Winbco Tank Co., Inc. v. Palmer & Cay of Minn.

• Decision Date: 17 May 2006
• Docket Number: No. 4:04-CV-00694-CFB.,4:04-CV-00694-CFB.
• Citation: 435 F.Supp.2d 945
• Parties: WINBCO TANK COMPANY, INC., Plaintiff, v. PALMER & CAY OF MINNESOTA, L.L.C., Defendant. Palmer & Cay of Minnesota, L.L.C., Third-Party Plaintiff, v. St. Paul Fire and Marine Insurance Company, Third-Party Defendant. St. Paul Fire and Marine Insurance Company, Third-Party Plaintiff, v. Verasun Energy Corporation and Affiliated FM Insurance Company, Third-Party Defendants. Verasun Energy Corporation Company, Cross-Claim Plaintiff, v. Affiliated FM Insurance Company, Cross-Claim Defendant.
• Court: U.S. District Court — Southern District of Iowa

435 F.Supp.2d 945

WINBCO TANK COMPANY, INC., Plaintiff, v. PALMER & CAY OF MINNESOTA, L.L.C., Defendant.

Palmer & Cay of Minnesota, L.L.C., Third-Party Plaintiff, v. St. Paul Fire and Marine Insurance Company, Third-Party Defendant.

St. Paul Fire and Marine Insurance Company, Third-Party Plaintiff, v. Verasun Energy Corporation and Affiliated FM Insurance Company, Third-Party Defendants.

Verasun Energy Corporation Company, Cross-Claim Plaintiff, v. Affiliated FM Insurance Company, Cross-Claim Defendant.

No. 4:04-CV-00694-CFB.

United States District Court, S.D. Iowa, Central Division.

May 17, 2006.

COPYRIGHT MATERIAL OMITTED

John N. Moreland, Harrison, Moreland & Webber PC, Ottumwa, IA, for Plaintiff.

F. Richard Lyford, Richard A. Malm, Dickinson Mackaman Tyler & Hagen PC, Des Moines, IA, for Defendant, Third-Party Plaintiff.

Stephen D. Hardy, Grefe & Sidney PLC, Des Moines, IA, for Third-Party Defendant, Third-Party Plaintiff.

Gregory M. Lederer, Simmons Perrine Albright & Ellwood, Cedar Rapids, IA, Matthew S. Ponzi, Michael L. Foran, Foran Glennon Palandech & Ponzi PC, Chicago, IL, for Cross-Claim Defendant.

Brent R. Appel, Wandro, Baer, Appel & Casper, PC, Des Moines, IA, for Third-Party Defendants, Cross-Claim Plaintiff.

ORDER ON MOTIONS TO DISMISS

BREMER, United States Magistrate Judge.

The Court has before it Third-Party Defendant and Cross-Claim Defendant Affiliated FM Insurance Company's Motion to Dismiss St. Paul Fire and Marine Insurance Company's Third-Party Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Clerk's No. 26), filed on January 17, 2006; and Affiliated FM's Motion to Dismiss VeraSun Energy Corporation's¹ Cross-Claim (Clerk's No. 32), filed on January 24, 2006. The parties have filed Resistances and Replies. These matters are fully submitted.

The Court held a hearing on February 22, 2006. At the hearing, Richard Lyford represented Defendant and Third-Party Plaintiff Palmer & Cay of Minnesota, Stephen Hardy and Jacob Cummings represented Third-Party Defendant and Third-Party Plaintiff St. Paul, Brent Appel represented Third-Party Defendant and Cross-Claim Plaintiff VeraSun, and Michael Foran represented Third-Party Defendant and Cross-Claim Defendant Affiliated FM.

The parties consented to proceed before a United States Magistrate Judge, and on May 19, 2005, the case was referred to the undersigned for all further proceedings. See 28 U.S.C. § 636(c).

I. Applicable Standard and Law

A court may grant a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim, "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema, 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (noting the Federal Rule's simplified notice pleading standard) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)); accord Miller v. Pilgrim's Pride Corp., 366 F.3d 672, 673 (8th Cir.2004); First Nat'l Bank of Camden, Ark. v. Tracor, Inc., 851 F.2d 212, 214 (8th Cir.1988) (stating that on a motion to dismiss for failure to state a claim, the court must deny the motion and grant leave to file an amended petition, "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief") (quoting Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). A court must accept all the factual allegations in the complaint as true and construe the facts in the light most favorable to the plaintiff. Maki v. Allete, Inc., 383 F.3d 740, 742 (8th Cir. 2004) (stating courts draw all reasonable inferences in favor of the nonmoving party on a Rule 12(b)(6) motion to dismiss); Miller, 366 F.3d at 673.

In this case, the claims, third-party claims, and cross-claims involve contracts between parties in various states, and property damage in South Dakota. Plaintiff WINBCO Tank Company bases jurisdiction over its claim on diversity of citizenship. 28 U.S.C. § 1332. Federal courts exercising diversity jurisdiction apply the forum state's substantive law, including its choice-of-law doctrines. Miller, 366 F.3d at 673; Holden Farms, Inc. v. Hog Slat, Inc., 347 F.3d 1055, 1064 (8th Cir.2003).² When no party raises a conflict-of-law issue in a diversity case, however, "the federal court simply applies" the forum state's law. Grundstad v. Ritt, 166 F.3d 867, 870 (7th Cir.1999); cf. Union Elec. Co. v. Southwestern Bell Tel., 378 F.3d 781, 785 (8th Cir.2004) (applying the law of the forum state, when parties apparently agreed that application of that state's law was proper); Cordry v. Vanderbilt Mortgage & Finance, Inc., 445 F.3d 1106, 1108 (8th Cir.2006) (stating the parties agreed that Missouri contract applied in the diversity action). In this case, the parties apparently agree that the application of the law of the forum state, Iowa, is proper, and therefore the Court will apply Iowa's substantive law.

II. Facts Alleged

The relevant alleged facts are as follows.³

A. WINBCO's Complaint (Clerk's No. 1)

WINBCO alleges that on approximately April 1, 2003, Defendant Palmer & Cay, an insurance broker, "caused to be issued" by St. Paul an insurance policy covering WINBCO's risks in connection with its construction of facilities on property owned by VeraSun in Aurora, South Dakota.⁴ (Clerk's No. 1 at 1.) WINBCO asserts that before the policy's inception date, Palmer & Cay, through its employee James A. Silesky, assured WINBCO that the insurance policy would cover WINBCO's "construction projects in progress after the beginning of the work, but prior to completion and acceptance by the owner," and it was therefore unnecessary for WINBCO to buy "builders' risk" insurance. Id.

On April 16, 2003, wind damaged the Aurora facilities while they were under construction. WINBCO made the necessary repairs. WINBCO alleges that when it presented claims for reimbursement⁵ of the repair cost to Palmer & Cay, the broker said St. Paul, "would not honor the claims as presented," and that WINBCO had to seek reimbursement through the insurance coverage, if any, purchased by VeraSun. Id. at 2.

WINBCO filed its Complaint against Palmer & Cay on December 13, 2004, seeking reimbursement for the cost of repairing the wind-damaged facilities. WINBCO attached to its complaint Exhibit B, a Certificate of Liability Insurance, "showing certain coverages on the project[] in question." Id. at 1 (alteration added). Palmer & Cay authored the certificate. The certificate stated that insurance policies were issued to WINBCO covering commercial general liability, automobile liability, and workers' compensation and employers' liability. Id. at Ex. B. WINBCO made no allegations in its Complaint concerning the names of the insurance companies providing the coverage listed in the certificate. The certificate itself, however, stated that St. Paul provided the workers' compensation and employers' liability coverage, while another insurer, Steadfast Insurance Company, provided the general liability coverage. Id. WINBCO attached no insurance policy to its Complaint.

In its Answer, Palmer & Cay admits it acted as a broker in procuring insurance for WINBCO, including insurance covering the construction project at issue, but admits only that Exhibit B "generally" described the coverage obtained. (Clerk's No. 5 at 2.)

B. Palmer & Cay's Third-Party Complaint (Clerk's No. 14)

In its Third-Party Complaint against St. Paul, Palmer & Cay claims that while acting as a broker for WINBCO, it sold an insurance policy to WINBCO issued by St. Paul and covering the loss for which WINBCO claims insurance coverage exists.

Palmer & Cay alleges that when demand was made on St. Paul to cover the amounts WINBCO claimed, St. Paul "refused to honor or pay any claim." (Clerk's No. 14 at 2.)

Palmer & Cay claims that St. Paul "breached its contract to insure and damaged" the broker as a result. Id. Palmer & Cay did not state in its Third-Party Complaint that if it is found liable on WINBCO's claim against it, then St. Paul is liable to Palmer & Cay.

C. St. Paul's Third-Party Complaint (Clerk's No. 18)

St. Paul summarizes in its Third-Party Complaint WINBCO's claims and allegations, stating, "Plaintiff asserts that Defendant, Palmer & Cay of Minnesota, L.L.C., should be required to pay" WINBCO's claims for reimbursement for repairs to the tanks in Aurora, and attaching a copy of WINBCO's Complaint and exhibits, including the Certificate of Liability Insurance. (Clerk's No. 18 at 1, Ex. B.)

St. Paul alleges VeraSun entered into a prime contract for construction of its Aurora facility, which included tanks. The prime contract and its subcontracts identified VeraSun as the "owner" and WINBCO as "a subcontractor." Id. at 3. "The parties to the prime contract agreed in pertinent part to all pertinent provisions of the subcontracts and that the subcontractors were entitled to all rights, remedies and redress to which the contractor and owner were entitled." Id.

St. Paul further asserts the prime contract provided that VeraSun, "shall purchase and maintain" appropriate "all risk" insurance covering all property relevant to the contract against such perils as windstorm, and "expressly to include the interests of the owner, contractor, and subcontractors on the project and to adjust any loss insured thereunder and to pay to contractor and subcontractors their just shares of insurance proceeds received." Id.

St. Paul maintains that a policy issued by Affiliated FM to VeraSun⁶, "was obtained at least in apparent compliance or accord" with the prime contract. Id. St. Paul claims It and WINBCO were "third-party beneficiaries of the aforesaid prime contract and insurance policy of Affiliated FM Insurance Company, and entitled to direct recovery of their loss or damages thereunder." Id. at 4.

St. Paul alleges that the insurance coverage applicable to WINBCO's...