Hall v. Associated International Insurance ( 2012 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT August 21, 2012
Elisabeth A. Shumaker
Clerk of Court
GEORGE HALL,
Plaintiff-Appellant,
v. No. 11-3347
(D.C. No. 5:11-CV-04013-JTM-DJW)
ASSOCIATED INTERNATIONAL (D. Kan.)
INSURANCE COMPANY; PROCTOR
FINANCIAL, INC.,
Defendants-Appellees.
ORDER AND JUDGMENT*
Before HOLMES, Circuit Judge, BRORBY, Senior Circuit Judge, and EBEL,
Circuit Judge.
George Hall appeals from the district court’s decision dismissing his complaint
pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can
be granted. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
I.
Mr. Hall owns a farm in Kansas. At some point, Mr. Hall let the insurance on
his farm lapse. As a result, the bank who held the mortgage acquired insurance to
protect its interest in the farm (this is commonly known as “forced-placed”
insurance). The bank acquired its insurance through defendant Proctor Financial,
Inc., who acted as the agent for defendant Associated International Insurance
Company.
The original insurance policy provided coverage up to $90,000, but Mr. Hall
subsequently notified the bank that the value of the bank’s collateral was $185,000.
A new policy was issued with coverage up to $190,000. On unknown dates, Mr. Hall
received two notices titled “Evidence of Insurance.” The notices stated:
Your Lending Institution (hereinafter called “the Named Insured”) has
procured insurance under the above referenced Master Policy. This
Master Policy has been issued by Associated International (hereinafter
called carrier) in respect of coverage and limits as required by the
Named Insured (hereinafter called “Required Perils”) as agreed and
fully detailed within the terms and conditions of your Loan agreement.
This document is issued to notify you that the Named Insured has
included your property under the above-mentioned Master Policy for
Required Perils. The insurance provided is in accordance with the
terms, limitations, conditions and exclusions contained in the Master
Policy and any attachments thereto, held on file at the office of the
Named Insured. The Original Master Policy may be inspected at the
office of the Named Insured, situated at the above address.
In the event of a claim or any circumstances giving rise to the
possibility of a claim the Named Insured must IMMEDIATELY notify
the person(s) named within the Master Policy.
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THIS DOCUMENT IS ISSUED AS EVIDENCE OF INSURANCE
ONLY. IT DOES NOT CONSTITUTE A LEGAL CONTRACT OF
INSURANCE
Aplt. App. at 7, 8.
In June 2009, Mr. Hall’s farm sustained damage from a storm. The bank made
a claim on its insurance policy with Associated and received a payment on that claim.
In October 2009, Proctor received notice that Mr. Hall disputed the amount paid on
the insurance claim.
In November 2009, Mr. Hall brought suit against the bank and Proctor.
Mr. Hall settled his claim with the bank and voluntarily dismissed his action against
Proctor without prejudice. The parties agreed to certain stipulations that were
memorialized in an Agreed Order of Dismissal. In February 2011, Mr. Hall filed a
complaint against Proctor and Associated.
Proctor moved to dismiss the complaint for lack of subject matter jurisdiction,
failure to state a claim upon which relief can be granted and failure to plead fraud
with particularity. The district court granted Proctor’s motion to dismiss under
Fed. R. Civ. P. 12(b)(6). Associated then filed a motion to dismiss, arguing that all
of Mr. Hall’s claims against it were derivative of his claims against Proctor. The
district court granted the motion. Mr. Hall now appeals from the district court’s
orders granting Proctor and Associated’s motions to dismiss.
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II.
We review de novo the district court’s Rule 12(b)(6) dismissal. Smith v.
United States, 561 F.3d 1090, 1098 (10th Cir. 2009). To survive a Rule 12(b)(6)
motion, the complaint must include “enough facts to state a claim to relief that is
plausible on its face.” Id. (quotations omitted). “In evaluating a Rule 12(b)(6)
motion to dismiss, courts may consider not only the complaint itself, but also
attached exhibits, and documents incorporated into the complaint by reference.” Id.
(citations omitted). Courts may also “consider documents referred to in the
complaint if the documents are central to the plaintiff’s claim and the parties do not
dispute the documents’ authenticity.” Id. (quotations omitted).
The court must accept as true factual allegations in the complaint, but this rule
does not apply to legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. Also, “factual allegations that
contradict . . . a properly considered document are not well-pleaded facts that the
court must accept as true.” GFF Corp. v. Associated Wholesale Grocers, 130 F.3d
1381, 1385 (10th Cir. 1997).
When considering a motion to dismiss, the court must first identify conclusory
allegations not entitled to the assumption of truth. Hall v. Witteman, 584 F.3d 859,
863 (10th Cir. 2009). The court must then determine whether the remaining
allegations plausibly suggest the plaintiff is entitled to relief. Id.
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III.
In its first order, the district court considered Proctor’s motion to dismiss. The
court noted that Mr. Hall’s complaint did not contain specifically enumerated claims,
but explained that Proctor and the court had construed the complaint as alleging three
causes of action: (1) a third-party beneficiary claim based on the forced-place
insurance policy (the Master policy); (2) a promissory estoppel claim based on the
notices titled “Evidence of Insurance”; and (3) a fraudulent misrepresentation claim
based on the same notices. In addition to the complaint, the district court considered
the notices titled “Evidence of Insurance,” which were attached to the complaint; the
dismissal order with the stipulations from the prior lawsuit; the loan documents; the
Agreement to Provide Insurance; and the Master Policy. These documents were
central to Mr. Hall’s claims and he did not dispute their authenticity.
Mr. Hall alleged in his complaint that, under the terms of the mortgage, the
bank was obligated to insure all of his property held as collateral by the bank. But
the district court concluded that this allegation was not entitled to an assumption of
truth because it was contradicted by the loan documents and the stipulations from the
prior lawsuit, both of which state that Mr. Hall was required to maintain insurance on
the property. Likewise, one of the related contracts to the mortgage, the Agreement
to Provide Insurance, states that the bank may provide insurance at Mr. Hall’s
expense, but any such insurance will provide limited protection against physical
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damage to the collateral and that Mr. Hall’s interest in the collateral “may not be
insured.” Aplt. App. at 279.
The district court next addressed the claims in the complaint. First, the district
court determined that Mr. Hall’s claim that he was a third-party beneficiary of the
insurance policy could not survive the motion to dismiss because he could not point
to any provision in the insurance policy that operated to his benefit, see Byers v.
Snyder, 237 P.3d 1258, 1265 (Kan. Ct. App. 2010) (“[P]arties are presumed to
contract for themselves, and their intent that a third person receive a direct benefit
must be clearly expressed in the contract.”). The policy was purchased by the bank
to protect its interest in Mr. Hall’s property and any losses under the policy would be
payable to the bank. Although Mr. Hall benefited indirectly from the policy because
it protected him by covering his loan obligation, his role as an incidental beneficiary
did not entitle him to bring a claim as a third-party beneficiary of the contract, see id.
(“Third-party beneficiaries of a contract are divided into intended beneficiaries and
incidental beneficiaries, and only intended beneficiaries have standing to sue for
damages resulting from the breach of a contract.”).
Next, the district court considered Mr. Hall’s claims for promissory estoppel
and fraudulent misrepresentation. These claims were based on Mr. Hall’s allegations
that defendants “represented to plaintiff that the coverage provided on plaintiff’s
property would provide protection for plaintiff’s property given to the bank as
collateral and plaintiff relied on that series of representations” and defendants
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“misrepresented that the insurance coverage complied with the bank’s obligations
under the loan documents.” Aplt. App. at 4. The court noted that both of these
claims require justifiable reliance. The court then explained that to withstand the
motion to dismiss, “[Mr. Hall’s] allegations must support a reasonable inference that
he did in fact rely to his detriment on Proctor’s representations, be they promises or
false statements, that the Master Policy protected [his] ownership interest in his
property and that his reliance was reasonable.” Id. at 291. After considering the
allegations in the complaint and the relevant documents, the court ultimately
concluded that “[t]he Master Policy was not intended to insure [Mr. Hall], and the
facts [he] alleges in his Complaint are insufficient, or otherwise directly contradicted
by properly considered documents, to support his claim that he justifiably relied on
any representations by Proctor.” Id. at 293.
In its second order addressing Associated’s motion to dismiss, the district
court explained that Mr. Hall’s claims against Associated “are based entirely on its
liability for Proctor’s actions” and “[b]ecause [Mr. Hall’s] complaint fails to state a
claim against Proctor, it also fails to state a claim against Associated.” Id. at 307.
On appeal, Mr. Hall argues that the court erred in granting Proctor and
Associated’s motions to dismiss. Mr. Hall also contends that his complaint contains
a claim for negligent misrepresentation, not fraudulent misrepresentation. This issue
was not litigated in the district court, which would normally result in its waiver on
appeal. In this case, however, it makes no difference if Mr. Hall’s claim was for
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negligent or fraudulent misrepresentation because both claims require justifiable
reliance, see Aplt. Br. at 13 (explaining that “Kansas has adopted the Restatement’s
definition of negligent misrepresentation,” which requires “justifiable reliance upon
the information” (quotation omitted)). Accordingly, the district court’s conclusion
that there were insufficient allegations to support Mr. Hall’s claim that he justifiably
relied on any representations by Proctor would result in the dismissal of either claim.
We conclude that the district court did not err in granting defendants’ motions
to dismiss. The district court’s analysis is thorough and well-reasoned. We therefore
AFFIRM the district court’s judgment for substantially the same reasons as stated in
its Memorandum and Order filed August 1, 2011, and its Memorandum and Order
filed November 10, 2011.
Entered for the Court
David M. Ebel
Circuit Judge
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