McShane Constr. Co. v. Gotham Ins. Co.

867 F.3d 923

MCSHANE CONSTRUCTION COMPANY, LLC, Plaintiff-Appellant

v.GOTHAM INSURANCE COMPANY, Defendant-Appellee

No. 16-2632

United States Court of Appeals, Eighth Circuit.

Submitted: May 10, 2017

Filed: August 11, 2017

David Jan Koukol, KOUKOL & JOHNSON, Omaha, NE, Alan Joseph Martin, LAW OFFICES OF ALAN J. MARTIN LLC, Chicago, IL, for McShane Construction Company, LLC, Plaintiff-Appellant.

Matthew F. Heffron, BROWN & BROWN, Omaha, NE, Ross Roloff, TRESSLER LLP, Chicago, IL, for Gotham Insurance Company, Defendant-Appellee.

Before RILEY, BEAM, and SHEPHERD, Circuit Judges.

SHEPHERD, Circuit Judge.

McShane Construction, LLC (McShane), a general contractor, sued Gotham Insurance Company (Gotham) directly for failing to pay its insurance claim related to the alleged improper installation of a fire protection and suppression system by one of McShane's subcontractors, Mallory Fire Protection Services (Mallory)—whom McShane has sued separately in Nebraska state court. The district court¹ granted Gotham's Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, and McShane now appeals. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I. Background

In 2012, McShane began general contract work on the construction of a 196-unit, $15 million apartment complex (Project) in Omaha, Nebraska. McShane hired Mallory as a subcontractor to design and install a fire suppression and protection system for the Project.

McShane and Mallory executed a subcontract on June 8, 2012, that included a provision requiring Mallory to obtain insurance policies and to list McShane as an Additional Insured on the Commercial General Liability (CGL) insurance policy. Mallory subsequently purchased and Gotham issued on September 15, 2012, Gotham Policy No. GL2012FSC00451(Policy) to fulfill this requirement. The "Additional Insured" endorsement modified the insurance provided under the "Commercial General Liability Coverage Part." It listed "Blanket where required by written contract"—which includes McShane since it contracted with Mallory—as the Additional Insured, and Gotham provided McShane with a Certificate of Liability Insurance verifying McShane as an Additional Insured.

Under its subcontract with McShane, Mallory designed and installed a fire suppression and protection system, which McShane determined was faulty. To replace the faulty system, McShane removed previously installed drywall and installation leading to damages and losses that McShane alleges exceed $614,291.17.

Mallory and McShane each filed independent claims with Gotham to cover the damages and losses. Gotham eventually combined the two claims into a single claim with Mallory listed as the insured. After a comprehensive adjustment process including McShane, Gotham's primary adjuster for this claim sent a final report recommending payment of $499,453.57 "for payment of the claim relating to the improper installation of the fire sprinkler system." Gotham subsequently stopped communicating with McShane other than through an attorney and ultimately refused to provide McShane with a formal coverage determination.

McShane filed this lawsuit on December 23, 2014, asserting eight causes of action including (in the order asserted by McShane) violation of the Nebraska Unfair Insurance Trade Practices Act (Count 1), violation of the Nebraska Unfair Insurance Claims Settlement Practices Act (Count 2), violation of the implied covenant of good faith and fair dealing (Count 3), a claim for attorney's fees under Neb. Rev. Stat. § 44-359 (Count 4), breach of contract (Count 5), waiver and estoppel (Count 6), a claim under the rescue doctrine (Count 7), and declaratory relief (Count 8).

On March 29, 2016, the district court granted Gotham's motion to dismiss all counts. McShane subsequently filed a Federal Rule of Civil Procedure 59(e) motion to reconsider and vacate the judgment, which the district court denied on May 9, 2016. McShane now appeals.²

II. Analysis

We review de novo the district court's grant of a motion to dismiss, "accepting as true the complaint's factual allegations and granting all reasonable inferences to the non-moving party." Braden v. Wal-Mart Stores, Inc. , 588 F.3d 585, 591 (8th Cir. 2009).

To survive a 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). The complaint must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Two working principles underlie the analysis: (1) the court's obligation to accept the non-movant's allegations as true "is inapplicable to legal conclusions," such that "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice"; and (2) "only a complaint that states a plausible claim for relief survives a motion to dismiss, ... [and] [d]etermining whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 678-79, 129 S.Ct. 1937.

We find that the district court's dismissal of all counts was proper. To explain, we will group McShane's six remaining causes of action into (A) statutory claims, (B) those pertaining to breach of contract, and (C) waiver and estoppel.

A. Statutory Claims

Two of McShane's claims are based upon Nebraska statutes that provide no private right of action and thus, are subject to dismissal for failing to state a claim upon which relief can be granted. In asserting its claim under Nebraska's Unfair Insurance Trade Practices Act, McShane alleges that Gotham has "not been forthright, truthful, or timely in its adjustment of ... the [ ] claims," and alleges that Gotham has acted in bad faith in violation of Neb. Rev. Stat. § 44-1525(9). In asserting its claim under Nebraska's Unfair Insurance Claims Settlement Practices Act, McShane alleges that Gotham violated Neb. Rev. Stat. § 44-1540 which lists numerous acts or practices that may be considered unfair claims settlement practices under Nebraska law.

However, neither of these statutes provides McShane with a private right of action. In Nebraska, "[w]hether a statute creates a private right of action depends on the statute's purpose and whether the Legislature intended to create a private right of action." Prof'l Mgmt. Midwest, Inc. v. Lund Co. , 284 Neb. 777, 826 N.W.2d 225, 233 (2012). The Nebraska Unfair Insurance Trade Practices Act "does not contemplate private suits, but instead vests powers and duties in the State Director of Insurance, who is empowered to enjoin and penalize certain prohibited acts." Allied Fin. Servs., Inc. v. Foremost Ins. Co. , 418 F.Supp. 157, 162 (D. Neb. 1976). Likewise, "[t]he purpose of the Unfair Insurance Claims Settlement Practices Act is to set forth standards for the investigation and disposition of claims arising under policies issued to residents of this state," and no private right of action is provided by the Nebraska legislature under this statute. Neb. Rev. Stat. § 44-1537. Therefore, both of these claims were properly dismissed because neither rests upon a private right of action and thus, both fail to state a claim upon which relief can be granted.

B. Breach of Contract and Related Claims

McShane asserts four claims arising from the insurance agreements including (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) failure to recognize third-party beneficiary status, and (4) mitigation. McShane argues that "[t]here is an absence of a reasonable basis for [Gotham's] failure to assume and pay for damages ... sustained by McShane" and alleges that Gotham "breached its obligations and duties [under the Policy] to McShane as an Additional Insured ... and/or [as] a Third Party Beneficiary."

1. Breach of Contract

In Nebraska, "[t]he meaning of an insurance policy is a question of law, in connection with which an appellate court has an obligation to reach its own conclusions independently of the determination made by the lower court." Auto-Owners Ins. Co. v. Home Pride Cos. , 268 Neb. 528, 684 N.W.2d 571, 575 (2004). "In construing insurance policy provisions, a court must determine from the clear language of the policy whether the insurer in fact insured against the risk involved." Id. "In an appellate review of an insurance policy, the court construes the policy as any other contract to give effect to the parties' intentions at the time the writing was made." Id. "Where the terms of a contract are clear, they are to be accorded their plain and ordinary meaning." Id.

Here, McShane is listed as an "Additional Insured" under the Policy. In Nebraska, "[s]ubject to restrictions in the additional insured endorsement, an additional insured has the same coverage rights and obligations as the principal insured under the policy." Federated Serv. Ins. Co. v. Alliance Constr., LLC , 282 Neb. 638, 805 N.W.2d 468, 476 (2011). Thus, McShane has the same liability coverage as Mallory under the parts of the Policy applicable to McShane. The Additional Insured endorsement includes McShane as an Additional Insured "only with respect to liability for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ caused ... by ... [Mallory's] acts or omissions or ... acts or omissions of those acting on [Mallory's] behalf." (emphasis added).

The nature of the Policy as a third-p...