[00:00:00] Speaker 01: Please be seated. [00:00:08] Speaker 01: We have six cases on the calendar this morning. [00:00:12] Speaker 01: A case from the Court of Federal Claims involving insurance. [00:00:16] Speaker 01: Three PAPA cases from district courts, a veterans case, a government employee case. [00:00:23] Speaker 01: The latter two are being submitted only in the briefs and will not be argued. [00:00:29] Speaker 01: Uh, the first case is fidelity and guarantee insurance versus the United States. [00:00:34] Speaker 01: 15, 1536, Mr. McConnell. [00:00:39] Speaker 00: Thank you, Your Honor. [00:00:43] Speaker 00: May it please the court. [00:00:44] Speaker 00: My name is Richard McConnell. [00:00:45] Speaker 00: I'm counsel for the USF and G companies who are the appellants in this case. [00:00:50] Speaker 03: McConnell, just one, this is purely a housekeeping question, but I just as a technicality, um, at page three, [00:00:58] Speaker 03: of your brief, you quote as it's recited in the record, the addendum to the contract. [00:01:09] Speaker 00: Yes, Your Honor. [00:01:10] Speaker 03: And you point out that typos were in the original. [00:01:14] Speaker 03: I just wanted, can we agree that as to what it should read just for the record? [00:01:22] Speaker 03: If you go to the fourth line down, it says, resulting from brought for or, it should be on account of, right? [00:01:30] Speaker 03: That's correct, Your Honor. [00:01:31] Speaker 03: And in the last, second to last line, received or sustained by any person or persons should be in there. [00:01:38] Speaker 00: That's also correct. [00:01:39] Speaker 03: OK. [00:01:39] Speaker 03: Proceed. [00:01:40] Speaker 00: I just wanted to- Those were in the original addendum as it was attached to the contract, and we just didn't alter the language. [00:01:46] Speaker 00: OK. [00:01:46] Speaker 03: No, no. [00:01:47] Speaker 03: That's fine. [00:01:47] Speaker 03: I just want to make sure, for going forward, we knew what it should be. [00:01:51] Speaker 03: Absolutely, Your Honor. [00:01:53] Speaker 00: The sole issue on appeal in this case is whether the Tucker Act provides jurisdiction in the Court of Federal Claims for USF&G's claim against the government as an equitable subregie to its insured under the terms of a contract between that insured and the Postal Service. [00:02:10] Speaker 00: The facts are simple and not in dispute. [00:02:13] Speaker 00: USF&G's insured Gibbs construction entered into a contract with the Postal Service for asbestos removal and fireproofing work at a building in New Orleans [00:02:24] Speaker 00: An addendum to the contract, which we've just talked about, required the government to hold Gibbs harmless from all liability and expense resulting from any personal injury claims attributable to that work. [00:02:37] Speaker 00: Gibbs completed the work under the contract to the satisfaction of the Puzzle Service. [00:02:41] Speaker 01: Mr. McConnell, are you asking us to expand the liability of the government beyond what the case law provides? [00:02:50] Speaker 01: In other words, is this [00:02:52] Speaker 01: Uh, uh, go beyond insurance company of the West. [00:02:57] Speaker 00: I think it follows insurance company of the West. [00:02:59] Speaker 00: And in fact, I think, uh, this case turns on this court's decision and insurance company of the West. [00:03:06] Speaker 02: Well, it follows, not necessarily the holding in insurance company of the West follows some language, perhaps. [00:03:15] Speaker 00: In insurance company of the West, the court addressed the claim of a surety. [00:03:21] Speaker 00: But the court's rationale in that case followed the Supreme Court's decision in Aetna. [00:03:26] Speaker 03: What you do is you really hang your hat, I guess, on the language at 1373 of the Insurance Company of the West. [00:03:34] Speaker 03: The section that starts, Aetna reflects a broader and more general applicable concept. [00:03:40] Speaker 00: That's correct. [00:03:42] Speaker 03: But I wonder, you know, I'm wondering, Mr. McConniff, you don't put more weight on that language than it can bear because [00:03:51] Speaker 03: You know, the point here in this case, Insurance Company West, was there was this discussion because in Blue Fox, the Supreme Court had made statements that cast doubt on Balboa's reliance on three earlier Supreme Court cases. [00:04:09] Speaker 03: So the court in Insurance Company West is seeking to explain the basis for equitable [00:04:20] Speaker 03: subrogation and why a surety can come in and take advantage of jurisdiction in the court of federal claims. [00:04:29] Speaker 03: I just see that discussion there as really saying, okay, here's an example of why it can come in as a surety. [00:04:38] Speaker 03: I don't think it can be read as going so far as to allow a liability insurer to come in as a surety does. [00:04:49] Speaker 03: Particularly when you look at how in Blue Fox, the court drew a distinction saying, none of the cases relied upon by respondent involve a question of sovereign immunity, and none where a subcontractor could sue. [00:05:05] Speaker 03: That's Blue Fox. [00:05:06] Speaker 03: And you could make the argument that a subcontractor is not that much different from a liability insurer. [00:05:15] Speaker 03: And finally, in that recent Supreme Court case, [00:05:18] Speaker 03: quite fun long from this year the uh... the court uh... draws a distinction between the waiver of sovereign immunity in the federal tort claims act and what's in the tucker act where it says uh... that uh... you know the tucker act is a stronger sovereign immunity provision in the federal tort claims act so i'm sorry for being long-winded but it just seems to me that you place a lot of [00:05:48] Speaker 03: undue weight on that statement in Insurance Company West. [00:05:53] Speaker 03: Now I'll hush and let you talk. [00:05:55] Speaker 00: No, that's a useful departure point for me, Your Honor. [00:05:58] Speaker 00: And let me explain why I believe Insurance Company of the West has to be construed to extend jurisdiction to liability insurers like USF&G here, who pay liability claims on behalf of their insurers and are subrogated to the rights of that insured under a government contract. [00:06:18] Speaker 00: The Tucker Act, like the Federal Tort Claims Act, provides jurisdiction with respect to claims. [00:06:26] Speaker 00: It doesn't specify who the claimant has to be. [00:06:29] Speaker 00: And that was a key point that the court recognized in the decision in the Insurance Company of the West. [00:06:35] Speaker 00: In that case, the court dealt with a surety, but it dealt with the surety as an equitable subregie to a government contractor. [00:06:45] Speaker 00: And I think that case really changed the landscape [00:06:48] Speaker 00: regarding Tucker Act jurisdiction over claims by equitable subrogates. [00:06:53] Speaker 00: And here's why I believe that. [00:06:55] Speaker 00: The case did first look at the viability of an older line of cases, beginning with this court's decision in Balboa that found a waiver of sovereign immunity for equitable subrogation claims by sureties. [00:07:08] Speaker 00: Balboa relied on a string of Supreme Court decisions in Prairie State, Henningsen, and Perlman [00:07:16] Speaker 00: all of which dealt specifically with sureties. [00:07:19] Speaker 00: And the rationale of Balboa was very tied into their status as sureties. [00:07:24] Speaker 00: In Insurance Company of the West, this court found that the rationale of Balboa was no longer viable because of Blue Fox. [00:07:34] Speaker 00: In Blue Fox, the Supreme Court specifically said that those three cases, those three prior Supreme Court decisions that had been relied upon in Balboa [00:07:44] Speaker 00: did not in fact address questions of equitable subrogation and sovereign immunity. [00:07:50] Speaker 00: To the contrary, in Insurance Company of the West, this court stated after Blue Fox, we can no longer rely on those three cases to find a waiver of sovereign immunity. [00:08:00] Speaker 00: And so the court was forced to look for a different rationale. [00:08:04] Speaker 00: And where it looked was the Aetna decision from the Supreme Court in which [00:08:09] Speaker 00: the court construed the similar language under the Federal Tort Claims Act, which also focuses on claims. [00:08:16] Speaker 00: Not on the claimant, but on the claim. [00:08:18] Speaker 02: But isn't there a real distinction between a tort claim and a contract claim in the sense that, oh, contract claim, there are terms and conditions that are all spelled out. [00:08:33] Speaker 02: There are obligations both ways. [00:08:37] Speaker 02: Quite a different thing than a tort. [00:08:41] Speaker 02: And when it comes to a waiver of sovereign immunity, the fact that the government has waived sovereign immunity with respect to a contractor that the government is dealing with for a security that steps in the shoes of the contractor, both with respect to, um, [00:09:06] Speaker 02: It's a two-way street with respect to the obligations and liabilities as between the contractor or the security and surety on the government. [00:09:21] Speaker 02: It seems to me there's quite a distinction there between a claim under the Federal Tort Claims Act and a claim under the Tucker Act. [00:09:30] Speaker 00: Well, there's a difference between a tort claim and a contract claim. [00:09:33] Speaker 00: I think we would all agree with that. [00:09:35] Speaker 00: But as the court held an insurance company of the West, the two statutes, the Federal Tort Claims Act and the Tucker Act, are similarly constructed. [00:09:43] Speaker 00: The language is analogous. [00:09:44] Speaker 00: It deals with claims. [00:09:46] Speaker 00: And what the court looked at was the rationale in the Aetna case. [00:09:51] Speaker 00: In that case, in Aetna, there were first party and liability insurers that paid claims for their insurance, just like USF&G did here. [00:10:00] Speaker 00: They were subrogated to the rights of those insurers against the government. [00:10:05] Speaker 00: The accidents or injuries in that case were allegedly caused by the negligence of government employees. [00:10:11] Speaker 00: And those parties, as equitable subrogues, were allowed to sue the government under the Federal Tort Claims Act. [00:10:21] Speaker 00: None of the insurers involved in the decision was a surety. [00:10:25] Speaker 00: Those were all first party or third party liability insurers that paid claims [00:10:30] Speaker 00: Just like the claims paid here by you. [00:10:32] Speaker 03: I mean, I think you're, you're, you're accurately describing the background and what the court said about the similarities in the language between the tort claims act and the Tucker act. [00:10:44] Speaker 03: But the fact remains they are, um, they are different statutes. [00:10:49] Speaker 03: And as I, as I, as I mentioned, I mean, just recently, um, justice Kagan in that [00:10:57] Speaker 03: Kung Fu case, whatever it is, just came out this year in April, really made the point that there's a much more certain definitive, strong sovereign immunity consideration at work in the Tucker Act than there is in the Federal Tort Claims Act. [00:11:19] Speaker 03: As I said, she said, you know, the government in the Federal Tort Claims Act is treated like a commoner. [00:11:25] Speaker 03: Perrin has distinguished from [00:11:26] Speaker 03: how it's treated in the Tucker Act. [00:11:29] Speaker 03: I just don't think there's enough in Insurance Company of the West to get over the proposition that it's difficult to see under the Tucker Act a liability insurer coming in. [00:11:48] Speaker 00: I think that's exactly the opposite of the way the insurance company of the West Court looked at this, Your Honor, because it did view the two statutes as being precisely parallel. [00:11:58] Speaker 00: It did rely upon the use of the term claim as opposed to claimant in both statutes. [00:12:04] Speaker 03: But does that really make it? [00:12:05] Speaker 03: I'm wondering. [00:12:06] Speaker 03: No, you're correct. [00:12:07] Speaker 03: Everything you say, you've got the record correct, so to speak. [00:12:10] Speaker 03: But I just wonder if that really makes a difference. [00:12:14] Speaker 00: Well, I think it does. [00:12:15] Speaker 00: the insurance company of the West decision expressly adopted lock, stock, and barrel, the rationale in Aetna. [00:12:22] Speaker 00: And the rationale in Aetna addressed, not sureties, but insurance companies that paid claims for their insurance, just like USF&G did in this case. [00:12:32] Speaker 00: It's exactly the same situation. [00:12:35] Speaker 00: And so if insurance company of the West relies on Aetna, then by definition, [00:12:44] Speaker 00: the subregis that are entitled to Tucker Act jurisdiction under Insurance Company of the West have to be a broader class than just sureties. [00:12:52] Speaker 00: I think under Balboa, the argument that you're suggesting might make sense because Balboa was a more restrictive decision. [00:13:01] Speaker 00: It was based on surety cases from the Supreme Court that we now know from Blue Fox don't involve sovereign immunity questions. [00:13:08] Speaker 00: That was a different regime, but it's been replaced by Insurance Company of the West. [00:13:13] Speaker 00: There's no way to read that decision in light of the Supreme Court's decision in Aetna, other than to say that there is a broader extension of the waiver of sovereign immunity under both statutes, under the Federal Tort Claims Act and under the Tucker Act. [00:13:30] Speaker 00: The insurance company of the West Court found no reason to give the word claim a different meaning in the Tucker Act than it had in the Federal Tort Claims Act. [00:13:40] Speaker 00: And the court expressly rejected the government's argument in Insurance Company of the West that Aetna was distinguishable or that the language of the Federal Tort Claims Act was somehow unique in this respect. [00:13:57] Speaker 00: And I think, as Your Honor pointed out earlier, that the key passage in Insurance Company of the West is the one you alluded to at page [00:14:09] Speaker 00: 1373 of the decision, at the reflex of broader and more generally applicable legal principle, waivers of sovereign immunity applicable to the original claimant are to be construed as extending to those who receive assignments, whether voluntary or assignments by operation of law. [00:14:26] Speaker 01: Mr. McConnell, you're well into your rebuttal time. [00:14:29] Speaker 01: We'll give you three minutes for rebuttal, and we'll now hear from the government. [00:14:33] Speaker 00: Thank you, Your Honor. [00:14:35] Speaker 01: There's more. [00:14:42] Speaker 04: Good morning, Your Honor. [00:14:45] Speaker 04: May it please the Court, the Court of Federal Claims properly dismiss Plaintiff's Appellant's complaint for lack of jurisdiction. [00:14:51] Speaker 04: Fidelity does not allege the existence of a contract between itself and the Postal Service. [00:14:56] Speaker 03: Ms. [00:14:57] Speaker 03: Moore, do you agree with the changes to the language of the contract that we discussed? [00:15:03] Speaker 04: Your Honor, oh, I'm sorry, Your Honor. [00:15:07] Speaker 04: Fidelity alleges that there was an addendum to the contract. [00:15:10] Speaker 04: The government has not agreed to that, and the government would not agree to that. [00:15:14] Speaker 03: But to the extent there's a quote of an addendum, well, we're going by the facts that are in the complaint. [00:15:22] Speaker 03: And it's alleged in the complaint. [00:15:23] Speaker 03: So in other words, to the extent the addendum, the purported addendum is quoted in the record, you don't have a problem with the changes, really typographical changes that I suggested. [00:15:36] Speaker 04: The on instead of no, Your Honor. [00:15:40] Speaker 04: And the or. [00:15:40] Speaker 04: And person or persons, Your Honor. [00:15:44] Speaker 04: Yes. [00:15:44] Speaker 04: And that is, just for the record, that is a letter dated March 12th, 1987. [00:15:51] Speaker 04: The government, for purposes of its motion to dismiss, accepted certain facts alleged in plaintiff's complaint as true. [00:15:58] Speaker 04: Not all facts, but certain facts. [00:16:01] Speaker 04: But regardless, those two changes are the only way that that letter makes any sense. [00:16:10] Speaker 04: Okay. [00:16:11] Speaker 04: In order for the trial court to possess jurisdiction, fidelity must fall within one of the limited exceptions to the rule of privity. [00:16:18] Speaker 04: These exceptions are, one, an intended third-party beneficiary, two, a subcontractor by means of a pass-through suit whereby the prime sues on behalf of a subcontractor, [00:16:29] Speaker 04: or three, a Miller Act surety for funds improperly dispersed to a prime contractor. [00:16:34] Speaker 03: Well, what is your answer to the argument that Mr. McConnell makes with respect to Insurance Company of the West? [00:16:46] Speaker 04: Your Honor, it is true that the Aetna case by the Supreme Court [00:16:54] Speaker 04: Explained that the cases relied upon by Balboa in 1985 and this by this court did not involve an issue of sovereign immunity. [00:17:04] Speaker 03: They were just stakeholder cases. [00:17:06] Speaker 04: Yes. [00:17:07] Speaker 04: And an insurance company in the West, therefore this court looked to a different rationale for upholding the law of equitable segregation under Balboa. [00:17:20] Speaker 04: In other words, this court did not change the holding of Balboa. [00:17:24] Speaker 04: Instead, on the last page of the Insurance Company of the West decision, it upheld the holding in Balboa, as did the Lumberman's case in 2011 by this court. [00:17:35] Speaker 04: Instead, this court looked to a different rationale to find the same holding in Insurance Company of the West. [00:17:43] Speaker 04: What it did is it looked to the Yetna decision by the Supreme Court. [00:17:47] Speaker 04: That case involved only the Federal Tort Claims Act, a suit by four insurers. [00:17:53] Speaker 04: liability insurers who had paid claims for individuals who suffered injuries because of the negligence of government employees. [00:18:04] Speaker 04: The Aetna case did not discuss the Tucker Act, did not mention the Tucker Act. [00:18:09] Speaker 04: This court and insurance company, the West, adopted some of the rationale in Aetna and said that express assignments and implied assignments in law could be used [00:18:22] Speaker 04: for jurisdictional purposes. [00:18:25] Speaker 04: It did say the Tucker Act had broad language in footnote three of the ethnic decision. [00:18:31] Speaker 04: It relied on the broad sweep of the language in the Federal Tort Claims Act. [00:18:37] Speaker 04: Indeed, in the Federal Tort Claims Act, jurisdiction is envisioned by an unknown person who is injured [00:18:46] Speaker 04: by a government employee. [00:18:48] Speaker 04: In other words, the government has no idea who may sue it under the Tort Claims Act because it's based on injury at the hands of a US government employee. [00:18:58] Speaker 04: The Tucker Act has a much more restrictive and narrow language for jurisdiction. [00:19:03] Speaker 03: Instead, the Tucker Act is based on... This case was brought under the Tucker Act, not under the Contract Disputes Act, correct? [00:19:11] Speaker 04: This case here, Your Honor? [00:19:13] Speaker 03: Yes. [00:19:13] Speaker 04: Yes. [00:19:14] Speaker 04: Brought under the Tucker Act. [00:19:15] Speaker 04: And the Tucker Act has two prongs by which jurisdiction is found. [00:19:20] Speaker 04: One is the money mandating statute, which plaintiff does not allege at all. [00:19:25] Speaker 04: Instead, Fidelity alleges that the claims court has jurisdiction under the contract prong of the Tucker Act. [00:19:33] Speaker 04: And the Tucker Act defines a contract claim, meaning a claim based on contract with the United States. [00:19:41] Speaker 04: In other words, a claimant must have a contract with the United States. [00:19:46] Speaker 04: Now, as we said, there are three exceptions to that, but Fidelity has not alleged that it is an intended third-party beneficiary, the first exception, nor has it alleged that it's a pass-through claim by the prime contractor Gibbs. [00:20:01] Speaker 04: Instead, it relies on the third exception, equitable subrogation. [00:20:05] Speaker 04: But even that exception, there must be a contractual obligation between the claimant and the government [00:20:14] Speaker 04: In other words, it can't be anybody suing. [00:20:17] Speaker 04: If it were anybody suing without any contractual obligation, the Tucker Act would be defeated. [00:20:22] Speaker 04: Indeed, subcontractors could see for that matter. [00:20:26] Speaker 04: In Lumberman's and Insurance Company of the West and Balboa, this court held very specifically that there must be a contractual obligation running. [00:20:37] Speaker 03: Let me ask you one thing. [00:20:38] Speaker 03: Would it be possible here for [00:20:41] Speaker 03: As I understand it, what's alleged, we have to go by what's alleged in the complaint, is that the insurance company paid the liability claim of the police officer, Mr. Wilson, correct? [00:20:55] Speaker 04: The insurance company paid the settlement monies between Gibbs, the prime, and Mr. Wilson. [00:21:02] Speaker 03: Now, assume for the moment that Gibbs had in fact paid [00:21:09] Speaker 03: the claim, okay? [00:21:12] Speaker 03: Could Gibbs then have under the contract come in and said there's a breach of contract because you didn't perform as you were required to do government under the addendum? [00:21:24] Speaker 03: Now I realize you apparently, I wasn't aware of this dispute, the addendum, but that's not before us in this setting. [00:21:30] Speaker 03: In other words, Gibbs could it not have come in and said there's an addendum to the contract pursuant to which you were obligated [00:21:38] Speaker 03: to reimburse me for liability claims for asbestos removal, you haven't done it, I paid X dollars, I'm suing. [00:21:47] Speaker 03: There you would say, you might contest the merits, but you would say there there was jurisdiction, correct? [00:21:52] Speaker 03: You wouldn't fight jurisdiction. [00:21:54] Speaker 04: Your Honor, Gibbs did submit a claim to the contracting officer. [00:21:58] Speaker 03: No, I understand. [00:21:59] Speaker 04: Based on the purported addendum. [00:22:00] Speaker 04: And yes, Gibbs could have appealed conceivably that final decision to the court of federal claims. [00:22:05] Speaker 03: And you would have said jurisdiction is fine there. [00:22:11] Speaker 04: Probably, Your Honor. [00:22:12] Speaker 04: We can't say for sure at this point, depending on the facts and the complaint and everything. [00:22:17] Speaker 04: But they'd be suing under the contract. [00:22:20] Speaker 04: Yes, they would be suing. [00:22:22] Speaker 04: If Gibbs had appealed within a year of the final decision of January 29, 2013 to the Court of Federal Claims, then they would have had a lawsuit in the Court of Federal Claims against the government. [00:22:34] Speaker 04: Gibbs did not do that. [00:22:36] Speaker 04: under the addendum. [00:22:37] Speaker 03: Oh no, we're not getting into the merits of it. [00:22:41] Speaker 03: I'm just saying, assuming the addendum is part of the contract and assuming Gibbs had paid the claim of the injured person from the asbestos and assuming there was a contracting officer's decision, whatever, it could have come in. [00:22:59] Speaker 04: Gibbs could have sued based on that scenario. [00:23:03] Speaker 04: Within one year of [00:23:04] Speaker 04: receiving the contracting officer's final decision. [00:23:07] Speaker 03: So you said this wasn't a contract, a suicide case, or it was? [00:23:10] Speaker 04: This is a CDA contract, yes. [00:23:13] Speaker 01: I thought you said it was Tucker Act. [00:23:17] Speaker 04: Well, the CDA is a statute that allows a contractor to sue in the court of federal claims to appeal a final decision within one year. [00:23:27] Speaker 04: Fidelity is not suing under the CDA. [00:23:31] Speaker 04: Fidelity is suing under the contract theory. [00:23:34] Speaker 04: Fidelity is suing saying we can step into the shoes of Gibbs and sue the government under Gibbs' contract, which is a CDA contract. [00:23:46] Speaker 04: In Lumberman's, the surety did take over performance, financed completion of perform, I mean not, I'm sorry, the surety did take over completion of performance in Lumberman's. [00:23:58] Speaker 04: The court held that Lumberman's had to submit a CDA claim. [00:24:02] Speaker 04: to the contracting officer in that case. [00:24:05] Speaker 04: Here, fidelity, though, is not even a surety. [00:24:07] Speaker 04: So fidelity doesn't have the obligation, did not have any obligation towards the government in contract, nor vice versa. [00:24:17] Speaker 04: And it's because of that reason, that finality is not an equitable subrogi to Gibbs. [00:24:23] Speaker 04: And that's what the Court of Federal Claims properly held. [00:24:27] Speaker 03: How does a surety, when you have a CDA, because environments fund [00:24:32] Speaker 03: insurance, we said that Assurity is not a contractor under the CDA. [00:24:40] Speaker 03: How does Assurity under a contract dispute that contract properly come in in the Court of Federal Claims? [00:24:49] Speaker 04: Your Honor, in that case, Fireman's Fund was not the contractor and didn't have standing. [00:24:58] Speaker 04: If Fireman's Fund [00:25:00] Speaker 04: or a surety that took over performance of the contract upon default by the prime, then the surety, if it actually takes over performance rather than finances performance, it enters into a contract, a takeover agreement with the government. [00:25:16] Speaker 04: And that takeover agreement becomes the contract between that surety and the United States. [00:25:26] Speaker 03: Okay. [00:25:27] Speaker 04: Here, fidelity is by no stretch of the imagination. [00:25:30] Speaker 03: What if it funds the contract? [00:25:33] Speaker 04: If it funds the contract? [00:25:34] Speaker 03: If it finances completion of the contract? [00:25:36] Speaker 03: The insurance company of the West, I think there was a statement there that a surety could obtain jurisdiction by stepping in and giving money to the contractor to perform the contract. [00:25:51] Speaker 04: Yes, and an insurance company of the West, Your Honor, insurance company of the West financed completion of the contract. [00:25:58] Speaker 04: that allowed it to become an equitable subrogate. [00:26:02] Speaker 04: And it was only upon default. [00:26:04] Speaker 03: That was a CDA contract also? [00:26:05] Speaker 04: An insurance company in the West, I believe so. [00:26:08] Speaker 04: And only upon default by the prime and assurity stepping into the shoes of the prime towards, with respect to the prime's obligation towards the government, i.e. [00:26:21] Speaker 04: by financing a completion contract by another contractor [00:26:25] Speaker 04: or actually performing the contract for the government, does a surety become an equitable suffragate? [00:26:31] Speaker 04: So it's not simply because a surety has the title surety that it can become an equitable suffragate. [00:26:37] Speaker 04: There must first be a default by the prime contractor and its performance. [00:26:41] Speaker 04: And secondly, the surety must step into the shoes of the prime, either by financing completion of that contract or completing it itself towards the government. [00:26:53] Speaker 04: And fidelity doesn't like any of those things. [00:26:56] Speaker 04: It's not a surety. [00:26:57] Speaker 04: There was no default by the prime, nor did fidelity enter into any obligation towards the U S government. [00:27:05] Speaker 02: If the decision here stands, what impact do you think this will have in terms of, uh, uh, government contractors obtaining general liability coverage in the future? [00:27:21] Speaker 04: Well, I believe it's, um, [00:27:23] Speaker 04: something that's pervasive, Your Honor, that they already do obtain such coverage. [00:27:28] Speaker 04: Um, some contracts require the coverage and, uh, a prime contractor for its own, being a prudent prime, I would think most of them would have general liability coverage just for their own employee's actions, if nothing else. [00:27:41] Speaker 02: To what extent will insurance companies be interested in providing that coverage if they have no assurance of being, um, [00:27:50] Speaker 02: entitled to sue as a sovereignty. [00:27:53] Speaker 04: Your honor, they've never been entitled to sue. [00:27:56] Speaker 04: So nothing would change, really. [00:27:59] Speaker 04: Up to now, they've never been entitled to sue. [00:28:01] Speaker 04: And should that not change, then nothing really would change. [00:28:04] Speaker 04: And crimes most often have gotten insurance policies for general liability insurance. [00:28:13] Speaker 04: And if the insurer pays an insurance claim as fidelity did here, [00:28:18] Speaker 04: The insurer could sue the insured for that matter. [00:28:22] Speaker 04: If it felt that the insured breached the contract, it could either not pay and they could have litigation between themselves or it could maybe pay with a conditional payment or something. [00:28:33] Speaker 04: But it's really between the insurer and the prime contractor as to what transpires between them. [00:28:39] Speaker 04: And of course, that's a contract. [00:28:41] Speaker 04: So that would be dealt with in the appropriate legal venue for that. [00:28:50] Speaker 04: For these reasons, Your Honor, the Court said we respectfully request that the Court affirm the decision of the Court of Federal Claims. [00:28:58] Speaker 01: Thank you, Ms. [00:28:59] Speaker 01: Moore. [00:29:00] Speaker 01: Mr. McConnell will give you three minutes of repuddle. [00:29:03] Speaker 00: Thank you, Your Honor. [00:29:08] Speaker 00: Let me answer your question, Judge Land. [00:29:10] Speaker 00: If that decision stands, to the extent insurance is available for this kind of project, it will be more expensive [00:29:18] Speaker 00: And those costs eventually would be passed along to the government. [00:29:21] Speaker 01: But the law won't change, will it? [00:29:24] Speaker 00: Excuse me, Your Honor? [00:29:24] Speaker 01: But the law will not have changed. [00:29:26] Speaker 00: We think it will because we read Insurance Company of the West, which has now been out there for a number of years, as affording an opportunity for companies in the U.S. [00:29:35] Speaker 00: F&G's position to bring an action under the contract as an equitable subregime. [00:29:41] Speaker 03: Well, listen, you would agree that there's no case right now [00:29:45] Speaker 03: I mean, you read Insurance Company of the West as supporting your position, as you've argued in your briefs since today. [00:29:54] Speaker 03: But I think you would agree, because I haven't been able to find any case that says a liability insurer can do what you're seeking to do in this case. [00:30:05] Speaker 00: I'm not aware that this issue has ever been before this court. [00:30:08] Speaker 02: So I guess it's your position that there's never been a case that says [00:30:12] Speaker 02: you would not be entitled to subrogation. [00:30:14] Speaker 00: That's absolutely correct, Your Honor. [00:30:15] Speaker 00: We think Insurance Company of the West says we can. [00:30:19] Speaker 00: Just a couple of quick points, and I'm mindful of the time. [00:30:22] Speaker 00: The government continues to rely on what they call limited exceptions to the privity requirement that were in existence prior to Insurance Company of the West. [00:30:33] Speaker 00: For the reasons I discussed earlier, I think Insurance Company of the West necessarily extended those exceptions [00:30:40] Speaker 00: to equitable subrogies like USF&G here that pay claims for their insured. [00:30:46] Speaker 00: There's no other way to read that case in light of its reliance upon Aetna. [00:30:51] Speaker 00: Secondly, the court below asserted that USF&G had not stepped completely into the shoes of the contractor. [00:30:58] Speaker 00: I think that assertion is contrary to longstanding black letter law, which recognizes that equitable subrogies do step into the shoes of another person. [00:31:06] Speaker 00: We've cited a number of cases, including First National City Bank from the Court of Claims, U.S. [00:31:13] Speaker 00: Airways v. McCutcheon Supreme Court two years ago, which said subrogation simply means substitution of one person for another. [00:31:20] Speaker 00: That is, one person is allowed to stand in the shoes of another. [00:31:23] Speaker 00: That's exactly what's happening here. [00:31:25] Speaker 00: When it paid the claim, USSMG did step into the shoes of its insured. [00:31:31] Speaker 00: And third, in this case, USSMG, as an equitable subrogi, [00:31:36] Speaker 00: stands in the shoes of Gibbs with respect to its claim under the Hold Harmless provision. [00:31:42] Speaker 00: As Your Honor implied, Judge Schell, recognizing jurisdiction under the Tucker Act won't expand the scope of the government's liability at all. [00:31:52] Speaker 00: Gibbs would have a claim under this Hold Harmless provision. [00:31:55] Speaker 00: If USF&G had not stepped in and paid the claim, Gibbs would be able to pursue a claim against the government's contract. [00:32:04] Speaker 03: But as the case is positive, I guess the insurance company, your client, paid the claimant, and that's why you're advancing the claim. [00:32:17] Speaker 00: That's correct, Your Honor. [00:32:18] Speaker 00: USF&G is now the real party in interest, and that's why we're here. [00:32:23] Speaker 00: USF&G claims no more than Gibbs was entitled to. [00:32:28] Speaker 00: We're not seeking to expand the scope of the liability. [00:32:31] Speaker 00: We're simply seeking to enforce the right under the contract as an equitable subregie. [00:32:37] Speaker 00: And so we would ask that the decision below be reversed and the case remanded for proceedings on the merits. [00:32:43] Speaker 01: Thank you. [00:32:43] Speaker 01: Thank you. [00:32:43] Speaker 01: Mr. McConnell will take the case under advisement.