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SJC-13303,
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Ken's Foods, Inc. v. Steadfast Insurance Company.
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Okay, Attorney Green, whenever you're ready.
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Good morning, and may it please the court,
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Lawrence Green, joined by Gregory Paonessa,
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representing the appellant, Ken's Foods.
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We have before this court a pure question of law
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as certified by the First Circuit Court of Appeals.
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The question is very clear.
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We have provided this court a roadmap
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firmly based upon Massachusetts law,
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supported by cases from sister states,
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supported by treatises, supported by public policy,
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which should lead this court to the conclusion
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that the answer is affirmative
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to the question of the First Circuit.
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Steadfast, in turn, the appellee,
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doesn't want this court to get there.
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They have put up roadblocks.
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The first part of their argument-
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Could you get beyond the metaphors,
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'cause we gotta interpret this insurance policy,
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and I'd like you to interpret three provisions for me.
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Certainly, your Honor.
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So first, there's provision C,
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then there's the emergency provision,
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which I'd like to talk about a little bit,
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which you conceded, I guess.
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And H.
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So C covers the cleanup costs, right?
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That's correct, your Honor.
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And there was no dispute on that.
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And by the way,
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and there's no issue about whether these extra costs
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could fit within the cleanup costs?
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And we are not arguing that, Your Honor.
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These are mitigation costs.
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The cleanup costs were separately resolved
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in the federal court case.
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Okay.
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But I wanna make sure that it's clear to you.
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It's correct.
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There's no way that C covers these issues, right?
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That is correct, Your Honor.
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So now, take me to the emergency provision,
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'cause you conceded that,
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and I'm not sure I understand why
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that's not closer to this than H.
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So tell me why these costs don't fit
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within the emergency provision.
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Your Honor, our overall position in this case
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is based upon a common law obligation
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that supplements the insurance policy.
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We are not arguing about a particular coverage here.
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But, then again-
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And frankly, Your Honor, the question-
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Excuse me, Your Honor, go ahead.
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This is gonna be more decided
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on specifics than generalities.
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So the emergency provision is not applicable here.
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It's not triggered
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because there's not a danger of environment,
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further danger of environmental contamination.
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Is that right?
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That argument might have been made, Your Honor,
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but we are not relying on that
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because
Well, but I think.
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Go ahead.
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Because we are, in essence, saying,
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and the question that has been certified before this court
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is we, Ken's, spent $2 million to save Steadfast $10 million
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and we're not looking.
I really want you
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to answer my questions,
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because one of the questions I've got is,
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okay, you want this common law duty
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extended into the suspension provision,
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but you're not suggesting it's implicated
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by the emergency provision.
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Why is that?
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It is not implicated by the emergency provision,
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Your Honor, because the exact wording
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of the emergency provision really doesn't deal
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with what we were talking about here.
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But the exact wording of the suspension provision
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doesn't deal with it either.
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But you say nonetheless we should bootstrap the common law.
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Again, why doesn't it apply to the emergency provision
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but it would apply in the other one?
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Because, again, from our perspective,
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we obviously want environmental contamination cleaned up,
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and the provision covered that.
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It also covered emergency measures
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on top of the provision, right?
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Yes, it did, Your Honor.
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We are not-
You're waiving
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that argument, right?
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You're just focused on the suspension provision,
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and you're saying under that,
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read into this particular provision,
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the common law duty to mitigate damages.
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That is correct.
That's your argument.
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You've waived any other argument.
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We were not relying on the emergency argument.
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But before you leave my point-
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Yes, please, Your Honor.
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'Cause I'm trying to understand
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why you would waive it there,
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because you clearly didn't think there was any merit to it.
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But you want us to do basically the same thing
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in the suspension provision,
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which actually even has more negative language
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'cause it's so explicitly only references after suspension.
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That's the question I want answered before you move on.
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We presented this case based upon
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a common law supplement to H, which was firmly founded
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when we filed the case before the District of Massachusetts
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on the Demers case, Judge Tauro's case,
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that had come out in 2009,
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which dealt with this issue foursquare.
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So yes, Your Honor, we placed our reliance there.
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We were not looking at the provision of C.
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But again, and I'll stop.
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But so you're saying that there was no common law
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addition to the emergency provision.
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It only applies to the suspension provision.
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Why or you just gave it up?
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I'm just trying to understand the logic.
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The common law is very well-developed
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on the issue that we have briefed here, Your Honor.
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And it relates more clearly to the suspension provision.
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What was done here was really to,
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the coverage in question was a $10 million coverage
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per month for suspension of operations.
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That was the money that was saved here.
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That is what was implicated here
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as opposed to more emergency expenses,
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which is why we're talking about H.
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Go ahead.
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Thank you, Your Honor.
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So what Steadfast has done here
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is the major part of their argument.
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The first part of their brief basically says,
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"Simply look at the policy, i.e. the contract."
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Look at that.
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The First Circuit roundly criticized that argument below.
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The First Circuit said, "Wait a moment."
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It is clear.
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It is clear, even under the Mount Vernon case
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that was your primary case below,
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that Mount Vernon looked at common law.
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And the First Circuit said-
Just drill on that
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for a minute.
Certainly.
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We've looked at that.
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So the question is big picture.
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I'll get out of the minutiae for one second.
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Big picture.
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How are you asking us to look at the common law
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as we look at the Mount Vernon case
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and think about its application here?
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Are you saying that the common law is going to assist
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in interpreting the insurance contract?
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Or are you saying that, nope,
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we are going to supplement the contract
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by infusing the common law separate and distinct
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from any particular part of the contract?
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It's not separate and distinct, Your Honor,
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but what we have cited to,
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we all agree, there's no disagreement here,
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that Massachusetts recognizes
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the obligation to mitigate damages.
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Our next part of the roadmap,
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to answer the court's question here,
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is to say we have case after case
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looking at insurance policies where the court
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has supplemented the insurance policies.
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But that's based on language within the policy, correct?
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And also based upon common law principles
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beyond that language.
Like Mount Vernon,
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and I think to echo Justice Lowy,
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Mount Vernon dealt with the ward's duty to defend.
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Yes, it dealt with the-
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And then based upon the contract language
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of the duty to defend, the question at Mount Vernon
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was whether that encompasses a counterclaim.
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And we looked at the in for one,
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in for all common law doctrine, correct?
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That is correct, Your Honor.
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We can look at-
But it starts
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with the contract language.
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That particular case did start
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with the contract language.
And here we don't have
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contract language.
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It's an absent self.
You're not relying
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on a specific contractual clause.
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But consider this, Your Honor.
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What if we had a situation here
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where Ken's simply failed to mitigate damages
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the day before a suspension occurred?
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We know that this policy-
But then, Ken's might have
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gone out of business.
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That's true.
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But let me complete my point here, Your Honor.
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We know for sure-
I guess just before you go
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off on the policy issue,
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to go back to Justice Gaziano's question,
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which was usually, in fact I would argue, always,
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when you have the need to interpret a contract,
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which is what the policy is,
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you start with the words of the policy.
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And in the duty to defend cases,
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there were words in the policy about a duty to defend.
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And the question was, "What's the scope of that?"
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Here, you're saying the policies words don't apply,
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but we should glom on this common law duty,
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because there is a duty to mitigate damages.
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And so what Ken's Foods has done in effect
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is save the insurer the $10 million.
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That is correct, Your Honor.
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And so what is your closest analogy
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when somebody's trying to interpret a contract
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that clearly doesn't, in its plain words,
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apply and is not ambiguous?
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Do we glom on this common law duty?
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Because if you're relying on the Mount Vernons of the world,
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at least those were hooked into the duty to defend
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language of the contract.
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Yes, Your Honor, but we're talking about
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going beyond the policy.
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I was just positing a situation,
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because I believe this answers your question.
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If Ken's had not fully mitigated its damages
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before the suspension took place,
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we know that the contract said
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you have to mitigate after the suspension.
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You can rest assured that Steadfast
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would've been raising all kinds of red flags saying,
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"We're not paying a dime for that suspension
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of obligations because you failed to mitigate."
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Steadfast would've been looking beyond the contract.
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They would've been looking at common law principles.
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What we are saying to the court is we have authority
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after authority from others-
And would you concede then
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in that hypothetical
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that Steadfast would've won that argument?
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Steadfast would've won that argument,
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and Steadfast would've been not relying
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on the policy, Your Honor.
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They would've been relying
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on something outside of the contract.
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And my statement to you and to the Justices of this court
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is we have the Demers case,
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District of Massachusetts applying Massachusetts law.
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That's after the loss.
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You keep on mentioning Judge Tauro's case.
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That case is after the loss.
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After a triggering event.
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After a triggering event.
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It was really during the course of a triggering event,
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action was taken to basically safeguard
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some things during the course of a fire here.
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So here, Your Honor, we had a triggering event.
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We know that there's a pollution event,
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and the next thing that could happen here
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is there's going to be potentially
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a suspension of operations.
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So unlike the Roche Brothers case
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where someone's removing snow
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before there's any risk to a roof,
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and they cite to Roche Brothers as their sole authority,
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their lead authority on the notion
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00:12:37.710 --> 00:12:41.400
of the common law principle.
Well, a California case too.
272
00:12:41.400 --> 00:12:43.740
They had a lower court case from California.
273
00:12:43.740 --> 00:12:45.870
And we've argued in our brief
274
00:12:45.870 --> 00:12:48.000
why that is distinguishable.
275
00:12:48.000 --> 00:12:50.430
We have the Demers case and we have cases
276
00:12:50.430 --> 00:12:53.550
from the vast majority of other jurisdictions
277
00:12:53.550 --> 00:12:55.830
that have considered this to say that it's only fair,
278
00:12:55.830 --> 00:12:56.700
and Your Honor-
279
00:12:56.700 --> 00:12:58.140
Well, no, there're really
280
00:12:58.140 --> 00:13:00.240
aren't cases directly on point.
281
00:13:00.240 --> 00:13:02.370
Everyone's distinguishing everything.
282
00:13:02.370 --> 00:13:07.370
Can I ask you, at 2-51, they include a provision
283
00:13:08.280 --> 00:13:11.493
that says you could have bought in the record.
284
00:13:13.170 --> 00:13:15.150
Why is that not right?
285
00:13:15.150 --> 00:13:16.650
We disagree with that, Your Honor.
286
00:13:16.650 --> 00:13:18.423
As argued in our brief-
287
00:13:19.650 --> 00:13:21.990
I know you say that these,
288
00:13:21.990 --> 00:13:23.373
was that a CGL?
289
00:13:24.480 --> 00:13:28.950
I haven't read closely, but I quickly skimmed it.
290
00:13:28.950 --> 00:13:33.210
Is that not a pollution exclusion provision
291
00:13:33.210 --> 00:13:35.070
where you could buy that somewhere?
292
00:13:35.070 --> 00:13:36.600
Where does that come from?
293
00:13:36.600 --> 00:13:40.440
What they cite to, Your Honor, is a commercial policy.
294
00:13:40.440 --> 00:13:42.090
It's argued in our case-
295
00:13:42.090 --> 00:13:44.640
Literally, this is a fact question.
296
00:13:44.640 --> 00:13:47.910
I've read 2-51 is that,
297
00:13:47.910 --> 00:13:49.770
that is a CGL provision?
298
00:13:49.770 --> 00:13:53.700
It's not a policy that you can add
299
00:13:53.700 --> 00:13:55.962
to this pollution provision?
300
00:13:55.962 --> 00:13:59.250
It is not available in a pollution policy case.
301
00:13:59.250 --> 00:14:00.270
We argue that.
302
00:14:00.270 --> 00:14:02.423
It's argued more fully in the amicus brief.
303
00:14:02.423 --> 00:14:04.860
Just again, just 'cause I'm gonna go back
304
00:14:04.860 --> 00:14:06.390
to that and have to look at that.
305
00:14:06.390 --> 00:14:09.877
When I read 2-51, he's gonna stand up and say,
306
00:14:09.877 --> 00:14:11.700
"You could have bought that.
307
00:14:11.700 --> 00:14:13.650
And had you bought that,
308
00:14:13.650 --> 00:14:15.297
you would've been compensated for it,
309
00:14:15.297 --> 00:14:16.257
but you chose not to."
310
00:14:16.257 --> 00:14:18.180
And the answer to that is what?
311
00:14:18.180 --> 00:14:20.760
And again, focused on 2-51.
312
00:14:20.760 --> 00:14:25.560
It was not available for this pollution policy period.
313
00:14:25.560 --> 00:14:27.180
It was not available.
314
00:14:27.180 --> 00:14:29.760
And Steadfast is incorrect saying it was available.
315
00:14:29.760 --> 00:14:33.270
It's not available from Steadfast,
316
00:14:33.270 --> 00:14:34.950
or it's not available in the industry?
317
00:14:34.950 --> 00:14:36.870
It's not available in the industry,
318
00:14:36.870 --> 00:14:38.970
and Steadfast has pointed to nothing on that.
319
00:14:38.970 --> 00:14:40.020
All they've done, Your Honor,
320
00:14:40.020 --> 00:14:42.570
is point to a commercial policy
321
00:14:42.570 --> 00:14:45.720
as opposed to a pollution policy.
322
00:14:45.720 --> 00:14:47.190
So, again, when I go back
323
00:14:47.190 --> 00:14:49.530
and read these treatises and other things,
324
00:14:49.530 --> 00:14:51.750
I'm gonna find that you're right,
325
00:14:51.750 --> 00:14:54.720
that you can't buy this kind of coverage out there.
326
00:14:54.720 --> 00:14:56.160
If you can, Your Honor,
327
00:14:56.160 --> 00:14:58.230
we certainly don't know it from Steadfast.
328
00:14:58.230 --> 00:15:00.090
They haven't cited to that.
329
00:15:00.090 --> 00:15:01.830
And speaking of treatises, Your Honor,
330
00:15:01.830 --> 00:15:02.937
and I do wanna make this point.
331
00:15:02.937 --> 00:15:05.430
No, I know you're gonna now take this to Couch.
332
00:15:05.430 --> 00:15:06.540
Right?
Thank you, Your Honor.
333
00:15:06.540 --> 00:15:07.920
Right, okay.
334
00:15:07.920 --> 00:15:11.010
And I won't quote it 'cause it's right here
335
00:15:11.010 --> 00:15:12.720
on page 29 of the brief.
336
00:15:12.720 --> 00:15:16.560
Couch summarizes law out there
337
00:15:16.560 --> 00:15:18.780
looking at the case law stating why
338
00:15:18.780 --> 00:15:21.090
this is good public policy.
339
00:15:21.090 --> 00:15:25.050
This court has cited Couch many, many times.
340
00:15:25.050 --> 00:15:28.650
It's found on page 30 and on in our brief.
341
00:15:28.650 --> 00:15:30.030
And yes.
342
00:15:30.030 --> 00:15:33.060
Yes, it only makes sense for the very good reasons
343
00:15:33.060 --> 00:15:36.720
stated in the Couch treatise here.
344
00:15:36.720 --> 00:15:38.370
Okay, so I know what Couch is.
345
00:15:38.370 --> 00:15:39.390
Can I ask you another set
346
00:15:39.390 --> 00:15:40.440
of questions?
Certainly, Your Honor.
347
00:15:40.440 --> 00:15:43.020
So Mount Vernon makes the point about
348
00:15:43.020 --> 00:15:46.713
litigation, avoidance, and who bears costs.
349
00:15:48.030 --> 00:15:53.030
So here we've got sort of this preventive mitigation.
350
00:15:54.240 --> 00:15:58.020
And I understand there's a difference between the snow case
351
00:15:58.020 --> 00:16:01.110
where it's not about the fall.
352
00:16:01.110 --> 00:16:04.893
In this case, where there's an ongoing emergency.
353
00:16:06.330 --> 00:16:09.750
That line drawing is gonna be difficult, right?
354
00:16:09.750 --> 00:16:11.460
I don't believe it should be, Your Honor.
355
00:16:11.460 --> 00:16:14.010
Okay, why not?
Clearly, the Roche Brothers'
356
00:16:14.010 --> 00:16:18.240
snow removal case is on one side of the line.
357
00:16:18.240 --> 00:16:20.130
We need three things here, Your Honor.
358
00:16:20.130 --> 00:16:23.670
We need something very imminent to be happening here.
359
00:16:23.670 --> 00:16:25.920
In our case, we already had a triggering event,
360
00:16:25.920 --> 00:16:27.510
and there was an imminent plant closure.
361
00:16:27.510 --> 00:16:28.950
That's point one.
362
00:16:28.950 --> 00:16:32.550
Point two, the costs need to be reasonable.
363
00:16:32.550 --> 00:16:35.010
You just can't go out and do something exorbitant
364
00:16:35.010 --> 00:16:35.850
and it has to be reasonable.
365
00:16:35.850 --> 00:16:40.050
And three, it has to save the insurance company money.
366
00:16:40.050 --> 00:16:43.610
So these are three very, very clear tests.
367
00:16:43.610 --> 00:16:47.372
Is the second and the third different?
368
00:16:47.372 --> 00:16:48.720
The second and the third are different, Your Honor.
369
00:16:48.720 --> 00:16:51.817
Let's take, for example, Ken's required
370
00:16:51.817 --> 00:16:55.770
$11 million to avoid a plant closure.
371
00:16:55.770 --> 00:16:57.960
The cases would recognize you can't get more money
372
00:16:57.960 --> 00:17:01.350
than what you do to save Steadfast money here.
373
00:17:01.350 --> 00:17:03.600
Is that because there is a,
374
00:17:03.600 --> 00:17:05.670
you're going back to the words of the contract now?
375
00:17:05.670 --> 00:17:09.605
No, I'm going back to the common law recognition here.
376
00:17:09.605 --> 00:17:14.310
I was just answering the question of Justice Kafker here
377
00:17:14.310 --> 00:17:17.160
that what is the bright line here?
378
00:17:17.160 --> 00:17:18.060
It's three things.
379
00:17:18.060 --> 00:17:20.970
It's immanency, it's reasonable,
380
00:17:20.970 --> 00:17:23.340
and you have to save money.
381
00:17:23.340 --> 00:17:24.870
And those are very bright lines.
382
00:17:24.870 --> 00:17:27.210
So I will not tell the court here
383
00:17:27.210 --> 00:17:29.250
that we couldn't have more litigation,
384
00:17:29.250 --> 00:17:30.267
but that's what courts are for,
385
00:17:30.267 --> 00:17:32.310
and the courts ought to be able to distinguish
386
00:17:32.310 --> 00:17:33.690
Roche Brothers from this case.
387
00:17:33.690 --> 00:17:36.300
Since you're not gonna get any rebuttal time,
388
00:17:36.300 --> 00:17:37.530
let me ask you the question
389
00:17:37.530 --> 00:17:41.280
that you'd wanna be able to answer on rebuttal.
390
00:17:41.280 --> 00:17:44.850
So assuming we can just take the common law
391
00:17:44.850 --> 00:17:47.520
divorce from a provision,
392
00:17:47.520 --> 00:17:52.520
what we're going to hear from the appellee is two things.
393
00:17:53.220 --> 00:17:57.210
One, that the litigation between imminent
394
00:17:57.210 --> 00:18:00.870
as opposed to maintenance slash prevention
395
00:18:00.870 --> 00:18:03.930
is going to have a huge impact
396
00:18:03.930 --> 00:18:05.340
on how much litigation we have.
397
00:18:05.340 --> 00:18:09.270
And the second thing they're inevitably going to say
398
00:18:09.270 --> 00:18:11.610
is that we're gonna completely scrap the market
399
00:18:11.610 --> 00:18:14.100
and the ability to price insurance.
400
00:18:14.100 --> 00:18:15.390
So you don't get rebuttal.
401
00:18:15.390 --> 00:18:16.560
So there's your opportunity
402
00:18:16.560 --> 00:18:18.270
to do your rebuttal.
I appreciate the question,
403
00:18:18.270 --> 00:18:19.103
Justice Lowy.
404
00:18:20.190 --> 00:18:23.850
The question that the First Circuit has raised
405
00:18:23.850 --> 00:18:26.400
before the court talks about immanency,
406
00:18:26.400 --> 00:18:30.240
to prevent imminent covered loss here.
407
00:18:30.240 --> 00:18:31.680
So to the extent he's going
408
00:18:31.680 --> 00:18:34.530
to be getting into that argument here,
409
00:18:34.530 --> 00:18:37.590
we're not making any case other than imminent.
410
00:18:37.590 --> 00:18:39.390
And there can be no question in this case
411
00:18:39.390 --> 00:18:41.190
where we already have a triggering event
412
00:18:41.190 --> 00:18:46.080
and an imminent plant loss here, plant closure.
413
00:18:46.080 --> 00:18:47.400
It very much was imminent.
414
00:18:47.400 --> 00:18:50.730
We only want the court to answer this question,
415
00:18:50.730 --> 00:18:52.800
and that's what the First Circuit is saying.
416
00:18:52.800 --> 00:18:55.200
In terms of what's going to happen
417
00:18:55.200 --> 00:18:58.140
with the market and whatever here,
418
00:18:58.140 --> 00:18:59.490
ultimately here, Your Honor,
419
00:18:59.490 --> 00:19:03.783
this saves the carrier's money here.
420
00:19:04.890 --> 00:19:06.930
This saves the carrier's money.
421
00:19:06.930 --> 00:19:09.270
Steadfast in this case would've quickly had
422
00:19:09.270 --> 00:19:10.533
to have paid $10 million.
423
00:19:11.760 --> 00:19:14.280
They didn't have to pay that and the money was saved.
424
00:19:14.280 --> 00:19:15.780
And what the treatise says,
425
00:19:15.780 --> 00:19:19.110
what the other courts from other states recognize here
426
00:19:19.110 --> 00:19:22.470
is that there is a strong public policy
427
00:19:22.470 --> 00:19:25.470
to mitigate damages and concomitant to that.
428
00:19:25.470 --> 00:19:27.330
It's to be reimbursed for the reasonable
429
00:19:27.330 --> 00:19:28.347
and necessary expenses of litigation.
430
00:19:28.347 --> 00:19:30.300
Can I ask one last question?
431
00:19:30.300 --> 00:19:31.410
Certainly.
One last question.
432
00:19:31.410 --> 00:19:34.410
So is this a sui generis case?
433
00:19:34.410 --> 00:19:36.240
I mean, both sides are describing this
434
00:19:36.240 --> 00:19:37.413
as the sky is falling.
435
00:19:39.930 --> 00:19:43.803
Again, normal cleanup costs would be covered.
436
00:19:46.033 --> 00:19:47.100
Post-suspension would be covered.
437
00:19:47.100 --> 00:19:49.320
Here we've got this oddity
438
00:19:49.320 --> 00:19:52.593
where they're continuing their business,
439
00:19:53.520 --> 00:19:55.890
thereby doing this kind of stuff
440
00:19:55.890 --> 00:19:58.710
that doesn't fit within the all the standard provisions.
441
00:19:58.710 --> 00:20:01.230
Is this just a strange case
442
00:20:01.230 --> 00:20:03.060
and it's not a sky is falling case?
443
00:20:03.060 --> 00:20:04.950
It's just the solution here
444
00:20:04.950 --> 00:20:08.460
is odd and unusual and creative,
445
00:20:08.460 --> 00:20:11.670
but just, it's just a weird case.
446
00:20:11.670 --> 00:20:15.540
It is certainly a very fact-specific case, Your Honor,
447
00:20:15.540 --> 00:20:19.560
in terms of what was done here to prevent a plant closure,
448
00:20:19.560 --> 00:20:22.800
because these really weren't cleanup costs per se
449
00:20:22.800 --> 00:20:27.390
as really cost dedicated to prevent this closure here,
450
00:20:27.390 --> 00:20:29.250
which may be another reason, Your Honor,
451
00:20:29.250 --> 00:20:31.380
to answer Justice Lowy's question
452
00:20:31.380 --> 00:20:33.450
that we shouldn't be concerned
453
00:20:33.450 --> 00:20:35.970
about all kinds of markets opening up
454
00:20:35.970 --> 00:20:37.650
in some parade of horribles.
455
00:20:37.650 --> 00:20:39.270
I cannot represent to this court
456
00:20:39.270 --> 00:20:42.032
that there won't be a future Roche brothers
457
00:20:42.032 --> 00:20:47.032
of the world case, but just as Superior Court denied relief,
458
00:20:47.490 --> 00:20:50.850
in that case, I have no fear that other courts
459
00:20:50.850 --> 00:20:55.230
will deny that type of what is really a frivolous case.
460
00:20:55.230 --> 00:20:56.130
Thank you, Your Honors.
461
00:20:56.130 --> 00:20:56.963
Thank you.
462
00:20:58.680 --> 00:20:59.913
Okay, Attorney Dolan.
463
00:21:07.740 --> 00:21:08.573
Good morning.
464
00:21:08.573 --> 00:21:09.930
And may it please the court, Jeffrey Dolan,
465
00:21:09.930 --> 00:21:11.310
on behalf of the defendant,
466
00:21:11.310 --> 00:21:13.710
appellee, Steadfast Insurance Company.
467
00:21:13.710 --> 00:21:15.510
Several of the questions that were asked early on
468
00:21:15.510 --> 00:21:16.800
in Attorney Green's presentation
469
00:21:16.800 --> 00:21:17.910
I think hit the nail on the head.
470
00:21:17.910 --> 00:21:20.220
From our perspective, this is a case
471
00:21:20.220 --> 00:21:23.010
that involves two sophisticated commercial parties.
472
00:21:23.010 --> 00:21:24.480
They enter into a contract
473
00:21:24.480 --> 00:21:26.670
that has an agreed upon allocation of risk.
474
00:21:26.670 --> 00:21:29.520
Now, opposing counsel says that they had no opportunity
475
00:21:29.520 --> 00:21:32.400
to ever get mitigation insurance.
476
00:21:32.400 --> 00:21:34.620
Is that true or not true?
477
00:21:34.620 --> 00:21:35.520
It's important.
478
00:21:35.520 --> 00:21:38.040
Yeah, it was not sold by Steadfast.
479
00:21:38.040 --> 00:21:40.320
I think that that goes to the fact that it was undisputedly
480
00:21:40.320 --> 00:21:42.296
not within the allocation of risk and not within-
481
00:21:42.296 --> 00:21:43.320
What about the samples?
482
00:21:43.320 --> 00:21:45.270
Didn't you provide sample policies?
483
00:21:45.270 --> 00:21:47.790
Those are sample policy forms
484
00:21:47.790 --> 00:21:49.440
just that we were able to identify from-
485
00:21:49.440 --> 00:21:52.620
They didn't cover this either, did they?
486
00:21:52.620 --> 00:21:53.970
They related to,
487
00:21:53.970 --> 00:21:55.290
they were just examples that showed
488
00:21:55.290 --> 00:21:56.790
that extra expense prevention
489
00:21:56.790 --> 00:21:58.560
and these are types of things that are contemplated
490
00:21:58.560 --> 00:21:59.850
within the insurance industry.
491
00:21:59.850 --> 00:22:02.250
We cited pretty extensively to the discussion
492
00:22:02.250 --> 00:22:04.020
of this issue in the McNeil Lab case,
493
00:22:04.020 --> 00:22:06.720
which was the federal court case out of New Jersey.
494
00:22:06.720 --> 00:22:11.430
When you sent in 2-51, that's a CGL policy provision.
495
00:22:11.430 --> 00:22:12.660
It's not a pollution.
496
00:22:12.660 --> 00:22:15.060
That's not something out there in the pollution.
497
00:22:16.671 --> 00:22:20.250
Yeah, so they were commercial property policy forms.
498
00:22:20.250 --> 00:22:22.110
Is that sort of, I mean ,
499
00:22:22.110 --> 00:22:25.170
that wasn't something you sold nor is it something
500
00:22:25.170 --> 00:22:29.040
available for in the environmental pollution world.
501
00:22:29.040 --> 00:22:30.480
Is that right?
Yeah, it's intended to show,
502
00:22:30.480 --> 00:22:31.470
'cause the way it would work
503
00:22:31.470 --> 00:22:35.250
ordinarily is that an insured such as Ken's Foods
504
00:22:35.250 --> 00:22:36.540
would work with their agent.
505
00:22:36.540 --> 00:22:38.070
There'd be a whole underwriting process
506
00:22:38.070 --> 00:22:41.010
where a series of forms potentially including those forms
507
00:22:41.010 --> 00:22:43.677
would be compiled to complete the policy.
508
00:22:43.677 --> 00:22:45.840
But as miserable as that is,
509
00:22:45.840 --> 00:22:49.440
when I send my law clerk out to look at the standard forms
510
00:22:49.440 --> 00:22:53.370
out there in social law and insurance,
511
00:22:53.370 --> 00:22:56.160
are there gonna be any standard forms out there
512
00:22:56.160 --> 00:22:57.990
purchasing this kind of stuff
513
00:22:57.990 --> 00:22:59.853
in the pollution insurance world?
514
00:23:00.960 --> 00:23:05.960
No, not in the pollution policy form.
515
00:23:06.390 --> 00:23:09.990
So your argument that you could just go out and buy it
516
00:23:09.990 --> 00:23:14.217
is kind of a little bit misleading then, is that right?
517
00:23:14.217 --> 00:23:15.420
No, I wouldn't agree with that
518
00:23:15.420 --> 00:23:17.520
because you can have commercial property forms
519
00:23:17.520 --> 00:23:20.580
that cover things that are related to pollution.
520
00:23:20.580 --> 00:23:22.410
They don't necessarily all have pollution
521
00:23:22.410 --> 00:23:23.670
exclusions on them.
522
00:23:23.670 --> 00:23:24.930
They may have different endorsements
523
00:23:24.930 --> 00:23:27.420
that allow certain coverages in the pollution context.
524
00:23:27.420 --> 00:23:30.210
And these are intended to show that more broadly,
525
00:23:30.210 --> 00:23:31.920
as the McNeil Lab case explained,
526
00:23:31.920 --> 00:23:33.720
as several other cases have explained,
527
00:23:33.720 --> 00:23:35.910
that the way to deal with these types of coverages
528
00:23:35.910 --> 00:23:38.130
is to require that they be covered.
529
00:23:38.130 --> 00:23:40.080
But I think another point also
530
00:23:40.080 --> 00:23:41.610
is that even if they were-
But again,
531
00:23:41.610 --> 00:23:43.743
if the market doesn't provide it,
532
00:23:45.930 --> 00:23:48.630
again, and I don't mean to bore at this point,
533
00:23:48.630 --> 00:23:49.800
but it's an important point
534
00:23:49.800 --> 00:23:53.490
that you can't go out and get this then.
535
00:23:53.490 --> 00:23:55.440
You'd have to get a whole different,
536
00:23:55.440 --> 00:23:57.120
you'd have to get a CGL policy
537
00:23:57.120 --> 00:23:59.370
that doesn't exclude environmental harm.
538
00:23:59.370 --> 00:24:00.360
Is that what it is?
539
00:24:00.360 --> 00:24:03.180
And then get an extra expense provision.
540
00:24:03.180 --> 00:24:04.710
It's not really out there in the industry.
541
00:24:04.710 --> 00:24:08.010
I mean, just is it or isn't it?
542
00:24:08.010 --> 00:24:09.480
I think they could go out there and get a,
543
00:24:09.480 --> 00:24:11.250
it would have to be a separate type of policy
544
00:24:11.250 --> 00:24:13.950
than what we covered to cover additional risks.
545
00:24:13.950 --> 00:24:15.900
So it's not something that they didn't negotiate
546
00:24:15.900 --> 00:24:17.700
with you that they could have bought.
547
00:24:17.700 --> 00:24:20.070
It's rather they would have to go a whole different route
548
00:24:20.070 --> 00:24:21.630
on insurance to get this.
Correct.
549
00:24:21.630 --> 00:24:23.640
And what it comes down to is whether it's available
550
00:24:23.640 --> 00:24:25.110
in the marketplace or whether it's not.
551
00:24:25.110 --> 00:24:26.340
Our point is that it's not.
552
00:24:26.340 --> 00:24:28.440
It's clearly something that's not contemplated.
553
00:24:28.440 --> 00:24:30.030
When you look at our policy,
554
00:24:30.030 --> 00:24:31.500
it's something that's not contemplated
555
00:24:31.500 --> 00:24:33.000
as compared with these policies
556
00:24:33.000 --> 00:24:35.190
where it can be purchased in other contexts.
557
00:24:35.190 --> 00:24:37.500
You asked us to adopt a minority rule,
558
00:24:37.500 --> 00:24:39.990
and if so, why shouldn't we go
559
00:24:39.990 --> 00:24:43.500
with the preferable public policy ruling?
560
00:24:43.500 --> 00:24:45.150
No, I don't think it's a minority rule
561
00:24:45.150 --> 00:24:46.860
in the sense that I think a lot of the cases
562
00:24:46.860 --> 00:24:51.860
that are cited by Ken's Foods are in different contexts.
563
00:24:52.800 --> 00:24:54.180
For example, you may have a third party
564
00:24:54.180 --> 00:24:56.460
liability insurance policy where you're talking
565
00:24:56.460 --> 00:24:59.215
about an event that's already happened,
566
00:24:59.215 --> 00:25:02.190
and an insurer who's responsible to pay all sums
567
00:25:02.190 --> 00:25:05.820
that the insured may become responsible to a third party.
568
00:25:05.820 --> 00:25:09.300
Whereas the Grebow case, the McNeil Lab case
569
00:25:09.300 --> 00:25:11.190
and others that have addressed the issue
570
00:25:11.190 --> 00:25:13.350
of preventative cost in the context
571
00:25:13.350 --> 00:25:15.240
of a first party insurance policy
572
00:25:15.240 --> 00:25:17.160
have typically come down on the side
573
00:25:17.160 --> 00:25:19.020
that this is not the type of thing
574
00:25:19.020 --> 00:25:21.663
that can be assessed under the common law.
575
00:25:22.920 --> 00:25:27.150
I have trouble with that because this isn't like
576
00:25:27.150 --> 00:25:32.150
the Roche Brothers case because there is a triggering event.
577
00:25:32.880 --> 00:25:35.340
In fact, C is triggered, right?
578
00:25:35.340 --> 00:25:38.970
So we're not dealing with an abstraction
579
00:25:38.970 --> 00:25:40.833
or even a third party liability.
580
00:25:41.760 --> 00:25:44.970
There's first party liability here under C.
581
00:25:44.970 --> 00:25:48.090
It's just how we deal with the relationship
582
00:25:48.090 --> 00:25:49.920
between C and H, right?
583
00:25:49.920 --> 00:25:51.510
Right, so under C,
584
00:25:51.510 --> 00:25:53.250
I think what's important to clarify under C
585
00:25:53.250 --> 00:25:55.980
is that it's the cleanup cost, and as you mentioned earlier,
586
00:25:55.980 --> 00:25:57.840
it is the emergency cost as well.
587
00:25:57.840 --> 00:25:59.190
All of those were paid to the tune
588
00:25:59.190 --> 00:26:00.330
of more than a million dollars.
589
00:26:00.330 --> 00:26:01.163
Those have been paid.
590
00:26:01.163 --> 00:26:03.060
They've been subject to a release,
591
00:26:03.060 --> 00:26:04.590
and they've been dismissed with prejudice
592
00:26:04.590 --> 00:26:06.030
in the underlying case.
593
00:26:06.030 --> 00:26:09.120
So that is not and cannot be how Ken's Foods
594
00:26:09.120 --> 00:26:10.050
get the coverage here.
595
00:26:10.050 --> 00:26:12.660
And our point is that that is the allocation of risk.
596
00:26:12.660 --> 00:26:15.150
If they wished to put it within anything
597
00:26:15.150 --> 00:26:17.820
that we had paid for or that they had paid for
598
00:26:17.820 --> 00:26:19.470
or coverage that they had purchased from us,
599
00:26:19.470 --> 00:26:20.940
that would be a different question.
600
00:26:20.940 --> 00:26:22.620
But what they're asking the court to do
601
00:26:22.620 --> 00:26:23.910
in this case is something different.
602
00:26:23.910 --> 00:26:25.267
What they're asking the court to do is say,
603
00:26:25.267 --> 00:26:27.720
"We resolved everything under the policy.
604
00:26:27.720 --> 00:26:29.460
Steadfast has paid us more than a million
605
00:26:29.460 --> 00:26:30.660
dollars in coverage.
606
00:26:30.660 --> 00:26:33.150
We've agreed to dismiss all claims under the policy.
607
00:26:33.150 --> 00:26:34.260
They've waived them here
608
00:26:34.260 --> 00:26:36.090
and they've dismissed them with prejudice."
609
00:26:36.090 --> 00:26:39.720
But what we're saying is that under the common law,
610
00:26:39.720 --> 00:26:42.780
you should look to doctrines of fairness or public policy
611
00:26:42.780 --> 00:26:45.030
and impose a different result than what we bought.
612
00:26:45.030 --> 00:26:47.490
But how do you deal with their hypothetical,
613
00:26:47.490 --> 00:26:52.290
which is that if they hadn't done this,
614
00:26:52.290 --> 00:26:55.350
you'd be looking at $8 million more,
615
00:26:55.350 --> 00:26:58.890
and you'd be arguing that they didn't mitigate
616
00:26:58.890 --> 00:27:01.170
their risk as they're required.
617
00:27:01.170 --> 00:27:03.060
So how do you address that?
618
00:27:03.060 --> 00:27:07.020
And also, why isn't there some logic to that?
619
00:27:07.020 --> 00:27:09.210
Well, I think I'll answer
620
00:27:09.210 --> 00:27:10.910
the first question first, I guess.
621
00:27:12.960 --> 00:27:13.980
Well, I guess, I'll answer,
622
00:27:13.980 --> 00:27:15.030
maybe I'll switch that around,
623
00:27:15.030 --> 00:27:16.140
answer the second question first.
624
00:27:16.140 --> 00:27:18.420
Because the McNeil Lab case that I referenced earlier
625
00:27:18.420 --> 00:27:21.420
actually had a pretty good explanation of this.
626
00:27:21.420 --> 00:27:23.220
And what they said is that these arguments
627
00:27:23.220 --> 00:27:25.500
do have some superficial appeal.
628
00:27:25.500 --> 00:27:27.510
But when you get down to the legal analysis,
629
00:27:27.510 --> 00:27:29.520
and we block quoted most of the relevant language
630
00:27:29.520 --> 00:27:32.430
of McNeil Lab in our brief, and what they said
631
00:27:32.430 --> 00:27:34.890
is really when you get down to the legal analysis,
632
00:27:34.890 --> 00:27:36.723
it doesn't work as a matter of law.
633
00:27:37.650 --> 00:27:39.210
First is, and there's a couple reasons.
634
00:27:39.210 --> 00:27:40.950
First is that it misframes the issue,
635
00:27:40.950 --> 00:27:44.160
because as I mentioned, what they're arguing in this case
636
00:27:44.160 --> 00:27:46.170
is wouldn't it be more fair
637
00:27:46.170 --> 00:27:48.660
to have a different result than what we bought?
638
00:27:48.660 --> 00:27:50.610
Or wouldn't that be a better result for everyone?
639
00:27:50.610 --> 00:27:51.900
And that under Massachusetts law
640
00:27:51.900 --> 00:27:54.150
is not a grounds for disregarding the policy.
641
00:27:55.050 --> 00:28:00.050
Secondarily, the notion that this creates disincentives
642
00:28:00.690 --> 00:28:03.630
or an inappropriate incentive structure is incorrect,
643
00:28:03.630 --> 00:28:06.060
especially in the first party insurance context,
644
00:28:06.060 --> 00:28:09.990
because as was mentioned, in the real world,
645
00:28:09.990 --> 00:28:12.150
if you're talking about a first party insurance policy,
646
00:28:12.150 --> 00:28:13.620
you're dealing with the insured's
647
00:28:13.620 --> 00:28:15.240
own business in their own property.
648
00:28:15.240 --> 00:28:17.580
You're not dealing with their liability to a third party.
649
00:28:17.580 --> 00:28:19.410
So they have their own incentives to protect
650
00:28:19.410 --> 00:28:21.270
their own business in their own insured.
651
00:28:21.270 --> 00:28:22.680
They have competitive repercussions.
652
00:28:22.680 --> 00:28:23.820
They may go out of business
653
00:28:23.820 --> 00:28:25.470
if they just elect to shut down
654
00:28:25.470 --> 00:28:27.630
in order to recover insurance.
655
00:28:27.630 --> 00:28:28.463
They may have,
656
00:28:28.463 --> 00:28:30.360
it may impact their personal relationships
657
00:28:30.360 --> 00:28:33.630
in the industry with customers, with business partners,
658
00:28:33.630 --> 00:28:34.740
with whoever else it may be.
659
00:28:34.740 --> 00:28:36.810
In this particular case, Ken's Foods has alleged
660
00:28:36.810 --> 00:28:39.660
that some of those costs related to compliance
661
00:28:39.660 --> 00:28:41.220
with state regulators.
662
00:28:41.220 --> 00:28:42.870
They're not in a position where they can just ignore
663
00:28:42.870 --> 00:28:46.170
state regulators to manipulate the insurance coverage.
664
00:28:46.170 --> 00:28:50.610
And if you expand the precedent that they're asking for,
665
00:28:50.610 --> 00:28:55.560
it would actually apply on a broader basis
666
00:28:55.560 --> 00:29:00.180
to potentially say an insured who lets damage happen,
667
00:29:00.180 --> 00:29:01.740
that may subject themselves to civil
668
00:29:01.740 --> 00:29:04.530
or criminal liability if they were to let a fire happen
669
00:29:04.530 --> 00:29:06.360
or if they would let something happen
670
00:29:06.360 --> 00:29:08.880
that would potentially put other parties in danger.
671
00:29:08.880 --> 00:29:13.560
So there are other incentives at work here as opposed to it
672
00:29:13.560 --> 00:29:15.060
just being about the money.
I get there are other
673
00:29:15.060 --> 00:29:16.980
incentives and they wanna keep in business.
674
00:29:16.980 --> 00:29:18.033
But don't you,
675
00:29:19.470 --> 00:29:20.700
what's your answer?
676
00:29:20.700 --> 00:29:24.130
We asked your brother, does Steadfast win this case
677
00:29:25.920 --> 00:29:27.573
if they hadn't mitigated?
678
00:29:28.410 --> 00:29:31.020
So you're saying you couldn't use that argument
679
00:29:31.020 --> 00:29:32.370
that they didn't mitigate?
680
00:29:32.370 --> 00:29:33.900
But it would be dictated by the policy,
681
00:29:33.900 --> 00:29:36.390
which is consistent with our position in the entire case.
682
00:29:36.390 --> 00:29:37.920
So if they had shut down-
683
00:29:37.920 --> 00:29:41.403
So again, so if they had not done this,
684
00:29:42.480 --> 00:29:45.480
you wouldn't be able to argue that their duty
685
00:29:45.480 --> 00:29:47.427
to mitigate is only post-suspension,
686
00:29:47.427 --> 00:29:49.800
t's not pre-suspension?
687
00:29:49.800 --> 00:29:51.240
And so I just wanna hold you,
688
00:29:51.240 --> 00:29:53.580
so when we write that into this decision
689
00:29:53.580 --> 00:29:56.040
and you're the responsible for that,
690
00:29:56.040 --> 00:29:58.728
the industry is gonna like that?
691
00:29:58.728 --> 00:30:00.210
It goes to what's covered
692
00:30:00.210 --> 00:30:01.920
once there is a suspension of operations,
693
00:30:01.920 --> 00:30:04.830
which is not the cost that you incur
694
00:30:04.830 --> 00:30:05.970
to keep your business up and running.
695
00:30:05.970 --> 00:30:08.130
It's the income that you lose.
696
00:30:08.130 --> 00:30:09.990
So in either case, it would not be
697
00:30:09.990 --> 00:30:12.510
as if once you get to the shutdown-
698
00:30:12.510 --> 00:30:14.130
No, but they made a different argument.
699
00:30:14.130 --> 00:30:16.530
They're saying that they would've argued,
700
00:30:16.530 --> 00:30:19.263
had we not done this, that we didn't mitigate.
701
00:30:21.240 --> 00:30:24.060
Again, you get to write our decision for us.
702
00:30:24.060 --> 00:30:25.530
We're gonna have that footnote in there.
703
00:30:25.530 --> 00:30:27.870
How do we address their argument?
704
00:30:27.870 --> 00:30:31.507
Counsel for Ken's for the insurance company says,
705
00:30:31.507 --> 00:30:34.890
"Nope, they didn't have a duty to mitigate."
706
00:30:34.890 --> 00:30:36.480
You want that in the opinion?
707
00:30:36.480 --> 00:30:38.550
No, well, no one is disputing that the duty
708
00:30:38.550 --> 00:30:40.140
to mitigate exists under the law.
709
00:30:40.140 --> 00:30:41.850
What we're saying is that the way the duty
710
00:30:41.850 --> 00:30:44.250
to mitigate would come in if they had a suspension
711
00:30:44.250 --> 00:30:46.590
of operations would be to address the amount
712
00:30:46.590 --> 00:30:49.350
of recoverable compensation that they could receive
713
00:30:49.350 --> 00:30:51.180
if that were to occur.
714
00:30:51.180 --> 00:30:54.600
It does not require any corresponding obligation
715
00:30:54.600 --> 00:30:56.850
to repay costs that are incurred
716
00:30:56.850 --> 00:30:59.370
to keep their business up and running.
717
00:30:59.370 --> 00:31:00.690
What they would be entitled to
718
00:31:00.690 --> 00:31:03.030
would be some sort of loss of business income,
719
00:31:03.030 --> 00:31:04.800
which is subject to the ordinary
720
00:31:04.800 --> 00:31:07.110
and the contractual duty to mitigate.
721
00:31:07.110 --> 00:31:09.810
And the amount of recovery may be impacted,
722
00:31:09.810 --> 00:31:11.220
but it would not be a scenario
723
00:31:11.220 --> 00:31:13.110
where it would be an independent-
724
00:31:13.110 --> 00:31:15.150
Can I ask you a different question?
725
00:31:15.150 --> 00:31:16.950
And sort of dovetails off
726
00:31:16.950 --> 00:31:20.070
of what Justice Kafker is asking you,
727
00:31:20.070 --> 00:31:25.070
which is if they did not avoid the suspension,
728
00:31:25.950 --> 00:31:29.100
would you, the insurer, have
729
00:31:29.100 --> 00:31:31.950
by incurring these $2 million in costs,
730
00:31:31.950 --> 00:31:36.950
if they did not avoid it, what would preclude,
731
00:31:37.140 --> 00:31:39.213
what would you be arguing instead?
732
00:31:40.470 --> 00:31:42.780
If they just let the shutdown happen,
733
00:31:42.780 --> 00:31:45.390
even though they could have avoided it for $2 million,
734
00:31:45.390 --> 00:31:48.360
what would be your argument under the policy?
735
00:31:48.360 --> 00:31:49.800
Again, it would be the same argument,
736
00:31:49.800 --> 00:31:54.030
that they would get the amount of lost business income
737
00:31:54.030 --> 00:31:56.250
that they sustained that is necessary
738
00:31:56.250 --> 00:31:58.170
as a result of the suspension.
739
00:31:58.170 --> 00:32:00.570
Even though they could have avoided
740
00:32:00.570 --> 00:32:02.943
altogether the closure?
741
00:32:03.990 --> 00:32:07.410
Well, that would go to the amount of recoverable
742
00:32:07.410 --> 00:32:09.480
in the sense that it's subject to,
743
00:32:09.480 --> 00:32:13.140
you can't just close unless you have to, right?
744
00:32:13.140 --> 00:32:16.290
That it's a necessary closure suspension of operations.
745
00:32:16.290 --> 00:32:18.180
Right, and that would've been your argument.
746
00:32:18.180 --> 00:32:21.420
That they allowed themselves to close
747
00:32:21.420 --> 00:32:24.030
even though they could have avoided the closure.
748
00:32:24.030 --> 00:32:26.610
So it wouldn't have been like, "I pay 10 million.
749
00:32:26.610 --> 00:32:28.170
Here you go, here's your check."
750
00:32:28.170 --> 00:32:29.760
You would've had an argument
751
00:32:29.760 --> 00:32:31.470
under the policy.
Correct.
752
00:32:31.470 --> 00:32:34.290
That they eyes wide open allowed themselves
753
00:32:34.290 --> 00:32:36.690
to close even though they could have avoided it.
754
00:32:36.690 --> 00:32:38.520
And we would've been dealing within the four corners
755
00:32:38.520 --> 00:32:40.770
of the policy and the application of the policy
756
00:32:40.770 --> 00:32:42.300
rather than these untethered concepts.
757
00:32:42.300 --> 00:32:44.310
So when we're talking about duty to mitigate,
758
00:32:44.310 --> 00:32:47.850
not mitigate, you're talking about post-suspension.
759
00:32:47.850 --> 00:32:49.860
And I think the more appropriate argument
760
00:32:49.860 --> 00:32:52.590
that you would've been making had they not incurred
761
00:32:52.590 --> 00:32:56.340
would've been they had a duty to avoid the closure.
762
00:32:56.340 --> 00:32:58.290
Yeah and/or they could have been able
763
00:32:59.850 --> 00:33:02.640
or to open back up within.
A shorter period of time.
764
00:33:02.640 --> 00:33:04.080
Short period of time.
765
00:33:04.080 --> 00:33:05.970
And I would also note too that the numbers
766
00:33:05.970 --> 00:33:08.880
that are being thrown around, just procedurally,
767
00:33:08.880 --> 00:33:10.680
I wanna make sure that I'm on the record with this,
768
00:33:10.680 --> 00:33:14.520
that the issue before you was addressed
769
00:33:14.520 --> 00:33:18.150
at an early summary judgment motion in the underlying case.
770
00:33:18.150 --> 00:33:21.180
So there never was any discovery as to the notion
771
00:33:21.180 --> 00:33:23.530
that they spent $2 million to save $10 million.
772
00:33:24.450 --> 00:33:26.250
I wanna make sure that my silence
773
00:33:26.250 --> 00:33:27.600
is not acceptance of those numbers.
774
00:33:27.600 --> 00:33:29.190
Those are not numbers that have been litigated.
775
00:33:29.190 --> 00:33:30.723
Those are their allegations.
776
00:33:31.950 --> 00:33:34.590
I think we're aware of the scope of our certification.
777
00:33:34.590 --> 00:33:36.270
Okay, yeah, I just wanted to make sure
778
00:33:36.270 --> 00:33:38.280
that I'm not waiving any right
779
00:33:38.280 --> 00:33:40.380
to dispute what the numbers-
First Circuit about that.
780
00:33:40.380 --> 00:33:41.850
Okay.
Can I just make sure,
781
00:33:41.850 --> 00:33:44.430
I wanna make sure I understand what you just said
782
00:33:44.430 --> 00:33:46.380
to Justice Wendlandt.
783
00:33:46.380 --> 00:33:51.380
You would be arguing, had they just stood back
784
00:33:51.600 --> 00:33:56.250
and let it happen, you wouldn't be arguing
785
00:33:56.250 --> 00:33:59.943
you shouldn't have sat back and let it happen.
786
00:34:01.590 --> 00:34:04.440
Yeah, that would go to the amount of,
787
00:34:04.440 --> 00:34:06.903
it would revert back to the policy.
788
00:34:07.829 --> 00:34:11.280
'Cause the policy says you have to mitigate once?
789
00:34:11.280 --> 00:34:12.870
Once you suspend, correct?
790
00:34:12.870 --> 00:34:14.760
If they actually had to suspend their operations
791
00:34:14.760 --> 00:34:17.280
as a result of this because they didn't do this,
792
00:34:17.280 --> 00:34:19.140
then it would go to the amount of recovery
793
00:34:19.140 --> 00:34:21.000
that was available under the contract.
794
00:34:21.000 --> 00:34:23.670
So under the contract, they're not obligated
795
00:34:23.670 --> 00:34:27.870
to do anything until the triggering event.
796
00:34:27.870 --> 00:34:30.720
And then they are required to mitigate.
797
00:34:30.720 --> 00:34:32.070
And correspondingly, correct.
798
00:34:32.070 --> 00:34:33.780
And we're correspondingly not obligated
799
00:34:33.780 --> 00:34:35.127
to reimburse them for the cost if they do-
800
00:34:35.127 --> 00:34:37.353
Because they mitigated too early?
801
00:34:38.250 --> 00:34:39.548
Is that it?
802
00:34:39.548 --> 00:34:41.056
No, I don't think that's right.
803
00:34:41.056 --> 00:34:42.300
Under the contract.
804
00:34:42.300 --> 00:34:43.260
Yeah, and I think it goes back to the,
805
00:34:43.260 --> 00:34:45.390
and it's the High Plains Beef case
806
00:34:45.390 --> 00:34:46.530
that we cited in our brief.
807
00:34:46.530 --> 00:34:48.150
It's a federal court case from Kansas
808
00:34:48.150 --> 00:34:50.880
kind of explained this issue that an insured
809
00:34:50.880 --> 00:34:53.880
is not prejudiced if they're able to continue
810
00:34:53.880 --> 00:34:56.640
their operations, because the coverage that they purchased
811
00:34:56.640 --> 00:34:58.200
never applied in the first place.
812
00:34:58.200 --> 00:34:59.910
And they say that expressly in the case.
813
00:34:59.910 --> 00:35:02.610
That if you're able to continue your operations,
814
00:35:02.610 --> 00:35:04.980
even if it's at a reduced capacity,
815
00:35:04.980 --> 00:35:07.020
you're not prejudiced because your insurance company
816
00:35:07.020 --> 00:35:10.140
doesn't pay you because what you did purchase
817
00:35:10.140 --> 00:35:11.853
was never triggered to begin with.
818
00:35:12.930 --> 00:35:15.300
Again, we're dealing with a lot of persuasive authority,
819
00:35:15.300 --> 00:35:18.210
I recognize, because there has been no Massachusetts
820
00:35:18.210 --> 00:35:19.440
appellate case that's addressed it.
821
00:35:19.440 --> 00:35:22.440
But I think that that case has a good explanation
822
00:35:22.440 --> 00:35:24.180
of why that is.
823
00:35:24.180 --> 00:35:26.450
And again, as I mentioned, the McNeil Lab case.
824
00:35:26.450 --> 00:35:29.160
So it's that gap that we're dealing with.
825
00:35:29.160 --> 00:35:33.000
Again, they contracted for cleanup costs.
826
00:35:33.000 --> 00:35:36.500
They contracted for emergency expenses necessary
827
00:35:36.500 --> 00:35:40.560
to prevent environmental damage,
828
00:35:40.560 --> 00:35:42.060
substantial environmental damage.
829
00:35:42.060 --> 00:35:46.350
What they didn't contract for is this sort of extra work
830
00:35:46.350 --> 00:35:48.930
they had to do to keep in business.
831
00:35:48.930 --> 00:35:49.763
Right.
832
00:35:51.210 --> 00:35:54.960
'Cause they did, again, they had to establish
833
00:35:54.960 --> 00:35:58.680
the necessity of, as you explained to Justice Wendlandt,
834
00:35:58.680 --> 00:36:01.950
the necessity of ceasing operations.
835
00:36:01.950 --> 00:36:03.960
But that there's a gap out there
836
00:36:03.960 --> 00:36:05.730
and they couldn't bought insurance for it either,
837
00:36:05.730 --> 00:36:08.190
'cause you didn't sell it and nobody else does.
838
00:36:08.190 --> 00:36:10.290
But there's this gap that's out there.
839
00:36:10.290 --> 00:36:13.890
Then you say that that we leave to the market.
840
00:36:13.890 --> 00:36:15.540
Right, but it's undisputably not part
841
00:36:15.540 --> 00:36:17.967
of what they purchased from us is at the end of the-
842
00:36:17.967 --> 00:36:19.290
But they couldn't purchase it.
843
00:36:19.290 --> 00:36:20.880
It's this kind of,
844
00:36:20.880 --> 00:36:23.790
and I'm not saying-
I agree with they couldn't,
845
00:36:23.790 --> 00:36:25.890
because there have been cases,
846
00:36:25.890 --> 00:36:30.090
the McNeil lab case that we cited, I think was 1986.
847
00:36:30.090 --> 00:36:31.320
One of the cases that they cite
848
00:36:31.320 --> 00:36:34.170
was the Coal City case from back in 1956
849
00:36:34.170 --> 00:36:35.910
that had language that,
850
00:36:35.910 --> 00:36:38.400
so even if it hasn't been litigated in this precise context,
851
00:36:38.400 --> 00:36:42.150
several cases and several ISO forms and several other things
852
00:36:42.150 --> 00:36:45.030
have addressed this on a policy basis.
853
00:36:45.030 --> 00:36:49.740
And the important thing is that under Massachusetts law,
854
00:36:49.740 --> 00:36:54.720
it's important to enforce the insurance contract
855
00:36:54.720 --> 00:36:58.470
pursuant to the risk that the parties agreed to cover.
856
00:36:58.470 --> 00:37:01.110
And that if an insurance company is obligated
857
00:37:01.110 --> 00:37:04.200
to pay costs on grounds of public policy or fairness,
858
00:37:04.200 --> 00:37:06.540
that's not something that they ever underwrote.
859
00:37:06.540 --> 00:37:09.450
And it would undermine the predictability
860
00:37:09.450 --> 00:37:11.340
of the stability that comes,
861
00:37:11.340 --> 00:37:12.900
that undermines the entire,
862
00:37:12.900 --> 00:37:16.230
or that underlies, excuse me, the entire insurance industry,
863
00:37:16.230 --> 00:37:19.470
because that's the fundamental function of insurance
864
00:37:19.470 --> 00:37:21.780
is to underwrite certain risks,
865
00:37:21.780 --> 00:37:25.200
enter into a policy that accurately reflects the risk,
866
00:37:25.200 --> 00:37:28.200
and accept a premium that also accurately reflects the risk.
867
00:37:28.200 --> 00:37:30.510
And I know I'm a little bit late on time,
868
00:37:30.510 --> 00:37:32.490
and I'll just make one last point I guess in that regard
869
00:37:32.490 --> 00:37:35.280
is that it's not just the insurance industry.
870
00:37:35.280 --> 00:37:37.380
That it's other industries that rely
871
00:37:37.380 --> 00:37:39.990
upon the certainty of enforcement of contracts
872
00:37:39.990 --> 00:37:41.910
and allocations of risk as they're written,
873
00:37:41.910 --> 00:37:44.520
whether it's construction and additional insured
874
00:37:44.520 --> 00:37:46.740
and indemnity issues, whether it's banking,
875
00:37:46.740 --> 00:37:51.060
whether it's finance, that the predictability
876
00:37:51.060 --> 00:37:54.360
and enforcement of contracts has broader implications
877
00:37:54.360 --> 00:37:56.433
than just the narrow facts of this case,
878
00:37:57.330 --> 00:37:59.490
and both within the insurance industry
879
00:37:59.490 --> 00:38:03.180
that would have to price in not just the particular cost
880
00:38:03.180 --> 00:38:04.710
that we're talking about here,
881
00:38:04.710 --> 00:38:08.250
but the unpredictability that the court may decide
882
00:38:08.250 --> 00:38:11.430
that other costs are consistent with public policy
883
00:38:11.430 --> 00:38:13.560
other than just mitigation costs.
884
00:38:13.560 --> 00:38:15.420
And that they may have to factor in those costs
885
00:38:15.420 --> 00:38:17.070
into their underwriting process,
886
00:38:17.070 --> 00:38:20.550
which would result in extraordinary increases
887
00:38:20.550 --> 00:38:23.160
in premiums across the commonwealth.
888
00:38:23.160 --> 00:38:25.260
So again, I recognize that I'm over time,
889
00:38:25.260 --> 00:38:26.250
so if you have any other questions
890
00:38:26.250 --> 00:38:27.090
I'm happy to answer them.
891
00:38:27.090 --> 00:38:29.253
But otherwise, we would rest on our briefs.