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