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00:00:19>> YOU MAY BE SEATED.
WE'RE HEARING CASE 11-1486 ON
00:00:34BEHALF OF PETITIONER MR. GARNER.
>> GOOD MORNING.
00:00:37I AM RICHARD GARNER
REPRESENTING THE PETITIONER
00:00:43WESTFIELD INSURANCE.
QUESTIONS CERTIFIED FROM THEN ON
00:00:47THE STATE'S COURT OF APPEALS AND
THE SIXTH CIRCUIT REGARDING
00:00:51LIABILITY INSURANCE COVERAGE FOR
THE RESPONDED CUSTOM AGRI
00:00:53SYSTEMS CORP. CUSTOM DEFECT
CLAIMS FOR THEIR WORK DONE ON AN
00:00:58$8.5 MILLION GREEN FACILITY FOR
SANDUSKY, OHIO.
00:01:02LIKE PLANS A BILL IN THE
DISTRICT COURT AND CUSTOMS
00:01:06ACCRA APPEALED CLIMBING HUNDREDS
OF THOUSANDS OF DOLLARS FROM THE
00:01:09GENERAL PRINT THE SIXTH CIRCUIT
DETERMINE OHIO LAW WAS
00:01:15CONFLICTED ON TO THE IMPORTANT
QUESTIONS FOR THIS CASE AS WELL
00:01:17AS MANY CONSTRUCTION CASES.
TO THE QUESTIONS ARE AS FOLLOWS
00:01:25-- ARE CRIMES OF DEFECTIVE
CONSTRUCTION WORK MISSION
00:01:30BROUGHT BY A PROPERTY OWNER
CLAIMS FOR PROPERTY DAMAGE
00:01:32CAUSED BY AN OCCURRENCE UNDER
COMMERCIAL GENERAL LIABILITY
00:01:35POLICY.
WE'RE ASKING THIS COURT TO
00:01:38ANSWER THAT QUESTION NOTE
BECAUSE THE DAMAGE THAT WERE
00:01:40SOUGHT AGAINST CUSTOM ADDRESS
SYSTEMS WERE NOT DAMAGES BECAUSE
00:01:44OF PROPERTY DAMAGES CAUSED BY AN
OCCURRENCE BUT WERE IN FACT
00:01:49CONTRACT DAMAGES EXPECTATION
DAMAGES.
00:01:51>> DOES THE POLICY AT ISSUE
DEFINE THE TERM "OCCURRENCE"?
00:01:56>> IT DOES.
>> HOW IS IT DEFINED?
00:01:58>> DEFINED AS AN ACCIDENT.
THIS COURT HAS GONE ON TO FIND
00:02:06BIG STIMULUS PROPOSED YOUR --
EXPOSURE.
00:02:10IT IS THE SAME TYPE OF
DEFINITION THIS CASE HACOURT HAS
00:02:16LOOKED AT.
AS TO THE AT THE AGREEMENT WITH
00:02:19RESPECT TO THIS FIRST QUESTION
IS WHETHER OR NOT THE TYPES OF
00:02:23DAMAGES WE HAVE INVOLVED IN A
CONSTRUCTION DEFECT CASE, SORT
00:02:28OF THE QUINTESSENTIAL CASE --
>> THE QUESTION IS, OUR
00:02:32CONSTRUCTION ACCIDENTS DEFECTS?
>> WHEN WE BEGIN TO LOOK AT THE
00:02:37TYPE OF TERMS BEING USED HERE
AND WHAT WE WILL TALK ABOUT AS
00:02:43TO GO TO THE ARGUMENT IS THIS IS
A TORT CONTEXT.
00:02:47>> ONLY AS DEFINED IN A
PARTICULAR POLICY?
00:02:50>> KNOW, THESE ARE STANDARD
ISO-BASED POLICIES.
00:02:54IT IS THE ORGANIZATION THAT
MANY USED FOR WRITING POLICIES
00:03:03FOR THEM.
MOST POLICIES WILL INCLUDE THIS
00:03:05TYPE OF LANGUAGE.
WHERE WE SEE THE REAL FRONT-
00:03:08LINE IS WITH RESPECT TO WHETHER
AND NOT BUILDER'S RISK
00:03:15COVERAGE, ASSURE THE BONDS ARE
ERRORS ON A MISSION APPLIES, BUT
00:03:18WHAT ARE NOT COMMERCIAL GENERAL
LIABILITY POLICIES WILL APPLY TO
00:03:20THESE TYPES OF CLAIMS.
>> SHOULD THE FEDERAL COURT HAVE
00:03:25DONE THIS FOR A MATTER OF OHIO
LAW THAT WE SHOULD BE DEFINING?
00:03:28>> AND MATTER OF OHIO LAW
BECAUSE THERE'S A CONFLICT
00:03:31BETWEEN THE OHIO COUPLE OF
DISTRICTS AS WELL AS ACROSS THE
00:03:34COUNTRY ON THESE ISSUES.
WE HAVE 12 APPELLATE DISTRICTS
00:03:39IN OHIO AND EIGHT DISTRICT AND
10TH DISTRICT WHICH HAVE BOTH OF
00:03:41THESE TYPES WOULD QUALIFY AND
FALL IN THE INTERIM AGREEMENT.
00:03:45YET THE FIFTH DISTRICT, FIRST
DISTRICT WHO SAID THEY DON'T.
00:03:49WHEN THEY LOOKED AT THIS CASE,
THEY SAID WE RECOGNIZE THERE IS
00:03:53A DIVIDE UNDER OHIO LAW WITH
THESE CONTRACTS ARE TRADED BY
00:03:56OHIO LAW.
WHILE WE CAN TRY TO DEFINE WHAT
00:04:00THIS COURT WOULD DO, WE FEEL WE
HAVE A RESOLUTION AVAILABLE
00:04:04UNDER SUPREME COURT RULED 18
WE'RE ENCOURAGED BY THE U.S.
00:04:06SUPREME COURT TO DO IN ORDER TO
PRESERVE THE INTEGRITY OF OUR
00:04:09FEDERAL SYSTEM AND BRING IT TO
YOU, JUST AS O'DONNELL, AND YOUR
00:04:12COLLEAGUES TO TELL US HOW THIS
SHOULD WORK OUT.
00:04:14THAT WAY WHETHER YOU'RE IN
CINCINNATI OR COLUMBUS OR
00:04:20CLEVELAND OR WHATEVER COURT, WE
HAVE THE SAME RULE OF LAW BEING
00:04:23APPLIED AND WE DO NOT HAVE
DIFFERENT OUTCOMES BASED UPON
00:04:26VENUE BUT FAX AND EVIDENCE AND
SO FORTH RATHER THAN DIFFERENT
00:04:31INTERPRETATIONS OF OHIO LAW.
>> >> WAS THE ARGUMENT OR THE
00:04:35RATIONALE OF THE TENT OR EIGHT
THAT SAID BASICALLY POOR WORK
00:04:40MISSION CONSTRUCTION-TYPE
DEFECTS SIT UNDER A MORE TOTRT
00:04:49CLAIM TYPE POLICY?
>> I DO NOT THINK THEY MADE IT
00:04:52IN TERMS IT WAS A.ORG MODEL, BUT
SAID, WE'RE GOING TO LOOK AT THE
00:04:56POLICY AND TAKE THESE TERMS OF
CONTEXT AND SAY, WELL, IT COULD
00:05:00BE INTERPRETED THIS WAY AND SO
WE WILL INTERPRET IT THIS WAY.
00:05:03THE PROBLEM WITH THAT, WHEN YOU
LIFT WORDS OUT OF FEAR OF LEGAL
00:05:07CONTEXT, THERE BEREFT OF THEIR
MEANING.
00:05:10YOU END UP WITH A SITUATION
WHERE YOU COULD HAVE THE SAME
00:05:14WORD MEAN DIFFERENT THINGS.
LET ME GIVE THE EXAMPLE.
00:05:17LET'S SUPPOSE I GIVE YOU A
DOCUMENT THAT TALKS ABOUT WHAT
00:05:23THE MEANING OF THE WORD OFFSIDES
MEANS.
00:05:24IF I BEGAN TO LOOK AT THAT WORD
AND SEE THE DOCUMENT TALKS
00:05:31ABOUT QUARTERBACKS,
LINEBACKERS, FIRST DOWNS AND
00:05:35TOUCHDOWNS, I WILL REASONABLY
CONCLUDE IT IS TALKING ABOUT
00:05:38AMERICAN FOOTBALL AND IT IS A
PENALTY IN AMERICAN FOOTBALL
00:05:41THAT HAS A CERTAIN MEANING.
IF I'M LOOKING AT THE DOCUMENT
00:05:45AND IT TALKS ABOUT GOALS AND
CAND PENALTY KICKS, IT
00:05:52IS TALKING ABOUT SOCCER.
THAT IS A DIFFERENT TYPE OF
00:05:55PENALTY.
THE EXACT SAME WORD HAS
00:05:58DIFFERENT MEANINGS DEPENDING ON
THE CONTEXT.
00:06:00MOREOVER, WE CAN TAKE THE SAME
DOCUMENT AND SAY, FROM THIS,
00:06:04EVEN IF WE'RE NOT TALKING ABOUT
OFFSIDES, WE CAN EXTRAPOLATE FOR
00:06:08CERTAIN THINGS THAT ARE
IMPLICIT.
00:06:10IF I ASKED IN THE SAME EXAMPLE,
JUSTICE BROWN, WHAT IS THE TYPE
00:06:16OF BALL OR THE SHAPE OF THE
BALL IN THIS COURT?
00:06:18IF IT IS A FOOTBALL, IT IS OVAL
AND IF IT IS SOCCER, IT IS
00:06:23ROUND.
>> AND THE DISTRICTS THAT WENT
00:06:28THE OPPOSITE DIRECTION, WHAT WAS
THE DIFFERENCE IN THEIR
00:06:31RATIONALE THAT LED TO THE
OUTCOME THERE'S NO COVERAGE?
00:06:34>> THOSE THAT FOLLOW THE LINE OF
COVERAGE HAVE SAID, LOOK, WE'RE
00:06:40TALKING ABOUT AN AGREEMENT, A
CONTRACTUAL AGREEMENT TO BUILD A
00:06:44CERTAIN BUILDING THERE ARE
CERTAIN THINGS THAT COME ALONG
00:06:47WITH THAT AGREEMENT.
THE DAMAGES YOU'RE SEEKING WHEN
00:06:49YOU SAY, I WAS PROMISED A
BUILDING AND A CERTAIN QUALITY
00:06:54AND WAS DELIVERED WAS LESS THAN
THAT, WHAT YOUR OBTAINING IS
00:06:58EXPECTATION DAMAGES.
YOU DID NOT EVER ON THAT
00:07:01BUILDING WHEN IT WAS NOT
DAMAGED, AT LEAST IN THE CONTEXT
00:07:04WE ARE TALKING ABOUT.
THERE ARE CONSTRUCTION DEFECT
00:07:07CASES WHERE THERE IS REAL
PROPERTY DAMAGE.
00:07:09BUT IN THIS TYPE OF CASE, WE'RE
TALKING SIMPLY ABOUT, I WAS
00:07:13PROMISED SOMETHING UNDER THESE
CONTRACTUAL SPECIFICATIONS AND
00:07:18GIVEN SOMETHING LESS THAN THAT,
AND I'M ENTITLED TO THE
00:07:21DIFFERENCE FROM WHAT WAS
PROMISED AND THE DELIVERY.
00:07:24>> AND THE MARKET COVERAGE FOR
THAT TYPE OF DAMAGE?
00:07:28>> WE SAY COVERAGE, IT DEPENDS
ON WHAT WE'RE TALKING ABOUT.
00:07:33THE MOST COMMON KINDS WE WOULD
BE LOOKING OUT IN THAT CONTEXT
00:07:35WOULD BE A PERFORMANCE BOND OR
ASSURE THE BOND OR IF YOU HAD AT
00:07:41THE CONTRACTOR THAT WAS
FINANCIALLY UNABLE TO FINISH OR
00:07:44WENT OUT OF BUSINESS, AND THE
BOND WOULD BE ABLE TO STEP UP
00:07:48AND PAY THOSE THINGS.
THAT IS NOT REALLY INSURANCE
00:07:51BECAUSE THEY CAN GO BACK AGAINST
THE CONTRACTOR, THE ASSURED THE
00:07:55CAN.
YOU COULD LOOK AT, WAS THE
00:07:58BUILDING POORLY DESIGNED?
THEN THERE MAY BE ERRORS AND
00:08:01OMISSION COVERAGE FOR AN
ARCHITECT OR ENGINEER OR SOMEONE
00:08:04LIKE THAT.
WE HAVE DESIGNED ISSUES INVOLVED
00:08:07IN THIS CASE AS WELL.
THE REASON IT WOULD APPLY, I
00:08:10LIKED CGL COVERAGE THAT IS
ACCIDENT BODILY INJURY AND SUCH,
00:08:18IT IS FOR FINANCIAL LOSSES AS
RESULT OF PROFESSIONAL
00:08:22MALPRACTICE.
>> WE ARE A BIT HANDICAP HERE.
00:08:25WE JUST HAVE ONE SIDE, ONE
PICTURE BEING PAINTED.
00:08:33ONE COULD LOOK AT THIS AND
CONCLUDE WHAT WAS REALLY GOING
00:08:40ON IS THE OWNER OF THE PROPERTY
WANTED TO GYP THE CONTRACTOR OUT
00:08:49OF $1 MILLION, ADJUSTED NOT WANT
TO PAY FOR THE WHOLE DEAL.
00:08:58AND WHAT YOU HAVE GIVEN US, AT
LEAST NOW THERE IS AN
00:09:03ALLEGATION THAT ROOF DAMAGE,
CONCRETE MAY HAVE BEEN A LITTLE
00:09:07SUBSTANDARD, BUT DID NOT MATTER
AND THE ROOF DAMAGE MAY HAVE
00:09:12OCCURRED FROM PDS TO IN A
FAULTY JOB OF PAINTING THE IN AT
00:09:18SOME POINT.
-- EMPTYING A BIN AT SOME POINT.
00:09:29>> FIRST OF ALL, I DON'T KNOW
YOUR HANDICAPPED [LAUGHTER]
00:09:35I WOULD LIKE TO THINK EVERYTHING
YOU NEED.
00:09:39[LAUGHTER]
BUT WITH RESPECT TO THE CLAIMS,
00:09:45IF YOU READ OUR BRIEF PAGES 4-10
SET OUT WHAT WE BELIEVE TO BE
00:09:49THE MATERIAL FACTS, IT IS PRETTY
CLEAR WITH A PROPERTY OWNER WAS
00:09:52LOOKING AT.
THEY BROUGHT ONLY TO CLAIMS
00:09:54AGAINST THE CONTRACTOR.
IT WAS BREACH OF CONTRACT AND
00:09:58BREACH OF WARRANTY.
UNDER THE FACTS AND EVIDENCE IN
00:10:04THIS CASE, YOU DO NOT HAVE THAT.
THE ONLY BROUGHT THOSE TWO
00:10:09CLAIMS BUT THEY SAID WE WERE
PROMISED SOMETHING AND DELIVERED
00:10:12SOMETHING LESS.
WITH CUSTOM AGRI SYSTEMS, IT WAS
00:10:17SOMETHING ELSE.
THE TALKED ABOUT A PROBLEM WITH
00:10:19THE CONCRETE BUT THEIR OWN
EXPERT BACKED OFF THAT IDEA AND
00:10:22SAID, THIS IS NOT A COMPRESS A
PROBLEM WITH THE CONCRETE.
00:10:26WHAT WE HAVE IS THE SILO WAS
DESIGNED WRONG THAT CUSTOM AGRI
00:10:34SYSTEMS PROVIDED.
BY THE WAY, THEY DID NOT TRAIN
00:10:36AS THE WAY WE WERE SUPPOSED TO
BE TRAINED.
00:10:38THE SO-CALLED ASYMMETRICAL
DISCHARGE BECAUSE THE SILO TO
00:10:44COLLAPSE -- THAT CAUSED THE
SELLER TO COLLAPSE, IT HAPPENED
00:10:48BECAUSE WE WERE NOT PROPERLY
TRAINED.
00:10:51WE DID NOT GET THE BENEFIT OF
BEATHE CONTRACT.
00:10:57WHEN THE FIRST HEARD THE CASE,
THE CITY HAVE TO DEFEND THIS
00:11:02BECAUSE IT IS IMPLIED TORT
CLAIMS.
00:11:04AS THE RECORD DEVELOPED AND WE
WENT BACK ON A MOTION FOR
00:11:07RECONSIDERATION, IS CLEAR WHAT
YOUNGLOVE IS ASKING FOR,
00:11:15EXPECTATION DAMAGES.
NOTECARD IT WAS DAMAGED.
00:11:17-- NO PROPERTY WAS DAMAGED.
I GET A DIFFERENT RESULT
00:11:26DEPENDING ON THE DISTRICT.
>> DID THE WHOLE THING
00:11:28COLLAPSED?
>> YOU HAD ROOF DAMAGE AND THE
00:11:32BIN COLLAPSED.
THE QUESTION WAS, WHAT CAUSED
00:11:37THAT?
THE EXPERT CAME OUT THAT DATE IS
00:11:41USED THE SILO.
>> MR. GARNER, IF WE ANSWER YOUR
00:11:47CERTIFIED QUESTIONED, NO, WE DO
NOT GET TO THE SECOND QUESTION
00:11:52AT ALL?
>> YOU ARE CORRECT IN THE SENSE
00:11:54OF GOING THROUGH THIS, IF THE
ANSWER THE CERTIFIED QUESTION1
00:11:58NO, IN THIS CASE YOU WOULD NOT
HAVE TO REACH THAT QUESTION.
00:12:03WE ASKING THIS COURT TO ANSWER
THAT QUESTION ALSO.
00:12:06THEY'RE LOGICAL COROLLARY TO
EACH OTHER.
00:12:09IF YOU'RE TALKING ABOUT A BREACH
OF CONTRACT AS THE CAUSE OF
00:12:13ACTION AND WE WILL HAVE A
SITUATION WHERE THERE IS NOT
00:12:16DAMAGE BECAUSE THE PROPERTY
DAMAGE WITH THE OCCURRENCE, WE
00:12:20WOULD NEVER GET PAST THE
ENSURING.
00:12:23IF WE DO, AND I WOULD NOT SAY I
THINK OF EVERY POSSIBLE
00:12:29SCENARIO, BUT IF WE HAVE A
SCENARIO WHERE WE DO HAVE SOME
00:12:32PROPERTY DAMAGE THERE, THE
QUESTION IS, DOES THAT
00:12:35EXCLUSION, CONTRACTUAL LIABILITY
EXCLUSION PRECLUDE THAT CAR
00:12:40BRIDGE?
IT IS AN AREA WHERE OHIO LOT IS
00:12:43IN CONFLICT.
THIS WILL CLARIFY THE SITUATION
00:12:48SO WE DO NOT SPENT YEARS
FIGHTING ABOUT THE COVERAGE
00:12:52ISSUES.
>> SO IS YOUR ANSWER TO NUMBER
00:12:55ONE, NO, IT DEPENDS?
IT SOUNDS AS IF YOU'RE SAYING
00:12:59THERE MAY BE SITUATIONS WHERE
THE ANSWER TO NO. 1 WOULD BE
00:13:02YES.
BECAUSE THE SECOND QUESTION THEN
00:13:05SAYS, IF THE CLAIMS ARE
CONSIDERED PROPERTY DAMAGE
00:13:08CAUSED BY AN OCCURRENCE.
THEN DOES THE CONTRACTUAL
00:13:12LIABILITY EXCLUSION STOP
COVERAGE FOR THOSE CLAIMS.
00:13:15IT SEEMS THE SECOND QUESTION WAS
DEPENDENT ON AN ANSWER TO THE
00:13:21FIRST.
IF YOU'RE SAYING THERE IS SOME
00:13:24SITUATIONS WHERE YOU WOULD SAY
YES TO THE FIRST QUESTION, THAT
00:13:27IS WHERE YOU ARE LOSING ME.
>> RIGHT.
00:13:29YOU MAY HAVE SITUATIONS WHERE
YOU ARE DEALING WITH
00:13:34CONSTRUCTION DEFECT CLAIMS WERE
WE'RE TALKING ABOUT DAMAGE TO
00:13:36PROPERTY OTHER THAN THE INSUREDS
OWN WORK OR PRODUCT.
00:13:40IT MAY BE ON A SIMPLE CASE,
MAYBE A HOME OR YOU DO NOT HAVE
00:13:47A SITUATION.
WE'RE TALKING ABOUT A $10
00:13:50MILLION PROJECT WAS
SUBCONTRACTORS.
00:13:52YOU MAY DAMAGE SOMEONE ELSE'S
WORK PRODUCT.
00:13:54THE ANSWER TO THE FIRST QUESTION
IS IMPORTANT.
00:13:57IN THIS CONTEXT WE'RE SAYING,
UNLESS YOU HAVE DAMAGE BECAUSE
00:14:02THE PARTY DAMAGED BY AN
OCCURRENCE MEANS YOU MUST HAVE
00:14:05DAMAGE TO PROPERTY OTHER THAN
THE ENSURE ITS OWN WORK OR
00:14:07PRODUCT.
IF YOU HAVE THAT, THEN YOU GET
00:14:10PAST THE INSURING AGREEMENT.
IF YOU DO NOT, YOU NEVER MAKE IT
00:14:13AS THE INTERIM AGREEMENT OR GET
TO THE CONTRACTUAL LIABILITY
00:14:16EXPOSURE.
>> THANK YOU.
00:14:17>> THAT IS ALL I HAVE.
>> THANK YOU.
00:14:23>> WE WILL TAKE THE MATTER UNDER
ADVISEMENT AND WILL BE NOTIFIED
00:14:26OF OUR DECISION.
Note : Transcripts are compiled from uncorrected captions