speaker 03:
If they had not moved, and that was the hypo I tried to give in the, if they dropped something, I didn't realize there were other things.

[00:21:30] Speaker 03:
I'm not sure how much damage a file cabinet could do, but an RV could probably do some damage.

[00:21:35] Speaker 03:
And if they had done that negligently, then you would have covered it.

[00:21:38] Speaker 00:
That's right, because that's a different circumstance.

[00:21:40] Speaker 00:
I mean, I'm certain there would have still been some analysis as to whether or not the blurring of the lines of the hangar in particular and whether that care custody aspect came into play.

[00:21:52] Speaker 03:
Well, but under that scenario, it wouldn't have mattered.

[00:21:55] Speaker 03:
The blurring of the lines wouldn't have been.

[00:21:57] Speaker 03:
We would have asked the same question.

[00:21:59] Speaker 03:
Was there custody or care or control?

[00:22:03] Speaker 03:
And we presumably would have said there's no control over the airplane because they didn't touch it.

[00:22:08] Speaker 03:
In fact, they walked in and they said, we can't touch it.

[00:22:11] Speaker 00:
Under these circumstances, what the lower court dealt with and what State Farm had to deal with in addressing coverage was that control aspect of the plane.

[00:22:22] Speaker 00:
And it wasn't just the one motion of moving it out, as we know, and I offer to the court.

[00:22:28] Speaker 03:
As I understand it, there was actual damage to the plane.

[00:22:32] Speaker 03:
That was repaired, but that was a different policy.

[00:22:35] Speaker 00:
It was a different policy, and I think there might have been a misrepresentation even in our brief, but there was some confusion between the two briefs.

[00:22:42] Speaker 00:
State Farm was not the insurer for the airplane.

[00:22:45] Speaker 00:
There was a separate insurer.

[00:22:47] Speaker 00:
There was about $188,000 of damage to the airplane from this incident.

[00:22:52] Speaker 00:
That was paid, and Mr. Harris or 702 PC was compensated for that damage.

[00:22:58] Speaker 00:
So once they were compensated for that, about six months later, Mr. Harris made the decision to sell the plane.

[00:23:04] Speaker 00:
And when he sold the plane, his allegation is, I had to sell it for less because it had this pre-existing property damage.

[00:23:11] Speaker 00:
And the claim to State Farm was for the diminished value of the plane that he alleged was the result of the negligence of his employees.

[00:23:19] Speaker 01:
Let me ask you this.

[00:23:20] Speaker 01:
As I understand the position of Mr. Clark, is that there's a difference under the policy between actual control

[00:23:31] Speaker 01:
and legally authorized control.

[00:23:34] Speaker 01:
How do you respond to that?

[00:23:35] Speaker 00:
Well, I would respond to it the way the lower court did in that control doesn't necessarily require consent or permission from the owner.

[00:23:45] Speaker 00:
In this particular case, there was access that and there's not testimony necessarily from the employees that they

[00:23:53] Speaker 00:
had been given this bright light standard, what we knew and what we know is that they understood that they had a... Sorry, go ahead.

[00:24:01] Speaker 01:
I'm not asking a factual question.

[00:24:02] Speaker 01:
I'm asking a legal question.

[00:24:04] Speaker 01:
Okay.

[00:24:04] Speaker 01:
Is there a difference for purposes of the policy between actual control and legally authorized control?

[00:24:10] Speaker 00:
Thank you for that.

[00:24:11] Speaker 00:
No, there is not a difference under the policy.

[00:24:12] Speaker 00:
The policy exclusion doesn't have any sort of language that suggests that care custody or control requires permission.

[00:24:20] Speaker 00:
or consent which is the argument of Mr. Harris and the Harris law firm.

[00:24:25] Speaker 00:
Thank you for that distinguishing question.

[00:24:29] Speaker 00:
With regard to this particular allegation we've got I mean the lower court did a great job in its order summarizing custody care control and addressing the issue of permission and permissive use or custody and we've got a lot of case law

[00:24:47] Speaker 00:
But I think that what is so significant in this case is the fact that the insured, who is seeking to make a claim, essentially, the insured as a managing member of the LLC is making a claim against himself and alleging that he didn't give permission to his own employees to control this airplane.

[00:25:09] Speaker 00:
The other issue that I think that the Harris Law Firm brought up in their briefing had to do with

[00:25:15] Speaker 00:
the fact that the damage happened when nobody was present, where they weren't actually right next to the plane.

[00:25:22] Speaker 00:
And I think the case law submitted by the lower court or referred to by the lower court and in our brief establishes that the control doesn't have to be continuous to still qualify as control under the terms of the contract and case law.

[00:25:35] Speaker 03:
Do we know how the hangar started closing?

[00:25:38] Speaker 00:
Nobody knows.

[00:25:39] Speaker 03:
And does it matter?

[00:25:40] Speaker 00:
I don't think it matters.

[00:25:42] Speaker 03:
If there was a third party that came in and closed the hangar, you would have still said, no, you had control over the airplane, so therefore we're not going to cover it.

[00:25:55] Speaker 00:
Yeah, I guess in fairness, that would depend on the third party.

[00:25:58] Speaker 00:
If the pilot came in and was in some way

[00:26:02] Speaker 00:
intervening in the placement or the situation of the airplane and close the door, that might be a different set of circumstances.

[00:26:11] Speaker 03:
Say that the airport just had a safety mechanism that once a hangar is open for two hours or whatever, we're going to automatically close it out of safety and that operated.

[00:26:26] Speaker 03:
Then you'd say there was negligence from a third party.

[00:26:31] Speaker 03:
That wouldn't change the control analysis.

[00:26:33] Speaker 03:
That's what's confusing.

[00:26:34] Speaker 00:
That's what I would get back to.

[00:26:36] Speaker 00:
The continuous control of Harris Law firm employees would not have been interrupted by some mechanism by which the door would come down or if they had the opener in their pocket.

[00:26:45] Speaker 03:
But maybe there's something.

[00:26:48] Speaker 03:
But don't the employees have to have caused the harm for the exclusion to apply?

[00:26:52] Speaker 00:
Well, they cause the harm by leaving the aircraft under a moving door, and that ultimately caused the harm in this circumstance and their control.

[00:27:01] Speaker 03:
Well, I don't know.

[00:27:02] Speaker 03:
That's why I'm asking my question about the hanger.

[00:27:04] Speaker 03:
It sounds like it doesn't matter, but it's not leaving it under that caused the damage.

[00:27:11] Speaker 03:
It's closing the door that caused the damage.

[00:27:14] Speaker 00:
Well, it's putting it in the situation where peril could result, leaving a car or a hangar or an airplane under a movable door.

[00:27:24] Speaker 00:
While you are in control of that property is what caused the damage.

[00:27:31] Speaker 00:
And you created the risk by leaving it in a situation where peril could be afforded to that item.

[00:27:37] Speaker 00:
Just in closing, as I see my time running, unless there are any other questions, we would just conclude that the intentional knowing and exclusive possessory control of the Harris law firm employees resulted in the aircraft being in Harris law firm's care, custody, or control according to the terms.

[00:27:55] Speaker 00:
And State Farm would request that the court affirm the lower court's order granting summary judgment, as there are no genuine issues of material fact as to that issue of control at the time that the airplane was damaged.

[00:28:07] Speaker 00:
and that the lower court's order be affirmed.

[00:28:10] Speaker 00:
Thank you very much.

[00:28:20] Speaker 04:
I first respond to the contention that there was a blurring of the lines.

[00:28:24] Speaker 04:
These are two completely separate entities with completely separate responsibilities, completely separate scopes of authority and a year of course in dealing where that was observed, but that was honored and that was practiced.

[00:28:36] Speaker 04:
So there was no blurring of the line.

[00:28:39] Speaker 04:
There was no allegation that he pierced a corporate bail and that one was a wholly owned subsidiary of the other.

[00:28:44] Speaker 04:
There's no evidence of that in the court's decision.

[00:28:46] Speaker 04:
There is evidence of that.

[00:28:48] Speaker 03:
I don't know how you can say there's not evidence of that.

[00:28:51] Speaker 03:
He had personal property, he had law firm property, and he had the LLC property all in the same hanger that was paid for by different entities.

[00:28:59] Speaker 03:
There was no honoring of any corporate formalities here.

[00:29:06] Speaker 04:
There was no, there wasn't.

[00:29:08] Speaker 04:
They were bonafide corporate entities.

[00:29:09] Speaker 03:
There were, but there was no honoring of it.

[00:29:12] Speaker 04:
They had separate and distinct scopes of authority.

[00:29:15] Speaker 04:
And that was, that's an undisputed fact.

[00:29:17] Speaker 01:
Does it matter?

[00:29:19] Speaker 04:
I didn't hear that your honor.

[00:29:20] Speaker 04:
Does it matter?

[00:29:22] Speaker 04:
I believe it does.

[00:29:23] Speaker 04:
It shows that there was no custody, care or control, a Harris law firm prior to.

[00:29:27] Speaker 01:
But you don't contest it was physical control of the aircraft by employees of the firm.

[00:29:33] Speaker 04:
as part of the tort there was.

[00:29:34] Speaker 01:
Well, why do you care whether it's part of a tort or not part of a tort?

[00:29:37] Speaker 01:
I'm just looking at the policy that says control.

[00:29:39] Speaker 04:
Because the case law, the Ferguson case says, or the Essex case said they have prior access, they have prior authority, they have prior right of access to the equipment.

[00:29:52] Speaker 04:
The Global Sterilization case says they had prior

[00:29:55] Speaker 03:
Yeah, but those were different because they didn't have a key to the, if I'm remembering, this was the cleaning crew or am I thinking of a different case?

[00:30:04] Speaker 04:
That's the child, the child time care.

[00:30:06] Speaker 03:
They didn't have actually access.

[00:30:09] Speaker 03:
They had to go to the owner to get access.

[00:30:11] Speaker 03:
They didn't have keys to even lock up.

[00:30:13] Speaker 03:
That doesn't appear to be the case here.

[00:30:15] Speaker 04:
I would say that child time care is, is very close fashion on this case because they on their own without authority moved the furniture out.

[00:30:24] Speaker 04:
into the outside and then left it there.

[00:30:27] Speaker 04:
And that was when it rained later, when the rain fell on it, that's what damaged it.

[00:30:31] Speaker 04:
But the court there said, no, they didn't have exclusive control at the time of the damage.

[00:30:35] Speaker 03:
That's because they didn't have access to take it back in.

[00:30:39] Speaker 03:
They couldn't walk up.

[00:30:41] Speaker 04:
I don't believe that was the facts of the case.

[00:30:42] Speaker 04:
They left it out there.

[00:30:44] Speaker 04:
I would submit then, Your Honor, that again, if my employees commit a tort,

[00:30:52] Speaker 04:
and do damage to someone else's property, and this was someone else's property, it was owned by a different entity, then I can buy coverage for that, I can buy property damage liability insurance.

[00:31:06] Speaker 04:
Under the State Farm's reasoning is if I exercise any control over it, even in the course of that one tort, which you do all the time, every time you damage property, you exercise control over it, then the exclusion applies, and I've bought nothing.

[00:31:19] Speaker 04:
It's an absurd result, and I have no coverage under their rationing.

[00:31:23] Speaker 04:
Okay.

[00:31:25] Speaker 03:
Thank you.

[00:31:25] Speaker 03:
Thank you to both counsel for your arguments.

[00:31:27] Speaker 03:
The case is now submitted.