Aten v. Scottsdale Ins. Co.

• Decision Date: 08 January 2008
• Docket Number: No. 06-3966.,06-3966.
• Citation: 511 F.3d 818
• Parties: Jonathan ATEN, Appellant, v. SCOTTSDALE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

511 F.3d 818

Jonathan ATEN, Appellant, v. SCOTTSDALE INSURANCE COMPANY, Appellee.

No. 06-3966.

United States Court of Appeals, Eighth Circuit.

Submitted: October 5, 2007.

Filed: January 8, 2008.

Jaren Lee Johnson, argued, Renee I. Fossen, on the brief, Eagan, MN, for appellant Jonathan Aten.

Richard Gary Jensen, argued, Dean B. Thomson and Kyle E. Hart, on the brief, Minneapolis, MN, for amici Associated General Contractors of Minnesota and Associated General Contractors.

Stacy Ann Broman, argued, Bradley M. Jones and Steven C. Wang, on the brief, Minneapolis, MN, for appellee.

Before LOKEN, Chief Judge, RILEY and SMITH, Circuit Judges.

RILEY, Circuit Judge.

In this insurance coverage dispute, Jonathan Aten (Aten) appeals the district court's grant of the motion to dismiss filed by Scottsdale Insurance Company (Scottsdale) on the grounds Scottsdale never breached its policy of insurance because Aten's damages either (1) were not a result of a covered occurrence or, alternatively, (2) even if the damages were a result of a covered occurrence, they were properly excluded under the policy's terms. On appeal, Aten asserts the district court erred in (1) granting Scottsdale's motion to dismiss and (2) ruling that damages to Aten's home did not constitute an occurrence under the policy terms.

I. BACKGROUND

On March 16, 2004, Aten contracted with Leslie Joe Hanke and Castlerock Construction LLC (Castlerock) to construct a house in St. Paul, Minnesota. Work commenced in April 2004 and was completed before the November 1, 2004 closing of the mortgage on the property. Upon taking possession of the house, Aten discovered a wide variety of defects in the construction of the home. Castlerock also did not pay for certain materials used in the home's construction, requiring Aten to satisfy an $11,035.62 materialman's lien on the house.¹

In December 2005, Aten commenced an action against Hanke and Castlerock in Ramsey County, Minnesota District Court, seeking to recover damages for the defective construction and the lien Aten was required to satisfy. Neither defendant appeared, and a default judgment was entered against the defendants and in favor of Aten for the $11,035.62 Aten paid to satisfy the lien and for an additional $90,000 "to remedy and correct the defects and deficiencies in the construction of the home." In its findings of fact, the state court found "[t]here was trim missing, exposed sheetrock screws, damaged pieces of sheetrock installed, interior walls that were not plumb, floors that were uneven, gaps between the flooring and the wall/trim, doors off center, door jambs improperly installed, uneven and cracked floors in the garage and basement, with the basement floor not graded properly towards the drain causing water damage." (Emphasis added). The court further found the home construction was "inadequate and defective, including but not limited to problems with the basement and garage floors, sheetrock and drainage."

Because neither defendant appeared, Aten had no opportunity to conduct any discovery to find out whether any of the deficiencies or defects were the result of work done by subcontractors, or whether Castlerock caused damage to work done by subcontractors. The state court acknowledged some work was performed by subcontractors by noting, "[s]ome of the Plaintiffs complaints, however, deal with cosmetic issues and matters not related to work performed by Castlerock." Because Aten never had the opportunity to discover exactly what work was done by Castlerock and what work was done by subcontractors, Aten could not (1) name in his state court action the specific subcontractors and their failures, if any; or (2) identify the work performed by subcontractors that Castlerock damaged.

On June 6, 2006, Aten commenced the instant action against Scottsdale. Scottsdale had issued a commercial general liability insurance policy (Policy) to Castlerock that was in force during the construction period. Aten alleges Scottsdale is obligated under the Policy to pay the default judgment entered against Castlerock in the state court action, asserting claims for (1) breach of the implied covenant of good faith and fair dealing; (2) breach of contract; and (3) unjust enrichment.

On July 6, 2006, Scottsdale filed a notice of removal in the United States District Court for the District of Minnesota, removing this action to federal court. Scottsdale then filed a motion to dismiss all of the claims, which the district court granted. This appeal follows.

II. DISCUSSION

"We review a Rule 12(b)(6) dismissal de novo, accepting the claimant's allegations of fact as true and affirming only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Reis v. Walker, 491 F.3d 868, 870 (8th Cir.2007) (internal quotation and citation omitted).

For there to be coverage under the Policy there must first be an "occurrence." If an occurrence exists, the next step is to determine whether the occurrence resulted in "property damage" or "bodily injury." If property damage or...