Free Statement - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13

Wayne Gill, Esq., (FL Bar 114953) Walton Lantaff Schroeder & Carson 1700 Palm Beach Lakes Blvd., 7th Floor West Palm Beach, FL 33401 Tel: 561/689-6700 Fax: 561/689-2647 [email protected] Steven Plitt, Esq. (State Bar No. 007481) Daniel Maldonado, Esq. (State Bar No. 018483) KUNZ PLITT HYLAND DEMLONG & KLEIFIELD A Professional Corporation 3838 North Central Avenue, Suite 1500 Phoenix, Arizona 85012-1092 Telephone: (602) 331-4600 Facsimile: (602) 331-8600 [email protected] [email protected] Attorneys for Defendants IN THE UNITED STATES DISTRICT COURT

14 15 16 17 18 19 20 21 22

FOR THE DISTRICT OF ARIZONA U-Haul International, Inc.; U-Haul Company Of Pennsylvania; U-Haul Company Of Florida; and Republic Western Insurance Company, Plaintiffs, vs. Lumbermens Mutual Casualty Company, Defendants. DEFENDANT LUMBERMENS MUTUAL CASUALTY COMPANY'S STATEMENT OF UNDISPUTED MATERIAL FACTS CASE NO.: CIV-04-0662-PHXDGC (Maricopa County Superior Court Cause No. CV 2004-002438)

23 24 25 26

Pursuant to Rule 56.1(a) of the Local Rules of Practice of the United States District Court for the District of Arizona, Defendant Lumbermens Mutual Casualty Company ("LMC"), by and through undersigned counsel, hereby submits the following

Case 2:04-cv-00662-DGC

Document 112

Filed 09/30/2005

Page 1 of 35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Statement of Undisputed Material Facts in Support of its Motion for Summary Judgment (hereinafter "SOF"). This Statement of Facts ("SOF") is supported by the attached exhibits. Solely for the limited purpose of Defendant's motion, these facts are undisputed: STATEMENT OF FACTS I. 1. THE POLICIES

Republic Western Insurance Company ("Republic Western") issued three

liability policies to AMERCO/U-Haul for the 4/1/99-00 policy period: " Commercial Liability Policy" RG99; "Commercial Excess Liability Policy" RX99; and "Commercial Umbrella Liability Policy" RU99. (See Transcript of Deposition of Douglas M. Bell, dated January 13, 2005, attached hereto as Exhibit 1, p. 10, l. 8 ­ p. 11, l. 8; Republic Western Ins. Co. Policy RG99, attached hereto as Exhibit 2; Republic Western Ins. Co. Policy RX99, attached hereto as Exhibit 3; and Republic Western Ins. Co. Policy RU99, attached hereto as Exhibit 4.)

17 18 19 20 21

2.

Republic Western policy RG99 provides a $250,000 occurrence limit in

excess of the insured's $25,000 self-insured retention, and a $250,000 annual aggregate limit because of "bodily injury" and "property damage" included within the Products and Completed Operations Hazard. Republic Western policy RX99 provides a

22 23 24 25 26

$750,000 occurrence limit in excess of $250,000, and a $750,000 annual aggregate limit because of "bodily injury" and "property damage" included within the products hazard. Republic Western policy RU99 provides a $6,000,000 occurrence limit in excess of

Case 2:04-cv-00662-DGC

-2 Document 112 - Filed 09/30/2005

Page 2 of 35

1 2 3

$1,000,000, and a $12,000,000 annual aggregate limit because of "bodily injury" and "property damage" included within the products hazard. 3. Republic Western policies RG99, RX99, and RU99, were renewed for the

4 5 6 7 8

4/1/00-01 policy period as policy numbers RGMM, RXMM, and RUMM. (See Exhibit 1, p. 11, ll. 9-24; Republic Western Ins. Co. Policy RGMM, attached hereto as Exhibit 5; Republic Western Ins. Co. Policy RXMM, attached hereto as Exhibit 6; and Republic Western Ins. Co. Policy RUMM, attached hereto as Exhibit 7.)

9 10 11 12 13

4.

For the 4/1/00-01 policy year, the liability limits of Republic Western's

RG policy remained the same, the occurrence and aggregate limits of Republic Western's RX policy were each increased to $1,750,000, the occurrence limit of Republic Western's RU policy was decreased to $5,000,000, and the RU policy's

14 15 16 17 18 19 20 21 22 23 24

aggregate limit remained the same. (See Exhibits 5, 6, and 7.) 5. Lumbermens Mutual Casualty Company ("LMC") policy number

9SR120037-01 was issued to AMERCO/U-Haul for the policy period 4/1/99-00. LMC policy number 9SR120037-02 was issued to AMERCO/U-Haul for the policy period 4/1/00-01. For each of the aforesaid two policy periods the LMC policy provides a $13,000,000 occurrence limit in excess of $7,000,000, and a products-completed operations annual aggregate limit of $13,000,000. (See Exhibit 1, p. 12, l. 21 ­ p. 13, l. 2; LMC Policy 9SR 120-037-00, attached hereto as Exhibit 8; and LMC Policy 9SR 120-037-01, attached hereto as Exhibit 9.)

25 26

A.

The Republic Western RG Policies

Case 2:04-cv-00662-DGC

-3 Document 112 - Filed 09/30/2005

Page 3 of 35

1 2 3

6.

These policies include the following relevant provisions: SUPPLEMENTARY PAYMENTS We will pay, with respect to any claim or "suit" we defend:

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

1.

All expenses we incur.

These payments will reduce the limit of insurance.

LIMITS OF INSURANCE The Limit of Insurance stated herein is the Company's total limit of liability for all damages including legal fees, court costs, interest and other allocated loss expenses arising out of the same occurrence regardless of the number of claims or claimants. PRODUCTS AGGREGATE ENDORSEMENT (Endorsement 5) Subject to the limit of each "occurrence" or each "accident," the total liability of the Company for all damages because of "bodily injury" and "property damage" included within the Products and Completed Operations hazard shall not exceed $250,000 "aggregate" in any one policy year for Products which are sold by AMERCO or its subsidiaries. This aggregate limit does not apply to vehicles (either trucks or trailers) or other property owned by AMERCO or its subsidiaries rented or leased to U-Haul customers.

B.

The Republic Western RX Policies 7. These policies include the following relevant provisions:

22 23 24 25 26

Item 3. Limit of Liability -- as Insuring Agreement VI (A) Coverage I(a) or I(b) or I(c) or all combined with respect to each occurrence $ 1,750,000 Limit in the aggregate for each annual period

(B)

Case 2:04-cv-00662-DGC

-4 Document 112 - Filed 09/30/2005

Page 4 of 35

1 2 3 4 5 6 7 8

where applicable

$

Per Endorsement #4

FOLLOWING FORM (Endorsement 3) It is hereby agreed that this policy follows form of the scheduled underlying policies and does not extend, add, or otherwise modify coverages provided in the underlying policies. This endorsement modifies Section II, III and IV under insuring agreements. PRODUCTS AGGREGATE (Endorsement 4)

9 10 11 12 13 14 15 16

Subject to the limit of "each occurrence" or "each accident," the total liability of the company for all damages because of bodily injury and property damage included within the Products hazard shall not exceed $7,750,000 "aggregate" in any one policy year for Products which are sold by AMERCO or its subsidiaries. This aggregate limit does not apply to vehicles (either trucks or trailers) or other property owned by AMERCO or its subsidiaries rented or leased to U-Haul customers. It is understood and agreed that this policy attaches excess of aggregate limits of $250,000 for the products hazard C. The Republic Western RU Policies: 8. These include the following relevant provisions: INSURING AGREEMENTS COVERAGE. To indemnify the insured for the ultimate net loss in excess of the applicable underlying (or retained) limit hereinafter stated, which the insured shall become obligated to pay by reason of the liability imposed upon the insured by law or assumed by the insured under contract. (a) PERSONAL INJURY LIABILITY. For damages, including damages for care and loss of services, because of personal injury, including death at any time resulting there from, sustained by any person or persons.

17 18 19 20 21 22 23 24 25 26

Case 2:04-cv-00662-DGC

-5 Document 112 - Filed 09/30/2005

Page 5 of 35

1 2 3

to which this insurance applies under Coverages (a), (b), and (c) above, caused by an occurrence. . . II. Defense, Settlement, Supplementary Payments. With respect to any occurrence not covered by the underlying policies listed in Schedule A hereof or any other underlying insurance collectible by the insured, but covered by the terms and conditions of this policy except for the amount of retained limit specified in item 3(C) of the declarations, the company shall. (a) Defend any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, reputation and settlement of any claim or suit as it deems expedient. Pay all premiums on bonds to release attachments for an amount not in excess of the applicable limit of liability of this policy, all premiums on appeal bonds required in any such defended suit, but without any obligation to apply for or furnish any such bonds. Pay all expenses incurred by the company, all costs taxed against the insured on any such defended suit and all interest accruing after entry of judgment until the company has paid or tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon. Reimburse the insured for all reasonable expenses, other than loss of earnings in excess of $50 per day, incurred at the company's request, and the amounts so incurred, except settlement of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

(b)

(c)

(d)

In jurisdictions where the company may be prevented by law or otherwise from carrying out this agreement, the company shall pay any expense incurred with its written consent in accordance with this agreement.

Case 2:04-cv-00662-DGC

-6 Document 112 - Filed 09/30/2005

Page 6 of 35

1 2 3

The insured shall promptly reimburse the company (excepting Defense Costs) for any amount of ultimate net loss paid on behalf of the insured within the retained limit specified in item 3(C) of the declarations. IV. Other Definitions. When Used In This Policy (Including Endorsements Forming a Part Hereof). (b) "Ultimate Net Loss" means the total of the following sums with respect to each occurrence. all sums which the insured or any carrier as his insured or both become legally obligated to pay as damages whether by reason of adjudication or settlement because of personal injury property damage or advertising occurrences to which this policy applies and all expenses incurred by the insured in the investigation, negotiation, settlement, and defense of any claim or suit seeking such damages excluding only the salaries of the insured's regular employees provided ultimate net loss shall not include any damage or expense because of liability excluded by this policy (including endorsements forming a part hereof).

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

(1)

(2)

This policy shall not apply to defense, investigation, settlement, or legal expenses covered by underlying insurance.

VI. Limits. With respect to coverage (a), (b) or (c) or any combination thereof, the company's liability shall be only for the ultimate net loss in excess of the insured's underlying or retained limit which shall be: (a) Underlying Limit -- the total of the applicable limits of the underlying policies listed in Schedule A thereof, and the applicable limits of any other underlying insurance collectible by the insured; or In the event of the reduction or exhaustion of the aggregate limits of liability of the underlying policies listed in Schedule A by reason of losses

Case 2:04-cv-00662-DGC

-7 Document 112 - Filed 09/30/2005

Page 7 of 35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

paid thereunder, this policy, subject to the above limitations. (1) in the event of reduction shall pay the excess of the reduced underlying limits, or (2) in the event of exhaustion shall continue in force as underlying insurance. The inclusion or addition hereunder of more than one insured shall not operate to increase the company's limit of liability. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. "Property damage" means: a. Physical injury to tangible property, including all resulting loss of use of that property; or Loss of use of tangible property that is not physically injured.

b.

D.

The LMC Policies: 9. These policies contain the following relevant provisions:

SECTION I - INSURING AGREEMENTS A. COVERAGE 1. We will pay on behalf of the "Insured" that part of "Loss" covered by this insurance in excess of the limits of liability of the "Underlying Insurance" as set forth in the Schedule of Underlying Insurance but only up to an amount not exceeding our Limits of Liability as set forth in Item 4. of the Declarations, provided the "Insured Event" takes place during our "Policy Period." Except when stated to apply otherwise, this policy is subject to all of the terms, conditions, insuring agreements, definitions, and exclusions (hereinafter called "provisions") of the "Designated Underlying Policy"' but in no event shall this policy be subject to the provisions of the "Designated Underlying Policy" with respect to the premium, the "Policy Period," the renewal or extension agreement (if any), the amount or limits of liability or any other provision of the

17 18 19 20 21

2.
22 23 24 25 26

Case 2:04-cv-00662-DGC

-8 Document 112 - Filed 09/30/2005

Page 8 of 35

1 2 3

"Designated Underlying Policy" that may be inconsistent with this policy.

B.
4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

LIMITS OF LIABILITY 4. Subject to subparagraph 3. of this paragraph B. LIMITS OF LIABILITY, the Limit of Liability set forth in Item 4. of the Declarations as the Products Completed Operations Aggregate Limit of Liability is the most we will pay for "Loss" under this policy under the products completed operations hazard, as defined in the "Designated Underlying Policy."

6.

Subject to subparagraphs 3., 4. and 5. of this paragraph B. LIMITS OF LIABILITY: a. If the limits of liability of the "Underlying Insurance" have been reduced, by payments of "Loss" for "Insured Events" which take place during our "Policy Period," then this policy will drop down to become immediately excess of the reduced underlying limits of liability, provided all "Underlying Insurance" applies to "Loss" and also drops down; or

SECTION IV - DEFINITIONS A. When used in this policy, including endorsements forming a part hereof: 4. "Loss" means those sums actually paid in the settlement or satisfaction of a claim which the "Insured" is legally obligated to pay as damages because of injury or damage after making proper deductions for all recoveries and salvage. "Loss" includes defense and supplementary expense payments if such payments are included within the limits of liability of any respective "Underlying Insurance," by the terms of that policy. "Loss" may be established by adjudication, arbitration to which the "Insured" must submit

Case 2:04-cv-00662-DGC

-9 Document 112 - Filed 09/30/2005

Page 9 of 35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

or does submit with our consent, or compromise settlement to which we have previously agreed in writing. SCHEDULE OF UNDERLYING INSURANCE -- EXCESS Except when stated to apply otherwise, this policy is subject to all of the terms, conditions, insuring agreements, definitions, and exclusions (hereafter called provisions) of the "Designated Underlying Policy," but in no event shall this policy be subject to the provisions of the "Designated Underlying Policy" with respect to the premium, the "Policy Period," the renewal or extension agreement (if any), the amount or Limits of Liability or any other provision of the "Designated Underlying Policy" that may be inconsistent with this policy. The Schedule of Underlying Insurance is completed as follows: Designated Underlying Policy Insurer: REPUBLIC WESTERN INSURANCE COMPANY Policy Number: RU00 Policy Term: From 04/01/2000 To 04/01/2001 Limits: $**6,000,000 Each Occurrence Nil Aggregate (where applicable) $*13,000,000 Products/Completed Operations Aggregate Products Sold only, excess of primary

COMMERCIAL EXCESS FOLLOWING FORM A. This policy follows the exact terms and conditions of the Republic Western Insurance Company, Insurance Company policy number RU00, except with respect to: 1. The Limits of Liability of this policy shall be $13,000,000 Each Occurrence, $13,000,000 Aggregate (where applicable), $13,000,000 Products/Completed Operations Aggregate, in excess of limits shown in the Schedule of Underlying Insurance; The Premium of this policy shall be $145,000; and

22 23 24 25 26

2.

Case 2:04-cv-00662-DGC

- 10 Document 112 - Filed 09/30/2005

Page 10 of 35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

3.

Any coverage modification endorsement attached to this policy.

B.

All preprinted terms and conditions of form CE 71 00 (Ed. 04 97) are deleted to the extent that they are inconsistent with the terms and conditions of Republic Western Insurance Company, Insurance Company policy numbers RU00. Nothing contained in this endorsement shall obligate us to provide a duty to defend or investigate any claim or suit before the Underlying Insurance Limits shown in the Schedule of Underlying Insurance, are exhausted by payment of judgments, claims or settlements.

C.

All other terms and conditions of this policy remain unchanged. CE 79 12 (Ed. 05 98)

COMMERCIAL EXCESS CHANGE ENDORSEMENT CHANGES: CE 7904 (ED. 05 98) SCHEDULE OF UNDERLYING INSURANCE IS AMENDED TO READ AS FOLLOWS: Designated Underlying Policy: Insurer: Policy No.: Limits: underlying REPUBLIC WESTERN INSURANCE COMPANY RUMM $5,000,000 Each Occurrence $12,000,000 Aggregate Products only in excess of limits/self-insured retention of: $2,000,000 Each Occurrence $1,750,000 Aggregate Products sold only.

CE 7914 (ED. 05 98) COMMERCIAL EXCESS -- LIMITS OF LIABILITY IS AMENDED TO READ AS FOLLOWS: Each Occurrence General Aggregate Products/Completed Operations Aggregate Excess of $13,000,000 $13,000,000 $13,000,000

Case 2:04-cv-00662-DGC

- 11 Document 112 - Filed 09/30/2005

Page 11 of 35

1 2 3

Each Occurrence Aggregate Products sold only Excess of primary.

$5,000,000 $12,000,000

4 5 6 7 8

II.

RELATIONSHIP BETWEEN AMERCO, U-HAUL AND REPUBLIC WESTERN. AMERCO is the parent corporation of U-Haul and Republic Western.

10.

(See Exhibit 1, p. 17, l. 22 ­ p. 18, l. 13.)
9 10 11 12 13

11.

Republic Western was "the arm that was responsible for purchasing all of

the insurance" for the AMERCO organization. (See Exhibit 1, p. 99, ll. 8-16.) 12. Republic Western placed its policies directly on behalf of U-Haul. (See

Transcript of Deposition of Michael J. Mizrachi, dated January 12, 2005, attached
14 15 16 17 18 19 20 21 22 23 24

hereto as Exhibit 10, p. 29, ll. 9-14.) III. 13. THE UNDERWRITING OF REPUBLIC WESTERN'S POLICIES. Ronald McCarty was Republic Western's risk manager and U-Haul

underwriting manager from June or July 1997 to August 1999. (See Transcript of Deposition of Ronald K. McCarty, dated February 15, 2005, attached hereto as Exhibit 11, p. 9, l. 25 ­ p. 10, l. 15.) 14. Mr. McCarty does not recall having any intent regarding whether

Republic Western's policies were to be defense inside limits or defense in addition to limits. (See Exhibit 11, p. 43, ll. 3-12.)

25 26

Case 2:04-cv-00662-DGC

- 12 Document 112 - Filed 09/30/2005

Page 12 of 35

1 2 3

15.

Holly Reed was Republic Western's risk manager from 1999 until 2002.

(See Transcript of Deposition of Holly Lyn Thorkildson-Reed, dated January 25, 2005, attached hereto as Exhibit 12, p. 14, ll. 15-19.)

4 5 6 7 8

16.

As Republic Western's risk manager, Ms. Reed underwrote casualty

policies, including auto policies. (See Exhibit 12, p. 15, l. 25 ­ p. 16, l. 5.) 17. People at Republic Western told Ms. Reed what to physically put into the

policies that Republic Western issued to U-Haul for the 1999 and 2000 policy periods.
9 10 11 12 13

(See Exhibit 12, p. 23, l. 16 ­ p. 25, l. 2.) 18. There is nothing in any of the Republic Western policies for 1999 or 2000

that reflect any independent decision on the part of Ms. Reed. (See Exhibit 12, p. 21, l. 24 ­ p. 23, l. 15).

14 15 16

IV.

RELATIONSHIP BETWEEN WESTERN AND AON.

U-HAUL/REPUBLIC

19.
17 18 19 20 21

AON had been the AMERCO organization's appointed broker for a long

time prior to 1999, and up to January 2003 when Mr. Bell replaced AON with another broker. (See Exhibit 1, p. 99, l. 8 ­ p. 100, l. 16.) 20. 21. AON was U-Haul's broker. (See Exhibit 11, p. 24, l. 23 ­ p. 25, l. 2.) There was an engagement between AON and U -Haul by which AON

22 23 24 25 26

would provide broker services to U-Haul in exchange for compensation. (See Exhibit 10, p. 12, ll. 18-25.)

Case 2:04-cv-00662-DGC

- 13 Document 112 - Filed 09/30/2005

Page 13 of 35

1 2 3

22.

Mizrachi considered the ultimate customer to be AMERCO, and its group

of subsidiaries, but the contact resided within Republic Western. (See Exhibit 10, p. 59, l. 20 ­ p. 60, l. 5.)

4 5 6 7 8

23.

The Risk Management Department of Republic Western was AON's

customer. (See Exhibit 10, p. 59, ll. 17-19.) 24. Attached hereto as Exhibit 14 is Mizrachi's March 2, 1998, letter to U-

Haul which states: "Further to our telephone conversation this afternoon, we represent
9 10 11 12 13

AMERCO as its insurance brokers for the procurement of property and casualty insurance." (See Exhibit 10, p. 79, l. 22 ­ p. 80, l. 11.) V. 25. THE PLACEMENT AND ISSUANCE OF LMC'S POLICIES. Ms. Reed cannot recall any communications with Kemper/LMC leading

14 15 16 17 18 19 20 21 22 23 24

up to or regarding the issuance of LMC's two policies. (See Exhibit 12, p. 37, ll. 2-9.) 26. Ms. Reed had no direct communications with LMC regarding the issue of

defense inside limits or defense outside limits. (See Exhibit 12, p. 107, ll. 3-6.) 27. ll. 2-15.) 28. Ms. Reed put "the insurance programs" together with AON to "market the Ms. Reed's communications went through AON. (See Exhibit 12, p. 109,

material." (See Exhibit 12, p. 30, ll. 21-24.) 29. When Ms. Reed says "to market," she means "to get placement of other

insurance for AMERCO." (See Exhibit 12, p. 31, ll. 18-21.)
25 26

Case 2:04-cv-00662-DGC

- 14 Document 112 - Filed 09/30/2005

Page 14 of 35

1 2 3

30.

All coverages, other than Republic Western's policies, were placed

through AON. (See Exhibit 11, p. 25, l. 21 ­ p. 26, l. 7.) 31. The process, and the standard procedure, is that AON applies to the

4 5 6 7 8

market with applications for U-Haul. (See Exhibit 11, p. 29, l. 21 ­ p. 30, l. 4.) 32. AON supplied the application to insurers to review for acceptability and

pricing. (See Exhibit 11, p. 31, ll. 7-12.) 33. Mr. McCarty does not recall if he had any communications with anyone at

9 10 11 12 13

U-Haul or Republic Western regarding whether any of the policies in question were to be defense inside limits or defense outside limits. (See Exhibit 11, p. 38, ll. 5-11.) 34. Mr. McCarty does not recall if he had any communications with anyone

from AON as to whether any of the Republic Western policies were to be defense inside
14 15 16 17 18 19 20 21 22 23 24

limits or defense outside limits. (See Exhibit 11, p. 37, l. 25 ­ p. 38, l. 4.) 35. Mr. McCarty does not recall any communications with Kemper or LMC

as to whether any Republic Western policy or LMC policy was to be defense inside limits, or defense in addition to limits. (See Exhibit 11, p. 44, l. 24 ­ p. 45, l. 8.) 36. To Mr. McCarty's knowledge, Republic Western never notified any of U-

Haul's excess carriers that Republic Western contends that Republic Western's liability coverages were defense inside limits. (See Exhibit 11, p. 50, ll. 1-15.) 37. Mae Sandoval started working for Alexander and Alexander in Phoenix,

Arizona. She kept working in that office for AON until she left in May of 2003. (See
25 26

Case 2:04-cv-00662-DGC

- 15 Document 112 - Filed 09/30/2005

Page 15 of 35

1 2 3

Transcript of Deposition of Mae Louise Sandoval, dated January 11, 2005, attached hereto as Exhibit 13, p. 8, l. 25 ­ p. 9, l. 12.) 38. Ms. Sandoval was an account manager the entire time she worked at

4 5 6 7 8

AON. (See Exhibit 13, p. 10, ll. 4-7.) 39. As account manager, Ms. Sandoval assisted the account executive in

preparing the proposals and specifications, and in marketing. (See Exhibit 13, p. 10, ll. 8-21.)

9 10 11 12 13

40.

U-Haul was Ms. Sandoval's account from 1989 until when she left AON.

(See Exhibit 13, p. 10, l. 22 ­ p. 11, l. 4.) 41. The person at AON who was responsible for maintaining the business

relationship between AON and U-Haul was Mike Mizrachi. (See Exhibit 13, p. 12, ll.
14 15 16 17 18 19 20 21 22 23 24

9-14.) 42. Mizrachi is an account executive. Ms. Sandoval worked with him at AON

for eight or nine years. (See Exhibit 13, p. 11, ll. 13-17.) 43. The account manager was mostly administrative. The account executive

made the primary decisions on the account such as how they were written and placed. (See Exhibit 13, p. 11, l. 22 ­ p. 12., l. 7.) 44. During the years that Ms. Sandoval was handling the U-Haul account, no

one from U-Haul ever told her whether they wanted any of Republic Western's policies to be defense inside limits. (See Exhibit 13, p. 109, ll. 1-5.)

25 26

Case 2:04-cv-00662-DGC

- 16 Document 112 - Filed 09/30/2005

Page 16 of 35

1 2 3

45.

Ms. Sandoval had no discussions with anyone at Republic Western about

whether defense costs would be inside or outside policy limits. (See Exhibit 13, p. 112, l. 15 ­ p. 113, l. 5.)

4 5 6 7 8

46.

Mr. Mizrachi does not recall anyone from AMERCO, U-Haul, or

Republic Western telling him that Republic Western's aggregate limits were to be reduced by the amount of payment of defense costs. (See Exhibit 10, p. 102, ll. 13-18.) 47. Mr. Mizrachi has no recollection of seeing anything inside the RU policy

9 10 11 12 13

for either 1999 or 2000, that he thought was a defense within limits provision. (See Exhibit 10, p. 97, ll. 7-12.) 48. It is Mr. Mizrachi's recollection that when he placed the LMC policies for

April 1, 1999 to April 1, 2000, his "recollection was that the RU policy had defense in
14 15 16 17 18 19 20 21 22 23 24

addition to the limit, but that beneath the RU policy, defense was inside the limit. (See Exhibit 10, p. 93, ll. 12-20.) 49. It was Mr. Mizrachi's "understanding of how the program was intended to

work, which is that the RX and below was effectively retained in-house, and the intention was therefore to include defense costs within the retained amount to effectively minimize the retained limit. With that, the first reinsured layer or risk transfer layer would be the RU, the intention was for defense costs to be in addition to the limit, because the risk was transferred. (See Exhibit 10, p. 93, l. 24 ­ p. 94, l. 12.) 50. The standard procedure leading up to the annual U -Haul renewal (for

25 26

policies above Republic Western policies) was that approximately 120 days before the

Case 2:04-cv-00662-DGC

- 17 Document 112 - Filed 09/30/2005

Page 17 of 35

1 2 3

expiration date, Ms. Sandoval and Mr. Mizrachi would meet to determine what information they needed for renewal specifications and what information they would request from U-Haul or Republic Western. (See Exhibit 13, p. 17, ll. 7-22.)

4 5 6 7 8

51.

AON's practice before each renewal was to prepare renewal specifications

to be sent to numerous underwriters at insurance companies. Included in the renewal specifications woul d be an Acord application, which is a standard application in the industry, any binder book, and all the attachments that the underwriter would need in

9 10 11 12 13

order to give AON a quotation. (See Exhibit 13, p. 18, ll. 9-18.) 52. No one from U-Haul ever told Ms. Sandoval whether they wanted LMC

to drop down and attach at a lower level if Republic Western pays defense costs. (See Exhibit 13, p. 109, ll. 1-5.)

14 15 16 17 18 19 20 21 22 23 24

53.

Exhibit 15 is an Acord application. It looks like every one that Ms.

Sandoval has ever done. (See Exhibit 13, p. 29, ll. 6-12.) 54. Ms. Sandoval believes she was the person who completed Exhibit 15.

(See Exhibit 13, p. 31, ll. 24-25.) 55. As account manager, Ms. Sandoval is the person who would have

completed Exhibit 15. (See Exhibit 13, p. 30, ll. 2-5.) 56. The information Ms. Sandoval used to complete Exhibit 15 was primarily

based on information that AON received from the client for that year, and information from the previous year's application. (See Exhibit 13, p. 30, ll. 6-12.)

25 26

Case 2:04-cv-00662-DGC

- 18 Document 112 - Filed 09/30/2005

Page 18 of 35

1 2 3

57.

The contract between the company and the insured is the binder which is

received from the carrier. (See Exhibit 13, p. 37, ll. 7-8.) 58. The placement of the "X" on Exhibit 15 next to the word "UNLIMITED"

4 5 6 7 8

on the line regarding defense costs means "the defense was outside the limits." (See Exhibit 13, p. 31, l. 14 ­ p. 32, l. 2.) 59. By "defense outside the limits" Ms. Sandoval means the cost of defense is

outside the policy's limits. (See Exhibit 13, p. 33, ll. 12-20.)
9 10 11 12 13

60.

Exhibit 16 is the 2/26/98 quote from Kemper to Ms. Sandoval. (See

Exhibit 13, p. 34, ll. 9-19.) 61. Exhibit 17 is the 4/7/98 Commercial Excess Binder from [LMC] to Ms.

Sandoval. (See Exhibit 13, p. 37, l. 25 ­ p. 38, l. 2.)
14 15 16 17 18 19 20 21 22 23 24

62.

Exhibit 18 is a memo dated 3/30/99 from Ms. Sandoval to Steve Tibbs of

Kemper in regard to the renewal period beginning 4/1/99. The first paragraph of the memo states: "Effective 4/1/99, please renew the above policy in accordance with your quote dated 3/4/99. The terms and conditions as expiring. . ." (Emphasis supplied.) (See Exhibit 13, p. 53, l. 24 ­ p. 54, l. 13.) 63. Exhibit 19 is the umbrella section of the Acord application dated 1/19/19.

(See Exhibit 13, p. 40, l. 24 ­ p. 41, l. 4.) 64. Ms. Sandoval assumes she completed Exhibit 19 because it would have

been her function to do that. (See Exhibit 13, p. 41, l. 23 ­ p. 42, l. 1.)
25 26

Case 2:04-cv-00662-DGC

- 19 Document 112 - Filed 09/30/2005

Page 19 of 35

1 2 3

65.

The placement of the "X" on Exhibit 19 next to the word "unlimited" on

the line regarding defense costs means the defense costs were outside the policy limits. (See Exhibit 13, p. 45, l. 2 ­ p. 46, l. 14.)

4 5 6 7 8

66.

The applications, such as Exhibit 19, were sent to the various carriers to

obtain a quote "for an excess liability policy." (See Exhibit 13, p. 48, ll. 2-7.) 67. The checking off of defense costs as being "unlimited" in the applications

sent to carriers "was because we would want the defense outside the limit." (See
9 10 11 12 13

Exhibit 13, p. 48, l. 16 ­ p. 49, l. 2.) 68. Exhibit 20 is the 2/26/99 letter from Mr. Mizrachi to Kemper which said: These

"Please find enclosed our underwriting specifications for your review."

underwriting specifications consisted of ". . . the applications and all the various
14 15 16 17 18 19 20 21 22 23 24

documents we used to obtain a renewal quote." (See Exhibit 13, p. 50, l. 25 ­ p. 51, l. 9.) 69. Exhibit 21 is the Liability Specifications for AMERCO/U-Haul for

1999/2000. (See Exhibit 13, p. 68, ll. 13-17.) 70. Ms. Sandoval's office sent Exhibit 21 to all the carriers from whom they

wanted a quote for excess liability coverage. (See Exhibit 13, p. 69, ll. 2-16.) 71. Ms. Sandoval believes Kemper/LMC received a copy of Exhibit 21

"because they gave us a quote, and they would not have done it without these specifications." (See Exhibit 13, p. 70, ll. 9-13.)

25 26

Case 2:04-cv-00662-DGC

- 20 Document 112 - Filed 09/30/2005

Page 20 of 35

1 2 3

72.

Exhibit 22 is the umbrella application section on Bates page #2872, dated

1/14/00. (See Exhibit 13, p. 83, l. 25 ­ p. 84, l. 14.) 73. Ms. Sandoval cannot recall why nothing was checked off on the line in

4 5 6 7 8

Exhibit 22 entitled "General Liability Information." (See Exhibit 13, p. 87, ll. 4-17.) 74. Exhibit 22 "would have been sent to the various excess liability carriers

we were requesting a quote from." (See Exhibit 13, p. 86, ll. 3-13.) 75. The underlying umbrella policy is included in the applications that are The application is stating what we [AON] would like the

9 10 11 12 13

sent to the carriers.

underwriters to do. (See Exhibit 13, p. 88, l. 16 ­ p. 89, l. 4.) 76. Exhibit 23 is the liability specifications for 2000, which contains a copy of

Republic Western policy RU98. (See Exhibit 13, p. 93, ll. 2-5.)
14 15 16 17 18 19 20 21 22 23 24

77.

Exhibit 23 was sent to all carriers from whom AON wanted a quote. (See

Exhibit 13, p. 93, ll. 19-20.) 78. The reason Republic Western policy RU99 is the only policy contained in

Exhibit 23 is that "The RU99 was the umbrella policy and all of the excess liability is keyed off of the umbrella policy." (See Exhibit 13, p. 96, ll. 17-22.) 79. Mr. Mizrachi has worked for Acordia brokerage for 18 months. Before

that, he worked ten years for AON in Phoenix, Arizona. (See Exhibit 10, p. 8, l. 6-23.) 80. ll. 3-10.) Mr. Mizrachi's job at AON was account executive. (See Exhibit 10, p. 10,

25 26

Case 2:04-cv-00662-DGC

- 21 Document 112 - Filed 09/30/2005

Page 21 of 35

1 2 3

81.

Republic Western was one of Mr. Mizrachi's accounts "insofar as it was

part of the overall U-Haul account. (See Exhibit 10, p. 11, ll. 14-17.) 82. AON did not place Republic Western policies. Republic Western placed

4 5 6 7 8

them directly on behalf of their customer, AON. (See Exhibit 10, p. 29, ll. 9-11.) 83. In seeking procurement of coverage above Republic Western's policies,

AON would forward "exposure information." (See Exhibit 10, p. 32, ll. 2-5.) 84. The checking off on Exhibit 15 of defense costs as being "unlimited"

9 10 11 12 13

means "That there is no limitation in the amount of defense costs." (See Exhibit 10, p. 36, l. 10 ­ p. 37, l. 21.) 85. An Acord umbrella application is a marketing document. (See Exhibit 10,

p. 39, ll. 21-22.)
14 15 16 17 18 19 20 21 22 23 24

86.

Where Exhibit 19 has defense costs checked off as being unlimited, that is

saying that "the underlying coverage has defense costs that are uncapped. (See Exhibit 10, p. 48, l. 23 ­ p. 49, l. 20.) 87. 57, ll. 19-24.) 88. The purpose of Exhibit 21 was to outline the exposure and the terms by Exhibit 21 is the liability specifications for 1999/2000. (See Exhibit 10, p.

which coverage is requested for renewal. (See Exhibit 10, p. 57, l. 19 ­ p. 58, l. 6.) 89. Exhibit 21 generally contains the type of information that prospective

companies are looking for in regard to whether to make a decision to offer coverage.
25 26

(See Exhibit 10, p. 58, l. 21 ­ p. 59, l. 2.)

Case 2:04-cv-00662-DGC

- 22 Document 112 - Filed 09/30/2005

Page 22 of 35

1 2 3

90.

LMC issues their policies to AON because AON placed the business with

LMC. (See Exhibit 10, p. 85, ll. 18-19.) 91. Exhibit 24 is Mr. Mizrachi's hand-written document. (See Exhibit 10, p.

4 5 6 7 8

108, ll. 10-14.) 92. Mizrachi wrote on Exhibit 24 that RU is "defense O/S" by which he meant

"defense outside limits." (See Exhibit 10, p. 113, ll. 5-13.) 93. Mizrachi says Exhibit 24 INDICATES that RU does not drop down

9 10 11 12 13

because defense costs are included in the lower Republic Western policies. (See Exhibit 10, p. 114, ll. 7-25.) 94. Mr. Mizrachi does not recall anyone Republic Western or U-Haul ever

telling him that they wanted Republic Western's payment of defense costs to require
14 15 16 17 18 19 20 21 22 23 24

LMC to pay before $7,000,000 indemnity had been paid. (See Exhibit 10, p. 101, ll. 1320.) 95. Mr. Mizrachi does not recall anyone from AMERCO, U-Haul, or

Republic Western ever telling him that Republic Western's aggregate limits were to be reduced by the amount of payment of defense costs. (See Exhibit 10, p. 102, ll. 13-18.) 96. In seeking procurement of higher level coverages and/or reinsurance, Mr.

Mizrachi would forward exposure information to those insurance companies. (See Exhibit 10, p. 32, ll. 2-5.) 97. It was AON's customary practice to send renewal specifications to

25 26

prospective insurance companies because it contains the types of information that

Case 2:04-cv-00662-DGC

- 23 Document 112 - Filed 09/30/2005

Page 23 of 35

1 2 3

prospective companies are looking for in regard to whether to make a decision to offer coverage. (See Exhibit 10, p. 58, l. 15 ­ p. 59, l. 2.) 98. Based on Mr. Mizrachi's experience in dealing with the procurement of

4 5 6 7 8

policies, and marketing to procure excess liability policies, it has been his experience that carriers want to know at what level their policy will attach. (See Exhibit 10, p. 41, ll. 2-8.) 99. The reason a prospective carrier wants to know whether defense costs are

9 10 11 12 13

unlimited is "because it impacts their participation" because "if defense costs are in addition to the underlying limit, then effectively more dollars can potentially flow into the underlying policy before it reaches the excess participant." (See Exhibit 10, p. 40, ll. 5-15.)

14 15 16 17 18 19 20 21 22 23 24

100. When Mr. Mizrachi says "effects their participation," he means potentially the level at which the policy would attach. (See Exhibit 10, p. 40, l. 24 ­ p. 41, l. 1.) 101. Carriers need to know their attachment point "because that's when they are required to start paying claims." (See Exhibit 10, p. 105, l. 24 ­ p. 106, l. 7.) 102. An Accord application is a marketing document. (See Exhibit 10, p. 39, ll. 20-22.) 103. The check off on Exhibit 19 (Accord application for 1999/2000) as to underlying defense costs being "unlimited," means there is underlying coverage that has defense costs that are not capped. (See Exhibit 10, p. 49, ll. 13-20.)

25 26

Case 2:04-cv-00662-DGC

- 24 Document 112 - Filed 09/30/2005

Page 24 of 35

1 2 3

104. For the renewal periods beginning April 1, 1999 to April 1, 2000, Mr. Mizrachi has no records, or any specific memory of any copies of Republic Western policies being sent to excess carriers, other than the RU policies. (See Exhibit 10, p. 83,

4 5 6 7 8

ll. 17-25.) 105. It would have been Mr. Mizrachi's custom and practice to send the Republic Western RU policy to Kemper (Lumbermens). (See Exhibit 10, p. 141, l. 25 ­ p. 142, l. 4.)

9 10 11 12 13

106. When Mr. Mizrachi placed the LMC policies for April 1, 1999 and April 1, 2000, his recollection "was that the RU policy had defense in addition to the limit, but that beneath the RU policy, defense was inside the limit." (See Exhibit 10, p. 93, ll. 1223.)

14 15 16 17 18 19 20 21 22 23 24

107. It is Mr. Mizrachi's understanding that the LMC policies for the 1999/2000 and 2000/2001 policy years would not attach until $7,000,000 underlying coverage had been paid. Mr. Mizrachi's understanding of this was based upon his understanding of the underlying structure. (See Exhibit 10, p. 97, ll. 13-25.) 108. Mr. Mizrachi has no recollection of seeing anything inside the RU policy, for either year, that he thought was a defense within limits provision. (See Exhibit 10, p. 97, ll. 7-12.) 109. Mr. Mizrachi does not recall anyone from AMERCO, Republic Western, or U-Haul ever telling him that they wanted the coverage layer above $7,000,000 to

25 26

Case 2:04-cv-00662-DGC

- 25 Document 112 - Filed 09/30/2005

Page 25 of 35

1 2 3

drop down by the amount of defense costs paid by Republic Western. (See Exhibit 10, p. 98, ll. 8-14.) 110. From 1995 on, the ". . . subject was addressed, and it was clearly

4 5 6 7 8

understood that the retention of the Republic Western policies was to act as a fully selfretained vehicle, and therefore no dropdown on a per-occurrence basis, unless maybe there was an exhaustion of aggregates or something like that." (See Exhibit 10, p. 99, ll. 10-22.)

9 10 11 12 13

111. The only way the LMC policy would drop down would be in the event of exhaustion of underlying aggregates. (See Exhibit 10, p. 131, l. 9 ­ p. 132, l. 17.) 112. Steve Tibbs worked for Kemper from August 1997 to February or March 2003. (See Transcript of Deposition of Stephen Tibbs, dated January 22, 2005, attached

14 15 16 17 18 19 20 21 22 23 24

hereto as Exhibit 27, p. 11, ll. 24-25.) 113. Mr. Tibbs' job at Kemper was head of excess casualty for the West Coast. (See Exhibit 27, p. 12, ll. 9-11.) 114. LMC's 4/1/99-00 policy was a renewal of the 1998 policy. (See Exhibit 27, p. 45, ll. 22-25.) 115. Exhibit 25 ("Account Summary Pricing Worksheet--Umbrella Excess") stating effective date of 4/1/99 is an underwriting document that summarizes the account. (See Exhibit 27, p. 53, l. 16 ­ p. 54, l. 21.) 116. Exhibit 25 was received by LMC's underwriters who put together a quote,

25 26

then ultimately a binder, and then ultimately a policy. (See Exhibit 27, p. 55, ll. 3-9.)

Case 2:04-cv-00662-DGC

- 26 Document 112 - Filed 09/30/2005

Page 26 of 35

1 2 3

117. The checking off of defense costs in the 1/16/99 application (Exhibit 26) means to Tibbs "that defense is outside the limits." (See Exhibit 27, p. 80, l. 20 ­ p. 81, l. 1.)

4 5 6 7 8

118. In August, 1997 Mr. Tibbs started with Kemper/Lumbermens has head of excess casualty for the West Coast. (See Exhibit 27, p. 12, ll. 6-11.) 119. Mr. Tibbs was responsible for producing and underwriting the excess casualty book of business for the West Coast. (See Exhibit 27, p. 12., l. 21 ­ p. 13, l. 1.)

9 10 11 12 13

120. LMC would rely on the information given to it by the broker. LMC would prefer to have copies of the underlying policies. But often some of those policies would be issued subsequent to LMC binding on the contract. So often, there are many times that those policies would not come to LMC. (See Exhibit , p. 24, l. 19 ­ p. 25, l.

14 15 16 17 18 19 20 21 22 23 24

13.) 121. If Mr. Tibbs decided that it was an appropriate risk to underwrite, then a written quote would be issued if it was in his authority. If it was beyond his authority, then discussions would go further. (See Exhibit 27, p. 27, ll. 3-9.) 122. The quote from LMC would go to the broker who would then present the quote to the insured. (See Exhibit 27, p. 28, ll. 5-9.) 123. After the issuance of a binder, there would be no more discussions and negotiations in terms of formal coverage, only for clarification. (See Exhibit 27, p. 28, ll. 16-19.)

25 26

Case 2:04-cv-00662-DGC

- 27 Document 112 - Filed 09/30/2005

Page 27 of 35

1 2 3

124. If the binder was issued, then the next step in the procedure generally was the issuance of a contract. (See Exhibit 27, p. 29, ll. 5-7.) 125. LMC would rely on what the broker told it, or what was given to it by the

4 5 6 7 8

broker. (See Exhibit 27, p. 32, ll. 21-22.) 126. By "contract," Mr. Tibbs is referring to the insurance policy, together with any applicable endorsements or amendments. (See Exhibit 27, p. 33, ll. 20-25.) 127. Normally, LMC would only review the policy immediately beneath its

9 10 11 12 13

layer. If Mr. Tibbs had an opportunity to review anything below that, then that would be good. (See Exhibit 27, p. 36, ll. 13-20.) 128. LMC knew that its form was defense outside the limits unless it endorsed otherwise. (See Exhibit 57, l. 24 ­ p. 58, l. 9.)

14 15 16 17 18 19 20 21 22 23 24 25 26

129. Exhibit 25 ("Account Summary and Pricing Worksheet--Umbrella Excess") stating effective date of 4/1/99, is attached. The information that is contained in Exhibit 25 is information the underwriter would have gotten from the broker. Exhibit 25 was something that was worked off of in order to put together a quote, then ultimately a binder, and then ultimately a policy. (See Exhibit 27, p. 53, l. 16 ­ p. 55, l. 8.) 130. The second page of Exhibit 25 contains a statement that says defense is "outside the limit." (See Exhibit 27, p. 55, l. 25 ­ p. 56, l. 6.)

Case 2:04-cv-00662-DGC

- 28 Document 112 - Filed 09/30/2005

Page 28 of 35

1 2 3

131. LMC's receipt of specifications in the letter that covers the specifications, is prior to the issuance by Lumbermens of any quote or binder. (See Exhibit 78, ll. 2124.)

4 5 6 7 8

132. LMC's underwriting summary would have been based on these specifications. (See Exhibit 27, p. 77, l. 23 ­ p. 79, l. 7.) 133. Exhibit 26 is AON's liability specifications for the 1999/2000 policy year. It is certainly something that was submitted to LMC. (See Exhibit 27, p. 90, ll. 4-12.)

9 10 11 12 13

134. The reason LMC priced the policy and the reason LMC issued its policy was that, based on discussions with LMC's underwriter and Mr. Mizrachi, LMC was to be defense outside the limits underneath it. (See Exhibit 27, p. 91, ll. 5-12.) 135. The only times Mr. Tibbs recalls attaching above the policies that were

14 15 16 17 18 19 20 21 22 23 24

defense inside the limit was on integrated oil companies like Chevron where Kemper would be excess of 200 or 400 million. (See Exhibit 27, p. 95, l. 15 ­ p. 96, l. 6.) 136. It was certainly LMC's practice that it did not attach through defense erosive primarily, at any layer at all. (See Exhibit 27, p. 96, ll. 17-21.) 137. The whole reason LMC attached to the contract "was because expenses were to be outside the limit." (See Exhibit 27, p. 102, l. 21 ­ p. 103, l. 6.) 138. Based on his conversations with AON, and applications received from AON, it was Mr. Tibbs' understanding that the policy underneath the LMC policy was defense outside the limits. (See Exhibit 27, p. 103, ll. 15-18.)

25 26

Case 2:04-cv-00662-DGC

- 29 Document 112 - Filed 09/30/2005

Page 29 of 35

1 2 3

139. Mr. Tibbs has no recollection of ever having any discussions with anyone at any time concerning the definition of ultimate net loss in the RUMM policy "because we were told consistently through AON that expenses were outside the limit." (See

4 5 6 7 8

Exhibit 27, p. 111, l. 19 ­ p. 112, l. 3.) 140. LMC was told at all relevant times that the policies it was attaching over had defense outside, so that therefore LMC would be recognizing policies that were not eroded by defense. (See Exhibit 27, p. 112, ll. 16-22.)

9 10 11 12 13

141. The reason LMC's binder that was included in LMC's March 28, 2000 letter to AON deleted any reference to not applying until $7,000,000 in underlying indemnity has been paid was that AON "stated since defense was outside, anyway, there is no need to put that on." (See Exhibit 27, p. 113, ll. 4-21, p. 114, ll. 3-10.)

14 15 16 17 18 19 20 21 22 23 24 25 26

142. Republic Western told LMC that the policies underneath LMC, which were issued through Republic Western, had defense outside the limit. (See Exhibit 27, p. 114, ll. 16-21.) 143. LMC relied on the broker's word because the initial applications were regularly not signed. (See Exhibit 27, p. 125, ll. 18-25.) 144. Mr. Tibbs recalls that LMC was told by AON that the defense in the underlying Republic Western policies was outside the limit. (See Exhibit 27, p. 143, l. 20 ­ p. 144, l. 2.)

Case 2:04-cv-00662-DGC

- 30 Document 112 - Filed 09/30/2005

Page 30 of 35

1 2 3

145. Each year that LMC issued its policy to U-Haul, it was explained to LMC by AON that the Lumbermens policy is triggered only after the RU policy pays its limits in indemnity. (See Exhibit 27, p. 147, ll. 10-16.)

4 5 6 7 8

146. Attached is the 2-10-98 Accord umbrella application which is exhibit 28. Mr. Tibbs says that the checking of the block "unlimited" on line 3 of this form "is consistent with what I was told by AON, that the underlying Republic Western policies were defense outside limits." (See Exhibit 27, p. 155, l. 20 ­ p. 156, l. 21.)

9 10 11 12 13

147. Exhibit 26 is attached.

It is the 1999 liability specifications.

Bates

#15514 within Exhibit 26 is Accord umbrella application section dated January 16, 1999. The check off of the word "unlimited" on line 3 regarding "defense costs" is consistent with what AON told LMC about the underlying policies being defense

14 15 16 17 18 19 20 21 22 23 24

outside limits. (See Exhibit 27, p. 157, ll. 4-19.) 148. If an LMC underwriter found that the underlying policy was defense inside limit, LMC would put a stop to the whole process because it really only wrote defense inside the limit at some very high attachment point such as $100 million or greater. (See Exhibit 27, p. 160, l. 10 ­ p. 161, l. 4.) 149. If anyone from U-Haul, or acting on behalf of U-Haul, had told Mr. Tibbs that U-Haul would ever contend that the Republic Western policy was defense within limits, then Mr. Tibbs never would have issued the quote because LMC did not write excess policies where the underlying had defense inside the limit. (See Exhibit 27, p.

25 26

161, ll. 5-17.)

Case 2:04-cv-00662-DGC

- 31 Document 112 - Filed 09/30/2005

Page 31 of 35

1 2 3

150. Mr. Tibbs would not have been comfortable with the $7,000,000 attachment point for LMC if the underlying policy had been defense within limit "because we just did not write excess of defense inside the limit. Certainly not on auto,

4 5 6 7 8

where there is a frequency of claims." (See Exhibit 27, p. 164, ll. 15-22.) 151. Exhibit 29, which is attached, is an LMC record on which someone wrote "okay per Steve. attachment point. Aggressive pricing as we feel comfortable with account at this Also we needed to establish a relationship with AON as a new

9 10 11 12 13

market." The term "aggressive pricing" refers to the premium. (See Exhibit 27, p. 162, l. 9 ­ p. 164, l. 6.) 152. Exhibit 29 is the LMC "Account Summary and Pricing Worksheet-Umbrella Excess" for the policy effective date of April 1, 2000. The statement on page

14 15 16 17 18 19 20 21 22 23 24

2 of Exhibit 29 that "defense is outside the limit" is consistent with Mr. Tibbs' understanding. (See Exhibit 27, p. 165, l. 16 ­ p. 166, l. 1.) 153. Exhibit 30 is LMC's "Account Summary and Pricing Worksheet-Umbrella Excess" stating an effective date of 4/1/00. The statement on page 2 of exhibit 30 that defense is outside the limits is consistent with Mr. Tibbs' understanding. (See Exhibit 27, p. 166, ll. 2-9.) 154. Page 2 of exhibit 31 which is the Account Summary Pricing Worksheet dated effective 4/1/00 states that the underlying limits are defense outside the limits. That is consistent with Mr. Tibbs' understanding. (See Exhibit 27, p. 167, l. 12 ­ p. 168,

25 26

l. 15.)

Case 2:04-cv-00662-DGC

- 32 Document 112 - Filed 09/30/2005

Page 32 of 35

1 2 3 4 5 6 7 8

155. LMC's underwriters relied on what the broker [AON] told them. (See Exhibit 27, p. 175, l. 25 ­ p. 176, l. 9.) PAYMENTS MADE BY REPUBLIC WESTERN AND LMC IN REGARD TO THE MARTINEZ ACCIDENT, THE NELSON ACCIDENT, AND THE FERNANDEZ ACCIDENT. 156. LMC contributed $13,000,000 to settlement of the Pedro and Olga Martinez v. U-Haul Company of Texas lawsuit. (See Affidavit of Lesley Eickert, attached hereto as Exhibit 32.)

9 10 11 12 13

157. The total settlement for the Nelson lawsuit was $7,500,000. (See Exhibit 32.) 158. The total settlement for the Fernandez lawsuit was $8,000,000. Exhibit 32; and Fernandez lawsuit release, attached hereto as Exhibit 33.) (See

14 15 16 17 18 19 20 21 22 23 24

159. LMC has paid a total of $666,221 to the Nelson settlement. (See Exhibit 32.) 160. LMC has paid a total of $4,110,769.50 to the Fernandez settlement. (See Exhibit 32.) 161. Attached is the Fernandez release produced in this action by plaintiffs bearing U-Haul/Republic Western Bates #00434. (See Exhibit 33.) 162. Republic Western paid $275,000 in July 2002 to settle the Veloz claim which arose out of the Fernandez accident. (See Transcript of Deposition of Thomas Matush, dated January 14, 2005, attached hereto as Exhibit 37, p. 48, ll. 8-19.)

25 26

Case 2:04-cv-00662-DGC

- 33 Document 112 - Filed 09/30/2005

Page 33 of 35

1 2 3

163. In February 2004, Republic Western recovered $100,000 from Vela Mante on a cross-claim filed against Mante arising out of the Fernandez accident. (See Exhibit 37, p. 47, ll. 12-18.)

4 5 6 7 8

164. Republic Western's list of indemnity and defense cost payments made in regard to claims arising out of the Nelson accident. (See Exhibit 34.) 165. Republic Western's list of indemnity and defense cost payments made in regard to claims arising out of the Martinez accident. (See Exhibit 35.)

9 10 11 12 13

166. Republic Western's list of indemnity and defense cost payments made in regard to claims arising out of the Fernandez accident. (See Exhibit 36.) 167. It is Republic Western's position that the aggregate limits for Republic Western policies RGMM and RXMM were exhausted only by payments made on the

14 15 16 17 18 19 20 21 22 23 24 25 26

Martinez claim. (See Exhibit 37, p. 52, l. 13 ­ p. 53, l. 5.) DATED this 30th day of September, 2005 WALTON LANTAFF SCHROEDER & CARSON LLP Wayne T. Gill, Esq. Southtrust Center 1700 Palm Beach Lakes Blvd., #700 West Palm Beach, FL 33401 KUNZ PLITT HYLAND DEMLONG KLEIFIELD By:_s/Daniel Maldonado_________________ Steven Plitt, Esq. Daniel Maldonado, Esq. 3838 N. Central Ave., Suite 1500 Phoenix, AZ 85012-1902 Attorneys for Defendant/Counter-Plaintiff

Case 2:04-cv-00662-DGC

- 34 Document 112 - Filed 09/30/2005

Page 34 of 35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

CERTIFICATE OF SERVICE ORIGINAL filed this30th day of September, 2005, and a copy electronically served/mailed to: Gerald Gaffaney, Esq. David J. Ouimette, Esq. Attorneys for Plaintiff Mariscal, Weeks, McIntyre & Friedlander, P.A. 2901 North Central, Suite 200 Phoenix, AZ 85012 Bruce Friedman, Esq. Mark S. Fragner, Esq. Attorneys for Plaintiff Rubin, Fiorella & Friedman, LLP 292 Madison Avenue New York, NY 10017

s/Joye Gilsinger_____________

Case 2:04-cv-00662-DGC

- 35 Document 112 - Filed 09/30/2005

Page 35 of 35