[00:00:00] Speaker 00:
Good morning, Your Honor.

[00:00:02] Speaker 00:
Cheryl Orr, Music Peeler and Garrett on behalf of Appellant Aspen Insurance UK Limited.

[00:00:07] Speaker 00:
Briefly, on the motion of transfer, we believe the court abused its discretion.

[00:00:12] Speaker 00:
It allowed the defendants to use the removal and the transfer statutes to form shop to get the case to California.

[00:00:21] Speaker 04:
Why is that properly for us?

[00:00:22] Speaker 04:
Because I don't think it was part of what was certified to us.

[00:00:25] Speaker 04:
So why is that?

[00:00:27] Speaker 04:
None of the parties address that, but I'm not sure we have jurisdiction to cover that.

[00:00:31] Speaker 00:
Well, we cited the All Writs Act as the authority of this court.

[00:00:35] Speaker 04:
Yeah, but I mean, the standard for it is basically a mandamus standard.

[00:00:38] Speaker 04:
So, are you think this meets the mandamus standard?

[00:00:40] Speaker 00:
I do believe it's a clear abuse of discretion.

[00:00:42] Speaker 04:
Why?

[00:00:44] Speaker 04:
The mandamus standard is not abuse of discretion, and so did you even argue that it meets the actual mandamus standard?

[00:00:50] Speaker 00:
You did argue that it was abuse of discretion, but did you argue... Oh, we did say it was a manifest abuse of discretion in our brief, Your Honor, I believe, in the standard of review section.

[00:00:59] Speaker 00:
We submit that the question that Van Dusen presents is that you have to show it's a more convenient forum.

[00:01:07] Speaker 00:
And under 1404A, you have to show good cause for more convenient for the witnesses and the parties.

[00:01:14] Speaker 00:
Well, they never met this standard at all.

[00:01:16] Speaker 00:
The court didn't hold them to this standard.

[00:01:19] Speaker 00:
At AER 18 to 19, the court said they didn't meet that standard, but the court moved on and said it was a neutral factor.

[00:01:27] Speaker 00:
The convenience, more convenience, is the requirement of the statute.

[00:01:32] Speaker 00:
If you don't show that the other

[00:01:34] Speaker 00:
Transfer reform is more convenient.

[00:01:36] Speaker 00:
You don't show good cause under 1404 a and I'll submit on that that that that is where the court did not follow Van Dusen and did not follow the Decker Cole case because the court said if you don't show more convenient forum if it just Shifts the cost doesn't eliminate the extra cost then you don't meet the standard right, but I think we're again jumping the gun here in arguing the merits of whether the

[00:02:03] Speaker 02:
standard is met because mandamus relief you have to show that extraordinary circumstances otherwise we we don't hear the appeal

[00:02:14] Speaker 00:
Well, Your Honor, I think that this was extraordinary in the sense that it was used exactly for the purpose of foreign shopping in violation of the Van Dusen statute to get the California Insurance Code statute to apply.

[00:02:25] Speaker 00:
And with that, I will submit on that question, and I'll move on to the statutory question, because it's clear that the district court erred in applying California Insurance Code 11580.9.

[00:02:35] Speaker 00:
11580.9 does not govern a dispute between a true primary insurer and an excess insurer.

[00:02:44] Speaker 00:
NIIC is a true primary insurer.

[00:02:47] Speaker 00:
It has first-dollar coverage, has an obligation to defend.

[00:02:51] Speaker 00:
When the tender was made by Weyerhaeuser to NIIC, that coverage under that primary policy attached upon the tender.

[00:03:00] Speaker 00:
In contrast,

[00:03:01] Speaker 00:
The Aspen policy does not attach until $10 million in loss has been paid by Weyerhaeuser or its available insurance.

[00:03:10] Speaker 00:
That didn't happen until the settlement of the Afaro case and when at that point Aspen had to come in and pay $7.5 million because another $10 million had already been paid by Weyerhaeuser and $1 million by NIIC under the primary policy.

[00:03:30] Speaker 00:
That's the distinction here.

[00:03:31] Speaker 00:
The court failed to recognize that 11.580.9 applies to disputes between primary auto insurance carriers that were relying upon other insurance clauses to make their policies incidental excess policies and not to a situation where you're dealing with a true primary and an excess insurance policy, another attachment point.

[00:03:55] Speaker 00:
They do not apply at the same risk level

[00:03:58] Speaker 00:
And they don't apply to the same risk.

[00:04:01] Speaker 00:
They're different risks.

[00:04:02] Speaker 00:
As I mentioned earlier, upon the tender of that AFARA lawsuit, the coverage under the NIIC primary policy attached immediately.

[00:04:11] Speaker 00:
The coverage under the wirehouse policy did not attach until the $10 million in loss had been paid under the terms of that policy.

[00:04:19] Speaker 00:
So this is a situation where there are not co-insurers.

[00:04:22] Speaker 00:
They do not apply to the same loss.

[00:04:24] Speaker 00:
And so the language of 11-5-80 does not apply.

[00:04:28] Speaker 00:
With respect to the insurance coverage dispute between Weyerhaeuser and Aspen and the defendants who were named in the original complaint, they were all excess insurers.

[00:04:40] Speaker 00:
So the issue was all excess insurers, how do we decide this coverage dispute?

[00:04:45] Speaker 00:
That's a matter of priority of law under California case law.

[00:04:49] Speaker 00:
11.580.9 does not apply to the dispute between excess insurers.

[00:04:56] Speaker 00:
And that's another distinction here.

[00:04:58] Speaker 00:
I think if you look at the cases that we cited, the Sequoia case, the Continental case, and the American Alternative case all stand for proposition that when you have the dispute between the primary carriers pointing fingers at one another saying, I don't have a primary obligation here.

[00:05:12] Speaker 00:
That's what 11.580.9 addresses.

[00:05:15] Speaker 00:
It does not address a situation where you have different insurers at different levels or

[00:05:20] Speaker 00:
all excess insurers talking about what their obligations are to one another or to their insured in a particular circumstance.

[00:05:28] Speaker 04:
Why does 11.580.9 exist?

[00:05:31] Speaker 04:
Why was that passed?

[00:05:33] Speaker 00:
It was passed in 1970 to deal with the situation where you have auto liability insurance policies.

[00:05:38] Speaker 00:
You might have a primary insurance policy over like the one type of driver and a primary insurance policy on another driver, or you might have a primary insurance policy over the cab.

[00:05:51] Speaker 00:
and a primary insurance policy over a rig, and you might have these competing primary insurance claims where they're saying, I don't have the primary obligation.

[00:06:00] Speaker 00:
So in that situation, if no primary carrier steps up, the insurer is not

[00:06:06] Speaker 00:
given a defense, it would have to sue the insurance companies to get a defense while all the insurance companies are pointing at each other and saying, not me, I'm primary because I have another other insurance clause that says I am excess to when there's other primary insurance.

[00:06:24] Speaker 00:
That's.

[00:06:24] Speaker 04:
I mean, so the way you just explained it, but when I, it's not particularly intuitive that that's what it was meant to address with all this different types of primary insurance covering

[00:06:34] Speaker 04:
Because what it picks as the primary, essentially, is between basically motor vehicle insurance and premises insurance.

[00:06:47] Speaker 04:
Is that what it does?

[00:06:48] Speaker 00:
Well, in subsection C, that's the choice.

[00:06:51] Speaker 00:
The other subsections deal with specific circumstances.

[00:06:56] Speaker 04:
So there are four different circumstances, A, B, C, and D. Maybe I should make clear my question was specifically about C, because that's what

[00:07:03] Speaker 04:
The district court concluded it applies here, but what was the purpose of the California legislature?

[00:07:11] Speaker 04:
Why did they pass that?

[00:07:13] Speaker 00:
Well, the intent was to deal with the premises of being a primary insurer versus an auto policy being a primary insurer.

[00:07:20] Speaker 03:
I'm looking at the statute language and it doesn't say primary.

[00:07:23] Speaker 03:
It just says we're two or more policies.

[00:07:25] Speaker 03:
So why do we read in primary policies?

[00:07:28] Speaker 00:
Well, if you look at the legislative history, which was presented looking at the text and if you look at the text hold on your honor, I will pull my statute up and This specific reference you see later in the law is the reference to Where two or more policies are applicable to the same loss and then you read down and it says I

[00:07:55] Speaker 00:
the one covering the premises, shall be excess over other valid and collectible insurance applicable.

[00:08:03] Speaker 02:
And then at the end it says... I'm reading the part, and here's where I would like you to focus on.

[00:08:10] Speaker 02:
When two or more policies are applicable to the same loss, it shall be conclusively presumed that the insurance afforded by the policy covering the motor vehicle shall not be primary.

[00:08:19] Speaker 02:
Right.

[00:08:20] Speaker 02:
What do we do with that language?

[00:08:22] Speaker 00:
because it talks about primary, okay?

[00:08:25] Speaker 00:
And excess policy does not have the same risk level as the primary.

[00:08:29] Speaker 00:
It talks about two policies applied to the same loss.

[00:08:32] Speaker 02:
And then later... The motor priority, right?

[00:08:34] Speaker 02:
The motor vehicle policy is not the primary policy.

[00:08:37] Speaker 00:
True.

[00:08:37] Speaker 00:
But, Your Honor, further down, it talks about they shall not be concurrent coverage.

[00:08:43] Speaker 04:
So on the text here, is your... Your position must be that the two or more policies applicable to the same loss that's somehow built into

[00:08:51] Speaker 04:
applicable to the same loss as some primary concept?

[00:08:54] Speaker 04:
Yes, because it talks about primary and if you look at the statutory... It just goes on later to say something won't be primary but here it just says two or more policies are applicable to the same loss.

[00:09:06] Speaker 00:
it applicable same loss seems pretty broad on its face like whether something was primary or Not it would still be applicable to that I think you have to also look at how this has been interpreted Not only when it was first enacted when it was first enacted the Ohio casualty case said it talked about co-insurers co-insurers applied to the same loss co-insurers

[00:09:31] Speaker 00:
applied to the same risk.

[00:09:34] Speaker 00:
Co-insurers have to have the same risk level.

[00:09:37] Speaker 00:
So at the time this was enacted, they were talking about concurrent.

[00:09:40] Speaker 00:
If you read further down in the section, they talk about the two or more policies shall not be construed as providing concurrent coverage.

[00:09:50] Speaker 00:
So when you read that text, you have to consider the whole context of the statute.

[00:09:56] Speaker 00:
And when it talks about concurrent coverage,

[00:09:59] Speaker 00:
then that would get you to the point to say that these policies that they were talking about in subsection C were concurrent coverages that provided the same primary, but because of this statute that makes one of those primary policies access to the other primary policy.

[00:10:18] Speaker 02:
All right.

[00:10:18] Speaker 02:
Thank you, Council.

[00:10:19] Speaker 02:
Let's give Mr. Moore a chance.

[00:10:29] Speaker 05:
Good morning.

[00:10:32] Speaker 05:
May it please the court.

[00:10:34] Speaker 05:
Michael Moore for Appellant Warehouser Company and Warehouser NR.

[00:10:39] Speaker 05:
I'm just going to pick up right where your honor left off.

[00:10:44] Speaker 05:
This is a statutory interpretation case.

[00:10:48] Speaker 05:
The issue before the court is purely legal.

[00:10:51] Speaker 05:
It's about what this statute was intended to mean.

[00:10:54] Speaker 05:
It is intended to address a situation

[00:10:59] Speaker 05:
as the court just pointed out, where you have concurrent policies covering the same loss.

[00:11:05] Speaker 05:
The language of the statute speaks in terms of policies.

[00:11:09] Speaker 05:
And so the error the trial court made, Judge Fring-Pong prospectively made, was applying the statute to a self-insured retention that was merely referenced in the Aspen policy.

[00:11:21] Speaker 05:
So whereas or while we're co-appellants, we stand in a pretty remarkably different position.

[00:11:28] Speaker 05:
The narrow question is to Warehouser is whether Warehouser's $10 million self-insured retention, a retention that was just merely referenced in the Aspen policy as an attachment point for the Aspen coverage, whether that self-insured retention constitutes an actual policy of insurance.

[00:11:48] Speaker 05:
And respectfully, I think the running through three cases just very quickly.

[00:11:53] Speaker 05:
If I understand correctly,

[00:11:56] Speaker 04:
I think in response to one of the, as to a case, the statute was later changed to make it so that if you're self-insured and if you're self-insured and fully self-insured and you go and you get a certificate that says you're self-insured, which I assume you need that certificate in order to operate because, you know, California law requires you to be insured, but you can self-insure, but you have to get the certificate.

[00:12:17] Speaker 04:
If you do that, then you, then you are,

[00:12:21] Speaker 04:
That if you're fully self-insured in that sense that Yeah, I think your honor is correct.

[00:12:26] Speaker 04:
That's a particular type of and you you you distinguish that could say we're not that But I don't understand why that wouldn't help And that was in response to some California cases that said

[00:12:40] Speaker 05:
that accepted your argument with regard to full self-insurance, not... Yeah, respectfully, this concept of full self-insurance versus something less than full self-insurance, that is a concept that does not exist in California.

[00:12:55] Speaker 04:
Well, it sure does.

[00:12:55] Speaker 04:
It sure does.

[00:12:56] Speaker 04:
Because, you know, I mean, I don't own a trucking company or a logging company.

[00:13:00] Speaker 04:
but I do have car insurance and we all do and they have deductible.

[00:13:05] Speaker 04:
So this self-insurance, this self-insured retention is basically a deductible.

[00:13:11] Speaker 04:
It's basically saying we'll pay the first 10 million and then our insurance picks up.

[00:13:17] Speaker 05:
California law actually draws a distinction between a deductible and an SIR and indicates that an SIR is actually outside of the policy while the deductible is within the policy and we'll get to that.

[00:13:28] Speaker 04:
I guess I just because you don't have very time trying to make sure

[00:13:31] Speaker 04:
It seems like if California has said, listen, if you're fully self-insured, you're not talking about something akin to a deductible, but we're talking about it, then we are going to treat you like you are, like you are, have an insurance policy and we're going to make you step in first under this statute.

[00:13:50] Speaker 05:
I would absolutely agree with that.

[00:13:52] Speaker 04:
And so why wouldn't sort of, that same sort of rationale mean that if you have essentially a deductible,

[00:13:58] Speaker 04:
we're going to make you pay your deductible.

[00:14:00] Speaker 04:
I don't understand the argument that that case law helps you.

[00:14:03] Speaker 05:
There are different situations.

[00:14:05] Speaker 05:
And I'll just use the concept that you defined.

[00:14:07] Speaker 05:
Full self-insurance versus something like a deductible.

[00:14:11] Speaker 05:
And again, we'll get to the dear case that really addresses this issue head on.

[00:14:17] Speaker 05:
The full self-insurance concept

[00:14:19] Speaker 05:
There is the US Metro that came out said eleven five eighty point nine doesn't apply to self insurers.

[00:14:27] Speaker 05:
The legislature recognized there was one type of self insurer that should apply to fully self insurers who have a fleet of vehicles.

[00:14:37] Speaker 05:
that go out and prove they have the economic, the financial resources to pay for damages from auto accidents without having self-insurance, and they make that submission to the California court, or excuse me, to California, and they receive this particular type of self-insurance certificate back.

[00:14:57] Speaker 05:
In that situation, they're not required to go out and secure auto insurance, and so they,

[00:15:03] Speaker 05:
they stand in the shoes of a normal auto insurer because they have complied with that statutory regime, right?

[00:15:11] Speaker 05:
So it's a different situation.

[00:15:12] Speaker 05:
So when you're saying fully self-insured, you're talking about a situation where someone has actually complied.

[00:15:18] Speaker 04:
So why do you think California responded to this case and amended it to have these people that I call fully self-insured, whatever, to put them, they will still be priority.

[00:15:30] Speaker 04:
They will be priority over

[00:15:32] Speaker 04:
over the premises.

[00:15:34] Speaker 05:
Because California law otherwise requires automobile owners to have auto insurance.

[00:15:42] Speaker 05:
There is a particular exception to that requirement.

[00:15:45] Speaker 04:
The reason I'm asking that is similar to the question I was asking your colleague who was arguing before you which is

[00:15:50] Speaker 04:
I'm trying to figure out, like, what the reason for C is.

[00:15:52] Speaker 04:
What is the reason for C?

[00:15:54] Speaker 05:
The reason is because those fully self-insured entities, a company that has 30 vehicles, is getting the benefit of not securing insurance coverage under a couple of years.

[00:16:06] Speaker 04:
So is your company, if you, yeah, no, I mean, the work around, around California having done what they did is to say, well, we just won't be, we'll have a $50 trillion

[00:16:17] Speaker 04:
self-insured retention and a $5 coverage above that.

[00:16:22] Speaker 04:
And that gets us to say, that's how we get around what California did.

[00:16:27] Speaker 05:
Respectfully, I disagree, Your Honor.

[00:16:29] Speaker 04:
It would be really cheap insurance.

[00:16:31] Speaker 04:
That would be a really cheap insurance.

[00:16:33] Speaker 03:
Well, to follow up on that point, I mean, the self-insured portion, isn't that, I mean, of course the insurance company is thinking about that when they're figuring out what the premium is going to be.

[00:16:45] Speaker 03:
So it's not entirely outside of the insurance policy.

[00:16:50] Speaker 05:
You know, respectfully, the case law in California has already addressed this issue.

[00:16:56] Speaker 05:
And we have the case that all the parties rely on.

[00:17:00] Speaker 05:
It's the Deere case.

[00:17:03] Speaker 05:
It is the case that the district court relied on outlining this concept of

[00:17:08] Speaker 05:
that because an SIR is referenced in the policy, it must be considered part of that policy despite what the statute said.

[00:17:17] Speaker 05:
And what that case actually indicates is that an SIR is not insurance.

[00:17:24] Speaker 05:
So the trial court, the district court relied on kind of cherry picking this one statement that an SIR is considered part of the policy but ignored the holding of the case

[00:17:37] Speaker 05:
in the holding of the case is quite frankly crystal clear.

[00:17:42] Speaker 05:
The Court of Appeals indicated that the term retention or retained limit refers to a specific sum or percentage of a loss that is the insured's initial responsibility that must be satisfied before there is any coverage.

[00:17:57] Speaker 05:
So the question is, is the SIR a policy of insurance?

[00:18:04] Speaker 05:
And the California Court of Appeals has already addressed that question and ruled conclusive.

[00:18:09] Speaker 04:
The question is, is the SIR part of the Aspen policy?

[00:18:16] Speaker 05:
Yeah.

[00:18:16] Speaker 05:
And so let's take that apart, right?

[00:18:18] Speaker 05:
To use your deductible analogy, you talked about you have a medical procedure, $500, right?

[00:18:25] Speaker 05:
Excuse me.

[00:18:25] Speaker 05:
Your medical procedure is $5,000.

[00:18:27] Speaker 05:
You have a deductible in your policy of $500, right?

[00:18:32] Speaker 05:
All the deductible is signifying is the attachment point for actual insurance.

[00:18:38] Speaker 05:
Before that attachment point, you don't have insurance coverage.

[00:18:43] Speaker 05:
And that's what DEAR specifically says, that before the SIR is satisfied, all that denotes, all that SIR denotes is the attachment point for actual insurance coverage.

[00:18:59] Speaker 05:
So the reference in the policy

[00:19:01] Speaker 05:
is not an indication that you have insurance coverage.

[00:19:05] Speaker 05:
It's a reference to the attachment point of the actual insurance coverage.

[00:19:10] Speaker 05:
And again, Deere specifically says that.

[00:19:13] Speaker 05:
So this was not an unsettled issue.

[00:19:16] Speaker 05:
It's just an issue that the trial court respectfully got wrong.

[00:19:20] Speaker 03:
Can I switch gears here?

[00:19:21] Speaker 03:
I want to talk about the conflict of law.

[00:19:24] Speaker 03:
You haven't argued that issue.

[00:19:25] Speaker 03:
I assume you're still pursuing it.

[00:19:27] Speaker 05:
Yes.

[00:19:28] Speaker 05:
And I guess there's one point.

[00:19:31] Speaker 03:
I can boil it down for you.

[00:19:33] Speaker 03:
I'm not sure why the district court was focused at all on the underlying injury and accident.

[00:19:38] Speaker 03:
It seems to me that this is an insurance dispute.

[00:19:41] Speaker 03:
And so we care about the relationship that the forums have to the insurance dispute.

[00:19:46] Speaker 03:
which has nothing to do with the underlying accident.

[00:19:48] Speaker 03:
Am I wrong about that?

[00:19:49] Speaker 05:
No, you're not.

[00:19:51] Speaker 05:
We cited the MKB case, which is a district court opinion from Judge Robart in Washington, lays out the analysis in an insurance coverage dispute exactly as Your Honor just described.

[00:20:02] Speaker 03:
So if we set aside the underlying accident, what are Washington's contacts to this insurance dispute?

[00:20:09] Speaker 03:
Because none of these insurers are in Washington.

[00:20:12] Speaker 03:
The primary insured is not in Washington.

[00:20:16] Speaker 05:
So what is the Washington connection?

[00:20:22] Speaker 05:
Warehouser is the additional insured.

[00:20:24] Speaker 05:
And we know that you evaluate an additional insured's right to coverage independently from the primary insured.

[00:20:30] Speaker 05:
So you're always correct.

[00:20:32] Speaker 05:
When you're looking at extra contractual bad faith claims, you're looking at the contacts between an insurer on one hand and the insured or potential insured on the other.

[00:20:40] Speaker 05:
So you have a warehouser in Washington.

[00:20:43] Speaker 05:
We have the certificate of insurance being delivered in Washington.

[00:20:47] Speaker 05:
We have what we allege is bad faith conduct originating from states other than Washington but not originating from California.

[00:20:56] Speaker 05:
We have those what we consider to be bad faith.

[00:20:58] Speaker 05:
Was there a certificate of insurance delivered?

[00:21:02] Speaker 04:
I'm trying to remember because, you know, there's all these stack of insurance for the,

[00:21:06] Speaker 04:
Was it just the first level that provided a certificate of insurance?

[00:21:10] Speaker 04:
I think it was the primary, but to be honest, Your Honor, I don't recall it.

[00:21:13] Speaker 04:
But I mean, that would seem to matter here, especially if you're trying to rope in the other ones as far as contacts.

[00:21:19] Speaker 04:
Their argument is we didn't even know about this thing existing.

[00:21:23] Speaker 05:
Well, the claim had been submitted to them all.

[00:21:26] Speaker 04:
Obviously, if they had issued a certificate of insurance, they would, but I don't know.

[00:21:30] Speaker 05:
The conduct that we're examining for purposes of the bad faith claim

[00:21:35] Speaker 05:
is the communications between the insurers and warehouses.

[00:21:39] Speaker 05:
Warehouses in Washington, the insurers are outside of California communicating, again, what we consider to be debt.

[00:21:46] Speaker 02:
Do we have to get to that if we can tell from the insurance contract that the parties chose California law?

[00:21:52] Speaker 02:
You actually don't need to get to the issue at all if you reverse on the priority of coverage statute because the only conflict... On the choice of law question, under the restatement section 187, if we can tell from the contract that the parties intended to apply California law, do we need to figure out where the primary contacts are?

[00:22:13] Speaker 05:
No, but again, I think the MKB case makes it clear that all of the contacts here

[00:22:19] Speaker 05:
are either neutral or favor Washington, because we look to the nature of the bad faith claims and the conduct that the insurers delivered to warehouse in Washington when assessing that claim.

[00:22:31] Speaker 05:
It doesn't matter about the underlying lawsuit.

[00:22:34] Speaker 05:
It doesn't matter about where the contract claims originate from.

[00:22:38] Speaker 05:
We just look at the extracontractual claims themselves

[00:22:42] Speaker 05:
as your honor noted.

[00:22:43] Speaker 02:
Thank you.

[00:22:43] Speaker 02:
You're a little over time, and you didn't tell me, but I think you told our courtroom deputy you wanted to save a couple of minutes, so I'll put a couple of minutes back on the clock.

[00:22:51] Speaker 02:
Thank you.

[00:23:02] Speaker 01:
Thank you.

[00:23:03] Speaker 01:
Sam Colito.

[00:23:04] Speaker 01:
I represent First Mercury Insurance Company and the North River Insurance Company.

[00:23:09] Speaker 04:
Before I get started I like to remind me can where you are in the stack of these things.

[00:23:13] Speaker 01:
We are the top two levels of excess coverage if that's what you're referring to Top the top two levels of excess coverage.

[00:23:24] Speaker 01:
I did not have a primary policy or the national insurance No, I am first mercury insurance company and the North River insurance company.

[00:23:32] Speaker ?:
I

[00:23:33] Speaker 01:
This takes me to my next point.

[00:23:35] Speaker 01:
I'm going to give a little roadmap.

[00:23:37] Speaker 01:
We didn't want to come up here and repeat the same arguments over and over again, so we've divided the issues up among us.

[00:23:42] Speaker 01:
I'm going to start and address the choice of law for the contractual issues.

[00:23:47] Speaker 01:
My colleague Mr. Harvey is going to address the applicability of 11-580, and my colleague Mr. Gergen is going to address the choice of law issues for extra contractual claims and any transfer issues.

[00:24:00] Speaker 04:
What was the middle fellow addressing?

[00:24:02] Speaker 04:
I didn't hear.

[00:24:02] Speaker 01:
Mr. Harvey is addressing the applicability of 11-580 and coverage under the policies.

[00:24:08] Speaker 01:
So I'm here for choice of law on the contract issue.

[00:24:10] Speaker 02:
Choice of law, okay.

[00:24:11] Speaker 02:
So that leads me naturally to ask you to pick up where I left off with Mr. Moore on the, let's see, your first mercury in North River, fourth and fifth level, but on choice of law, are you just relying on the policy with national then?

[00:24:29] Speaker 01:
It's the primary policy.

[00:24:31] Speaker 02:
Are you making the argument that the primary policy contemplates the application of California law?

[00:24:39] Speaker 02:
It's not express choice of law, but there are many, many provisions that references arguably contemplating that California law is the only law that the parties intended.

[00:24:49] Speaker 01:
The policies tend to sort of follow form down, right?

[00:24:53] Speaker 01:
They follow form on down.

[00:24:55] Speaker 01:
My North River policy follows the... Right.

[00:24:58] Speaker 02:
So in looking at the national policy, the primary policy, why don't you just go ahead and give me your argument on choice of law.

[00:25:05] Speaker 01:
Sure.

[00:25:06] Speaker 01:
Well, I'd like to focus on the center of the relationship for the contractual issues, which I think gets to your question, and that the center of the relationship for the contractual issues is California.

[00:25:17] Speaker 01:
In fact, the most significant contacts of California are on the law.

[00:25:21] Speaker 03:
I want to note this down because I'm not sure I'm fully understanding the nature of or what Judge Wynn is getting at.

[00:25:27] Speaker 03:
So, your argument for why California law should apply is that the parties chose California law to apply or that the most significant relationship test tells us?

[00:25:36] Speaker 01:
The most significant relationship test.

[00:25:37] Speaker 02:
I thought that you would have argued that under 187 the parties had already contemplated the application of California laws.

[00:25:46] Speaker 02:
We don't even get to the restatement 188 where you're trying to analyze where the significant contacts are.

[00:25:52] Speaker 01:
I think your question just sort of solidified for me.

[00:25:54] Speaker 01:
There are California specific endorsements.

[00:25:57] Speaker 01:
The national interstate policy that certainly indicate that this was a California policy and an expectation that California law would apply But if we do have one of the factors right or are you relying?

[00:26:06] Speaker 01:
I mean Judge Wynn is referencing a presumption Correct correct, and that's that's under we've really only addressed the most significant relationship test out but given the contacts with California versus the contacts with Washington and

[00:26:21] Speaker 01:
The relationship with California being more significant is fairly clear.

[00:26:25] Speaker 01:
These policies were issued to Gardner in California using California brokers.

[00:26:30] Speaker 01:
This is sort of the macro factors, right?

[00:26:33] Speaker 01:
Not claim specific.

[00:26:34] Speaker 03:
So when the policies were issued by your clients, your clients knew that you were going to be down in line from first interstate or first net, I can't remember what it's called, but the primary access policy, right?

[00:26:49] Speaker 03:
You knew that you were downstream from that policy?

[00:26:51] Speaker 01:
Correct.

[00:26:52] Speaker 03:
And did you know, did you have access to that policy to know what its terms were?

[00:26:58] Speaker 01:
Yes.

[00:26:59] Speaker 01:
If not immediately, yes, because they're scheduled on the policy, yes.

[00:27:03] Speaker 03:
And that policy specifically required WareHouser to be an additional named insured.

[00:27:07] Speaker 01:
It contained a blanket additional insured endorsement.

[00:27:09] Speaker 01:
It didn't name WareHouser.

[00:27:10] Speaker 03:
I thought there was a page in there that specifically named WareHouser.

[00:27:15] Speaker 01:
My recollection is that it was blanket.

[00:27:16] Speaker 01:
But if it did specifically name WareHouser,

[00:27:19] Speaker 01:
that, you know, it may have.

[00:27:21] Speaker 03:
So you knew that there was an additional named insured involved?

[00:27:24] Speaker 03:
You knew that the first line excess policy was saying that we're going to be excess unless there's a contract out there that says we have to be primary?

[00:27:35] Speaker 04:
Yeah?

[00:27:36] Speaker 03:
Correct.

[00:27:36] Speaker 03:
Okay.

[00:27:37] Speaker 04:
Yeah, I thought maybe there was a consistent what we said that there was a certificate of insurance or, you know, naming them as an additional insured sent to them.

[00:27:45] Speaker 04:
Opposed to them being named as an additional insured in the policy and I don't would that make a difference for for you all having notice about specific notice about why wire house or in the sense that like I don't know if you would be copied on that yeah on that certificate sent but in theory you would have access to the I Don't know if that certificate was sent.

[00:28:04] Speaker 01:
I don't know if there was one sent for the I

[00:28:07] Speaker 01:
the downstream access policies.

[00:28:08] Speaker 04:
Well, I didn't think there was one cent for you all.

[00:28:10] Speaker 04:
I thought there was one cent for the first level.

[00:28:12] Speaker 01:
And I don't know if we had access to that prior to the claim or after.

[00:28:16] Speaker 04:
But your understanding is that the national policy, the first level national policy, named, sort of had this language that named people as additional insured broadly but didn't necessarily name specifically who they each were.

[00:28:29] Speaker 04:
Correct.

[00:28:29] Speaker 04:
Which, as I understand, so you couldn't look at that and go, well, this person's name, they're in,

[00:28:35] Speaker 04:
you know, Colorado, so I guess we could expect that Colorado would apply.

[00:28:38] Speaker 01:
This person's name, they're in... Well, and providing coverage to an additional insurer located in a different state doesn't change the fact that it's a contract issued in California.

[00:28:50] Speaker 01:
Okay.

[00:28:50] Speaker 01:
It's a California contract.

[00:28:52] Speaker 01:
They use California brokers.

[00:28:54] Speaker 01:
And then, from a specific view,

[00:28:57] Speaker 01:
We were asked to provide, there's two benefits under liability policy, defense and indemnity.

[00:29:02] Speaker 04:
We were asked to... I know you're out of time, but... Can I say one more thing?

[00:29:06] Speaker 04:
Of course.

[00:29:06] Speaker 04:
So, in theory, if you did look at, you know, if they were named, and there's names like five different companies, and these five different companies are all in different states, then you could end up in a, and that mattered, as opposed to

[00:29:22] Speaker 04:
California where the company that you're actually giving the gardener you know that you're actually giving then you would end up almost like it'd be a venue closet pick venues in different states right because you could end up like you know if it turned out that the additional insured had a problem and you ended up and they were in Colorado you end up in Colorado and then you and

[00:29:41] Speaker 04:
Is there any case law you know about that talks about that?

[00:29:44] Speaker 01:
I don't, but I do see a real problem that could arise from that approach.

[00:29:48] Speaker 01:
This claim, we didn't have a claim from a named insured in this case.

[00:29:51] Speaker 01:
Gardner wasn't a party in the underlying action, just a warehouser, just an AI.

[00:29:55] Speaker 01:
But often you do have claims for the same loss under the same policies from a named insured and an additional insured.

[00:30:02] Speaker 01:
If we were to follow that approach and apply the law, you know, okay, you are the AI, you're in Colorado, you're the NI, you're in California, we've got to adjust your claim under California law, your claim under Colorado law, well, those states may disagree on pertinent and relevant coverage issues.

[00:30:18] Speaker 01:
And so we might not be able to administer equal insurance, give equal consideration to both insureds, if we've got to apply sort of whatever state they're located in, that's the law they get.

[00:30:30] Speaker 01:
You know, in this case, California and Washington, for example, Washington has no right to independent counsel.

[00:30:34] Speaker 01:
California has cumus counsel.

[00:30:35] Speaker 01:
That could easily be an issue where that Washington entity goes, hey, why don't I get to pick my own attorney?

[00:30:42] Speaker 01:
Well, because the policy says you are a Washington entity, and therefore you're subject to Washington law.

[00:30:47] Speaker 01:
It becomes a very complicated administration of insurance, and I'm sorry for going over.

[00:31:00] Speaker 06:
Good morning, Your Honors.

[00:31:01] Speaker 06:
Matt Harvey for Appley National Interstate.

[00:31:06] Speaker 06:
We issued the primary policy and the second-layer excess policy.

[00:31:10] Speaker 06:
I'm here to talk about 11.580.9, but I do want to just talk about one minor point that came up during my colleague Mr. Colito's discussion with the Court.

[00:31:20] Speaker 06:
That's the question of whether the National Interstate primary policy, named Wehrhauser specifically,

[00:31:26] Speaker 06:
It did not.

[00:31:26] Speaker 06:
It had what we call a blanket endorsement that says, if you named insured gardener trucking, agree to make somebody else an additional insured under this policy, we're okay with that, but there's a cap on the amount of insurance they get.

[00:31:38] Speaker 06:
And there's all sorts of limitations.

[00:31:41] Speaker 06:
The certificate... Was there some certificate sent?

[00:31:43] Speaker 06:
Exactly.

[00:31:44] Speaker 06:
There was a certificate of liability insurance.

[00:31:46] Speaker 06:
It's ER-1228, not issued by my client.

[00:31:50] Speaker 06:
This is issued by Gardner Trucking, the name insured's California insurance broker.

[00:31:56] Speaker 06:
We did not issue this.

[00:31:57] Speaker 03:
But who did it go to?

[00:31:58] Speaker 06:
It went to Winnhauser.

[00:32:00] Speaker 03:
So it didn't come to you.

[00:32:02] Speaker 06:
I'm sorry.

[00:32:03] Speaker 03:
I'm sorry.

[00:32:03] Speaker 04:
It didn't come to the the downstream excess insurers as they were deciding No No, I I don't even have any evidence that this came to my client national interstate it only went from the broker to warehouse anyway that happens I assume is that the Gardner reaches out to the broker and says hey We've got this additional insured and they want a certificate and then the broker fires one off to him correct and under the terms those those general terms that you were just referencing and

[00:32:31] Speaker 04:
in your policy.

[00:32:32] Speaker 06:
Correct.

[00:32:33] Speaker 06:
And certificates, it's probably beyond today's discussion, but certificates of liability insurance, they come on these specialized accord forms and there's all sorts of language that says, this isn't the insurance, this is just somebody saying that the policy exists, you have to go read the terms, et cetera, et cetera.

[00:32:46] Speaker 04:
You heard me asking the other council about what, why did California enact this 11580.9C?

[00:32:56] Speaker 04:
I guess I should be clear about C, why?

[00:33:00] Speaker 06:
So lawsuits like this didn't exist.

[00:33:02] Speaker 06:
I mean literally, so lawsuits like this where parties are fighting over what's the impact of the language and the different policies, who's going to be primary, who's going to be excess, the courts were sick with that.

[00:33:12] Speaker 04:
Well I guess I'm asking a more specific question in the sense that like I don't know

[00:33:16] Speaker 04:
that the legislature envision this, even thought about probably this idea of the self-insured retentions and all of those types.

[00:33:26] Speaker 04:
But I'm trying to figure out the more basic question of why the legislature said premises will govern over the vehicle insurance policies.

[00:33:37] Speaker 04:
I have a reason in my head, and I'm wanting you to tell me that I'm right.

[00:33:41] Speaker 04:
I'm not going to tell you what it is.

[00:33:42] Speaker 06:
I would love to do that, your honor.

[00:33:45] Speaker 06:
I suspect I have the same reason in my head.

[00:33:46] Speaker 06:
I don't have an express answer for you from the case law, but what I can tell you is if your honor surveyed the case law about loading and unloading accidents, what you will find statistically is that it is almost always the premises owner's employees doing something negligent that harms the trucking company's employees.

[00:34:05] Speaker 04:
Yeah, that's what I was thinking was that, so something I was thinking that

[00:34:08] Speaker 04:
If you're an insurance company, I'm guessing the insurance companies went to the legislature and said, listen, as over the road insurance people, we don't have any idea where these trucks go, et cetera.

[00:34:17] Speaker 04:
It's a lot easier for the insurance that is insuring a premises to know what kind of stuff is going on at that premises and therefore address that risk more.

[00:34:25] Speaker 04:
And that's probably, and so the reason I'm getting at that is that if that is the basis for this distinction,

[00:34:31] Speaker 04:
then that goes to whether or not self-insured retention should be somehow exempted from it, because self-insured, you still want to have the liability placed where somebody is best able to address it and reduce it, which is the premises.

[00:34:48] Speaker 04:
But is there any basis for that, or is it just in my head?

[00:34:52] Speaker 06:
I think statistically it bears out there is no express explanation of that's why the rule is what the rule is, but I think that is the most logical explanation.

[00:35:00] Speaker 06:
And I can give you two reasons why this statute applies to self-insured retentions, or I should say policies with self-insured retentions.

[00:35:11] Speaker 06:
One is just the language.

[00:35:13] Speaker 06:
So California law governs.

[00:35:15] Speaker 06:
This is a loading and unloading accident.

[00:35:17] Speaker 06:
Warehouse is the premises owner.

[00:35:20] Speaker 06:
Our named insured, our clients named insured, is the trucking company to own the motor vehicle.

[00:35:25] Speaker 06:
Under 11580.9C, that means that

[00:35:29] Speaker 06:
Gardner's insurance is all excess to warehouses insurance.

[00:35:35] Speaker 06:
And that's simply what the statute says.

[00:35:37] Speaker 06:
There is no limitation to primary policies or any particular type of policy.

[00:35:44] Speaker 06:
The premises owner's policies are primary.

[00:35:47] Speaker 06:
The vehicle owner's policies are excess.

[00:35:51] Speaker 06:
And the only argument that's really been raised here is that warehouses says, well, we can sever

[00:35:59] Speaker 06:
the SIR out from our ASPEN policy.

[00:36:01] Speaker 06:
We can call it a gap in coverage, and then we can demand that the policies the statute says are access should drop down and fill that gap.

[00:36:11] Speaker 06:
And although there's no 11.580.9C case that says that, there are California Court of Appeal and Ninth Circuit cases that say that principle is absolutely wrong.

[00:36:23] Speaker 06:
So PIDEA and Pacific Coast Building Products

[00:36:28] Speaker 06:
They both rejected that exact same argument.

[00:36:32] Speaker 06:
And I'm usually loathe to read from cases in the argument, but the Padilla case takes this argument head on.

[00:36:41] Speaker 06:
So in that case, it was a construction company

[00:36:45] Speaker 06:
It had a $25,000 SIR under its primary policy, under the relevant primary policy, and it was demanding that its excess insurer drop down and fill that gap because it hadn't satisfied the SIR.

[00:36:59] Speaker 06:
So what the court said is no case yet held that an excess insurer with an other insurer clause that does not include a specific reference to self-insurance has no duty to drop down until the self-insured retention

[00:37:13] Speaker 06:
and any primary insurance overlying that self-insured retention is exhausted.

[00:37:18] Speaker 06:
From the viewpoint of the insured, the Stage 4, that was the relevant primary policy, the Stage 4 primary insurer self-insured retention clause did not provide for a first dollar defense obligation.

[00:37:29] Speaker 06:
That is, the Stage 4 insurer was not responsible for anything until the $25,000 retention was reached.

[00:37:36] Speaker 06:
In other words, and this mirrors Warehouse's argument exactly, for the first $25,000, the insured really had no insurance from the Stage 4 primary insurer.

[00:37:48] Speaker 06:
Since the insured had no other insurance for the first $25,000 of the claim,

[00:37:53] Speaker 06:
The stage one umbrella insurers other insurance clause could not operate to make it excess of the stage four primary insurer at least as to that amount.

[00:38:01] Speaker 06:
It was obligated to defend dollar one there being after all no other insurance to pay dollars through 25,000.

[00:38:08] Speaker 06:
The flaw in this logic, and this is the holding, the flaw in this logic is the assumption that the self insured retention can be meaningfully separated from the primary policy or primary insurer's policy of which it is a creature

[00:38:22] Speaker 06:
In classic insurance law terms, treating the self-insured retention as a separate entity from the Stage 4 primary insurance policy defeats the reasonable expectations of all the parties, including the insured.

[00:38:33] Speaker 06:
It obliterates the distinction between primary and excess insurance.

[00:38:38] Speaker 06:
So that language is repeated by the Ninth Circuit.

[00:38:41] Speaker 06:
in the Pacific Coast Building Products case, it is dead on for warehouses argument.

[00:38:47] Speaker 06:
It rejects it completely.

[00:38:48] Speaker 06:
And it answers the statutory question here.

[00:38:51] Speaker 06:
I just wanted to touch.

[00:38:52] Speaker 03:
I mean.

[00:38:52] Speaker 06:
Sure.

[00:38:54] Speaker 03:
I guess the pushback I would have on that is where the person, the primary excess policy says we're going to be primary, not excess if a contract requires us.

[00:39:06] Speaker 03:
So the party's reasonable expectations is a little muddled here because,

[00:39:10] Speaker 03:
It wasn't clear at the outset that at least the first person in line was always going to be excess.

[00:39:16] Speaker 06:
Well, Your Honor, for different kinds of losses, the result might be different.

[00:39:20] Speaker 06:
But for a loading and unloading accident that happens at a premises in California.

[00:39:23] Speaker 03:
But that's because of the operation of the statute, not the party's expectations.

[00:39:27] Speaker 06:
Well, this statute has been on the books, Your Honor, for 55 years.

[00:39:30] Speaker 06:
And I think it's reasonable to think everybody's expectations should have been consistent with what the statement, or sorry, the language of the statute says.

[00:39:38] Speaker 06:
And I'd also just point out, ever so briefly,

[00:39:40] Speaker 06:
The 11580.9 has actually been amended several times.

[00:39:46] Speaker 06:
And the only theme one can take away or lesson one can take away from the statutory or the legislative history is that it shows that any time

[00:39:56] Speaker 06:
A court has acknowledged or recognized some loophole in 11.580.9.

[00:40:01] Speaker 06:
The legislature has immediately acted to close it.

[00:40:04] Speaker 06:
So in 79, the Metro case came out.

[00:40:07] Speaker 06:
It was certificates of self-insurance.

[00:40:09] Speaker 06:
A year later, the legislature amended the statute, said those count as insurance.

[00:40:14] Speaker 06:
In 1982- Thank you, counsel.

[00:40:15] Speaker 06:
Oh, sure.

[00:40:16] Speaker 06:
Thank you.

[00:40:18] Speaker 02:
Let's hear from Mr. Gargan.

[00:40:27] Speaker 07:
Good morning, Your Honors.

[00:40:28] Speaker 07:
Eric Gergen on behalf of Lexington Insurance Company and AIG claims.

[00:40:33] Speaker 07:
And where we fit into the mix is we're the first level excess auto insurance carrier.

[00:40:39] Speaker 07:
Just a couple quick points on, not to go back to it too long, but on venue.

[00:40:46] Speaker 07:
There was Aspen and Warehouser did not seek mandamus relief.

[00:40:51] Speaker 07:
There was no mention of manifest abuse of discretion in their brief.

[00:40:57] Speaker 07:
Aspen was the only one that briefed the issue.

[00:40:59] Speaker 07:
And on page 33, they say that an order granting a motion to transfer under section 1404A is generally reviewed for abuse of discretion.

[00:41:11] Speaker 07:
The Washington District Court correctly applied this court's nine part Jones test and concluding that on balance, transfer was warranted.

[00:41:24] Speaker 07:
Moving on to the meat of the choice of law question on the extra contractual tort claims.

[00:41:33] Speaker 07:
The most important factor really in this as for the tort claims is the fourth factor.

[00:41:41] Speaker 07:
And that deals with the center of the party's relationship.

[00:41:44] Speaker 07:
And as the district court found, that strongly favors application of California law in this case.

[00:41:52] Speaker 07:
As my colleagues mentioned, Gardner Trucking, the entity that purchased the excess auto policies, is a California company, undisputed, who purchased that insurance through a California broker and purchased that insurance, of course, from California.

[00:42:12] Speaker 07:
And there was a question regarding the location of the underlying litigation and whether that's a relevant factor.

[00:42:20] Speaker 07:
Some cases, some district court cases hold that it is, others say that it is not.

[00:42:27] Speaker 07:
The polygon case that's out of the Western District of Washington and the Costco case say that it is an important factor for the court to consider in evaluating

[00:42:42] Speaker 02:
The contacts to the relative question, I guess I'm confusing everybody because in my view, if we can tell that the parties intended for California law to apply, I don't think we consider any other factor.

[00:42:55] Speaker 07:
Your honor, that's correct as to the contract claim.

[00:42:58] Speaker 02:
The contract claim, yeah.

[00:43:00] Speaker 07:
Yes, the extra contractual tort claims that warehouse are asserted.

[00:43:05] Speaker 02:
And did you raise that argument, that looking at the Gardner, the national insurance policy contract, it was clear that California law was supposed to apply?

[00:43:16] Speaker 07:
On the contract issue?

[00:43:17] Speaker 07:
On the contract claim.

[00:43:18] Speaker 07:
I believe so, but with respect to the tort claims, no.

[00:43:23] Speaker 07:
But that factor is still relevant.

[00:43:26] Speaker 07:
in looking at the parties, the center of the party's relationship.

[00:43:31] Speaker 07:
And in this court's decision in Lang, the court said that bad faith insurance claims are grounded.

[00:43:40] Speaker 07:
And you first look to the contract.

[00:43:42] Speaker 07:
It's grounded in the contract.

[00:43:44] Speaker 02:
Right.

[00:43:45] Speaker 02:
So that's what I'm contemplating, is that on the contract claim, clearly, if the party's intended for California

[00:43:54] Speaker 02:
law to apply that sort of ends the inquiry and as to the tort claim and the remaining claims, that sort of drives the analysis of where the court should really or which law the court should apply, right?

[00:44:06] Speaker 07:
That's right, Your Honor.

[00:44:07] Speaker 03:
It does drive the analysis, but it... Why is that right?

[00:44:10] Speaker 03:
Why does it drive the analysis?

[00:44:11] Speaker 03:
The factors are different for tort and contracts.

[00:44:13] Speaker 03:
Absolutely your honor, but the fourth factor that the district court found was the most significant in this case and it's I'm looking at the factors the place of injury well in a bad faith claim the place of injury is where the person who didn't get paid is so that's Washington Place where the conduct causing the injury occurred I don't I assume that's where all these insurance companies are located where they made their decision to not cover so that's not California it's

[00:44:36] Speaker 03:
New Jersey, and all the other places.

[00:44:39] Speaker 03:
The residence and place of incorporation, place of business of the parties.

[00:44:42] Speaker 03:
Well, we've got Warehouser in Washington, and we've got Gardner, who's not a party in California.

[00:44:47] Speaker 03:
We have the insurance companies not in either Washington or California.

[00:44:50] Speaker 03:
Not helpful.

[00:44:51] Speaker 03:
Then the last one, where the relationship, if any, between the parties is centered.

[00:44:55] Speaker 03:
So who's the parties?

[00:44:57] Speaker 03:
When we're talking about the tort claim, aren't we talking about Warehousers and its relationship with all these insurance companies, not necessarily Gardner?

[00:45:06] Speaker 07:
Well, it's Gardner.

[00:45:09] Speaker 07:
It all relates to Gardner.

[00:45:11] Speaker 03:
And the accident occurred in... I thought the law was when you had an additional insured, that additional insured is the party to the contract.

[00:45:19] Speaker 03:
And that party is not Gardner, it's Warehouser here.

[00:45:22] Speaker 07:
But Your Honor, it doesn't create a whole new body of law as to what applies to that contract.

[00:45:30] Speaker 07:
The contract... Look to the contract.

[00:45:33] Speaker 07:
That's right.

[00:45:34] Speaker 07:
Look to the contract.

[00:45:35] Speaker 07:
That's California law.

[00:45:37] Speaker 07:
And for consistency purposes here, California law applies to the contract and should also apply to the tort claims.

[00:45:46] Speaker 03:
I guess that's the point that I don't, I mean, that makes perfect common sense.

[00:45:51] Speaker 03:
Yes.

[00:45:51] Speaker 03:
But if that was true, why would we have two different factors?

[00:45:55] Speaker 07:
Your Honor, there are different factors, but there is some overlap.

[00:45:59] Speaker 07:
the center where the party's relationship is.

[00:46:02] Speaker 07:
And California really is the glue that ties all of these parties together.

[00:46:08] Speaker 07:
And the insured risk was in California.

[00:46:13] Speaker 07:
And also to address your honor's point about the location of the insured being the place of injury.

[00:46:21] Speaker 07:
That is typically the case.

[00:46:23] Speaker 07:
But the district court said in this case, this isn't the typical injury being sought.

[00:46:29] Speaker 07:
that Weyerhaeuser alleges is that it paid more to settle a claim than it otherwise would have paid.

[00:46:36] Speaker 07:
And so that's not your typical injury.

[00:46:39] Speaker 07:
And therefore, the district court correctly held that that takes it outside the scope of the place of injury is where the insured is located.

[00:46:50] Speaker 02:
All right.

[00:46:50] Speaker 02:
Thank you very much.

[00:46:51] Speaker 07:
Thank you, Your Honors.

[00:46:52] Speaker 02:
I did promise to give Mr. Moore a couple of minutes.

[00:47:02] Speaker 05:
Just to pick up where you left off, Judge Forrest, again, your analysis is completely correct that we examine the tort claims and the context completely independent of the underlying injury claim and of the breach of contract claim.

[00:47:18] Speaker 05:
That's what the restatement says.

[00:47:20] Speaker 03:
So then what's your take on the last factor, which now I have the place where the relationship of the parties is centered?

[00:47:27] Speaker 03:
What are we looking at there?

[00:47:29] Speaker 05:
You're looking at the relationship of the parties, but relative to the claim for insurance coverage, are the insurers acting in good faith when they're sending correspondence to Warehouser in Washington?

[00:47:40] Speaker 05:
And this analysis is laid out

[00:47:42] Speaker 05:
perfectly by Judge Robart in the MKB case.

[00:47:45] Speaker 05:
He says we do not look where the underlying injury occurred.

[00:47:49] Speaker 05:
We do not look even at coverage under the insurance policy, where it was delivered.

[00:47:53] Speaker 05:
We look at the conduct that's at issue on a bad faith claim, which is the correspondence from the insurers to the potential insured and where those contacts were occurring.

[00:48:04] Speaker 05:
And so it's the nature, and I admit it's somewhat fuzzy, the nature of a bad faith claim

[00:48:11] Speaker 05:
is centered on the conduct and the communications between those parties.

[00:48:16] Speaker 05:
It has nothing to do with the underlying injury or where that occurred.

[00:48:19] Speaker 05:
And again, MKB lays this out perfectly.

[00:48:24] Speaker 02:
I want to just quickly address a few- What's the standard review on the court's choice of law decision?

[00:48:30] Speaker 05:
It's de novo.

[00:48:33] Speaker 05:
I want to quickly address my colleague Mr. Harvey's comments about PDEA and Your Honor's question about what is the statute intended to address.

[00:48:42] Speaker 05:
The statute by its very terms is intended to only address the situation when you have concurrent policies, two policies covering the same laws.

[00:48:53] Speaker 05:
And if you look at the legislative history that's laid out in the briefing,

[00:48:57] Speaker 05:
The issue was you had this kind of who's on first situation where you had primary policies covering the same loss.

[00:49:04] Speaker 05:
And the insurers would say, it's not us.

[00:49:06] Speaker 05:
There's another insurance clause.

[00:49:08] Speaker 05:
And so litigation would ensue.

[00:49:09] Speaker 05:
And so the statute was designed to set a priority in that situation where you have competing policies of coverage.

[00:49:16] Speaker 05:
And so the question, the language of the statute speaks only in terms of policies of insurance.

[00:49:23] Speaker 05:
And so the question is, is an SIR

[00:49:26] Speaker 05:
the mere reference to an attachment point in the policy.

[00:49:30] Speaker 05:
The point at which the policy actually provides coverage, just that reference to an SIR, is that SIR itself, that uncovered amount, is that actual insurance coverage.

[00:49:42] Speaker 05:
And again, the dear case from the Court of Appeals, 2019, addressed that very issue

[00:49:48] Speaker 05:
and said conclusively that it was not.

[00:49:51] Speaker 05:
The Padilla case referenced by Mr. Harvey that came years earlier talks about exhaustion.

[00:49:58] Speaker 05:
It's an exhaustion case.

[00:50:00] Speaker 05:
So the question in that scenario is whether an excess insurer can require exhaustion of the underlying SIR and the statements that it can't be severed from the policy in that situation.

[00:50:13] Speaker 05:
Those only relates to exhaustion.

[00:50:16] Speaker 05:
The California Court of Appeals has already said inclusively and dear that an SIR is not insurance.

[00:50:22] Speaker 05:
And that question is binding on this court as a California decision on that issue.

[00:50:26] Speaker 02:
All right, thank you very much.

[00:50:27] Speaker 02:
All counsel, we appreciate your argument.

[00:50:30] Speaker 02:
The matter is submitted.

[00:50:32] Speaker 02:
We'll take a 10 minute break before we hear the last case.