[00:00:00] Speaker 00:
Good morning.

[00:00:01] Speaker 00:
Good morning, Your Honors.

[00:00:04] Speaker 00:
If I may, could I please reserve five minutes for rebuttal?

[00:00:15] Speaker 05:
You may proceed.

[00:00:16] Speaker 00:
Thank you.

[00:00:18] Speaker 00:
And good morning again.

[00:00:19] Speaker 00:
My name is Terry Kilpatrick.

[00:00:21] Speaker 00:
I'm one of the attorneys for Paula Farms, who's here pursuing a bad faith insurance claim on behalf of Gemini's insurance company's insured Dole Oil Company.

[00:00:36] Speaker 00:
What I would like to do is start with a quick recap of how we got here today.

[00:00:42] Speaker 00:
Dole Oil Company is a small oil company in the Central Valley run by Karen Dole, who took over when her husband had passed away.

[00:00:50] Speaker 00:
And they're in the business of pulling oil and salt water out of the ground, separating it out, and then re-injecting that salt water back into a well bore underground.

[00:01:03] Speaker 00:
And unfortunately what happened is that saltwater broke through some formations, it got into the fresh groundwater that Paul Farms used to irrigate its crops, and it killed and harmed thousands of trees, and it cost millions of dollars.

[00:01:23] Speaker 00:
Well, Mrs. Dole contacted the Gemini Insurance Company and said, I've been sued, please defend me.

[00:01:30] Speaker 00:
And Gemini wrote back and said, no, we're not going to do that because we have a pollution exclusion.

[00:01:37] Speaker 00:
We do not ensure pollution incidents.

[00:01:42] Speaker 00:
And the original letter that Gemini wrote and in the briefs, to your honors, submitted in this case,

[00:01:54] Speaker 00:
Gemini spent a lot of time saying, you're not covered under section 2B of the policy.

[00:02:01] Speaker 00:
That is pollution costs.

[00:02:04] Speaker 00:
Well, Dole Oil Company never sought coverage under 2B.

[00:02:08] Speaker 00:
Dole Oil Company was seeking coverage under 2A.

[00:02:11] Speaker 00:
That's the property damage section.

[00:02:14] Speaker 00:
And I'm going to get into that in just a little more detail in a moment.

[00:02:21] Speaker 05:
Well, the main argument in your opening brief appears to be that saltwater is not a pollutant because it is exempted from the definition of waste, which in turn exempts it from the definition of pollutant.

[00:02:36] Speaker 05:
However, under McKinnon versus Trek Insurance Exchange, it seems to me that the initial question is whether a reasonable layperson would commonly understand saltwater to be an environmental pollutant.

[00:02:51] Speaker 05:
Do you concede that a reasonable lay person would think that salt water is an environmental pollutant?

[00:02:58] Speaker 05:
Did you argue this in your opening brief or if so, where?

[00:03:02] Speaker 00:
It's a good question, your honor, and I will find that site for you.

[00:03:07] Speaker 00:
But that is the issue.

[00:03:09] Speaker 00:
And I don't think it's essential that we answer that question, to be quite honest.

[00:03:15] Speaker 00:
I think it's just another reason to reverse the decision in this case.

[00:03:22] Speaker 00:
But saltwater is a natural element pulled up into the ground.

[00:03:27] Speaker 00:
People typically don't treat

[00:03:29] Speaker 00:
and then it's reinjected underground, I don't think a reasonable lay person would consider saltwater as a pollutant.

[00:03:37] Speaker 04:
I thought you acknowledged in the proceedings below that saltwater is an irritant or contaminant.

[00:03:43] Speaker 04:
I mean, isn't that the case?

[00:03:45] Speaker 00:
Yes, we did concede that, Your Honor.

[00:03:48] Speaker 00:
And again, I don't think that's the essential question for this case.

[00:03:53] Speaker 00:
So I will concede it again, that saltwater can be considered as a contaminant.

[00:03:59] Speaker 00:
Now, I will say in the truck exchange case,

[00:04:01] Speaker 00:
They do address that issue and I do believe that is a basis still.

[00:04:06] Speaker 00:
We have argued it below and we argue it again in this court that saltwater really should not be considered a pollutant.

[00:04:13] Speaker 00:
But even if it is, it's the definition of pollutant that is the problem here for Gemini because pollution is defined as a contaminant or irritant.

[00:04:25] Speaker 00:
and soot and vapor and waste.

[00:04:29] Speaker 00:
And waste is defined as recyclable or unwanted material, but not salt water.

[00:04:36] Speaker 01:
But why can salt water not be waste and still be an irritant and contaminant?

[00:04:43] Speaker 00:
Well, because that's how the policy terms are defined.

[00:04:47] Speaker 00:
That's what Gemini decided how they were going to do this.

[00:04:50] Speaker 00:
So, you know, I think it was the truck case too, saying anything in an extreme could be a contaminant or irritant.

[00:04:59] Speaker 00:
You know, enough water will kill somebody.

[00:05:02] Speaker 00:
You drink too much water, you can die from that.

[00:05:04] Speaker 00:
Well, it doesn't make fresh water a dangerous chemical or a contaminant or an irritant.

[00:05:13] Speaker 05:
So hypothetically, if we agree with the district court that saltwater is a pollutant for purposes of the exclusion, there still seems to be one remaining question, namely whether your underlying claim against Dole

[00:05:26] Speaker 05:
could still potentially fall within the policy.

[00:05:30] Speaker 05:
So assuming saltwater is a pollutant, does your complaint against Dole potentially give rise to liability that could be covered by the policy?

[00:05:39] Speaker 05:
Or could your complaint against Dole be amended to give rise to liability that would be covered under the policy?

[00:05:47] Speaker 05:
Please explain that to me.

[00:05:49] Speaker 00:
Well, I guess I want to be careful about what we're talking about because

[00:05:57] Speaker 00:
What I think that the district court did, what the magistrate judge did was tried to divide the meaning of pollutant and the meaning of waste and that they're used two different ways and they mean two different things.

[00:06:10] Speaker 00:
We have always contended and we still contend that the definition of pollution includes pollutants and waste.

[00:06:21] Speaker 00:
So when we're talking about a pollution exclusion,

[00:06:25] Speaker 00:
If waste is part of that definition and waste excludes saltwater, then saltwater is not a pollutant.

[00:06:35] Speaker 00:
Now, what the magistrate judge did, which I believe was erroneous, and it's why I was pointing out these two sections, sections 2A and 2B.

[00:06:45] Speaker 00:
Section 2A is a straight property damage claim.

[00:06:51] Speaker 00:
The damages in property damage are the repair or the replacement of the property.

[00:06:55] Speaker 00:
The damage and pollution costs are investigating,

[00:07:00] Speaker 00:
the causes of the pollution, the remediation and removal of the pollution, the monitoring of the pollution, plus it has all these other conditions.

[00:07:12] Speaker 00:
You need to know about the leak within 30 days.

[00:07:15] Speaker 00:
You need to notify Jim and I about it within 90 days.

[00:07:18] Speaker 00:
So these two sections,

[00:07:22] Speaker 00:
for property damage and pollution costs.

[00:07:24] Speaker 00:
They're different.

[00:07:25] Speaker 00:
They have different risks.

[00:07:27] Speaker 00:
They have different conditions.

[00:07:28] Speaker 00:
And that's important because what Gemini and the magistrate judge were saying is, hey, we're taking on all these risks.

[00:07:36] Speaker 00:
Well, yes, you are.

[00:07:37] Speaker 00:
But you've resolved that in the way you're going to deal with it because you have two separate sections.

[00:07:44] Speaker 00:
Section 2A on property damage has to stand on its own.

[00:07:49] Speaker 00:
And I want you to imagine for a moment, imagine if this policy written in there was no 2B.

[00:07:54] Speaker 00:
All it was, was 2A saying we'll pay for property damage caused by an occurrence.

[00:08:01] Speaker 00:
And clearly this is an occurrence, this was an accident, the salt water broke through.

[00:08:05] Speaker 00:
And we're going to define pollution as soot and vapor and waste, and waste isn't salt water.

[00:08:12] Speaker 00:
What ordinary layperson

[00:08:16] Speaker 00:
would think that salt water somehow is a pollutant.

[00:08:20] Speaker 00:
Why would that word, why would the word waste be in the definition of pollution, but for to define pollution, that's its whole purpose, right?

[00:08:31] Speaker 00:
When word A uses word B to define its terms, the terms and meaning of word B become part of word A. That is how definitions work.

[00:08:46] Speaker 00:
So we need, Section 2A is a standalone provision in terms of coverages.

[00:08:53] Speaker 00:
That's how the policy deals with it, right?

[00:08:56] Speaker 00:
So I think an ordinary person and the reasonable expectations of an insured looking at that policy would go, it sure looks like saltwater is excluded from the terms of pollution.

[00:09:09] Speaker 00:
And if you go to the policy too, I mean, in the actual exclusionary language,

[00:09:17] Speaker 00:
I'm looking at page 1347 of the volume 9 of the excerpts of record.

[00:09:23] Speaker 00:
It says, this is the pollution exclusion.

[00:09:26] Speaker 00:
We don't cover for the discharge of pollutants.

[00:09:31] Speaker 00:
Caps all bold and then it goes on.

[00:09:35] Speaker 00:
We don't cover for any disposal or treatment of waste.

[00:09:42] Speaker 00:
And it goes on again.

[00:09:43] Speaker 00:
We don't pollution doesn't mean waste handled or treated by you.

[00:09:50] Speaker 00:
Well, if I'm an insured person and my job, my business, is re-injecting waste into well bores, I'm looking at this policy going, again, it sure looks like salt water is being singled out as being a non-pollutant.

[00:10:13] Speaker 00:
What Gemini has done,

[00:10:17] Speaker 00:
They engage in this very complicated analysis about buyback provisions.

[00:10:25] Speaker 00:
Well, I don't know much about the oil business, but what I do know is the buyback provision, that's nowhere to be found in this insurance agreement.

[00:10:35] Speaker 00:
There is nowhere in the insurance agreement that says,

[00:10:39] Speaker 00:
hey lay person, hey insured person, be sure that when you're making a claim, read through not only A, which you're making a claim under, read through B, figure out if there's going to be coverages under B. Oh, and by the way, this presumes all this knowledge of the oil business.

[00:10:56] Speaker 01:
I guess is the question, I mean, we're all reasonable people, but the audience here is the insured, right?

[00:11:04] Speaker 01:
Not the plaintiff who's

[00:11:09] Speaker 01:
bringing a suit against the insured and this is a policy that's targeted towards energy production, is it not?

[00:11:16] Speaker 01:
So I guess it doesn't strike me that that does all of the work.

[00:11:20] Speaker 01:
I mean the insurance, this insurance contract was not with any potential plaintiff if the insured is a tortfeasor, the audience is the insured.

[00:11:31] Speaker 01:
We're trying to understand where was the meaning of the minds between those two.

[00:11:34] Speaker 01:
The fact that it has these energy terms of art doesn't seem to be disqualifying of their interpretation.

[00:11:39] Speaker 00:
Well, it's a great question.

[00:11:41] Speaker 00:
And Jim and I and the magistrate judge both talked about that.

[00:11:46] Speaker 00:
Hey, these insurance policies have to do with negotiations and industry standards and allocations of risks and reserves.

[00:11:55] Speaker 00:
Look for that anywhere in the record.

[00:11:57] Speaker 00:
There is nothing in the record.

[00:11:58] Speaker 00:
I mean, first of all, it's inadmissible parole evidence, but there is nothing about, you know, Mrs. Dole's sophistication, her negotiations.

[00:12:07] Speaker 00:
We're left with the meaning of this contract.

[00:12:10] Speaker 00:
And I think it is inappropriate and inadmissible for the magistrate judge

[00:12:17] Speaker 00:
to rule that all these industry standards, none of which I know about, none of which are in the record anywhere that I can see, had something to do with how Mrs. Dole would read that contract.

[00:12:29] Speaker 00:
So I see I've used up my time.

[00:12:31] Speaker 00:
I will reserve the remaining time.

[00:12:33] Speaker 00:
Thank you.

[00:12:52] Speaker 05:
Good morning.

[00:12:52] Speaker 03:
Good morning, Your Honor.

[00:12:53] Speaker 03:
It's me, a police of court, Alex Potenti for Gemini Insurance Company, defendant and appellee.

[00:12:59] Speaker 03:
I guess a couple of points.

[00:13:00] Speaker 03:
The first is that PALA did waive and concede the issue of is saltwater a pollutant?

[00:13:11] Speaker 03:
It did not raise this issue in the underlying case.

[00:13:13] Speaker 03:
It did not raise it in its opening brief.

[00:13:15] Speaker 03:
It raised it for the first time on appeal.

[00:13:17] Speaker 03:
But on the merits of that issue,

[00:13:20] Speaker 03:
This is not just salt water, it's produced water.

[00:13:25] Speaker 03:
Produced water is water that's withdrawn from a wellbore that contains not only salt water but boron, sometimes metals and other dissolved solids.

[00:13:35] Speaker 03:
The problem of course is that salt water and the other produced fluids that were reinjected into the wellbore leaked.

[00:13:43] Speaker 03:
They leaked.

[00:13:45] Speaker 03:
in a way that was covered under this policy, but in a gradual way.

[00:13:49] Speaker 05:
It wasn't an incident.

[00:13:52] Speaker 03:
Right.

[00:13:52] Speaker 05:
It wasn't an eligible pollution.

[00:13:54] Speaker 05:
I mean, there's no doubt that a whole bunch of trees got destroyed and that it was caused by this leak, but it was a leak that gradually went into their water source.

[00:14:06] Speaker 03:
Right.

[00:14:07] Speaker 03:
it contaminated the water source and killed trees.

[00:14:10] Speaker 03:
This is the exact situation that McKinnon is talking about as what is the commonly understood definition of pollution.

[00:14:22] Speaker 05:
So McKinnon instructs us to put ourselves in the position of a layperson and understand how they might reasonably interpret

[00:14:29] Speaker 05:
the exclusionary language in the policy.

[00:14:32] Speaker 05:
So why would a lay person not believe that by excluding saltwater from a definition of waste, the policy also excluded saltwater from a definition of pollutant?

[00:14:43] Speaker 05:
After all, a pollutant is defined in part as waste.

[00:14:47] Speaker 03:
That's an excellent question and it has a simple answer that's in the plain language of 2A, the very policy provision that PALA seeks recovery under.

[00:15:00] Speaker 03:
Pollutants, as applies to 2A, means any solid, liquid, gaseous or thermal, irritant or contaminant.

[00:15:07] Speaker 03:
And we know from McKesson, from McKinnon rather, that this is an irritant or contaminant.

[00:15:14] Speaker 03:
It meets the definition of common understanding of the word pollute indicates that it is something that creates impurity, something objectionable and unwanted.

[00:15:24] Speaker 03:
And no one could possibly say that salt water and the other produced fluids that leaked into the aquifer were something that were

[00:15:33] Speaker 03:
unobjectionable or unwanted.

[00:15:35] Speaker 03:
They killed the trees.

[00:15:36] Speaker 03:
They rendered the potable aquifer unusable for that purpose.

[00:15:41] Speaker 03:
They were unwanted, unobjectionable, and they constitute classical pollution.

[00:15:47] Speaker 01:
Thank you for drawing us for 2A.

[00:15:48] Speaker 01:
That is the provision at issue.

[00:15:51] Speaker 01:
Where are we finding the text where 2A points to that definition of waste and pollution rather than the plaintiff's preferred one?

[00:16:00] Speaker 03:
Well, there is only one definition of pollution in the policy.

[00:16:05] Speaker 03:
If you look at the exclusion for pollution, that's the exclusion number 13.

[00:16:16] Speaker 03:
It applies to section 2A, bodily injury and property damage liability.

[00:16:21] Speaker 03:
So the exclusion that we're talking about, that we're relying upon for this case, applies only to 2A.

[00:16:28] Speaker 03:
And it excludes bodily injury or property damage arising out of or resulting from the actual alleged or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants.

[00:16:41] Speaker 03:
One, at or any premises, site or location which is or was

[00:16:46] Speaker 03:
at any time owned or occupied or rented or loaned to any insured.

[00:16:49] Speaker 03:
So we meet that standard.

[00:16:50] Speaker 03:
There's no dispute about that.

[00:16:52] Speaker 01:
OK.

[00:16:52] Speaker 01:
Now help me with do the same for waste.

[00:16:57] Speaker 03:
So all right.

[00:16:57] Speaker 03:
So there is an exception in the pollution exclusion under one for an eligible pollution incident.

[00:17:05] Speaker 03:
And that eligible pollution incident has to be basically sudden, accidental, learned of within 30 and reported within 90 days, not met here.

[00:17:16] Speaker 03:
So there are some times in which when you re-inject salt water or produce water into a well bore,

[00:17:23] Speaker 03:
that they would be covered if it wasn't eligible pollution.

[00:17:28] Speaker 03:
So if you look at two and three under the pollution exclusion, they exclude waste without exception.

[00:17:38] Speaker 03:
So if something is waste, it's never covered.

[00:17:42] Speaker 03:
If something is pollution, it's covered sometimes, just not here.

[00:17:46] Speaker 03:
So we intended, under the plain language of the agreement, and by the way, this contract is an ISO form.

[00:17:52] Speaker 03:
It's not written by us.

[00:17:53] Speaker 03:
It's not a manuscript form.

[00:17:55] Speaker 03:
It's a form that is

[00:17:58] Speaker 03:
drafted by the Insurance Services Organization.

[00:18:00] Speaker 03:
It's designed for, specifically, oil producers.

[00:18:08] Speaker 03:
But they exclude waste expressly, without exception.

[00:18:12] Speaker 04:
But if you get salt water under both definitions, you're getting something that's illogical.

[00:18:17] Speaker 04:
Like, salt water can both be excluded and both be covered.

[00:18:20] Speaker 03:
No, not at all, Your Honor.

[00:18:23] Speaker 03:
So the definition of pollutant is an irritant or contaminant,

[00:18:26] Speaker 03:
And it includes smoke, vapor, soot, fumes, acids, alkylides, chemicals, and waste.

[00:18:32] Speaker 03:
And we know from Garamendi versus Golden Eagle and a half dozen other cases that the word including is merely illustrative.

[00:18:39] Speaker 03:
It's not restrictive.

[00:18:41] Speaker 03:
Right.

[00:18:41] Speaker 04:
I'm saying if you have salt water,

[00:18:44] Speaker 04:
If you don't exclude saltwater from the definition of waste, you can end up with illogical, I think, results under the policy.

[00:18:54] Speaker 03:
That's exactly right.

[00:18:55] Speaker 03:
You would have rendered as mere surplusage the exception to the pollution exclusion because you would be saying that if it is waste, it's never covered, but we have these exceptions that are going to never be in play because waste can never be covered.

[00:19:10] Speaker 05:
You know, I know two people that do insurance all the time.

[00:19:13] Speaker 05:
There's very logical things to you.

[00:19:15] Speaker 05:
But going back to the layperson part of things, let's say if we find it reasonable that a layperson would not consider saltwater, I'm saying hypothetically, an environmental pollutant, do you lose?

[00:19:32] Speaker 05:
If we find that a lay person would not consider salt water an environmental pollutant, do you lose?

[00:19:41] Speaker 03:
No, because this is not just salt water.

[00:19:42] Speaker 03:
It's produced water.

[00:19:44] Speaker 03:
So this is salt water and chemicals that are drawn up and re-injected.

[00:19:48] Speaker 03:
So it's not like you went out to the ocean and got a bucket full of salt water.

[00:19:54] Speaker 03:
It's got boron in it.

[00:19:55] Speaker 03:
It's got heavy metals in it.

[00:19:56] Speaker 03:
It's got it's got a whole host of things.

[00:19:58] Speaker 05:
But because you have a couple of things going on here.

[00:20:01] Speaker 05:
It's obviously you can win under the policy, but the duty to defend is is a different situation.

[00:20:08] Speaker 05:
And if things are, you know, you can have a duty to defend and still win.

[00:20:13] Speaker 05:
Right.

[00:20:15] Speaker 03:
At issue currently is both the duty to defend and the duty to indemnify.

[00:20:20] Speaker 03:
We declined both.

[00:20:22] Speaker 03:
And the Ninth Circuit case, Serfing says that if the language of the policy is clear and unambiguous and doesn't cover the laws, then we do not owe a duty to defend, where there's no factual dispute.

[00:20:35] Speaker 03:
Here, there is no factual dispute.

[00:20:36] Speaker 01:
Well, I guess it strikes me that you've walked us through two different definitions of waste.

[00:20:43] Speaker 01:
And so isn't that the very definition of ambiguity?

[00:20:46] Speaker 01:
There's the waste that, for one purpose, that is in which saltwater doesn't matter.

[00:20:55] Speaker 01:
And then there's the waste, the exact same word with, as you said, only a single definition that does all the work with respect to the pollution incident.

[00:21:05] Speaker 01:
So if there are two definitions, why isn't it ambiguous?

[00:21:09] Speaker 03:
I'm sorry, I'm not following that, Your Honor.

[00:21:10] Speaker 03:
Waste has one definition.

[00:21:13] Speaker 03:
Waste means a discarded, unusable, or unwanted substance or materials.

[00:21:18] Speaker 03:
And it says also that produced fluids are not waste.

[00:21:25] Speaker 03:
All that means is if you have a Venn diagram of pollution and then you have waste, all waste is pollution, but not all pollution is waste.

[00:21:37] Speaker 03:
The reason for that is because pollution is sometimes covered.

[00:21:41] Speaker 03:
and waste is never covered.

[00:21:42] Speaker 03:
Waste is excluded under 2A, 2 and 3, but pollution has an exception that allows an eligible pollution incident to be covered if certain things are met.

[00:21:54] Speaker 05:
Sometimes it occurs to me if we have to explain things on so many layers, could it be ambiguous to a lay person?

[00:22:00] Speaker 03:
No, that's street surfing, Your Honor.

[00:22:02] Speaker 03:
There is no other reading of this.

[00:22:04] Speaker 03:
If one, particularly with regard to a

[00:22:09] Speaker 03:
an environmental policy that's issued to an oil producer.

[00:22:12] Speaker 05:
But I guess what I'm saying, hypothetically, if there is another, or if it's ambiguous, at least to a lay person, wouldn't that trigger your duty to defend?

[00:22:20] Speaker 03:
But an ambiguity must, there must be a reasonable reading based on the plain language of the policy.

[00:22:26] Speaker 03:
And I would submit there is no reasonable reading here.

[00:22:29] Speaker 03:
Waste excludes produced fluids.

[00:22:31] Speaker 03:
Pollution

[00:22:32] Speaker 03:
is an irritant or contaminant, which Martinelli says, in other cases, that McKinnon, among others, that something that's unwanted and that contaminates aquifers, that's a classic pollution.

[00:22:45] Speaker 03:
So there's really no dispute.

[00:22:47] Speaker 03:
And Paula Farms conceded that, it seems to me, at a number of occasions.

[00:22:53] Speaker 05:
That's right.

[00:22:54] Speaker 05:
Let me understand.

[00:22:56] Speaker 05:
I always like to understand the implications of things.

[00:22:59] Speaker 05:
Let's say, hypothetically,

[00:23:01] Speaker 05:
that I thought you had a duty to defend, but that you're right in your, you're ultimately right in your interpretation.

[00:23:06] Speaker 05:
But if I thought you had a duty to defend and you didn't hear, doesn't that, that puts you on that hook for that default judgment, doesn't it?

[00:23:16] Speaker 03:
That's a bit of a dispute.

[00:23:17] Speaker 03:
I think there still has to be coverage for the indemnity, but we would certainly owe defense costs and they would seek bad fate damages.

[00:23:23] Speaker 02:
So that would be that mean that that does you on the hook for something.

[00:23:27] Speaker 02:
Yes, absolutely Something absolutely something a lot Possibly possibly.

[00:23:32] Speaker 01:
Yes, you can I pick up more on the I guess on the implications kind of industry-wide So why is it important with respect to these policies that?

[00:23:41] Speaker 01:
That you know some some saltwater You know count some saltwater doesn't what's what's the policy behind the policy?

[00:23:49] Speaker 01:
for these sorts of contracts?

[00:23:51] Speaker 03:
I mean, there's a case law in California that technical terms are to be read in the way that a person understanding the technical term would read them, a technical insured.

[00:23:58] Speaker 03:
So an oil producer is the audience for this policy.

[00:24:03] Speaker 03:
But here, the issue is you have a contaminant, saltwater and a collection of other chemicals, that leaked into the aquifer and poison trees.

[00:24:16] Speaker 03:
So that's the pollutant that's causing the pollution.

[00:24:21] Speaker 03:
And that pollutant is not waste, so it's subject to the exceptions in the pollution exclusion.

[00:24:26] Speaker 03:
But they are not met here, so there's no coverage.

[00:24:29] Speaker 01:
So the idea of an example in which the produced fluids would trigger coverage.

[00:24:37] Speaker 01:
What's an example in the business where

[00:24:40] Speaker 01:
What was the insured getting?

[00:24:45] Speaker 03:
So if the produce fluids re-injected into the Bell War, if they leaked in a manner that triggered the four criteria, which are essentially sudden accidental

[00:25:04] Speaker 03:
discovered within 30 and reported within 90 days.

[00:25:07] Speaker 03:
If those criteria had been met, there would be coverage.

[00:25:10] Speaker 03:
So we fully admit that produced water, and that's why it's not included in the definition of waste and it is included in the definition of pollutant, is covered in those circumstances when it leaks slowly.

[00:25:22] Speaker 03:
It has to be reinjected into a well borer.

[00:25:24] Speaker 03:
And it has to leak out slowly.

[00:25:26] Speaker 03:
And then the insurer has to learn of it in 30 days.

[00:25:30] Speaker 03:
The leak has to happen during the policy period.

[00:25:33] Speaker 03:
And they have to report it.

[00:25:34] Speaker 01:
Well, it can't be too slow if it has to be notified.

[00:25:36] Speaker 03:
No, it can't be slow at all.

[00:25:37] Speaker 03:
It has to be sudden.

[00:25:38] Speaker 01:
Oh, it has to be sudden.

[00:25:39] Speaker 03:
That's right.

[00:25:40] Speaker 03:
That's right.

[00:25:40] Speaker 03:
Yes.

[00:25:41] Speaker 03:
Yes.

[00:25:41] Speaker 03:
I misspoke.

[00:25:42] Speaker 03:
It has to be sort of a catastrophic thing.

[00:25:45] Speaker 01:
OK.

[00:25:45] Speaker 01:
And that's the sorts of risks in general.

[00:25:47] Speaker 03:
That's the risk that this policy form provides coverage for.

[00:25:50] Speaker 01:
That's right.

[00:25:51] Speaker 01:
Thank you for that.

[00:25:53] Speaker 03:
I've made my points.

[00:25:55] Speaker 03:
Any other questions from the court?

[00:25:57] Speaker 05:
I don't think so.

[00:25:58] Speaker 05:
Thank you for your arguments.

[00:26:19] Speaker 00:
Just a couple of points I would like to address.

[00:26:25] Speaker 00:
My friend Defense Counsel had mentioned that this is a standard foreign policy everybody uses.

[00:26:32] Speaker 00:
I don't know that.

[00:26:33] Speaker 00:
I'm not an oil guy.

[00:26:34] Speaker 00:
I don't think that's anywhere in the record.

[00:26:37] Speaker 00:
And what I do know, however, is there is not one case, one case we could find that they could find, that the magistrate judge could find, where the offending chemical that we're talking about is excluded in the definition of terms of the policy.

[00:26:56] Speaker 00:
So no case that says, we're here arguing whether pollution exclusion applies for salt water or produced water or chlorine gas or whatever it is.

[00:27:05] Speaker 00:
But by the way, we're going to exclude that in this definition.

[00:27:09] Speaker 00:
And we're going to include that exclusion in the definition of the word pollutant.

[00:27:14] Speaker 00:
So to me, that's a dispositive issue in this case.

[00:27:23] Speaker 00:
I also believe that this going into the eligible pollution incident issue, I don't understand that.

[00:27:37] Speaker 00:
Section 2A is Section 2A.

[00:27:39] Speaker 00:
It defines pollutants.

[00:27:41] Speaker 00:
Pollutants includes waste.

[00:27:42] Speaker 00:
Waste excludes saltwater and produce water.

[00:27:50] Speaker 00:
And as my friend said, you know, the list is illustrative, it's not exclusive, but definitions can be inclusive and exclusive, right?

[00:28:03] Speaker 00:
I don't agree with the Venn diagram, I don't think the waste is inside pollutants and it swallows everything, because if it does, what is the exclusion for saltwater there for at all?

[00:28:14] Speaker 00:
What does that mean to a regular person?

[00:28:16] Speaker 00:
I just, I don't think people think in terms of Venn diagrams and reading to policy provisions, one of which doesn't even apply to them.

[00:28:25] Speaker 00:
So if a definition says it's A and B, but not C and not D,

[00:28:30] Speaker 00:
Well, that's the definition, and that's really what this definition says.

[00:28:35] Speaker 00:
Instead of just using the word waste and making us turn a page to go to that, they could have just written it all out under the term pollutants when they were defining the term, right?

[00:28:45] Speaker 00:
It's the same thing.

[00:28:47] Speaker 00:
So right there in the definition of pollution is an exclusion of saltwater and produced water.

[00:28:53] Speaker 00:
That's what Doyle Oil Company did.

[00:28:55] Speaker 00:
That's their business.

[00:28:57] Speaker 00:
That was their reasonable expectation that this insurance policy is going to cover my business, which is separating oil from produced water and salt water.

[00:29:06] Speaker 00:
And I get it.

[00:29:07] Speaker 00:
If I dump a bunch of oil on the ground, that's a pollutant, and that's not covered.

[00:29:12] Speaker 00:
Not so with salt water.

[00:29:14] Speaker 00:
Not so with produced water.

[00:29:16] Speaker 00:
So we would ask that you reverse this decision.

[00:29:19] Speaker 00:
And, Your Honor, as you also said, the worst case here is we've got some ambiguities and confusion about this policy.

[00:29:27] Speaker 00:
Thank you very much.

[00:29:28] Speaker 05:
Thank you.

[00:29:29] Speaker 05:
This matter will stand to manage.

[00:29:32] Speaker 00:
All right.