Estvold Oilfield Servs., Inc. v. Hanover Ins. Co.
| Decision Date | 27 April 2018 |
| Docket Number | Case No. 1:17-cv-016 |
| Parties | Estvold Oilfield Services, Inc., Plaintiff, v. The Hanover Insurance Company and PayneWest Insurance, Inc., Defendants. |
| Court | U.S. District Court — District of North Dakota |
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS AND DENYING REQUEST FOR A HEARING
Before the court is a "Motion to Dismiss for Failure to State a Claim" filed by the Hanover Insurance Company ("Hanover") on May 26, 2017. See Doc. Nos. 26 and 27. Also before the court is Estvold Oilfield Services, Inc.'s ("Estvold") motion for a hearing on Hanover's motion. For the reasons set forth below, Hanover's motion is granted in part and denied in part and Estvold's motion for a hearing is denied.
The following facts are either undisputed or are otherwise accepted as true for the purposes of this motion. McAuley v. Federal Ins. Co., 500 F.3d 784, 787 (8th Cir. 2007).
Estvold purchased a Hanover-underwritten insurance policy through PayneWest in January 2016 for properties it owned in or near three North Dakota towns: New Town, Alexander, and Richardton. One of Estvold's properties, a Steel Shop located at 8449 39th St. NW, New Town, North Dakota (hereinafter referred to as the "39th St. Steel Shop") was destroyed in a conflagration on April 23, 2016. Estvold promptly tendered a fire loss claim to Hanover. Hanover denied the claim on the ground that the 39th St. Steel Shop was not amongst properties covered by Estvold's insurance policy.
Estvold initiated the above-entitled action on January 18, 2017. It has asserted claims against Hanover for breach of contract, declaratory judgment, reformation of contract and specific performance, and violation of the State's Unfair Insurance Practices Act. It has asserted the same claims along with additional claims for professional negligence and negligence against PayneWest. It seeks a declaration that its insurance policy covers the fire damage to the 39th St. Steel Shop. In the alternative, it seeks either reformation of the policy to reflect that the 39th St. Steel Shop was covered and payment from Hanover for the fire loss claim, or a finding that PayneWest was negligent for failing to correctly identify the 39th St. Steel Shop in the insurance proposal.
The insurance proposal prepared by PayneWest (and presumably accepted as is by Estvold) listed the following schedule of properties to be covered by the policy:
Loc. No. 1- 3962 84th Ave. NW, New Town, ND 58763: Building #1 Office/Shop: Steel
Loc. No. 2 - 3914 84th Ave. NW, New Town, ND 58763: Building #1 Building #2 Steel Shop Shop
Loc. No. 3 - Lot 1; Blk 6, Alexander Energy park, Alexander, ND: Building #1 Storage
Loc. No. 4 - 4211 Hwy 8, Richardton, ND 58652: Building #1 Building #2 Building #3 Building #4 Steel Shop TBD Office Propane/water Depot tanks/pumps
(Doc. No. 1). Conspicuously absent from this schedule was any explicit identification of a fifth location, i.e., 8449 39th St. NW, New Town, or mention of the 39th St. Steel Shop.
In its Complaint, Estvold contends that the 39th St. Steel Shop was not really omitted from the insurance proposal but rather misidentified as Building #1 at Loc. No. 4, that there was mutualunderstanding amongst the parties that 39th St. Steel Shop was covered by the policy, and that such coverage was calculated into the insurance premiums that were timely paid and that Hanover accepted. Specifically, Estvold asserts that its intent was clear from the outset that it was seeking coverage for all of its property, including the 39th St. Steel Shop; PayneWest understood this and twice inspected the 39th St. Steel Shop during coverage negotiations; PayneWest prepared an insurance proposal that listed a nonexistent property, Building #1 at Loc. No. 4; it and PayneWest mutually understood and agreed that the insurance proposal's reference to the Building #1 at Loc. No. 4 was in actuality the 39th St. Steel Shop; PayneWest acted as Hanover's agent at all times relevant to this action; and PayneWest's knowledge and understanding is imputable to Hanover.
On May 26, 2017, Hanover filed a motion to dismiss Estvold's claims against it pursuant to Fed. R. Civ. P. 12(b)(6). Estvold has filed a response in opposition and has requesting a hearing. PayneWest has filed a special response, staking out its position regarding its relationship to Hanover--it denies that it was Hanover's agent--but otherwise taking no position as to whether Estvold has pled its claims against Hanover with the requisite specificity. Hanover, in turn, has filed a reply in support of its motion.
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a pleading to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8 (a)(2). Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim if there has been a failure to state a claim upon which relief can be granted. In order to survive a motion to dismiss under Rule 12(b)(6), "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(2009). A plaintiff must show that success on the merits is more than a "sheer possibility." Id. A complaint is sufficient if its "factual content . . . allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The court must accept all factual allegations as true, except for legal conclusions or "formulaic recitation of the elements of a cause of action." Id. at 681. A complaint does not "suffice if it tenders a naked assertion devoid of further factual enhancement." Id. at 678. The determination of whether a complaint states a claim upon which relief can be granted is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. Dismissal will not be granted unless it appears beyond doubt the plaintiff can prove no set of facts entitling the plaintiff to relief. Ulrich v. Pope Cnty, 715 F.3d 1054, 1058 (8th Cir. 2013).
The court is generally confined to looking only to the allegations contained in the complaint to make a Rule 12(b)(6) determination. McAuley v. Fed. Ins. Co., 500 F.3d 784, 787 (8th Cir. 2007). However, the "court may sometimes consider materials outside the pleadings, such as materials that are necessarily embraced by the pleadings and exhibits attached to the complaint." Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003) (citing Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999)).
In assessing the sufficiency of Estvold's pleadings in this diversity action, the court shall apply state substantive law. See Bell v. Pfizer, Inc., 716 F.3d 1087, 1091 (8th Cir. 2013); Moses.com Sec., Inc., Comprehensive Software Sys., Inc., 406 F.3d 1052, 1063 (8th cir. 2005).
"A breach of contract is the nonperformance of a contractual duty when it is due." WFND, LLC v. Fargo Marc, LLC, 2007 ND 67, ¶ 13, 730 N.W.2d 841. To establish a breach of contract,the party asserting the breach must prove: (1) the existence of a contract; (2) a breach of the contract; and (3) damages which flow from the breach. Id.
Under N.D.C.C. § 9-07-02, "[t]he language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity." N.D.C.C. § 9-07-06.
Here, there is no dispute that the 39th St. Steel Shop was not explicitly listed amongst the properties to be covered in the insurance proposal. Seizing upon this, Hanover insists that, because the policy explicitly and unambiguously excluded coverage for the 39th St. Steel Shop, its denial of the claim for fire damage 39th St. Steel Shop cannot constitute a viable claim for breach of contract.
The gist of Estvold's response is that Hanover breached the contract that was intended. According to Estvold, there was a mutual understanding between PayneWest and Estvold that: (1) Estvold was purchasing coverage for all of its property, including the 39th St. Steel Shop; (2) the reference in the insurance proposal to Building #1 at Loc. No. 4 was a scrivener's error; (3) the aforementioned Building #1 was in actuality the 39th St. Steel Shop; and (4) PayneWest's knowledge and understanding can be imputed to Hanover by the fact that it was acting as its agent either in fact or because of its apparent authority.
Hanover denies that PayneWest was its agent. In its special response, PayneWest likewise denies it was Hanover's agent. Additionally, it disputes Estvold's assertion that the exclusion of the 39th St. Steel Shop from the insurance proposal was a mistake or that it had a mutual understanding with Estvold that Building #1 at Loc. No. 4 was in fact the 39th St. Steel Shop.
While the court has some doubt about whether PayneWest acted as Hanover's agent forpurposes of the negotiation of the policy, the resolution of that question is for another day since the court must accept as true what has been pled in the complaint for purposes of the motion to dismiss. Further, if the court was to reform the contract, then, theoretically, it is the breach of the reformed contract that would provide a basis for the recovery. At this point, the court will not dismiss the breach of contract claim.
Hanover next contends that declaratory judgment in Estvold's favor would be inappropriate as Estvold is ostensibly seeking to reform its insurance policy as opposed to a determination of its rights under it and that such a claim is otherwise subject to dismissal on the ground that it is duplicative of the breach of contract claim. See Catalono v. BMW of N. Amer., LLC, 167 F. Supp....
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