Topp's Mech., Inc. v. Kinsale Ins. Co.
| Decision Date | 15 April 2019 |
| Docket Number | 8:19CV20 |
| Citation | 374 F.Supp.3d 813 |
| Parties | TOPP'S MECHANICAL, INC., Plaintiff, v. KINSALE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Nebraska |
David S. Houghton, Justin D. Eichmann, Houghton, Bradford Law Firm, Omaha, NE, for Plaintiff.
Sina Bahadoran, Pro Hac Vice, Junaid Savani, Pro Hac Vice, Clyde & Co., Miami, FL, Michael L. Moran Engles, Ketcham Law Firm Omaha, NE for Defendant.
This matter is before the Court on defendant Kinsale Insurance Company's ("Kinsale") Motion to Dismiss for Failure to State a Valid Cause of Action (Filing No. 13 ). See Fed. R. Civ. P. 12(b)(6). Plaintiff Topp's Mechanical, Inc. ("TMI") opposes dismissal (Filing No. 15 ), arguing its "allegations and causes of action are sufficiently clear [and] specific" to withstand Kinsale's motion. With diversity jurisdiction under 28 U.S.C. § 1332(a)(1),1 the Court grants Kinsale's motion to dismiss.
TMI is a specialty mechanical contractor based in Tecumseh, Nebraska. In 2013, TMI obtained a commercial general liability insurance policy ("policy") from Kinsale. Effective from August 1, 2013, to August 1, 2014, the policy generally obligated Kinsale to defend and indemnify TMI against liability for "bodily injury" and "property damage" claims caused within the policy period. The policy also included an "Absolute Pollution and Pollution Related Liability Exclusion" ("pollution exclusion") that excluded coverage for any suit "arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release, or escape of ‘pollutants.’ " The term "pollutants" is defined as "any solid, liquid, gaseous, fuel, lubricant, thermal, acoustic, electrical, or magnetic irritant or contaminant, including but not limited to smoke, vapor, soot, fumes, fibers, radiation, acid, alkalis, petroleums, chemicals or ‘waste,’ " the latter of which is defined to include "medical waste, biological infectants, and all other materials to be disposed of, recycled, stored, reconditioned or reclaimed."
The policy also included an exception labeled the "Time Element Pollution Endorsement" ("time-element exception") which stated that Kinsale would provide liability coverage for certain "pollution incidents" as defined in the exception if the incident was (1) "discovered by the insured within the [scheduled] ‘discovery time period’ " of seven days and (2) "reported to [Kinsale] in writing within the [scheduled] ‘reporting time period’ " of forty-five days. The time-element exception defined "pollution incident" as "the discharge, dispersal, release or escape of ‘pollutants’ into or upon land or any structure on land, the atmosphere or any water course or body of water that arises from ‘insured operations’ and results in en-vironmental [sic] damage."
As part of its business operations, TMI agreed to deconstruct an existing carbon-dioxide plant in Beatrice, Nebraska, and reassemble the plant in Boyceville, Wisconsin, for Air Products & Chemicals, Inc. ("Air Products"). On May 29, 2014, Alan Wangerin ("Wangerin"), an Air Products employee, was reportedly standing on a catwalk at the reassembled plant when he was immersed in a hot cloud of ammonia gas that was released from the pressure valve of an anhydrous-ammonia tank at the plant.
Within about a week of the gas release, TMI learned that the plant was being shut down while the incident was investigated. TMI alleges that upon learning of the incident, TMI's representative contacted Kinsale by phone "out of an abundance of caution" to notify Kinsale of the incident and to ask "for Kinsale's instruction as to how best to proceed," even though no demand had been made and TMI did not think the incident constituted a claim under the policy.
According to TMI, someone in the Kinsale claims department told TMI that it could not yet report the incident as a claim under its policy and that TMI should wait until a formal demand had been made or suit had been filed. That did not happen until November 20, 2015, when Wangerin made a formal demand on TMI for injuries he claimed to have suffered as a result of the incident. TMI forwarded the demand to Kinsale and requested in writing that Kinsale defend and indemnify TMI under the policy. On January 8, 2016, Kinsale denied coverage based on the pollution exclusion.
In March 2017, Wangerin sued TMI and others in the United States District Court for the Western District of Wisconsin, alleging they "were negligent in their placement of anhydrous ammonia pressure relief valves under a catwalk where employees of Air Products & Chemicals, Inc. were expected and anticipated to be during work hours." Wangerin alleged his sudden and unexpected immersion in ammonia gas caused him to suffer personal injuries and damages, including injuries to his knees
and shoulder from a "hard impact" following his descent from a ladder. TMI notified Kinsale of the suit; Kinsale again denied coverage.
On December 14, 2018, TMI sued Kinsale in the District Court of Douglas County, Nebraska (Filing No. 1-1), alleging Kinsale breached its insurance contract with TMI by refusing to defend and indemnify TMI against Wangerin's claims. On January 17, 2019, Kinsale timely removed the case to this Court, see 28 U.S.C. §§ 1441(a), 1446, and now moves for dismissal pursuant to Rule 12(b)(6) for failure to state a cause of action.
Federal Rule of Procedure 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." A plaintiff need not provide " ‘detailed factual allegations’ " to meet that standard but must plead "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).
"To survive a 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.’ " Id. (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). A claim is facially plausible if supported by sufficient factual allegations to allow the Court to draw a "reasonable inference that the defendant is liable for the misconduct alleged." Id. A complaint that alleges facts that are "merely consistent with" a defendant's liability "stops short of the line between possibility and plausibility." Twombly , 550 U.S. at 557, 127 S.Ct. 1955.
The Court must "accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the nonmoving party, but [is] not bound to accept as true ‘threadbare recitals of the elements of a cause of action, supported by mere conclusory statements’ or legal conclusions couched as factual allegations." McDonough v. Anoka County , 799 F.3d 931, 945 (8th Cir. 2015) (internal marks omitted) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). "When considering a Rule 12(b)(6) motion, the court generally must ignore materials outside the pleadings, but it may consider some materials that are part of the public record or do not contradict the complaint, as well as materials that are necessarily embraced by the pleadings." Ashford v. Douglas County , 880 F.3d 990, 992 (8th Cir. 2018) (quoting Smithrud v. City of St. Paul , 746 F.3d 391, 395 (8th Cir. 2014) ). " ‘In a case involving a contract, the court may examine’ " contract documents that are not attached to the complaint, even if they "refute a breach-of-contract claim." Zean v. Fairview Health Servs. , 858 F.3d 520, 526 (8th Cir. 2017) (quoting Stahl v. USDA , 327 F.3d 697, 700 (8th Cir. 2003) ).
The parties agree Nebraska substantive law applies in this diversity case. See Erie R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; Secura Ins. v. Horizon Plumbing, Inc. , 670 F.3d 857, 861 (8th Cir. 2012) (). If the Nebraska Supreme Court has "not decided a particular substantive legal issue of relevance, [the Court] must try to predict how [that] court would do so and decide the case accordingly." Lindholm v. BMW of N. Am., LLC , 862 F.3d 648, 651 (8th Cir. 2017). The Court will "follow decisions of the intermediate state court when they are the best evidence of [Nebraska] law." Friedberg v. Chubb & Son, Inc. , 691 F.3d 948, 951 (8th Cir. 2012).
Under Nebraska law, "[t]he interpretation of an insurance policy"—like any other contract—"is a question of law." Guerrier v. Mid-Century Ins. Co. , 266 Neb. 150, 663 N.W.2d 131, 134 (2003). "In construing an insurance contract, a court must give effect to the instrument as a whole and, if possible, to every part thereof." Harleysville Ins. Grp. v. Omaha Gas Appliance Co. , 278 Neb. 547, 772 N.W.2d 88, 95 (2009).
TMI has the burden of proving coverage under the policy. Farm Bureau Ins. Co. of Neb. v. Martinsen , 265 Neb. 770, 659 N.W.2d 823, 827 (2003). Kinsale then must prove that the pollution exclusion applies. Econ. Preferred Ins. Co. v. Mass , 242 Neb. 842, 497 N.W.2d 6, 8 (1993). The burden then shifts to TMI to show that the time-element "exception to that exclusion" applies. Dutton-Lainson Co. v. Cont'l Ins. Co. , 271 Neb. 810, 716 N.W.2d 87, 96 (2006).
In interpreting an insurance policy, the Court "must first determine, as a matter of law, whether the contract is ambiguous." Reisig v. Allstate Ins. Co. , 264 Neb. 74, 645 N.W.2d 544, 550 (2002). "A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings." Id. The Court must determine whether the policy "is ambiguous ‘on an objective basis, not by the subjective contentions of the parties’ and [is]...
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