[00:00:09] Speaker 02:
Please proceed.

[00:00:11] Speaker 02:
May it please the court, Clint Nurlich, for the appellant, Fred Dardashti.

[00:00:15] Speaker 02:
I'm in the unusual position this morning of asking this court to overturn a judgment in favor of my client.

[00:00:22] Speaker 02:
But that's necessary because the district court made three errors that collectively prevented my client from recovering the full amount to which he was entitled.

[00:00:31] Speaker 02:
The first of those errors was the grant of partial summary judgment under the genuine dispute doctrine.

[00:00:37] Speaker 02:
That was error because the dispute in this case was anything but genuine.

[00:00:42] Speaker 02:
The exclusion hit issue here.

[00:00:44] Speaker 00:
If I might, Council, could you address whether you could have a sudden and accidental discharge or overflow of water that results in a continuous or repeated leakage or seepage?

[00:00:56] Speaker 00:
So in other words, the initiating event is sudden and accidental, but what it results in is something that's occurring continuously, repeatedly over time and therefore is excluded from coverage.

[00:01:10] Speaker 02:
I understand the argument that Your Honor is making.

[00:01:14] Speaker 02:
I think that there are cases where there's seepage or leakage, and it's obvious that those sort of leaks are supposed to fall within the scope of this exclusion, and that lawyers have attempted to make creative arguments about the idea that, well, there was some point at which it was sudden.

[00:01:34] Speaker 02:
There was a moment

[00:01:35] Speaker 02:
in time where it went from not leaking to leaking, and then they attempted to spin that as saying, well, that means it was sudden, and so it's covered.

[00:01:45] Speaker 02:
And I certainly am not trying to advance that kind of argument here.

[00:01:49] Speaker 02:
If sudden is used in that sense, refer to the idea that there's a point at which the leak begins, then certainly you could have a sudden discharge that was nevertheless subject to the exclusion.

[00:02:05] Speaker 02:
I think that when the trial court here used the concept of sudden versus gradual and used it in a way that's consistent with State Farm's own use of it in the course of adjusting the claim, what was being referenced was

[00:02:19] Speaker 02:
the distinction between a sudden leak in the sense that the volume of water that's being discharged is very large, and so it's discovered quickly.

[00:02:29] Speaker 02:
And so in this particular version of the exclusion, there isn't a time limit.

[00:02:32] Speaker 02:
It doesn't say that the exclusion applies if the leak has gone on, for example, more than two months.

[00:02:40] Speaker 02:
But State Farm cites examples in its briefing of versions of the exclusion that do contain that language.

[00:02:47] Speaker 02:
And I think that, in a certain sense, that's the prototypical version of the exclusion.

[00:02:51] Speaker 01:
Can you help me with this, counsel?

[00:02:54] Speaker 01:
If you look at the exclusion and the policy, it's hard for me to understand why State Farm actually ended up saying, OK, there's some liability here.

[00:03:02] Speaker 01:
But you started off by claiming there was bad faith.

[00:03:07] Speaker 01:
What's your best argument?

[00:03:09] Speaker 01:
given all that occurred, the back and forth with the insurance company, the inspectors, et cetera, that this in any way qualifies as a bad faith claim under California law?

[00:03:19] Speaker 02:
Well, in order to get to bad faith, I think we have to pin down the meaning of the exclusion, because my argument about it being bad faith is premised.

[00:03:27] Speaker 01:
Well, with respect, I don't think that's right.

[00:03:29] Speaker 01:
I mean, it's either covered or it's not covered.

[00:03:32] Speaker 01:
If it's not covered at all, then you never get to that.

[00:03:34] Speaker 01:
Let's assume for a moment that it is.

[00:03:36] Speaker 01:
OK.

[00:03:38] Speaker 01:
You've claimed bad faith.

[00:03:40] Speaker 01:
We all know what bad faith is, and basically the insurance company just shines you on.

[00:03:44] Speaker 01:
You don't do anything.

[00:03:44] Speaker 01:
But in this case, if I understand the record correctly, there was a lot of back and forth between the insurance company and your client.

[00:03:53] Speaker 01:
There were people that came in and inspected and so on and so on.

[00:03:55] Speaker 01:
There were disagreements about what the cost was.

[00:03:58] Speaker 01:
But how do you get to bad faith?

[00:04:00] Speaker 01:
What's your best case?

[00:04:02] Speaker 01:
that suggest that the facts evident in this case qualifies as bad faith and that the district judge erred in finding there was none.

[00:04:11] Speaker 02:
I think that my strongest argument for bad faith concerns the representations that were made about the 4X forensic report.

[00:04:21] Speaker 02:
That's bad faith?

[00:04:23] Speaker 01:
What case would you cite that suggests that what was said about the forensic report qualifies as bad faith?

[00:04:31] Speaker 02:
I think that virtually every case about bad faith from Wilson to Amadeo shows that companies have to act reasonably, and if they misrepresent the content of a report

[00:04:45] Speaker 02:
that that's prototypical bad faith.

[00:04:47] Speaker 01:
And that... Well, let's just say I don't see it that way, but help me with this then.

[00:04:52] Speaker 01:
On what basis would you request punitive damages under California law?

[00:04:57] Speaker 02:
I believe that State Farm misrepresented the content of the report in their supplemental coverage denial letter.

[00:05:03] Speaker 01:
They said that... So your whole claim for bad faith and punitive damages is that State Farm misrepresented

[00:05:11] Speaker 01:
a self-evident report.

[00:05:12] Speaker 01:
Anybody can read it.

[00:05:13] Speaker 01:
The district court can read it.

[00:05:14] Speaker 01:
You're saying that they said it was something different than it was, and you think that qualifies as bad faith and qualifying for punitive damages under California law?

[00:05:23] Speaker 02:
I think it would qualify as fraud, Your Honor, and I want to clarify, it's not just the content of the report, it's also the claim file, which contains a transcription of a voicemail

[00:05:34] Speaker 02:
from Forex Forensics to State Farm, where they explain that the absence of corrosion and staining on the outside of the pipe indicates that it was a sudden failure rather than a gradual failure.

[00:05:46] Speaker 02:
And the reason I was so focused on that, Your Honor, is that in the course of adjusting the claim,

[00:05:50] Speaker 02:
state farms adjusters and its experts treated that as the critical distinction.

[00:05:57] Speaker 02:
That's why they represented to my client that Forex Forensics needed to do the testing.

[00:06:02] Speaker 01:
Well, is that why they ultimately agreed that there was some damage as due?

[00:06:07] Speaker 02:
Yes, Your Honor.

[00:06:09] Speaker 02:
The truth came out.

[00:06:10] Speaker 02:
during this litigation when they had to produce the claim file and so we got a copy of the report and we got a copy of the transcripts of that voicemail.

[00:06:18] Speaker 01:
I guess what I struggle with, as you well know, in litigation people take the same facts and they argue it differently.

[00:06:26] Speaker 01:
There's never been a lawyer born that can't put a spin on something.

[00:06:31] Speaker 01:
But that's just the nature of the litigation process.

[00:06:34] Speaker 01:
In this case, you went back and forth, back and forth.

[00:06:36] Speaker 01:
Ultimately, State Farm, despite what was arguably an exclusion from the policy, said, OK, we're going to admit there's some liability here, just a question of the damages.

[00:06:44] Speaker 01:
And that's what the court ended up doing.

[00:06:46] Speaker 01:
What went wrong here, from your perspective?

[00:06:48] Speaker 02:
Well, Your Honor, I think that you have to evaluate the exclusion as if the critical distinction is sudden versus gradual, because that was how

[00:06:55] Speaker 02:
the district court construed it, and then State Farm stipulated to coverage, and they haven't filed a cross-appeal disputing how the language was construed.

[00:07:03] Speaker 02:
And so if we construe the language that way, so that that's the critical distinction, then State Farm misrepresented the evidence about whether the leak occurred suddenly to my client.

[00:07:15] Speaker 02:
There was a disparity in access to information.

[00:07:18] Speaker 02:
State Farm had access to the report.

[00:07:20] Speaker 02:
and claimed two different things about the report.

[00:07:23] Speaker 02:
First, they said that expert examination had determined that the leak was subject to the exclusion, and then they said that, specifically, that Forex Forensics had been unable to determine how the leak happened.

[00:07:37] Speaker 02:
Those things were not true.

[00:07:38] Speaker 01:
Well, they had experts that said that, though, did they not?

[00:07:41] Speaker 02:
No, they never had an expert who said that the... They had internal people that said that.

[00:07:45] Speaker 02:
Jeff and Natalia, their adjuster looked...

[00:07:48] Speaker 02:
at the Forex Forensics Report.

[00:07:51] Speaker 02:
He testified at his deposition that he understood that the expert that State Farm had retained Forex Forensics

[00:07:57] Speaker 02:
determined that the leak occurred suddenly and that he himself, as an adjuster, overrode them and said that it occurred gradually.

[00:08:06] Speaker 02:
The Amadeo case holds that out, the idea of looking at the opinion of an expert and then, without any justification, overruling that opinion through the fiat of an adjuster as a prototypical example of bad faith.

[00:08:21] Speaker 02:
And I think that the same is true here, that the State Farm

[00:08:26] Speaker 02:
talks a lot about the things that they did, but none of the things that they found pointed to this being an exclusion that was subject to a loss that was subject to the exclusion.

[00:08:40] Speaker 00:
And the Council, I wonder if we might move to the jury instruction.

[00:08:43] Speaker 00:
Yes, Your Honor.

[00:08:43] Speaker 00:
Just for a moment.

[00:08:44] Speaker 00:
And set to one side the standard of review, we'll get back to that.

[00:08:48] Speaker 00:
But as I read the instruction that was given, the district court addressed uniform appearance requirement

[00:08:55] Speaker 00:
the reasonable value of repairs to the damaged property, the contents handling required, and additional living expenses.

[00:09:03] Speaker 00:
What was it that was not sufficiently covered then, recognizing that you're using this consequential physical damage concept?

[00:09:12] Speaker 00:
Yes, sir.

[00:09:13] Speaker 00:
What really wasn't covered in that?

[00:09:16] Speaker 00:
The jury awarded you substantially more than what State Farm said should have been recovered.

[00:09:21] Speaker 02:
Yes, General.

[00:09:22] Speaker 02:
What wasn't covered was the damage that occurred to portions of the house, like the baseboards, that would have to be damaged in order to remove the floor.

[00:09:29] Speaker 02:
And so our expert, Michael Nidabiti, testified that a significant portion of his estimate of $600,000 for replacing the floor was the damage that would occur to the rest of the home.

[00:09:40] Speaker 02:
And State Farm's rebuttal expert specifically challenged that estimate and said that it was inflated

[00:09:46] Speaker 02:
and mocked the concept, actually, of including physical damage, saying, quote, I wouldn't hire a contractor if he was going to bump into things and destroy them.

[00:09:54] Speaker 02:
And so it's that specific element of the damages, the idea that the consequential physical damages to the rest of the home are covered above and beyond the cost of the materials and the labor that have to be used to put in the floor.

[00:10:08] Speaker 00:
And as far as the standard of review, I would agree with you that what occurred prior to the reading of the instructions is confusing to me as a district judge.

[00:10:17] Speaker 00:
But after the instructions were given, you did not object.

[00:10:20] Speaker 00:
And you had an opportunity to object.

[00:10:21] Speaker 00:
So wouldn't the standard here be plain error?

[00:10:24] Speaker 02:
I don't believe so, Your Honor, because when you say that what happened was confusing, that there's— Well, in the sense that it sounded like the district judge was going to give the instruction number one.

[00:10:40] Speaker 00:
You thought that's what was going to happen until the jury was charged?

[00:10:43] Speaker 02:
No, I don't believe that that's accurate, Your Honor.

[00:10:44] Speaker 02:
The district judge called the instruction gibberish and indicated that he was not going to give it and then gave.

[00:10:50] Speaker 02:
So we knew that it was going to be a different instruction before the district court gave that.

[00:10:54] Speaker 03:
Didn't trial counsel agree to the instruction as they were having an exchange with

[00:11:00] Speaker 03:
the district judge and the district judge was saying how the instruction was going to be changed and then there's this colloquy and the attorney says yes that's correct oh yes it's covered in this other instruction seem like there was not only a lack of an objection but actually an agreement I don't believe that there was I'm sorry I don't believe that there was an agreement the trial counsel didn't see

[00:11:21] Speaker 02:
the instruction until it was read to the jury.

[00:11:25] Speaker 02:
And so counsel certainly didn't agree to the version of the instruction that the trial court gave.

[00:11:31] Speaker 03:
So the transcript is what it is.

[00:11:33] Speaker 03:
So I guess we can just look at that again and decide if that's what actually happened.

[00:11:37] Speaker 03:
The other issue I have is I just pulled up the Forex Forensics Report, and it says that the leak was most likely because of the leak whose erosion and corrosion, which seems like a gradual process, not something that happens suddenly.

[00:11:55] Speaker 03:
Eventually it fails, but that's what the Forex Report says.

[00:12:02] Speaker 02:
It's not that the leak itself is not gradual, so the process that happens in advance may be gradual, but then as soon as the leak happens, it isn't a slow dribble that then grows, it's immediately a high-pressure leak.

[00:12:14] Speaker 02:
And I would emphasize that their adjuster, Ms.

[00:12:17] Speaker 02:
Urquilla, saw the video of the leak, saw the water shooting out of it, and said that she didn't consider that to be

[00:12:23] Speaker 02:
CRSL, continuous or repeated seepage or leakage.

[00:12:28] Speaker 02:
And so even viewing the video evidence that was taken, she said that wasn't the case.

[00:12:33] Speaker 02:
And then Forex Forensics, in the voicemail that they left, which was transcribed, they said that it wasn't something that happened over time.

[00:12:39] Speaker 02:
They characterized it as a sudden failure.

[00:12:41] Speaker 01:
Do you want to save any of your time?

[00:12:43] Speaker 02:
I would save the balance of my time, yeah.

[00:12:45] Speaker 02:
Very well.

[00:12:47] Speaker 01:
Okay, let's hear now from State Farms Council and Ms.

[00:12:50] Speaker 01:
Orr.

[00:12:54] Speaker 04:
Good morning, Your Honors, may it please the Court.

[00:12:58] Speaker 04:
Cheryl Orr, Music Peeler, and Garrett on behalf of Appellee State Farm.

[00:13:02] Speaker 04:
Inflammatory rhetoric unsupported by evidence does not create a genuine dispute to avoid summary judgment.

[00:13:08] Speaker 04:
And that's what we've heard here.

[00:13:09] Speaker 04:
And that's what was presented at the time of the motion for summary judgment.

[00:13:14] Speaker 04:
And I apologize.

[00:13:15] Speaker 04:
I'm losing my voice.

[00:13:17] Speaker 04:
I guess I practiced too long.

[00:13:18] Speaker 01:
You're probably not the only person in Southern California with the respiratory problem.

[00:13:22] Speaker 04:
The 4X report dated March 26, 2021, as Your Honor pointed out, opined that the cause of the failure was a defect or erosion corrosion.

[00:13:34] Speaker 04:
The report never used the word sudden as Dardashti claims.

[00:13:38] Speaker 04:
The report never favored coverage, just the opposite, and State Farm did not conceal the report.

[00:13:46] Speaker 04:
Dardashti's counsel knew about the testing of the pipe because he was present at the testing.

[00:13:51] Speaker 04:
He delivered the pipe to 4X.

[00:13:53] Speaker 04:
He was present.

[00:13:55] Speaker 04:
That appears at 2ER204, 205, and 250 of the record.

[00:14:00] Speaker 04:
He never asked for the report.

[00:14:02] Speaker 04:
He knew that the testing had taken place.

[00:14:03] Speaker 04:
He never asked for it.

[00:14:04] Speaker 04:
State Farm was actually not apprised of the testing and didn't get to go to the testing the day it occurred.

[00:14:11] Speaker 04:
And ultimately, the report did not opine on the cause of the resulting damage and whether that was a result of continuous or repeated seepage or leakage of water.

[00:14:25] Speaker 04:
Jeff Natali didn't ignore any conclusions in that report that favored coverage.

[00:14:29] Speaker 04:
We set that out at the State Farm Brief at pages 40 to 41 and all the evidence, including Natali's deposition.

[00:14:36] Speaker 04:
which appears at 2ER95 to 96.

[00:14:40] Speaker 04:
This is not a situation like in Wilson where the examiner ignored evidence of favored coverage no matter how Dardasti wants to spin this.

[00:14:48] Speaker 04:
And Your Honor's question about this sudden and accidental overflow that results in continuous and repeated leakage or seepage is the crux of this case.

[00:15:00] Speaker 04:
The problem here is that, as noted in the Sokol and Brown cases, whether the pinhole leak gives way suddenly or gradually is not the question.

[00:15:10] Speaker 04:
It's the application of the CRSL exclusion turns on whether the damage was caused by a, quote, continuous or repeated seepage or leakage of water, end quote.

[00:15:20] Speaker 04:
as opposed to a sudden burst of water.

[00:15:23] Speaker 04:
And the discussion in the Brown and the Sokol cases talks about this metaphysical moment that there is suddenly a leak.

[00:15:30] Speaker 04:
There wasn't one before, then there's a sudden leak.

[00:15:33] Speaker 04:
But the language of the CRSL exclusion applies, quote, regardless of whether the event occurs suddenly or gradually.

[00:15:44] Speaker 04:
End quote.

[00:15:45] Speaker 04:
So if the event was a sudden pinhole leak or a gradual erosion of the pipe, which finally gave way, it doesn't matter.

[00:15:52] Speaker 04:
The focus is on the discharge of the water and whether it was continuously repeated before it was discovered.

[00:15:58] Speaker 04:
And I urge the court to look at Exhibit H, which was submitted by the Dardashtes, which was a video showing the spraying and the leaking of the water continuously.

[00:16:10] Speaker 04:
spraying of the water was unknown to the Dardashtys until Mr. Dardashty discovered or his housekeeper discovered the dripping of water from the ceiling and the evidence of a CRSL condition was

[00:16:28] Speaker 03:
I thought there was something in the record about mold being discovered but a month later.

[00:16:35] Speaker 03:
So how do you know that this leak had been allowing water to escape into the walls or the ceiling or the floor for a continuous period of time rather than what they allege, which was it was a powerful spray of water that came through the ceiling immediately?

[00:16:52] Speaker 04:
The presence or absence of mold is an indicia of CRSL condition, but it's not dispositive.

[00:16:59] Speaker 04:
And the speculation that it developed because State Farm didn't allow any remediation is just that speculation.

[00:17:08] Speaker 04:
In opposition to the motion for summary judgment, there wasn't no expert offered

[00:17:13] Speaker 04:
by Dardasti to say that this was a condition that mold should not have developed because it was a sudden leak.

[00:17:20] Speaker 04:
That was not offered.

[00:17:21] Speaker 04:
No testimony, expert testimony, was offered with respect to the development of mold.

[00:17:27] Speaker 04:
As noted by Mr. Natali, there was a problem with the date on the pictures of the remediation from Service Master, because Service Master came in on the day after the leak was discovered, on 2-24, and they

[00:17:40] Speaker 04:
tore off the drywall and discovered the leak on that day.

[00:17:43] Speaker 04:
They also took off drywall subsequently.

[00:17:47] Speaker 04:
And so there is a dispute because there are notes in the file that before 331, the second floor exam,

[00:17:59] Speaker 04:
all of the drywall had been removed.

[00:18:01] Speaker 04:
So those pictures that show the mold, those pictures show mold that developed well before 331 when the service master was removing the drywall.

[00:18:12] Speaker 04:
So there is a question, and that's why Mr. DeTali said the photographs and the date of the photographs suggest that there was mold at that property well before the first evidence of mold was mentioned by Mr. Golshani on 331.

[00:18:29] Speaker 01:
My understanding of State Farm Position is, hey, look, every report we had, they got.

[00:18:38] Speaker 01:
Every inspection we did, they were there.

[00:18:41] Speaker 01:
They offered no expert testimony about the mold.

[00:18:47] Speaker 01:
Seems to me that under your policy, you would probably not have any liability at all.

[00:18:53] Speaker 01:
State Farm agreed there was some liability and decided to go to trial on the amount of the damages.

[00:19:00] Speaker 01:
Why did you agree that you had liability in light of your position respecting the reports, inspection, and the mold?

[00:19:08] Speaker 04:
Well, we just decided at the point that there was no bad faith liability, we had secured a determination on the MSJ that there was no bad faith, there was no punitive damages.

[00:19:18] Speaker 04:
We decided to streamline the case for trial just on the issue of the value of the loss.

[00:19:24] Speaker 01:
From your perspective, while you probably could have claimed there was no coverage, you thought, hey, let's

[00:19:31] Speaker 01:
the cost of this versus the cost of the other, it makes more sense to try it.

[00:19:36] Speaker 01:
Is that basically what it was?

[00:19:37] Speaker 04:
Correct, Your Honor.

[00:19:38] Speaker 04:
It's a business decision to go to trial on just a value issue instead of trying to dispute coverage and then have them take a second shot at the apple.

[00:19:46] Speaker 04:
You go all the way down that road and then you go to the trial and they try to come up with some other issues on appeal to say, oh, there was bad faith all along.

[00:19:56] Speaker 04:
I think that the genuine dispute

[00:19:57] Speaker 04:
doctrine was applied correctly here because the idea is that, again, you can't just have argument unsupported by evidence.

[00:20:06] Speaker 04:
You have to come forward with something that shows that there was an unreasonable investigation, there was a conscious disregard of rights.

[00:20:12] Speaker 04:
And I also take issue that

[00:20:15] Speaker 04:
their best bad faith case has any support in the record whatsoever.

[00:20:21] Speaker 04:
State Farm never falsely claimed that the forensics group could not determine how the leak occurred.

[00:20:29] Speaker 04:
That is false.

[00:20:30] Speaker 04:
And they make this claim in the AOB at page 36 and they make the claim in their reply brief.

[00:20:35] Speaker 04:
and they cite to 2ER 243 and 253.

[00:20:38] Speaker 04:
Neither of those letters support the claim that there was a misrepresentation of the 4X report.

[00:20:45] Speaker 04:
The June 15, 2021 denial letter stated, the predominant cause of the plumbing failure was wear, tear, or deterioration.

[00:20:52] Speaker 04:
That's exactly what the 4X report determined.

[00:20:56] Speaker 00:
Council, if I might shift over to the appraisal issue for a moment.

[00:21:00] Speaker 00:
Sure.

[00:21:00] Speaker 00:
What could the other side have done other than request an appraisal?

[00:21:06] Speaker 00:
Are you saying that there should have been a formal petition filed?

[00:21:10] Speaker 04:
Well, first of all, the policy requires that the request be in writing.

[00:21:14] Speaker 04:
They had the opportunity back in 2021 when they first received the April 2021 letter.

[00:21:20] Speaker 04:
The claims note indicate that Mr. Golshani, I believe it's at 2ER196, Mr. Golshani mentioned to Ms.

[00:21:28] Speaker 04:
Urquia that he intended,

[00:21:31] Speaker 04:
to raise the appraisal issue.

[00:21:32] Speaker 04:
He never raised the appraisal issue.

[00:21:34] Speaker 04:
They never raised the appraisal issue during the claims process.

[00:21:38] Speaker 04:
When they filed suit, they chose to sue both in the complaint and first-amended complaint on both the issue of coverage and the issue of damages.

[00:21:46] Speaker 04:
They never alleged that if we prevail on the issue of coverage, we wish to go to an appraisal.

[00:21:52] Speaker 04:
The court was faced with the position that

[00:21:55] Speaker 04:
They were the day before trial, appearing at the final status conference.

[00:21:59] Speaker 04:
And all of a sudden, up pops, oh, we want to go to appraisal, Your Honor.

[00:22:04] Speaker 04:
This court treated it as a waiver issue.

[00:22:06] Speaker 04:
The court rightly noted that it should like an agreement to arbitrate and agreements to arbitrate to be waived if you litigate long enough.

[00:22:14] Speaker 04:
And in this case, they litigated for nine months.

[00:22:17] Speaker 04:
They were on the eve of trial.

[00:22:18] Speaker 04:
They already had a week's notice that State Farm had stipulated

[00:22:24] Speaker 04:
on the record that there was going to be no issue but the issue of value tried at the court trial or the jury trial.

[00:22:33] Speaker 04:
And not only had they noted that at the final, or I'm sorry, that was the status conference before the final status conference because it continued.

[00:22:41] Speaker 04:
But State Farm also filed a notice of abandonment of all of its affirmative defenses on 1129.

[00:22:47] Speaker 04:
That appears in the docket at number 78.

[00:22:49] Speaker 04:
That specific document said we are waiving all of our right to proceed on all of our affirmative defenses, and the only issue that's going to be presented to the jury is waiver.

[00:23:01] Speaker 00:
And they waited a week.

[00:23:01] Speaker 00:
I follow your argument.

[00:23:03] Speaker 00:
One other argument on the jury instruction baseboards, is in fact there a deficiency in the coverage of the district court instruction?

[00:23:12] Speaker 00:
No.

[00:23:13] Speaker 04:
The jury instruction accurately addressed in a fair manner both elements of the insurance regulation.

[00:23:21] Speaker 04:
It stated that

[00:23:23] Speaker 04:
The court noted that it was gibberish and decided that it was too verbose, too technical to use and might confuse the jury.

[00:23:30] Speaker 04:
So the court said the jury is to award the value of any damages.

[00:23:36] Speaker 04:
Any damages include direct damages as well as consequential property damage that would be required.

[00:23:42] Speaker 04:
And the second element was given verbatim from the regulation.

[00:23:47] Speaker 04:
That is the reasonably uniform appearance.

[00:23:50] Speaker 04:
And this argument relating to the jury instruction that we were deprived of arguing consequential property damage is a red herring because all of the argument, as you note in the record, indicates that they were concerned about

[00:24:04] Speaker 04:
the reasonable uniform appearance.

[00:24:06] Speaker 04:
And that's where they got to the point that they could seek to recover not only all of the finished replacements on the first floor, but the stairs and the carpeting and the wood on the second floor and all the finishes on the second floor.

[00:24:23] Speaker 04:
only based upon the reasonable uniform appearance, the court said, OK, I'll give you that part of the instruction.

[00:24:30] Speaker 04:
But this other part of the instruction is gibberish, and I'm going to make it more digestible for the jury.

[00:24:38] Speaker 04:
And he did so.

[00:24:39] Speaker 04:
So both aspects of the insurance regulation were fairly and accurately covered.

[00:24:44] Speaker 04:
And in fact, the main point that Dardashti wanted to focus on, reasonable

[00:24:51] Speaker 04:
uniform appearance was in fact given verbatim from the insurance regulation.

[00:24:57] Speaker 04:
So there's no error in the instruction and the court doesn't have to use the precise words that were proposed by Dardashti.

[00:25:04] Speaker 01:
Was the jury instruction was ultimately used part of a model instruction, one that would be commonly used in the cyber litigation?

[00:25:12] Speaker 04:
No, what the court did is the court just put together a normal damages instruction and then he did modify it to add the language on the second part of the insurance regulation to directly address this reasonable uniform appearance because that was, in all of the discussion on the jury instructions, that was the point that the plaintiff was making.

[00:25:41] Speaker 04:
that plaintiff's counsel wanted that reasonable uniform appearance because that's the yarn, the ball of yarn that gets them downstairs in full and upstairs as well in terms of the cost of repair estimate.

[00:25:53] Speaker 01:
So from your perspective, they had an opportunity to present that.

[00:25:57] Speaker 01:
The jury instructions included that and that jury didn't buy it.

[00:26:01] Speaker 04:
Right, and the cost of repair estimate, all of his testimony was about reasonable uniform appearance.

[00:26:08] Speaker 04:
None of the language in his cost of repair estimate, which we included in the supplemental exit of record, includes any language about consequential property damage.

[00:26:17] Speaker 04:
All he was talking about was reasonable uniform appearance.

[00:26:20] Speaker 04:
He talked about that on direct, he talked about that on cross.

[00:26:24] Speaker 04:
And nothing about consequential property damage was included in his report.

[00:26:28] Speaker 04:
So this is an argument that was made to suit the way that the jury instruction was created by the trial judge and doesn't reflect what the main argument or consideration was at the time the jury arguments were made to the court.

[00:26:44] Speaker 04:
If there's any questions with respect, oh, I just wanted to add one more thing about the State Farm falsely claiming that forensic could not determine how the leak occurred.

[00:26:53] Speaker 04:
They also cite to the September 29th, 2021 denial letter.

[00:26:57] Speaker 04:
There's nothing in that letter that misrepresents the 4X report.

[00:27:01] Speaker 04:
It cites that the, was consistent with the report in terms of the pressure and how the water was leaking out, but also notes that Bruce Angle told State Farm that he did not

[00:27:13] Speaker 04:
know what pressure was at the house when the burst occurred.

[00:27:17] Speaker 04:
And that was documented in the claims notes at 3ER204.

[00:27:23] Speaker 04:
So nothing in that letter, nothing in the June letter ever falsely represented what the conclusions were of 4X.

[00:27:33] Speaker 04:
If I have I only have 20 seconds left if any of them anyway, I thought if your honor has any one question We submit that the motion should be affirmed.

[00:27:42] Speaker 04:
The judgment should be affirmed Dardashti is not entitled to a new trial on any issue and Dardashti is not entitled to an appraisal Thank you, your honor Thank you, your honor

[00:27:58] Speaker 02:
I believe that the most applicable case on the question of bad faith would be the Fadif v. State Farm case that we cite at page 8 of our reply brief that's at 50 CalAP 5th, 94.

[00:28:10] Speaker 02:
And what happened in that case is that the Court of Appeal found that the fact that State Farm's adjuster had reached a conclusion contrary to its expert's opinion would, when viewed in the light most favorable to the insured, allow a finding of bad faith.

[00:28:24] Speaker 02:
And that's what happened in this case.

[00:28:26] Speaker 01:
I would direct the Court to...

[00:28:28] Speaker 01:
The opposing counsel says, and I think the record reflects, that your client at an opportunity to have someone there whenever there's an inspection, your client received copies of the reports that were relied upon.

[00:28:43] Speaker 01:
Is that not true?

[00:28:44] Speaker 01:
That's not true, Your Honor.

[00:28:45] Speaker 01:
Okay, please tell me on the record where that shows.

[00:28:48] Speaker 02:
Your Honor, I don't believe that it's actually disputed that my client only received a copy of the Forex Forensics Report during discovery in this case.

[00:28:57] Speaker 02:
So it's true that my client was present during the site inspections, and it's true that my client retained the pipe and provided that pipe to Forex Forensics, but we didn't receive the report until this litigation.

[00:29:11] Speaker 02:
And we certainly didn't receive access to the voicemail from Forex Forensics, where they described the leak as sudden.

[00:29:18] Speaker 02:
until this litigation.

[00:29:21] Speaker 02:
I would direct the court to the deposition testimony of Natale, which we cite at page 13 of our opening brief, and he says that it was his understanding

[00:29:30] Speaker 02:
that Forex Forensics had determined that the leak occurred suddenly.

[00:29:34] Speaker 02:
And so the attempt by State Farm to obfuscate that fact is inconsistent with the sworn testimony of their adjuster.

[00:29:41] Speaker 02:
And Mr. Natali then said that he did not agree with that determination, that in his own judgment, he decided that it was gradual.

[00:29:49] Speaker 00:
And so I think that that- Is it dispositive if it's sudden or not?

[00:29:53] Speaker 00:
Because you can have a sudden leak that is continuous and repeated, can you not?

[00:29:58] Speaker 02:
Well, Your Honor, the district court construed that as the definitive issue for coverage.

[00:30:04] Speaker 02:
They stipulated the coverage, and then they haven't appealed that coverage determination.

[00:30:08] Speaker 02:
There's not a cross-appeal here.

[00:30:10] Speaker 02:
So we've been operating as if that was how coverage was determined, because that's what happened in the district court.

[00:30:17] Speaker 02:
And so I do think that here, if sudden is used in the correct sense to refer to the idea of a leak in which most of the water is coming out immediately, i.e.

[00:30:25] Speaker 02:
a leak where there's no latent damage that's occurring over an extended period of time, but rather one where there's water that leaks out only for a matter of hours, or perhaps at most days before it's discovered, rather than months or years, I do think that that is dispositive yawning.

[00:30:41] Speaker 01:
Your time is up.

[00:30:42] Speaker 01:
Let me ask whether either of my colleagues has additional questions.

[00:30:45] Speaker 01:
Thank you both for your argument.

[00:30:46] Speaker 01:
Thank you very much.

[00:30:47] Speaker 01:
The case of Dardashti versus State Farm Insurance is submitted.