United States Court of Appeals

For the Eighth Circuit

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No. 16-2632

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McShane Construction Company, LLC

lllllllllllllllllllll Plaintiff - Appellant

v.

Gotham Insurance Company

lllllllllllllllllllll Defendant - Appellee

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Appeal from United States District Court 

for the District of Nebraska - Omaha

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 Submitted: May 10, 2017

 Filed: August 11, 2017

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Before RILEY, BEAM, and SHEPHERD, Circuit Judges.

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SHEPHERD, Circuit Judge. 

McShane Construction, LLC (McShane), a general contractor, sued Gotham

Insurance Company (Gotham) directly for failing to pay its insurance claim related

to the alleged improper installation of a fire protection and suppression systemby one

of McShane’s subcontractors, Mallory Fire Protection Services (Mallory)—whom
McShane has sued separately in Nebraska state court. The district court granted

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Gotham’s Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to

state a claim upon which relief can be granted, and McShane now appeals. Having

jurisdiction under 28 U.S.C. § 1291, we affirm. 

I. Background

In 2012, McShane began general contract work on the construction of a 196-

unit, $15 million apartment complex (Project) in Omaha, Nebraska. McShane hired

Mallory as a subcontractor to design and install a fire suppression and protection

system for the Project. 

McShane and Mallory executed a subcontract on June 8, 2012, that included

a provision requiring Mallory to obtain insurance policies and to list McShane as an

Additional Insured on the Commercial General Liability (CGL) insurance policy. 

Mallory subsequently purchased and Gothamissued on September 15, 2012, Gotham

Policy No. GL2012FSC00451(Policy) to fulfill this requirement. The “Additional

Insured” endorsement modified the insurance provided under the “Commercial

General Liability Coverage Part.” It listed “Blanket where required by written

contract”—which includes McShane since it contracted with Mallory—as the

Additional Insured, and Gotham provided McShane with a Certificate of Liability

Insurance verifying McShane as an Additional Insured. 

The Honorable John M. Gerrard, United States District Judge for the District 1

of Nebraska. 

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Under its subcontract with McShane, Mallory designed and installed a fire

suppression and protection system, which McShane determined was faulty. To

replace the faulty system, McShane removed previously installed drywall and

installation leading to damages and lossesthat McShane alleges exceed $614,291.17. 

Mallory and McShane each filed independent claims with Gothamto cover the

damages and losses. Gotham eventually combined the two claims into a single claim

with Mallory listed as the insured. After a comprehensive adjustment process

including McShane, Gotham’s primary adjuster for this claim sent a final report

recommending payment of $499,453.57 “for payment of the claim relating to the

improper installation of the fire sprinkler system.” Gotham subsequently stopped

communicating with McShane other than through an attorney and ultimately refused

to provide McShane with a formal coverage determination. 

McShane filed this lawsuit on December 23, 2014, asserting eight causes of

action including (in the order asserted by McShane) violation of the Nebraska Unfair

Insurance Trade Practices Act (Count 1), violation of the Nebraska Unfair Insurance

Claims Settlement Practices Act (Count 2), violation of the implied covenant of good

faith and fair dealing (Count 3), a claim for attorney’s fees under Neb. Rev. Stat.

§ 44-359 (Count 4), breach of contract (Count 5), waiver and estoppel (Count 6), a

claim under the rescue doctrine (Count 7), and declaratory relief (Count 8). 

On March 29, 2016, the district court granted Gotham’s motion to dismiss all

counts. McShane subsequently filed a Federal Rule of Civil Procedure 59(e) motion

to reconsider and vacate the judgment, which the district court denied on May 9,

2016. McShane now appeals. 

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McShane has not appealed dismissal of counts 4 and 8. 

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II. Analysis

We review de novo the district court’s grant of a motion to dismiss, “accepting

as true the complaint’s factual allegations and granting all reasonable inferences to

the non-moving party.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 591 (8th Cir.

2009).

To survive a 12(b)(6) 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.” 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). The

complaint must provide “more than labels and conclusions, and a formulaic recitation

of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 (2007). “A claim has facial plausibility when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the

defendant isliable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Two working

principles underlie the analysis: (1) the court’s obligation to accept the non-movant’s

allegations as true “is inapplicable to legal conclusions,” such that “[t]hreadbare

recitals of the elements of a cause of action, supported by mere conclusory

statements, do not suffice”; and (2) “only a complaint thatstates a plausible claim for

relief survives a motion to dismiss, . . . [and] [d]etermining whether a complaintstates

a plausible claim for relief . . . [is] a context-specific task that requires the reviewing

court to draw on its judicial experience and common sense.” Id. at 678-79. 

We find that the district court’s dismissal of all counts was proper. To explain,

we will group McShane’s six remaining causes of action into (A) statutory claims, (B)

those pertaining to breach of contract, and (C) waiver and estoppel. 

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A. Statutory Claims

Two of McShane’s claims are based upon Nebraska statutes that provide no

private right of action and thus, are subject to dismissal for failing to state a claim

upon which relief can be granted. In asserting its claim under Nebraska’s Unfair

Insurance Trade Practices Act, McShane alleges that Gotham has “not been

forthright, truthful, or timely in its adjustment of . . . the [] claims,” and alleges that

Gotham has acted in bad faith in violation of Neb. Rev. Stat. § 44-1525(9). In

asserting its claim under Nebraska’s Unfair Insurance Claims Settlement Practices

Act, McShane alleges that Gotham violated Neb. Rev. Stat. § 44-1540 which lists

numerous acts or practices that may be considered unfair claims settlement practices

under Nebraska law. 

However, neither of these statutes provides McShane with a private right of

action. In Nebraska, “[w]hether a statute creates a private right of action depends on

the statute’s purpose and whether the Legislature intended to create a private right of

action.” Prof’l Mgmt. Midwest, Inc. v. Lund Co., 826 N.W.2d 225, 233 (Neb. 2012). 

The Nebraska Unfair Insurance Trade Practices Act “does not contemplate private

suits, but instead vests powers and duties in the State Director of Insurance, who is

empowered to enjoin and penalize certain prohibited acts.” Allied Fin. Servs., Inc.

v. Foremost Ins. Co., 418 F. Supp. 157, 162 (D. Neb. 1976). Likewise, “[t]he purpose

of the Unfair Insurance Claims Settlement Practices Act is to set forth standards for

the investigation and disposition of claims arising under policies issued to residents

of this state,” and no private right of action is provided by the Nebraska legislature

under this statute. Neb. Rev. Stat. § 44-1537. Therefore, both of these claims were

properly dismissed because neither rests upon a private right of action and thus, both

fail to state a claim upon which relief can be granted.

 

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B. Breach of Contract and Related Claims

McShane asserts four claims arising from the insurance agreements including

(1) breach of contract, (2) breach of the implied covenant of good faith and fair

dealing, (3) failure to recognize third-party beneficiary status, and (4) mitigation. 

McShane argues that “[t]here is an absence of a reasonable basis for [Gotham’s]

failure to assume and pay for damages . . . sustained by McShane” and alleges that

Gotham “breached its obligations and duties [under the Policy] to McShane as an

Additional Insured . . . and/or [as] a Third Party Beneficiary.” 

1. Breach of Contract

In Nebraska, “[t]he meaning of an insurance policy is a question of law, in

connection with which an appellate court has an obligation to reach its own

conclusions independently of the determination made by the lower court.” 

Auto-Owners Ins. Co. v. Home Pride Cos., 684 N.W.2d 571, 575 (Neb. 2004). “In

construing insurance policy provisions, a court must determine from the clear

language of the policy whether the insurer in fact insured against the risk involved.” 

Id. “In an appellate review of an insurance policy, the court construes the policy as

any other contract to give effect to the parties’ intentions at the time the writing was

made.” Id. “Where the terms of a contract are clear, they are to be accorded their

plain and ordinary meaning.” Id.

Here, McShane is listed as an “Additional Insured” under the Policy. In

Nebraska, “[s]ubject to restrictions in the additional insured endorsement, an

additional insured has the same coverage rights and obligations as the principal

insured under the policy.” Federated Serv. Ins. Co. v. Alliance Constr., LLC, 805

N.W.2d 468, 476 (Neb. 2011). Thus, McShane has the same liability coverage as

Mallory under the parts of the Policy applicable to McShane. The Additional Insured

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endorsement includes McShane as an Additional Insured “only with respect to

liability for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’

caused . . . by . . . [Mallory’s] acts or omissions or . . . acts or omissions of those

acting on [Mallory’s] behalf.” (emphasis added). 

The nature of the Policy as a third-party liability policy is evident in its

language. “A ‘first-party insurance’ policy protects the insured from his or her own

losses, while a ‘third-party’ policy provides liability insurance that protects the

insured from claims resulting from the losses of others.” Metro Renovation, Inc. v.

Allied Grp., Inc., 389 F. Supp. 2d 1131, 1132 n.2 (D. Neb. 2005) (citing Douglas R.

Richmond, Trust Me: Insurers Are Not Fiduciaries to Their Insureds, 88 Ky. L.J. 1,

2 (2000)). “In the third-party situation, the insurance company will typically have the

power to defend and control litigation regarding the claims of strangers asserted

against the insured.” Id. Here, the Policy states, “We will pay those sums that the

insured becomes legally obligated to pay as damages because of ‘bodily injury’ or

‘property damage’ to which thisinsurance applies.” (emphasis added). Likewise, the

“Additional Insured” endorsement says that the additional insureds are covered “only

with respect to liability.” (emphasis added). Thus, the policy covers liability to third

parties, not first-party losses. 

The Nebraska Supreme Court has determined in a case involving an insurance

contract with similar language that the insurance company “[did] not have an

obligation to pay for all acts committed by the insured even though the act by the

insured may produce an injury covered by the policy” because “until it is determined

that [the insured] is legally obligated to pay . . . , the question of [the insurance

company’s] obligation is uncertain and contingent.” Allstate Ins. Co. v. Novak, 313

N.W.2d 636, 639 (Neb. 1981). Here, McShane fails to plausibly allege that any third

party obtained a judgment denoting a legal obligation for McShane to pay. Because

McShane failed to allege a legal obligation to pay covered under the terms of the

Policy, the district court properly granted Gotham’s motion to dismiss. 

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2. Good Faith and Fair Dealing

McShane accuses Gotham of “an act or series of acts performed in bad faith.” 

The Nebraska Supreme Court has stated that “in order to establish a claim for bad

faith, a plaintiff must show an absence of a reasonable basis for denying the benefits

of the insurance policy and the insurer’s knowledge or reckless disregard of the lack

of a reasonable basis for denying the claim.” LeRette v. Am. Med. Sec., Inc., 705

N.W.2d 41, 47-48 (Neb. 2005) (internal quotation marks omitted). Here, McShane

fails to allege that Gotham lacked a reasonable basis for denying benefits because it

failed to state a plausible claim that McShane was legally obligated to pay damages

covered under the Policy. Therefore, McShane failed to plausibly claim the absence

of a reasonable basis for denying the benefits, so its claim of bad faith is properly

dismissed. 

3. Third-Party Beneficiary

In addition to its claims as an Additional Insured, McShane claims that it is a

third-party beneficiary to other parts of the Policy not covered by the Additional

Insured endorsement. “In order for those not named as partiesto a contract to recover

thereunder as third-party beneficiaries, it must appear by express stipulation or by

reasonable intendment that the rights and interests of such unnamed parties were

contemplated and provision was made for them.” Props. Inv. Grp. of Mid-Am. v.

Applied Commc’ns, Inc., 495 N.W.2d 483, 488 (Neb. 1993). “A third-party

beneficiary’s rights depend upon, and are measured by, the terms of the contract

between the promisor and promisee.” Haakinson & Beaty Co. v. Inland Ins. Co., 344

N.W.2d 454, 458 (Neb. 1984) (internal quotation marks omitted). “The right of a

third party benefitted by a contract to sue thereon rests upon the liability of the

promisor, which must affirmatively appear from the language of the instrument when

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properly interpreted or construed . . . .” Osmond State Bank v. Uecker Grain, Inc.,

419 N.W.2d 518, 520 (Neb. 1988) (internal quotation marks omitted). 

Here, McShane claims third-party beneficiary status under Part D ofthe Policy,

in which Mallory isthe promisee and Gothamthe promisor. Part D is an endorsement

modifying the CGL coverage and titled “Coverage D—Errors and Omissions

Liability.” Part D says Gothamwill pay “those sums that the insured becomeslegally

obligated to pay as damages because of errors or omissions committed by the Insured

resulting from the services provided in the declarations.” The “declarations” lists

“fire suppression” as the “form of business.” 

McShane failsto plausibly allege that its rights and interests were contemplated

when Mallory and Gothamentered into the portion ofthe Policy agreement pertaining

to Mallory’s errors or design liability. McShane alleges no “express stipulation” that

it is included in Part D—even though McShane is expressly included in other parts

of the Policy. Instead, the Additional Insured endorsement includes McShane as an

Additional Insured using language that corresponds to coverage provided only under

Section I, Parts A and B of the Policy—not Part D. The language does not mention

coverage for Mallory’s “errors,” for which Mallory has coverage under the “Errors

and Omissions Coverage Extension” endorsement in Part D. Therefore, McShane

fails to plausibly allege that the terms of the Policy demonstrate a “reasonable

intendment” to include McShane in Mallory’s Errors and Omissions coverage or

allege thatsuch coverage “affirmatively appear[s] fromthe language of the [Policy],”

so Gotham’s motion to dismiss was properly granted. Id.; Applied Commc’ns, 495

N.W.2d at 488.

4. Mitigation

McShane’s mitigation claim was first framed under the rescue doctrine. 

McShane’s claim under the rescue doctrine is without merit because the rescue

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doctrine is inapplicable to the facts of this case. “The rescue doctrine contemplates

a voluntary act by one who, in an emergency and prompted by spontaneous human

motives to save human life, attempts a rescue which he had no duty to attempt by

virtue of a legal obligation or duty fastened on him by his employment.” Buchanan

v. Prickett & Son, Inc., 279 N.W.2d 855, 858 (Neb. 1979). Here, no facts alleging

an “emergency . . . prompt[ing] . . . spontaneous human motives to save human life”

were cited by McShane. 

Apparently recognizing that the rescue doctrine is inapplicable, McShane

argues that it meant to claim mitigation of damages and that the claimwas mislabeled

in the complaint. McShane cites a case that we decided under Missouri law, Slay

Warehousing Co. v. Reliance Insurance Co., 471 F.2d 1364 (8th Cir. 1973), for the

proposition that itshould be compensated for mitigation of damages. However, Slay

provides no help to McShane, because the Slay policy included language expressly

requiring mitigation by the insured, while McShane fails to identify any similar

express language in the Gotham Policy. Id. at 1365. “Even assuming [McShane] had

an implied duty to mitigate or prevent damages, the [Gotham] policy expressly placed

the burden of such costs on [McShane].” Clarinet, LLC v. Essex Ins. Co., 712 F.3d

1246, 1250 (8th Cir. 2013). Specifically, the Policy expressly states, “No insured

will, except at the insured’s own cost, voluntarily make a payment, assume an

obligation, or incur any expense, other than for first aid, without our consent.”

(emphasis added). From a policy standpoint, this makes sense as a business decision

of the insurance company to prevent the insured from uncontrolled expenditures in

the name of mitigation without the insurance company’s input. 

Likewise, McShane’s decision to proceed with repairs prior to the

determination of any legal obligation or entry of judgment was a business decision. 

McShane may be right that it was required to comply with building codes and

contractually obligated to the owner of the Project. But McShane’s remedy is to sue

Mallory, not the insurance company directly. McShane is properly a claimant, not an

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insured under the Policy for Mallory’s errors and omissions. Further, the Policy does

not cover contractual liability saying, “This insurance does not apply to . . . ‘property

damage’ for which the insured is obligated to pay damages by reason of the

assumption of liability in a contract or agreement.” McShane can and has sued

Mallory to recover its losses. McShane has failed to state a basis for which its alleged

mitigation could give it the right to successfully sue Mallory’s insurance company

directly for Mallory’s alleged errors. 

For the reasons stated above, McShane has failed to state a claim for which

relief can be granted with regard to its breach of contract theories, and we affirm the

district court’s dismissal of those counts. 

C. Waiver and Estoppel

McShane alleges that Gothamwaived denial of coverage orshould be estopped

fromdenying coverage to McShane under the Policy because McShane detrimentally

relied upon Gotham and the Policy in its decision to hire Mallory. McShane also

argues reliance because Gotham engaged in a long claim-adjustment process with

McShane delaying its lawsuit against Mallory, caused McShane to expend resources

during the prolonged adjustment, and engaged in “other related conduct” indicating

Gotham did not dispute the claim during the adjustment process. 

The complaint fails to plausibly allege waiver here. The Nebraska Supreme

Court has stated:

A waiver is a voluntary and intentional relinquishment of a known right,

privilege, or claim, and may be demonstrated by or inferred from a

person’s conduct. We have long held that an insurer may waive any

provision of a policy that is for the insurer’s benefit, including vacancy

provisions. Ordinarily, to establish a waiver of a legal right, there must

be a clear, unequivocal, and decisive act of a party showing such a

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purpose, or acts amounting to an estoppel on his or her part. A party

may waive a written contract in whole or in part, either directly or

inferentially. A party may prove the waiver by (1) a party’s express

declarations manifesting the intent not to claim an advantage or (2) a

party’s neglecting and failing to act so as to induce the belief that it

intended to waive. 

D & S Realty, Inc. v. Markel Ins. Co., 789 N.W.2d 1, 17-18 (Neb. 2010) (emphases

added). 

Here, McShane does not plausibly allege that Gotham waived its rights under

the Policy. First, there is no allegation of an express declaration by Gotham waiving

its right to deny McShane’s claim. Second, while McShane may have believed that

Gotham intended to pay for McShane’s damages, McShane alleges no clear,

unequivocal, and decisive acts by Gothamindicating that it intended to waive its right

to deny the claim. To be sure, Gotham did engage in a comprehensive adjustment

process investigating the reasonableness of McShane’s claimed costs. However,

Gotham’s communications indicate that it was defending Mallory, with Mallory being

named asthe “Insured” in the communications and with the claimbeing consolidated

into the claim number with Mallory listed as the “Insured.” For example, the “Final

Report” letter that resulted from the adjustment process and recommending

$499,453.57 in payment clearly lists Mallory as the “Insured,” not McShane. As

another example, McShane’s May 20, 2013, demand letter to Mallory says Mallory

should submit the costs for reimbursement on “[Mallory’s] general liability policy.” 

McShane thus understood that the adjustment process was occurring under Mallory’s

policy. Finding no plausible allegation in the complaint of a clear, unequivocal, and

decisive act by Gotham to justify any assumptions McShane may have made

regarding Gotham’s intent to waive its right to deny the claim, we affirm the district

court’s dismissal of the waiver claim.

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Likewise, we find that McShane has failed to sufficiently allege that Gotham

should be estopped from denying McShane’s claim. Estoppel in Nebraska is defined

generally by six elements: (1) calculated false representation or concealment of

material facts, (2) intention or expectation that the other party will act upon or be

influenced by the first element, (3) knowledge of the real facts, (4) lack of knowledge

(or means of knowledge) of the truth as to the real facts, (5) good faith reliance upon

the conduct or statements of the party to be estopped, and (6) resulting change in the

position orstatus of the party claiming estoppel. Am. Family Mut. Ins. Co. v. Regent

Ins. Co., 846 N.W.2d 170, 192-93 (Neb. 2014). “[E]stoppel cannot be invoked to

expand the scope of coverage of an insurance contract absent a showing of

detrimental good faith reliance upon statements or conduct ofthe party against whom

estoppel is invoked which reasonably led an insured to believe coverage was

present.” Design Data Corp. v. Md. Cas. Co., 503 N.W.2d 552, 560 (Neb. 1993)

(emphasis added). “As a general rule, the doctrine of estoppel may not be used to

bring within the coverage of a policy risks not covered by its terms, or risks expressly

excluded therefrom.” First United Bank of Bellevue v. First Am. Title Ins. Co., 496

N.W.2d 474, 480 (Neb. 1993) (emphasis added). Here, as noted above, Part D of the

Policy covering Mallory’s errors and omissions expressly excluded the property

damage claimed by McShane from coverage.

“A widely recognized exception to the general estoppel rule is that when an

insurance company assumes the defense of an action against its insured, without

reservation of rights, and,with knowledge, actual or presumed, of facts which would

have permitted it to deny coverage, it may be estopped from subsequently raising the

defense of non-coverage.” Id. (emphasis added). “The exception to the general

estoppel rule applies when an insured is able to show (1) that the insurer had

sufficient knowledge of facts or circumstances indicating non-coverage, (2) that the

insurer assumed or continued defense of the insured without obtaining an effective

reservation of rights agreement, and (3) that the insured suffered some type of harm

or prejudice.” Id. (emphasis added). 

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Here, McShane does not plausibly allege that Gotham assumed or continued

defense of any claim against McShane. As noted above, Gotham’s communications

internally and with McShane indicated that it was defending Mallory. Upon receipt

of a demand letter from McShane, Mallory tendered defense of the action to Gotham

leading Gotham to open a claim file into which it eventually merged McShane’s

claim—indicating that Gothamwastreating McShane’s claimas one directed against

Mallory by McShane, and not one covering McShane as an Additional Insured. 

McShane’s May 20, 2013, demand letter to Mallory instructed Mallory to submit the

costs on “[Mallory’s] general liability policy”—not under McShane’s Additional

Insured policy. Likewise, communications between McShane and Gotham did not

assert the claim based upon McShane’s status as an Additional Insured. Instead, the

demand letter clearly says that McShane is making a claim against Mallory for

damages due to design errors committed by Mallory and covered under Mallory’s

general liability policy. McShane fails to allege that Gotham assumed its defense

qualifying for an exception to the general estoppel rule. Id. Thus, McShane fails to

plausibly allege that it relied, in good faith, on any promises by Gotham, and is

therefore not entitled to estoppel. 

For the reasons stated above, McShane failed to state a claimupon which relief

can be granted based upon waiver or estoppel, so those counts were properly

dismissed. 

III. Conclusion

After giving all reasonable inferences to McShane and accepting the factual

allegations as true while drawing on our judicial experience and common sense, we

find that McShane has failed to state a claim upon which relief can be granted. 

Therefore, we affirm the district court’s grant of Gotham’s Federal Rule of Civil

Procedure 12(b)(6) motion to dismiss. 

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BEAM, Circuit Judge, concurring in the judgment.

It is my view that McShane Construction Company, LLC, as an endorsed

"Additional Insured" under the Gotham insurance policy, enjoys such insurance

coverage as is provided by the policy's "Commercial General Liability" part. This

would include, absent presently unstated limitations, coverage for any actionable

claims McShane may have against its subcontractor Mallory. Thus, within the time

frame of an applicable statute of limitations, McShane may state a cause of action

against Mallory, if any exists. To date, McShane has not done so.

Accordingly, as the court points out, Nebraska law prevents McShane from

seeking redress within this litigation. See, e.g., Allstate Ins. Co. v. Novak, 313

N.W.2d 636, 639 (Neb. 1981).

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