-: SJC-13303,
Ken's Foods, Inc. v. Steadfast Insurance Company.
-: Okay, Attorney Green, whenever you're ready.
-: Good morning, and may it please the court,
Lawrence Green, joined by Gregory Paonessa,
representing the appellant, Ken's Foods.
We have before this court a pure question of law
as certified by the First Circuit Court of Appeals.
The question is very clear.
We have provided this court a roadmap
firmly based upon Massachusetts law,
supported by cases from sister states,
supported by treatises, supported by public policy,
which should lead this court to the conclusion
that the answer is affirmative
to the question of the First Circuit.
Steadfast, in turn, the appellee,
doesn't want this court to get there.
They have put up roadblocks.
The first part of their argument-
-: Could you get beyond the metaphors,
'cause we gotta interpret this insurance policy,
and I'd like you to interpret three provisions for me.
Green: Certainly, your Honor.
-: So first, there's provision C,
then there's the emergency provision,
which I'd like to talk about a little bit,
which you conceded, I guess.
And H.
So C covers the cleanup costs, right?
-: That's correct, your Honor.
And there was no dispute on that.
-: And by the way,
and there's no issue about whether these extra costs
could fit within the cleanup costs?
-: And we are not arguing that, Your Honor.
These are mitigation costs.
The cleanup costs were separately resolved
in the federal court case.
-: Okay.
But I wanna make sure that it's clear to you.
It's correct.
There's no way that C covers these issues, right?
-: That is correct, Your Honor.
-: So now, take me to the emergency provision,
'cause you conceded that,
and I'm not sure I understand why
that's not closer to this than H.
So tell me why these costs don't fit
within the emergency provision.
-: Your Honor, our overall position in this case
is based upon a common law obligation
that supplements the insurance policy.
We are not arguing about a particular coverage here.
Justice Kafker: But, then again-
-: And frankly, Your Honor, the question-
Excuse me, Your Honor, go ahead.
-: This is gonna be more decided
on specifics than generalities.
So the emergency provision is not applicable here.
It's not triggered
because there's not a danger of environment,
further danger of environmental contamination.
Is that right?
-: That argument might have been made, Your Honor,
but we are not relying on that
because -: Well, but I think.
Go ahead.
-: Because we are, in essence, saying,
and the question that has been certified before this court
is we, Ken's, spent $2 million to save Steadfast $10 million
and we're not looking. -: I really want you
to answer my questions,
because one of the questions I've got is,
okay, you want this common law duty
extended into the suspension provision,
but you're not suggesting it's implicated
by the emergency provision.
Why is that?
-: It is not implicated by the emergency provision,
Your Honor, because the exact wording
of the emergency provision really doesn't deal
with what we were talking about here.
-: But the exact wording of the suspension provision
doesn't deal with it either.
But you say nonetheless we should bootstrap the common law.
Again, why doesn't it apply to the emergency provision
but it would apply in the other one?
Because, again, from our perspective,
we obviously want environmental contamination cleaned up,
and the provision covered that.
It also covered emergency measures
on top of the provision, right?
-: Yes, it did, Your Honor.
We are not- -: You're waiving
that argument, right?
You're just focused on the suspension provision,
and you're saying under that,
read into this particular provision,
the common law duty to mitigate damages.
Green: That is correct. -: That's your argument.
You've waived any other argument.
-: We were not relying on the emergency argument.
-: But before you leave my point-
-: Yes, please, Your Honor.
-: 'Cause I'm trying to understand
why you would waive it there,
because you clearly didn't think there was any merit to it.
But you want us to do basically the same thing
in the suspension provision,
which actually even has more negative language
'cause it's so explicitly only references after suspension.
That's the question I want answered before you move on.
-: We presented this case based upon
a common law supplement to H, which was firmly founded
when we filed the case before the District of Massachusetts
on the Demers case, Judge Tauro's case,
that had come out in 2009,
which dealt with this issue foursquare.
So yes, Your Honor, we placed our reliance there.
We were not looking at the provision of C.
-: But again, and I'll stop.
But so you're saying that there was no common law
addition to the emergency provision.
It only applies to the suspension provision.
Why or you just gave it up?
I'm just trying to understand the logic.
-: The common law is very well-developed
on the issue that we have briefed here, Your Honor.
And it relates more clearly to the suspension provision.
What was done here was really to,
the coverage in question was a $10 million coverage
per month for suspension of operations.
That was the money that was saved here.
That is what was implicated here
as opposed to more emergency expenses,
which is why we're talking about H.
Justice Kafker: Go ahead.
-: Thank you, Your Honor.
So what Steadfast has done here
is the major part of their argument.
The first part of their brief basically says,
"Simply look at the policy, i.e. the contract."
Look at that.
The First Circuit roundly criticized that argument below.
The First Circuit said, "Wait a moment."
It is clear.
It is clear, even under the Mount Vernon case
that was your primary case below,
that Mount Vernon looked at common law.
And the First Circuit said- -: Just drill on that
for a minute. -: Certainly.
-: We've looked at that.
So the question is big picture.
I'll get out of the minutiae for one second.
Big picture.
How are you asking us to look at the common law
as we look at the Mount Vernon case
and think about its application here?
Are you saying that the common law is going to assist
in interpreting the insurance contract?
Or are you saying that, nope,
we are going to supplement the contract
by infusing the common law separate and distinct
from any particular part of the contract?
-: It's not separate and distinct, Your Honor,
but what we have cited to,
we all agree, there's no disagreement here,
that Massachusetts recognizes
the obligation to mitigate damages.
Our next part of the roadmap,
to answer the court's question here,
is to say we have case after case
looking at insurance policies where the court
has supplemented the insurance policies.
-: But that's based on language within the policy, correct?
-: And also based upon common law principles
beyond that language. -: Like Mount Vernon,
and I think to echo Justice Lowy,
Mount Vernon dealt with the ward's duty to defend.
Green: Yes, it dealt with the-
-: And then based upon the contract language
of the duty to defend, the question at Mount Vernon
was whether that encompasses a counterclaim.
And we looked at the in for one,
in for all common law doctrine, correct?
-: That is correct, Your Honor.
We can look at- -: But it starts
with the contract language.
-: That particular case did start
with the contract language. -: And here we don't have
contract language.
It's an absent self. -: You're not relying
on a specific contractual clause.
But consider this, Your Honor.
What if we had a situation here
where Ken's simply failed to mitigate damages
the day before a suspension occurred?
We know that this policy- -: But then, Ken's might have
gone out of business.
-: That's true.
But let me complete my point here, Your Honor.
We know for sure- -: I guess just before you go
off on the policy issue,
to go back to Justice Gaziano's question,
which was usually, in fact I would argue, always,
when you have the need to interpret a contract,
which is what the policy is,
you start with the words of the policy.
And in the duty to defend cases,
there were words in the policy about a duty to defend.
And the question was, "What's the scope of that?"
Here, you're saying the policies words don't apply,
but we should glom on this common law duty,
because there is a duty to mitigate damages.
And so what Ken's Foods has done in effect
is save the insurer the $10 million.
-: That is correct, Your Honor.
-: And so what is your closest analogy
when somebody's trying to interpret a contract
that clearly doesn't, in its plain words,
apply and is not ambiguous?
Do we glom on this common law duty?
Because if you're relying on the Mount Vernons of the world,
at least those were hooked into the duty to defend
language of the contract.
-: Yes, Your Honor, but we're talking about
going beyond the policy.
I was just positing a situation,
because I believe this answers your question.
If Ken's had not fully mitigated its damages
before the suspension took place,
we know that the contract said
you have to mitigate after the suspension.
You can rest assured that Steadfast
would've been raising all kinds of red flags saying,
"We're not paying a dime for that suspension
of obligations because you failed to mitigate."
Steadfast would've been looking beyond the contract.
They would've been looking at common law principles.
What we are saying to the court is we have authority
after authority from others- -: And would you concede then
in that hypothetical
that Steadfast would've won that argument?
-: Steadfast would've won that argument,
and Steadfast would've been not relying
on the policy, Your Honor.
They would've been relying
on something outside of the contract.
And my statement to you and to the Justices of this court
is we have the Demers case,
District of Massachusetts applying Massachusetts law.
-: That's after the loss.
You keep on mentioning Judge Tauro's case.
That case is after the loss.
-: After a triggering event.
After a triggering event.
It was really during the course of a triggering event,
action was taken to basically safeguard
some things during the course of a fire here.
So here, Your Honor, we had a triggering event.
We know that there's a pollution event,
and the next thing that could happen here
is there's going to be potentially
a suspension of operations.
So unlike the Roche Brothers case
where someone's removing snow
before there's any risk to a roof,
and they cite to Roche Brothers as their sole authority,
their lead authority on the notion
of the common law principle. -: Well, a California case too.
-: They had a lower court case from California.
And we've argued in our brief
why that is distinguishable.
We have the Demers case and we have cases
from the vast majority of other jurisdictions
that have considered this to say that it's only fair,
and Your Honor-
-: Well, no, there're really
aren't cases directly on point.
Everyone's distinguishing everything.
Can I ask you, at 2-51, they include a provision
that says you could have bought in the record.
Why is that not right?
-: We disagree with that, Your Honor.
As argued in our brief-
-: I know you say that these,
was that a CGL?
I haven't read closely, but I quickly skimmed it.
Is that not a pollution exclusion provision
where you could buy that somewhere?
Where does that come from?
-: What they cite to, Your Honor, is a commercial policy.
It's argued in our case-
-: Literally, this is a fact question.
I've read 2-51 is that,
that is a CGL provision?
It's not a policy that you can add
to this pollution provision?
-: It is not available in a pollution policy case.
We argue that.
It's argued more fully in the amicus brief.
-: Just again, just 'cause I'm gonna go back
to that and have to look at that.
When I read 2-51, he's gonna stand up and say,
"You could have bought that.
And had you bought that,
you would've been compensated for it,
but you chose not to."
And the answer to that is what?
And again, focused on 2-51.
-: It was not available for this pollution policy period.
It was not available.
And Steadfast is incorrect saying it was available.
-: It's not available from Steadfast,
or it's not available in the industry?
-: It's not available in the industry,
and Steadfast has pointed to nothing on that.
All they've done, Your Honor,
is point to a commercial policy
as opposed to a pollution policy.
-: So, again, when I go back
and read these treatises and other things,
I'm gonna find that you're right,
that you can't buy this kind of coverage out there.
-: If you can, Your Honor,
we certainly don't know it from Steadfast.
They haven't cited to that.
And speaking of treatises, Your Honor,
and I do wanna make this point.
-: No, I know you're gonna now take this to Couch.
Right? -: Thank you, Your Honor.
-: Right, okay.
-: And I won't quote it 'cause it's right here
on page 29 of the brief.
Couch summarizes law out there
looking at the case law stating why
this is good public policy.
This court has cited Couch many, many times.
It's found on page 30 and on in our brief.
And yes.
Yes, it only makes sense for the very good reasons
stated in the Couch treatise here.
-: Okay, so I know what Couch is.
Can I ask you another set
of questions? -: Certainly, Your Honor.
-: So Mount Vernon makes the point about
litigation, avoidance, and who bears costs.
So here we've got sort of this preventive mitigation.
And I understand there's a difference between the snow case
where it's not about the fall.
In this case, where there's an ongoing emergency.
That line drawing is gonna be difficult, right?
Green: I don't believe it should be, Your Honor.
-: Okay, why not? -: Clearly, the Roche Brothers'
snow removal case is on one side of the line.
We need three things here, Your Honor.
We need something very imminent to be happening here.
In our case, we already had a triggering event,
and there was an imminent plant closure.
That's point one.
Point two, the costs need to be reasonable.
You just can't go out and do something exorbitant
and it has to be reasonable.
And three, it has to save the insurance company money.
So these are three very, very clear tests.
-: Is the second and the third different?
-: The second and the third are different, Your Honor.
Let's take, for example, Ken's required
$11 million to avoid a plant closure.
The cases would recognize you can't get more money
than what you do to save Steadfast money here.
-: Is that because there is a,
you're going back to the words of the contract now?
-: No, I'm going back to the common law recognition here.
I was just answering the question of Justice Kafker here
that what is the bright line here?
It's three things.
It's immanency, it's reasonable,
and you have to save money.
And those are very bright lines.
So I will not tell the court here
that we couldn't have more litigation,
but that's what courts are for,
and the courts ought to be able to distinguish
Roche Brothers from this case.
-: Since you're not gonna get any rebuttal time,
let me ask you the question
that you'd wanna be able to answer on rebuttal.
So assuming we can just take the common law
divorce from a provision,
what we're going to hear from the appellee is two things.
One, that the litigation between imminent
as opposed to maintenance slash prevention
is going to have a huge impact
on how much litigation we have.
And the second thing they're inevitably going to say
is that we're gonna completely scrap the market
and the ability to price insurance.
So you don't get rebuttal.
So there's your opportunity
to do your rebuttal. -: I appreciate the question,
Justice Lowy.
The question that the First Circuit has raised
before the court talks about immanency,
to prevent imminent covered loss here.
So to the extent he's going
to be getting into that argument here,
we're not making any case other than imminent.
And there can be no question in this case
where we already have a triggering event
and an imminent plant loss here, plant closure.
It very much was imminent.
We only want the court to answer this question,
and that's what the First Circuit is saying.
In terms of what's going to happen
with the market and whatever here,
ultimately here, Your Honor,
this saves the carrier's money here.
This saves the carrier's money.
Steadfast in this case would've quickly had
to have paid $10 million.
They didn't have to pay that and the money was saved.
And what the treatise says,
what the other courts from other states recognize here
is that there is a strong public policy
to mitigate damages and concomitant to that.
It's to be reimbursed for the reasonable
and necessary expenses of litigation.
-: Can I ask one last question?
-: Certainly. -: One last question.
-: So is this a sui generis case?
I mean, both sides are describing this
as the sky is falling.
Again, normal cleanup costs would be covered.
Post-suspension would be covered.
Here we've got this oddity
where they're continuing their business,
thereby doing this kind of stuff
that doesn't fit within the all the standard provisions.
Is this just a strange case
and it's not a sky is falling case?
It's just the solution here
is odd and unusual and creative,
but just, it's just a weird case.
-: It is certainly a very fact-specific case, Your Honor,
in terms of what was done here to prevent a plant closure,
because these really weren't cleanup costs per se
as really cost dedicated to prevent this closure here,
which may be another reason, Your Honor,
to answer Justice Lowy's question
that we shouldn't be concerned
about all kinds of markets opening up
in some parade of horribles.
I cannot represent to this court
that there won't be a future Roche brothers
of the world case, but just as Superior Court denied relief,
in that case, I have no fear that other courts
will deny that type of what is really a frivolous case.
Thank you, Your Honors.
-: Thank you.
Okay, Attorney Dolan.
-: Good morning.
And may it please the court, Jeffrey Dolan,
on behalf of the defendant,
appellee, Steadfast Insurance Company.
Several of the questions that were asked early on
in Attorney Green's presentation
I think hit the nail on the head.
From our perspective, this is a case
that involves two sophisticated commercial parties.
They enter into a contract
that has an agreed upon allocation of risk.
-: Now, opposing counsel says that they had no opportunity
to ever get mitigation insurance.
Is that true or not true?
It's important.
-: Yeah, it was not sold by Steadfast.
I think that that goes to the fact that it was undisputedly
not within the allocation of risk and not within-
-: What about the samples?
Didn't you provide sample policies?
-: Those are sample policy forms
just that we were able to identify from-
-: They didn't cover this either, did they?
-: They related to,
they were just examples that showed
that extra expense prevention
and these are types of things that are contemplated
within the insurance industry.
We cited pretty extensively to the discussion
of this issue in the McNeil Lab case,
which was the federal court case out of New Jersey.
-: When you sent in 2-51, that's a CGL policy provision.
It's not a pollution.
That's not something out there in the pollution.
-: Yeah, so they were commercial property policy forms.
-: Is that sort of, I mean ,
that wasn't something you sold nor is it something
available for in the environmental pollution world.
-: Is that right? -: Yeah, it's intended to show,
'cause the way it would work
ordinarily is that an insured such as Ken's Foods
would work with their agent.
There'd be a whole underwriting process
where a series of forms potentially including those forms
would be compiled to complete the policy.
-: But as miserable as that is,
when I send my law clerk out to look at the standard forms
out there in social law and insurance,
are there gonna be any standard forms out there
purchasing this kind of stuff
in the pollution insurance world?
-: No, not in the pollution policy form.
-: So your argument that you could just go out and buy it
is kind of a little bit misleading then, is that right?
-: No, I wouldn't agree with that
because you can have commercial property forms
that cover things that are related to pollution.
They don't necessarily all have pollution
exclusions on them.
They may have different endorsements
that allow certain coverages in the pollution context.
And these are intended to show that more broadly,
as the McNeil Lab case explained,
as several other cases have explained,
that the way to deal with these types of coverages
is to require that they be covered.
But I think another point also
is that even if they were- -: But again,
if the market doesn't provide it,
again, and I don't mean to bore at this point,
but it's an important point
that you can't go out and get this then.
You'd have to get a whole different,
you'd have to get a CGL policy
that doesn't exclude environmental harm.
Is that what it is?
And then get an extra expense provision.
It's not really out there in the industry.
I mean, just is it or isn't it?
-: I think they could go out there and get a,
it would have to be a separate type of policy
than what we covered to cover additional risks.
-: So it's not something that they didn't negotiate
with you that they could have bought.
It's rather they would have to go a whole different route
on insurance to get this. -: Correct.
And what it comes down to is whether it's available
in the marketplace or whether it's not.
Our point is that it's not.
It's clearly something that's not contemplated.
When you look at our policy,
it's something that's not contemplated
as compared with these policies
where it can be purchased in other contexts.
-: You asked us to adopt a minority rule,
and if so, why shouldn't we go
with the preferable public policy ruling?
-: No, I don't think it's a minority rule
in the sense that I think a lot of the cases
that are cited by Ken's Foods are in different contexts.
For example, you may have a third party
liability insurance policy where you're talking
about an event that's already happened,
and an insurer who's responsible to pay all sums
that the insured may become responsible to a third party.
Whereas the Grebow case, the McNeil Lab case
and others that have addressed the issue
of preventative cost in the context
of a first party insurance policy
have typically come down on the side
that this is not the type of thing
that can be assessed under the common law.
-: I have trouble with that because this isn't like
the Roche Brothers case because there is a triggering event.
In fact, C is triggered, right?
So we're not dealing with an abstraction
or even a third party liability.
There's first party liability here under C.
It's just how we deal with the relationship
between C and H, right?
-: Right, so under C,
I think what's important to clarify under C
is that it's the cleanup cost, and as you mentioned earlier,
it is the emergency cost as well.
All of those were paid to the tune
of more than a million dollars.
Those have been paid.
They've been subject to a release,
and they've been dismissed with prejudice
in the underlying case.
So that is not and cannot be how Ken's Foods
get the coverage here.
And our point is that that is the allocation of risk.
If they wished to put it within anything
that we had paid for or that they had paid for
or coverage that they had purchased from us,
that would be a different question.
But what they're asking the court to do
in this case is something different.
What they're asking the court to do is say,
"We resolved everything under the policy.
Steadfast has paid us more than a million
dollars in coverage.
We've agreed to dismiss all claims under the policy.
They've waived them here
and they've dismissed them with prejudice."
But what we're saying is that under the common law,
you should look to doctrines of fairness or public policy
and impose a different result than what we bought.
-: But how do you deal with their hypothetical,
which is that if they hadn't done this,
you'd be looking at $8 million more,
and you'd be arguing that they didn't mitigate
their risk as they're required.
So how do you address that?
And also, why isn't there some logic to that?
-: Well, I think I'll answer
the first question first, I guess.
Well, I guess, I'll answer,
maybe I'll switch that around,
answer the second question first.
Because the McNeil Lab case that I referenced earlier
actually had a pretty good explanation of this.
And what they said is that these arguments
do have some superficial appeal.
But when you get down to the legal analysis,
and we block quoted most of the relevant language
of McNeil Lab in our brief, and what they said
is really when you get down to the legal analysis,
it doesn't work as a matter of law.
First is, and there's a couple reasons.
First is that it misframes the issue,
because as I mentioned, what they're arguing in this case
is wouldn't it be more fair
to have a different result than what we bought?
Or wouldn't that be a better result for everyone?
And that under Massachusetts law
is not a grounds for disregarding the policy.
Secondarily, the notion that this creates disincentives
or an inappropriate incentive structure is incorrect,
especially in the first party insurance context,
because as was mentioned, in the real world,
if you're talking about a first party insurance policy,
you're dealing with the insured's
own business in their own property.
You're not dealing with their liability to a third party.
So they have their own incentives to protect
their own business in their own insured.
They have competitive repercussions.
They may go out of business
if they just elect to shut down
in order to recover insurance.
They may have,
it may impact their personal relationships
in the industry with customers, with business partners,
with whoever else it may be.
In this particular case, Ken's Foods has alleged
that some of those costs related to compliance
with state regulators.
They're not in a position where they can just ignore
state regulators to manipulate the insurance coverage.
And if you expand the precedent that they're asking for,
it would actually apply on a broader basis
to potentially say an insured who lets damage happen,
that may subject themselves to civil
or criminal liability if they were to let a fire happen
or if they would let something happen
that would potentially put other parties in danger.
So there are other incentives at work here as opposed to it
just being about the money. -: I get there are other
incentives and they wanna keep in business.
But don't you,
what's your answer?
We asked your brother, does Steadfast win this case
if they hadn't mitigated?
So you're saying you couldn't use that argument
that they didn't mitigate?
-: But it would be dictated by the policy,
which is consistent with our position in the entire case.
So if they had shut down-
-: So again, so if they had not done this,
you wouldn't be able to argue that their duty
to mitigate is only post-suspension,
t's not pre-suspension?
And so I just wanna hold you,
so when we write that into this decision
and you're the responsible for that,
the industry is gonna like that?
-: It goes to what's covered
once there is a suspension of operations,
which is not the cost that you incur
to keep your business up and running.
It's the income that you lose.
So in either case, it would not be
as if once you get to the shutdown-
-: No, but they made a different argument.
They're saying that they would've argued,
had we not done this, that we didn't mitigate.
Again, you get to write our decision for us.
We're gonna have that footnote in there.
How do we address their argument?
Counsel for Ken's for the insurance company says,
"Nope, they didn't have a duty to mitigate."
You want that in the opinion?
-: No, well, no one is disputing that the duty
to mitigate exists under the law.
What we're saying is that the way the duty
to mitigate would come in if they had a suspension
of operations would be to address the amount
of recoverable compensation that they could receive
if that were to occur.
It does not require any corresponding obligation
to repay costs that are incurred
to keep their business up and running.
What they would be entitled to
would be some sort of loss of business income,
which is subject to the ordinary
and the contractual duty to mitigate.
And the amount of recovery may be impacted,
but it would not be a scenario
where it would be an independent-
-: Can I ask you a different question?
And sort of dovetails off
of what Justice Kafker is asking you,
which is if they did not avoid the suspension,
would you, the insurer, have
by incurring these $2 million in costs,
if they did not avoid it, what would preclude,
what would you be arguing instead?
If they just let the shutdown happen,
even though they could have avoided it for $2 million,
what would be your argument under the policy?
-: Again, it would be the same argument,
that they would get the amount of lost business income
that they sustained that is necessary
as a result of the suspension.
-: Even though they could have avoided
altogether the closure?
-: Well, that would go to the amount of recoverable
in the sense that it's subject to,
you can't just close unless you have to, right?
That it's a necessary closure suspension of operations.
-: Right, and that would've been your argument.
That they allowed themselves to close
even though they could have avoided the closure.
So it wouldn't have been like, "I pay 10 million.
Here you go, here's your check."
You would've had an argument
under the policy. Dolan: Correct.
-: That they eyes wide open allowed themselves
to close even though they could have avoided it.
-: And we would've been dealing within the four corners
of the policy and the application of the policy
rather than these untethered concepts.
-: So when we're talking about duty to mitigate,
not mitigate, you're talking about post-suspension.
And I think the more appropriate argument
that you would've been making had they not incurred
would've been they had a duty to avoid the closure.
-: Yeah and/or they could have been able
or to open back up within. -: A shorter period of time.
-: Short period of time.
And I would also note too that the numbers
that are being thrown around, just procedurally,
I wanna make sure that I'm on the record with this,
that the issue before you was addressed
at an early summary judgment motion in the underlying case.
So there never was any discovery as to the notion
that they spent $2 million to save $10 million.
I wanna make sure that my silence
is not acceptance of those numbers.
Those are not numbers that have been litigated.
Those are their allegations.
-: I think we're aware of the scope of our certification.
-: Okay, yeah, I just wanted to make sure
that I'm not waiving any right
to dispute what the numbers- -: First Circuit about that.
-: Okay. -: Can I just make sure,
I wanna make sure I understand what you just said
to Justice Wendlandt.
You would be arguing, had they just stood back
and let it happen, you wouldn't be arguing
you shouldn't have sat back and let it happen.
-: Yeah, that would go to the amount of,
it would revert back to the policy.
-: 'Cause the policy says you have to mitigate once?
-: Once you suspend, correct?
If they actually had to suspend their operations
as a result of this because they didn't do this,
then it would go to the amount of recovery
that was available under the contract.
-: So under the contract, they're not obligated
to do anything until the triggering event.
And then they are required to mitigate.
-: And correspondingly, correct.
And we're correspondingly not obligated
to reimburse them for the cost if they do-
-: Because they mitigated too early?
Is that it?
-: No, I don't think that's right.
-: Under the contract.
-: Yeah, and I think it goes back to the,
and it's the High Plains Beef case
that we cited in our brief.
It's a federal court case from Kansas
kind of explained this issue that an insured
is not prejudiced if they're able to continue
their operations, because the coverage that they purchased
never applied in the first place.
And they say that expressly in the case.
That if you're able to continue your operations,
even if it's at a reduced capacity,
you're not prejudiced because your insurance company
doesn't pay you because what you did purchase
was never triggered to begin with.
Again, we're dealing with a lot of persuasive authority,
I recognize, because there has been no Massachusetts
appellate case that's addressed it.
But I think that that case has a good explanation
of why that is.
And again, as I mentioned, the McNeil Lab case.
-: So it's that gap that we're dealing with.
Again, they contracted for cleanup costs.
They contracted for emergency expenses necessary
to prevent environmental damage,
substantial environmental damage.
What they didn't contract for is this sort of extra work
they had to do to keep in business.
Dolan: Right.
-: 'Cause they did, again, they had to establish
the necessity of, as you explained to Justice Wendlandt,
the necessity of ceasing operations.
But that there's a gap out there
and they couldn't bought insurance for it either,
'cause you didn't sell it and nobody else does.
But there's this gap that's out there.
Then you say that that we leave to the market.
-: Right, but it's undisputably not part
of what they purchased from us is at the end of the-
-: But they couldn't purchase it.
It's this kind of,
and I'm not saying- -: I agree with they couldn't,
because there have been cases,
the McNeil lab case that we cited, I think was 1986.
One of the cases that they cite
was the Coal City case from back in 1956
that had language that,
so even if it hasn't been litigated in this precise context,
several cases and several ISO forms and several other things
have addressed this on a policy basis.
And the important thing is that under Massachusetts law,
it's important to enforce the insurance contract
pursuant to the risk that the parties agreed to cover.
And that if an insurance company is obligated
to pay costs on grounds of public policy or fairness,
that's not something that they ever underwrote.
And it would undermine the predictability
of the stability that comes,
that undermines the entire,
or that underlies, excuse me, the entire insurance industry,
because that's the fundamental function of insurance
is to underwrite certain risks,
enter into a policy that accurately reflects the risk,
and accept a premium that also accurately reflects the risk.
And I know I'm a little bit late on time,
and I'll just make one last point I guess in that regard
is that it's not just the insurance industry.
That it's other industries that rely
upon the certainty of enforcement of contracts
and allocations of risk as they're written,
whether it's construction and additional insured
and indemnity issues, whether it's banking,
whether it's finance, that the predictability
and enforcement of contracts has broader implications
than just the narrow facts of this case,
and both within the insurance industry
that would have to price in not just the particular cost
that we're talking about here,
but the unpredictability that the court may decide
that other costs are consistent with public policy
other than just mitigation costs.
And that they may have to factor in those costs
into their underwriting process,
which would result in extraordinary increases
in premiums across the commonwealth.
So again, I recognize that I'm over time,
so if you have any other questions
I'm happy to answer them.
But otherwise, we would rest on our briefs.