Mid-Continent Cas. Co. v. Greater Midwest Builders, Ltd.

• Decision Date: 06 December 2019
• Docket Number: No. 18-3113,18-3113
• Parties: MID-CONTINENT CASUALTY COMPANY, Plaintiff - Appellant, v. GREATER MIDWEST BUILDERS, LTD.; GREATER MISSOURI BUILDERS, INC., Defendants - Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

MID-CONTINENT CASUALTY COMPANY, Plaintiff - Appellant, v. GREATER MIDWEST BUILDERS, LTD.; GREATER MISSOURI BUILDERS, INC., Defendants - Appellees.

No. 18-3113

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

December 6, 2019

(D.C. No. 2:17-CV-02561-JWL-GEB)

(D. Kan.)

ORDER AND JUDGMENT^*

Before BRISCOE, McKAY, and HOLMES, Circuit Judges.

Plaintiff-Appellant Mid-Continent Casualty Company ("Mid-Continent") seeks reversal of an order granting a motion to dismiss made by Defendants-Appellees Greater Midwest Builders, Ltd. ("Greater Midwest") and Greater Missouri Builders, Inc. ("Greater Missouri"), as well as an order denying Mid-Continent's motion under Federal Rule of Civil Procedure ("Rule") 59(e) to alteror amend the judgment of dismissal. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court's rulings.

I

A

Mid-Continent contends that Greater Midwest and Greater Missouri, allegedly alter-egos of each other,¹ breached the terms of several functionally identical commercial general liability insurance policies (collectively, the "Policy") by failing to reimburse Mid-Continent for deductible amounts that it paid to settle certain litigation. Thus, we review relevant Policy terms before turning to the events giving rise to this appeal.

The Policy generally requires Mid-Continent to "pay those sums that the insured becomes legally obligated to pay as damages because of . . . 'property damage' to which this insurance applies." Aplt.'s App. at 26 (Ex. A to Compl., filed Sept. 25, 2017). According to the Policy's deductible endorsement, Mid-Continent's obligation to pay damages on its insured's behalf "applies only to the amount of damages in excess of [a] deductible amount[]" (here, $1,000 "per claim" for "[p]roperty [d]amage [l]iability"). Id. at 20. The deductible endorsement also states that Mid-Continent "may pay any part or all of the deductible amount to effect settlement of any claim or 'suit' and, upon notification of the action taken, [the insured] shall promptly reimburse [Mid-Continent] for such part of the deductible amount as has been paid by [Mid-Continent]." Id. at 21. The Policy defines a "suit" as follows:

"Suit" means a civil proceeding in which damages because of "bodily injury," "property damage" or "personal and advertising injury" to which this insurance applies are alleged. "Suit" includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with [Mid-Continent's] consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with [Mid-Continent's] consent.

Id. at 40; see also id. (defining "[p]roperty damage" as "[p]hysical injury to tangible property, including all resulting loss of use of that property," and "[l]oss of use of tangible property that is not physically injured").

B

Starting in or about 2000, Greater Missouri and Greater Midwest were engaged in the construction of townhomes at a Kansas real estate development.² Between 2004 and 2008, Mid-Continent provided liability insurance coverage to Greater Midwest under the Policy.

In 2007, a homeowners association and the individual owners of several of the townhomes (the "Homeowners Association" and "Individual Plaintiffs," respectively, and collectively, the "Kansas Plaintiffs") sued Greater Midwest and its president in Kansas state court for damages arising from water intrusion in the townhomes (the "Kansas Litigation").

Mid-Continent and State Auto, an insurer that had issued policies covering the first few years of the construction project (collectively, the "Insurers"), initially defended Greater Midwest and its president in the Kansas Litigation under a reservation of their rights to contest coverage.³ Greater Midwestultimately rejected their defense, however. Instead, per the Complaint in this case,

[Greater Midwest] entered into an agreement with the Kansas [Plaintiffs] to the effect that (1) [Greater Midwest] would not contest the claims by those plaintiffs at trial, and (2) they would only attempt to collect their judgment from [Greater Midwest] and Greater Missouri's available insurance coverage. Accordingly, judgment issued in the Kansas Litigation on the water intrusion claims.

Id. at 9.

The Kansas Plaintiffs then filed suit in Missouri state court (the "Missouri Litigation") to "collect on the judgment." Id. The Petition initiating that action designated Greater Midwest as a plaintiff and asserted no claims against Greater Midwest. A section of that Petition concerning a claim for "equitable garnishment" described the claim as being by only the Kansas Plaintiffs against the Insurers, but it also discussed Greater Midwest's negligent "acts and/or omissions" giving rise to the property damage at issue in the Kansas Litigation and asserted entitlement to equitable garnishment based on "the coverage afforded to [Greater Midwest]" under the Insurers' policies. Id. at 653-56 (Ex. B to Pl.'sMem. in Opp'n to Mot. to Dismiss, filed Jan. 11, 2018) (Pet. in Mo. Lit.).⁴ During the pendency of the Missouri Litigation, Greater Midwest was "realigned" as a defendant in connection with the equitable garnishment claim. See id. at 401 (Ex. D to Defs.' Mem. in Supp. of Mot. to Dismiss, filed Dec. 1, 2017) (Docket Sheet in Mo. Lit.); see also id. at 10 (alleging that, "[f]or purposes of the garnishment claim, [Greater Midwest] was aligned as a defendant").⁵

The Missouri trial court ultimately entered judgment on the equitable garnishment claim against the Insurers, expressly allocating liability between Mid-Continent and State Auto. Mid-Continent appealed, but the judgment was affirmed.⁶

Following post-judgment litigation, Mid-Continent eventually settled the Missouri Litigation. Specifically, according to the Complaint in this case, Mid-Continent "settled the garnishment claims in the [Missouri] Litigation, and paid over $5,000,000 to effectuate that settlement (which included [Mid-Continent's] proportionate share of the judgments for property damage determined in the Kansas Litigation plus interest)."⁷ Id. at 11.

In November 2014, Greater Midwest filed a stipulation of dismissal with prejudice in the Missouri Litigation, the Homeowners Association filed a satisfaction of judgment in the Missouri Litigation, and the Homeowners Association filed a satisfaction of judgment in the Kansas Litigation.

In 2017, Mid-Continent filed this action, claiming that Greater Midwest and Greater Missouri (again, allegedly alter-egos of each other) had failed to reimburse Mid-Continent for deductible amounts "arising from the property damage claims made in the Kansas [L]itigation and the settlement of the [Missouri] [L]itigation." Id. at 12. Greater Midwest and Greater Missouri moved to dismiss, arguing among other things that Mid-Continent had not settled a claim or suit against Greater Midwest, but rather had settled and secured a release of further claims against itself. Also, according to Greater Midwest and Greater Missouri, Mid-Continent had not shown that Greater Midwest "benefit[ted] from" settlement of the Missouri Litigation. Id. at 316 (Defs.' Mem. in Supp. of Mot. to Dismiss, filed Dec. 1, 2017). Mid-Continent opposed, arguing that, by its plain terms, the Policy did not limit the reimbursement obligation to a settlement that was "for the benefit of" Greater Midwest. Id. at 643-45 (Pl.'s Mem. in Opp'n to Mot. to Dismiss, filed Jan. 11, 2018).

The district court granted the motion to dismiss and entered judgment. In its view, "the only reasonable interpretation" of the Policy was that "the reimbursement obligation arises only in the context of a settlement by the insurer of a claim or suit against the insured." Id. at 705 (Mem. & Order, filed Feb. 12, 2018) (emphasis added). It reasoned that "[t]he only occasion in which an insured would need to reimburse the insurer for deductibles would be when theinsurer paid a claimant to settle a liability owed by the insured." Id. Here, the district court ruled the Homeowners Association had "already secured a judgment against" Greater Midwest, which Greater Midwest had "already satisfied" by its settlement with the Homeowners Association. Id. Thus, when Mid-Continent later settled with the Homeowners Association, it was not paying a judgment or settling liability against Greater Midwest, but rather was settling its own liability in the Missouri Litigation. In describing the parties' arguments, the district court noted Greater Midwest and Greater Missouri's argument that the reimbursement provision applies where "the insurer has settled a claim against the insured, thereby benefitting the insured." Id. at 704 (emphasis added).

Mid-Continent filed a timely Rule 59(e) motion to alter or amend the judgment, arguing that the district court erred in determining that the reimbursement obligation applied only if Mid-Continent settled a suit against, or for the benefit of, Greater Midwest and in determining that Greater Midwest satisfied the judgment in the Kansas Litigation before the settlement of the Missouri Litigation. The district court denied the Rule 59(e) motion on grounds mirroring those undergirding the initial dismissal ruling. Notably, it stated that its prior ruling turned on whether Mid-Continent was settling a suit against an insured, not whether Mid-Continent's settlement benefitted an insured, but it also stated that Mid-Continent had "still not explained how" Greater Midwestbenefitted from the settlement "in any real sense." Id. at 959-60 (Mem. & Order, dated Apr. 30, 2018). The district court also observed that, prior to the Missouri Litigation, the Kansas Plaintiffs had already "agreed not to execute against [Greater Midwest]" and to limit collection efforts to the Insurers, and Greater Midwest's liability would thus not be changed regardless of the outcome of the Missouri Litigation. Id. at 960.

Mid-Continent timely appealed.

II

A

We review a district court...