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Victaulic Co. v. American Home Assurance Co.

California Court of Appeals, First District, Second Division

February 26, 2018

VICTAULIC COMPANY, Plaintiff, Cross-defendant and Respondent,
v.
AMERICAN HOME ASSURANCE COMPANY et al., Defendants, Cross-complainants and Appellants.

         Trial Court: Alameda County Superior Court, No. RG12642929 Trial Judge: Hon. Frank Roesch

          Pillsbury Winthrop Shaw Pittman, Joseph D. Jean, Kevin Murray Fong, Colin T. Kemp, Clark T. Thiel for Plaintiff, Cross-defendant and Respondent.

          Horvitz & Levy, Peter Abrahams, Mitchell C. Tilner, Emily V. Cuatto; Riordan & Horgan, Dennis P. Riordan, Donald M. Horgan; Law Offices of Doron Weinberg and Doron Weinberg for Defendants, Cross-complainants and Appellants.

          Richman, Acting P.J.

         Victaulic Company (Victaulic), a manufacturer of plumbing products, sued its insurers in connection with nine product liability claims against Victaulic that resulted in litigation. Following a favorable ruling for Victaulic on summary adjudication (potential for coverage and thus a duty to defend) and then a favorable ruling in a court trial for declaratory relief (duty to indemnify), the case proceeded to a jury trial on Victaulic's claim of bad faith. That trial lasted three and one-half weeks, during which numerous witnesses testified and over 100 exhibits were introduced.

         One of those witnesses was Nancy Finberg, the examiner on a majority of the claims, who had also verified the insurers' responses to Victaulic's requests for admissions (RFAs). Reversing an in limine ruling to the contrary, the trial court allowed Victaulic to interrogate Finberg about those responses, interrogation twice interrupted by interrogation by the court itself, the second round of which was abruptly halted by the court for an in-chambers conference where the court concluded Finberg had “made an admission that she perjured herself.” Finberg's testimony was stopped at that point, and when she resumed the stand the next day, represented by personal counsel, the court ruled that she could, on a blanket basis, claim the Fifth Amendment privilege against self-incrimination-and would do so in front of jury.

         And so came Victaulic's closing arguments, with their focus on “Finberg, ” “RFAs, ” “lies, ” and “penalty of perjury, ” words used so often, and so interrelatedly, that it is truly difficult to count. The jury deliberated for some five hours, and returned with a verdict answering a total of six separate questions, one of which had seven subparts, a total of 13 separate questions. That verdict awarded damages for breach of contract totaling $1, 073, 868.80, finding for Victaulic on each of seven claims in the exact amount sought. The verdict awarded attorney fee damages for bad faith of $8, 259, 712.31, the exact amount Victaulic's expert testified to. And the jury also found, by a nine-to-three vote, the insurers acted with fraud, oppression, or malice committed by a managing agent. All this, after a three and one-half week trial, in some five hours of deliberation.

         The punitive damages trial followed shortly, a trial that was nothing but argument. Following brief deliberation, by a ten-to-two vote the jury awarded $46 million, the amount suggested by Victaulic's counsel.

         The insurers appeal, asserting six separate claims of error why the verdict cannot stand. We agree with the insurers there was error, beginning with the court's allowance of the use of the RFA responses, compounded by the court's intensive questioning of Finberg, and compounded further by several errors in how the court handled Finberg's invocation of the Fifth Amendment privilege. We conclude such error was prejudicial, and thus reverse on that ground, without the need to address the insurers' other arguments.

         BACKGROUND

         The Parties

         Appellants are three insurance companies, American Home Assurance Co. (American Home), Insurance Company of the State of Pennsylvania (ICSOP), and National Union Fire Insurance Company of Pittsburgh, PA (National Union). All three companies are members of the American Insurance Group (AIG), and will usually be referred to collectively, as the insurers or AIG.

         Respondent is Victaulic, a developer and producer of mechanical pipe joining systems, headquartered in Easton, Pennsylvania. It is a global company with major facilities that manufactures over 60, 000, 000 units per year, and employs over 3, 600 employees worldwide. As one underwriter described Victaulic, it is “one of the world's leading developer[s] and producer[s] of unique mechanical pipe coupling systems. They manufacture pipe couplings, fittings, valves, custom ductile iron castings and plastic piping systems.... Victaulic products are now in use worldwide for a variety of industrial, commercial and institutional uses including heating, air conditioning, fire protection including sprinkler heads, mining, maritime, oil field, municipal treatment and automotive.”

         The Insurance Program

         Victaulic approached AIG concerning possible insurance coverage, and such coverage was arranged, under a complex program with layers of insurance as described below. While the coverage was comprehensive, it was understood by AIG underwriters that the primary risk Victaulic would present was for its products. An early memorandum from an underwriter noted that Victaulic “is clearly a product risk, ” going on to note that “[s]ince the main products are different types of pipe couplings, the main hazards are product failure, i.e., pipe leaking or bursting, which can cause extensive property damage and business interruption.” Another memorandum noted that “the products exposure has highest frequency and activity level, ” and “[m]ost claims [are] a result of water damage to third party locations.” As AIG underwriter Clara Pincus would come to testify at trial, “obviously we knew that we had a products liability risk on our hands and the potential claims associated with it.”

         The insurance program was a customized, specialized plan that included a primary policy and also excess and umbrella policies. The original primary policy had policy limits of $1 million, later increasing to $2 million. Above the primary policy was an umbrella policy with $25 million in limits, above which were two excess policies, each with $25 million in limits.

         The insurance program also included three interrelated agreements regarding the primary layer of coverage: (1) a large risk rating plan (LRRP), (2) a payment agreement, and (3) a direct pay addendum (DPA) to the payment agreement. The effect of these agreements was that claims were handled differently than in the usual insurance situation, which is directly between insurer and insured. The program here involved the participation of a third party claims administrator, York Claims Association (York), and worked as follows: Victaulic would fund an account maintained by York, from which defense and indemnity costs under the primary policies would be paid based on a complicated formula. The account would be used to cover 100 percent of the indemnity and defense costs for any clam within Victaulic's “retained amount” (which under the LRRP varied by year from $250, 000 to $1 million). So, if a claim was resolved by settlement or judgment within the retained amount, the insurers had no obligation to pay any defense or indemnity costs on the claim. Thus, until a claim was resolved-and the primary insurer's payment obligations able to be calculated-Victaulic fronted all costs through the York account. Once the calculation of relative responsibility was made, the primary insurer then reimbursed Victaulic.

         As Victaulic describes in its brief: “In effect, the LRRP and DPA result in Victaulic initially funding the costs that AIG incurs defending Victaulic under a given primary policy. But because those agreements do not apply to the Program's umbrella or excess policy layers, AIG is solely responsible for all defense and indemnity costs once the applicable primary policy exhausts. [¶] By designing the Program such that the ancillary agreements apply only to its primary polices, however, AIG created for itself an economic incentive to slot Victaulic claims in stacks with unexhausted primary policies: ‘If the claims are chargeable to the primary policy, a large proportion of those claims would be [] the responsibility [of] Victaulic. If they were charged with the umbrella policies, they would be for AIG's account.' ” So, Victaulic would come to assert in support of its position at trial, these economic incentives would “drive AIG's improper claims handling decisions here.”

         Another aspect of Victaulic's theory at trial might be called AIG's motive for some aspects of its claims handling, which was that beginning with the renewal process for the 2009-2010 policy period, AIG became concerned about its financial exposure under the insurance program. And so, again quoting Victaulic's brief, “AIG's excess underwriters agreed they needed the primary policy's products coverage aggregate limit increased. This would delay or prevent its exhaustion, thereby protecting the excess policies. But the underwriters also recognized that AIG ‘is in jeopardy of losing this [client] as well if we change our program.' Accordingly, [AIG] Chief Underwriting Officer Stafford Hay ultimately made a ‘business decision' in September 2009 to renew the 09/10 Program policies on the prior year's terms... the ‘underlying Product aggregate will need to be increased to $4M next year in order for us to continue any further support.' ” In short, because of AIG's long standing relationship with Victaulic, it made a business decision to continue support over a products aggregate that was deemed too low by the actuaries.

         The same concern was raised again during the 2010-2011 renewal process. Acknowledging again that Victaulic was a “loyal and profitable [AIG] account, ” Hay concluded that the program presented AIG with “a lot of exposure on a class that is prone to a frequency of [property damage] claims... some of them severe.” AIG therefore increased the 2010-2011 primary policy's product aggregate limit from $2 million to $3 million.

         The Claims and the Claim Handlers

         What would ultimately come to be in issue were nine specific claims made against Victaulic that resulted in lawsuits against it, the first of which was in March 2012, called the Elizabeth claim. Before discussing it and the other claims, we set out the primary participants in the claims handling process at AIG, who would come to testify-or be testified about-at trial:

         Megan Watt was global head of complex casualty at AIG. Under her was James Scalise, who took control of the Victaulic program. Scalise then reassigned the handling of the claims to Assistant Vice President Keith Taylor and, under him, to Nancy Finberg, director of complex claims. As noted above, and discussed in detail below, Finberg became a focus of the trial, and whose handling by the trial court is at the heart of the insurers' appeal.

         Turning back to the claims, the Elizabeth claim was a lawsuit in Oregon alleging that rubber on a Victaulic plumbing component installed in a condominium complex was deteriorating, causing black specks to appear in the water. Responding to Victaulic's “request for coverage, ” on March 20, 2012, Taylor wrote a letter with what he called AIG's “coverage position.” The letter summarized the underlying complaint, set forth in four pages various bases for excluding or denying coverage, and concluded that AIG was reserving “all rights under the policies.”

         AIG had retained Oregon attorney Anne Cohen to defend Victaulic in the Elizabeth claim. And on June 21, Taylor telephoned Cohen to advise that “AIG had filed a lawsuit against Victaulic, ” a reference to a declaratory relief lawsuit AIG had filed in Pennsylvania. Before discussing it and the other lawsuits, we set forth a complete list of the claims that ultimately came to be in issue between Victaulic and the insurers, including their outcome or status:

         1. Elizabeth: A lawsuit in Oregon described above. Victaulic settled this claim for $150, 000 and a warranty.

         2. Essex: A condominium construction defect lawsuit in California, alleging that rubber on Victaulic valves and gaskets deteriorated, causing black specks to appear in the water. American Home settled this claim for $320, 000.

         3. Edge: A condominium construction defect lawsuit in Oregon, alleging black specks due to deteriorating rubber on Victaulic valves, as well as property damage due to leaky pipes. This claim resulted in a $113, 726 judgment against Victaulic, paid by National Union.

         4. Benson: A condominium construction defect lawsuit in Oregon, alleging black specks in the water due to deteriorating rubber on Victaulic valves. This claim resulted in an approximately $2 million judgment against Victaulic, which at the time of trial was on appeal at National Union's expense.

         5. Avenue: A condominium construction defect lawsuit in Oregon, alleging leaks and black specks due to deteriorating valves. At the time of trial, this claim was ongoing, with National Union funding the defense.

         6. 1521: A construction defect lawsuit in Washington, alleging defective Victaulic plumbing components caused water damage to a condominium complex. Victaulic settled this claim within its retention for $10, 000.

         7. Grant: A condominium construction defect lawsuit in Colorado, alleging degraded Victaulic valves and couplings had caused property damage. Victaulic settled this claim within its retention for $20, 000.

         8. United Hospital: A subrogation lawsuit in West Virginia brought by Travelers Insurance Company to recover the cost of repairing a hospital damaged by flooding from failed Victaulic couplings. Victaulic settled this claim for $1.2 million, $700, 000 of which was contributed by AIG companies.

         9. Massachusetts Water Resources Authority (MWRA): A product liability lawsuit in Massachusetts, alleging a Victaulic coupling installed in a Boston municipal water line had broken, resulting in millions of dollars in investigation and repair costs. Victaulic settled this claim for $875, 000, $234, 615 of which was contributed by AIG companies.

         All of these claims were tendered to York. And “in consultation with” Victaulic, counsel was retained to represent Victaulic in all of them: Craig Diamond to defend the Essex claim in California; AIG panel attorney Phil Sbrolla to defend the United Hospital claim in West Virginia; AIG panel attorney Grace Garcia to defend the MWRA claim in Massachusetts; and AIG panel attorney Cohen to defend the other six, in Oregon, Washington, and Colorado.

         There was no question that all four of these attorneys performed well, as Victaulic's general counsel Mark Van De Voorde would confirm at trial: all attorneys “did an excellent job.”

         The Lawsuits

         In June 2012, the insurers filed a declaratory relief action in Pennsylvania, Victaulic's headquarters, and also the home state of National Union and ICSOP. The Pennsylvania action, which came to be referred to as PA1, sought a declaration as to whether three of the claims-Essex, Edge, and Elizabeth-involved “property damage” caused by an “occurrence, ” and whether any of the damages were excluded as business risks. The basis for PA1 was the opinion in Kvaerner Metals v. Commercial Union Ins. (2006) 589 Pa. 317');">589 Pa. 317 [908 A.2d 888], holding that claims of faulty workmanship are not covered “occurrence[s].” PA1 was ultimately dismissed by court order on December 31, 2013, on the basis that the third party claimants were indispensable parties under Pennsylvania law, and were not amenable to jurisdiction there.

         After PA1 was filed, Watt, joined by AIG's head of underwriting and AIG's coverage counsel, met with representatives of Victaulic. Following that meeting, Victaulic decided not to renew the insurance program with AIG.

         Meanwhile, in August 2012, Victaulic filed this action in California, alleging that defendants had breached their duty to defend the Essex, Edge, and Elizabeth claims, forcing Victaulic to pay substantial sums to defend itself. The complaint alleged claims for breach of contract, bad faith, intentional misrepresentation, and declaratory relief. AIG sought to dismiss or stay the California action on the basis of the Pennsylvania action, but was unsuccessful.

         In December 2013, the insurers filed a cross-complaint in the California action seeking a declaration they did not owe payments for seven of the claims-Essex, Elizabeth, Edge, 1521, Benson, Grant, and Avenue. Victaulic later obtained leave to add the United Hospital and MWRA claims, so all nine claims were involved in the California action.

         In May 2014, Victaulic filed a second amended complaint (SAC), the operative complaint here. In light of the fact that defenses were being provided, Victaulic alleged that the insurers should be liable for “failing to acknowledge their duty to defend Victaulic, meaningfully participate in the defense or settlement of Claims, acknowledge coverage for and/or pay covered settlements in a timely manner, and otherwise pay amounts due, ” and that they “have unreasonably and without justification refused to provide and/or delayed the payment of policy benefits.” The SAC also sought declaratory relief that the allegations in each of the underlying actions triggered defendants' duties to defend and indemnify under the program.

         To complete the lawsuits, in April 2014 the insurers filed a second action in Pennsylvania (PA2), seeking a declaration as to the United Hospital and MWRA claims. PA2 was later dismissed in light of the California action.

         The Trial Court Grants Summary Adjudication for Victaulic on the Potential for Coverage

         Both sides moved for summary adjudication. The insurers sought summary adjudication on the basis that Pennsylvania law applied, that under Kvaerner “faulty workmanship” is not an “occurrence, ” and thus none of the nine claims would be covered.

         Victaulic's motion sought summary adjudication that the insurers had a duty to defend and indemnify it in connection with three claims-MWRA, United Hospital, and Edge.

         The trial court heard argument on the motions on December 4, 2014. And on December 12 the court entered its order denying the insurers' motion and granting in part Victaulic's, specifically holding that the insurers had a duty to defend the three claims because they all potentially involved “property damage” caused by an “ ‘occurrence.' ” The order noted in part that “even if AIG were correct that Pennsylvania law applies, summary adjudication in Victaulic's favor is appropriate. In Indalex Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pa. (2013) 83 A.3d 418, a Pennsylvania appellate court specifically rejected the arguments AIG makes here.” The order further held that there were triable issues on the scope of indemnity as to what portions of the settlements are for covered losses and must be indemnified.

         The court ordered the case bifurcated, with the declaratory relief claim to be tried first in a bench trial, which came to be called Phase 1.

         The Phase 1 Trial

         Phase 1 took place over 12 trial days, in February and March 2015. On June 10, 2015, the trial court issued its statement of decision, addressing two fundamental issues: “(1) does AIG have the duty to defend Victaulic in each of the underlying actions; (2) does AIG have the duty to indemnify Victaulic in each of the underlying actions.” The court answered yes to both questions, holding for Victaulic all the way.

         With respect to AIG's position as to “occurrence, ” the court first said that “[i]nitially, AIG contended that the policies did not cover any of the claims found in any of the lawsuits for lack of an ‘occurrence' that would trigger coverage, redefining the meaning of ‘occurrence' from the definition earlier used by the parties.” The court then noted that “AIG persisted in its contention that Victaulic had no products liability coverage under its policies for want of an ‘occurrence' until a Pennsylvania case entitled Indalex... became final in mid-2014, and until after this court ruled, in the context of the parties' competing summary judgment motions, that AIG's contentions regarding the definition of ‘occurrence' were incorrect as a matter of law.” And, the court went on, “[i]n a stark reversal of its previously-stated contentions, AIG now contends that it accepted the duty to defend all along in the underlying actions and that AIG has performed that duty, ” leading to this observation: “This change in position has confused the matters pending herein, as AIG has now adopted positions contrary to its contentions in its Cross-Complaint, but has not, however, dismissed any of the causes of action in the Cross-Complaint.”

         The court made similar findings regarding the duty to defend. It found that Taylor and Finberg “[e]ach testified during trial that AIG never denied that the [Victaulic] claims... gave rise to a potential for coverage and, accordingly, had always acknowledged the existence of a duty to defend Victaulic.” But the court noted, “In dramatic contrast to these averments, AIG initiated litigation against Victaulic in Pennsylvania asserting that they had no duty to defend Victaulic in connection with the Essex, Edge Lofts, and Elizabeth Lofts cases on grounds that, inter alia, garden-variety product liability claims do not constitute ‘an occurrence' under AIG's policies with Victaulic.”

         In sum, in this sternly worded statement of decision, the trial court granted declaratory relief in Victaulic's favor on the duty to defend, holding that all the underlying claims triggered the potential for coverage. It also held that defendants had a duty to indemnify with respect to all of the claims except Avenue, for which the duty to indemnify could not be finally determined until the claim resolved.

         The trial court set the case for Phase 2, a jury trial on the issues of breach of contract, bad faith, and punitive damages.

         The Phase 2 and Phase 3 Trials

         Phase 2 began on February 4, 2015. It would last some three and one-half weeks, during which the jury would hear from numerous witnesses and over 110 exhibits would be introduced. The bulk of Phase 2 was devoted to Victaulic's claim of bad faith, a “cornerstone[]” of which was that the insurers acted unreasonably in litigating against Victaulic, and Victaulic sought to introduce evidence of the insurers' litigation positions in the Pennsylvania and California actions. The trial court initially ruled that such evidence would be excluded, but after Phase 1, Victaulic convinced the court to reconsider, and the court let the evidence in.

         And so it began, in the opening statement in Phase 2, where counsel for Victaulic displayed the PA1 and PA2 declaratory relief complaints and told the jury that the insurers “broke [their] promises” by suing, that an insurer should not act as its insured's adversary as AIG did here when it filed the lawsuits. And during its case-in-chief, Victaulic called AIG claims personnel Taylor, David Luden, and Finberg as adverse witnesses, examining them in great detail about the litigation positions the insurers had asserted in the Pennsylvania complaints and in the California action.

         We need not detail all that examination here, but do note that one aspect of the court's ruling-and its fallout-is at the heart of two of the insurers' arguments on appeal, as discussed in detail below. Suffice to say here that it began with the trial court's allowance of Victaulic's counsel to interrogate Finberg with the insurers' responses to the RFAs, which was improper enough. This error was compounded by the court's own involvement-twice-in the questioning of Finberg, the second round of which was abruptly halted for an in-chambers conference where the court concluded Finberg had “made an admission that she perjured herself.” Finberg's testimony was abated at that point, and when she resumed the stand the next day, represented by personal counsel, the court ruled that she could claim the Fifth Amendment privilege against self-incrimination on a blanket basis, and would do so in front of the jury. Following that, Finberg was excused. But her testimony remained in the case.

         Instructing the jury, the court gave the CACI instructions pertinent to a bad faith case. (See CACI No. 2330 et seq.) Both sides had proposed special instructions, the insurers requesting instructions on principles such as the genuine dispute doctrine and that reservation of rights letters and declaratory relief actions are not evidence of bad faith. The trial court refused the insurers' special instructions. The trial court also gave CACI No. 3946 on punitive damages, which in its last paragraph provides that an employee is a “ ‘managing agent' if he or she exercises substantial independent authority and judgment in his or her corporate decision making such that his or her decisions ultimately determine corporate policy.” At Victaulic's request-and over the insurers' objection-the court added a further instruction that told the jury in the case of insurance companies, “[i]f an employee has substantial independent authority to pay or deny a claim for benefits under an insurance policy, then that individual is a managing agent for the purpose of awarding punitive damages.”[1]

         It was against that background that Victaulic's closing argument focused on Finberg and her “lies” in the RFAs-and all of it under penalty of perjury.

         The jury deliberated for some five hours, and on July 30 returned with a verdict answering a total of six separate questions in favor of Victaulic. The jury awarded damages for breach of contract on each of the seven claims[2] in the exact amount sought, down to the penny. Likewise the Brandt bad faith attorney fee damages of $8, 259, 712.31, the exact amount its expert testified to.[3] The jury also found, by clear and convincing evidence, fraud, oppression, or malice committed by a managing agent. The punitive damages trial followed, where, following brief deliberation, the jury awarded Victaulic $46 million.[4]

         Following the verdict, on September 4, the trial court awarded Victaulic approximately $5.5 million in cost of proof sanctions under Code of Civil Procedure section 2033.420 for the insurers' refusal to admit there was a “potential for coverage” for the claims and that the damage alleged was caused by an “occurrence.” The trial court noted that the award duplicated the Brandt fee award.[5]

         On October 19, the trial court entered judgment in conformity with the above, adding some $840, 000 in prejudgment/postjudgment interest.

         The insurers moved for judgment notwithstanding the verdict and new trial on multiple grounds, including excessive damages. The trial court denied the motions, and the insurers appealed.

         DISCUSSION

         Introduction and Background

         The insurers assert six separate arguments why the judgment cannot stand, the first of which is that the trial court committed reversible error in two respects. The first is allowing Victaulic to present evidence of defendants' litigation conduct, as part of which the insurers contend that it was error to allow Victaulic's counsel to use the responses to the RFAs in the examination of Finberg.[6] The second is the court's handling of Finberg, including the court's own interrogation of her, its abrupt halting of her testimony, and how the court handled the situation from then on, when Finberg asserted her privilege against self-incrimination. We agree-there was error in several respects.

         By way of background, Finberg was an experienced claims person with 35 years' experience, who was involved in handling six of the claims here. She was also the representative who verified the insurers' responses to the RFAs sent by Victaulic, verified, of course, under penalty of perjury.

         As pertinent here, referring to a specific third party claim, the RFAs asked the insurers to admit that the claim created a “potential for coverage under one or more of the insurance policies.” The insurers' responses, prepared and signed by their attorneys, were after a series of objections: “Deny.”[7]

         Finberg was called by Victaulic as an adverse witness under Evidence Code section 776. She had noted in the claim files that there was a potential for coverage, and testified that in her role as a claims examiner she believed the claims asserted property damage caused by an occurrence, and that is why the claims were defended through the insurance program, to Victaulic's benefit. The RFAs, on the other hand, responded as noted above: after all the objections, “Deny.” Despite that she did not prepare the responses, Finberg was interrogated at length about all this, interrogation twice interrupted by the court, the upshot of which was Finberg's invocation in front of the jury of her privilege against self-incrimination-and her departure from the witness stand.

         The story cannot adequately be told by description, or narration, or summation, or paraphrasing. It can adequately be told only by the transcript itself, a story that goes as follows:

         Confronting Finberg with the responses to the RFAs, counsel for Victaulic asked: “So each of the seven cases at issue in this litigation presented a potential for coverage; right?” Finberg responded, “Are you making a distinction between the handling of the claims or the coverage litigation? Because they're two separate things.” Counsel then clarified his question, leading to this colloquy:

         “[MR. JEAN (counsel for Victaulic)]: So in the underlying claims handling, you make a determination as a potential for coverage one way, and then in the coverage case, this litigation, the potential for coverage is determined differently?

         “[MS. FINBERG]: They're two separate things.

         “THE COURT: Answer his question. Are they determined differently?

         “[MS. FINBERG]: I don't know that I can answer yes or no because they're two separate things.”

         Counsel for Victaulic began to formulate a question, interrupted by the court:

         “ I can see that we should take our break now.” Following the break, the questioning resumed. This is how it went:

         “MR. JEAN:... Now, Ms. Finberg, before we left for break we were talking about potential for coverage. [¶] Do you recall that?

         “[MS. FINBERG]: Yes.

         “[MR. JEAN]: And I think where we left off, you had-you started talking about that maybe you handled the potential for coverage one way in the-when you handled claims, and perhaps in the litigation or this litigation maybe it's handled differently? [¶] Did I understand your testimony correctly?

         “[MS. FINBERG]: Well, there are two separate issues, two separate things.

         “THE COURT: That was a yes-or-no question.

         “[MS. FINBERG]: I don't know if I can answer yes or no, Your Honor, the way-

         “THE COURT: You don't know if you can answer that.

         “[MS. FINBERG]: The way he asked it. [¶] I'm sorry, ...


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