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Mau v. Twin City Fire Insurance Co.

United States Court of Appeals, Eighth Circuit

December 6, 2018

Robert Mau; Eagle Well Services, Inc. Plaintiffs-Appellants
v.
Twin City Fire Insurance Co. Defendant-Appellee

          Submitted: October 18, 2018

          Appeal from United States District Court for the District of North Dakota - Bismarck

          Before SMITH, Chief Judge, LOKEN and GRUENDER, Circuit Judges.

          GRUENDER, Circuit Judge.

         Robert Mau and Eagle Well Services, Inc. ("EWS") appeal the district court's[1]grant of Twin City Fire Insurance Company's ("Twin City") cross-motion for summary judgment. The district court found that Twin City did not owe Mau or EWS a duty to defend under a Twin City insurance policy. We affirm.

         The complicated facts of this case are set out fully in the district court's order, Mau v. Twin City Fire Ins. Co., No. 1:16-CV-325, 2017 WL 4479731, at *1-3 (D.N.D. Oct. 3, 2017), so we relate only the most relevant facts here. Twin City insured Eagle Operating, Inc. and its subsidiaries. Endorsement No. 2 of the policy defined Eagle Operating's subsidiaries to include EWS and MW Industries, Inc. During the relevant period, Mau was president of Eagle Operating, shareholder and president of EWS, director and president of MW, and an owner of American Well Services ("AWS").

         In February 2012, EWS sold its assets to a predecessor of Sun Well Services ("Sun Well") through an Asset Purchase Agreement ("Agreement"). EWS and Mau were parties to the Agreement, which included a noncompetition covenant. After the Agreement was signed, MW sold equipment to AWS. Claiming that the sale violated the noncompetition covenant, Sun Well sued Mau for breach of contract, fraud, and civil conspiracy, and it sued EWS for breach of contract and fraud. Twin City refused to defend the suit.[2]

         Mau and EWS sued Twin City, seeking a declaration that they were insured under the policy. They also sued Twin City for breach of contract and breach of the implied covenant of good faith and fair dealing. Mau filed a motion for partial summary judgment. Twin City filed a response in opposition and a cross-motion for summary judgment, asking the court to find that Twin City had no duty to defend Mau or EWS. The district court denied Mau's motion for partial summary judgment, and it granted Twin City's cross-motion for summary judgment.

         We review a grant of summary judgment de novo, considering the facts "in the light most favorable to the nonmoving party." Hiland Partners GP Holdings, LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 847 F.3d 594, 597 (8th Cir. 2017). A motion for summary judgment will be granted where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgement as a matter of law." Fed.R.Civ.P. 56(a). We review "the district court's construction of an insurance policy and interpretation of state law de novo." Philadelphia Consol. Holding Corp. v. LSI-Lowery Systems, Inc., 775 F.3d 1072, 1076 (8th Cir. 2015).

         The parties agree that North Dakota law applies in this case. "[T]he parameters of [an insurer's] duty to defend are governed by the allegations in the complaint against the insured." Pennzoil Co. v. U.S. Fid. & Guar. Co., 50 F.3d 580, 583 (8th Cir. 1995) (applying North Dakota law). "[A]n insurer has no duty to defend an action if there is no possibility of coverage under the policy." Schultze v. Cont'l Ins. Co., 619 N.W.2d 510, 513 (N.D. 2000). "[A]ny doubt about whether a duty to defend exists must be resolved in favor of the insured." Tilbert v. Nodak Mut. Ins. Co., 816 N.W.2d 31, 42 (N.D. 2012).

         The district court properly granted summary judgment to Twin City as to both Mau and EWS. Mau argued before the district court that Twin City owed him a duty to defend because Sun Well sued him in his capacity as a director and officer of MW, an insured subsidiary of Eagle Operating. The district court rejected his argument, and so do we. Sun Well's claims do not depend on any actions Mau took as president of MW. This is evidenced by the fact that Sun Well did not sue MW. While Sun Well's complaint mentions MW contextually, MW is not a party to the suit.

         Instead, Sun Well's claims depend on the alleged breach of the noncompetition covenant in the Agreement between EWS and Sun Well, an agreement to which MW was not a party. Sun Well would have no claim for breach of contract, fraud, or civil conspiracy against Mau were it not for the Agreement, which he signed as president of EWS, not as a director and officer of MW. Thus, Sun Well sued Mau in his capacity as president of EWS. Because Sun Well's complaint contains no claims based on any actions Mau took as a director and officer of MW, Twin City owes him no duty to defend on that basis.

         For the first time on appeal, Mau argues that Twin City owes him a duty to defend because he was sued in his capacity as president of EWS. But before the district court he argued only that he was entitled to coverage in his capacity as officer and director of MW. "It is well settled that we will not consider an argument raised for the first time on appeal." Eagle Tech. v. Expander Ams., Inc., 783 F.3d 1131, 1138 (8th Cir. 2015). Because Mau did not give the district court the opportunity to consider whether he was entitled to coverage in his capacity as president of EWS, we decline to do so here.

         But even had Mau raised this argument before the district court, Eagle Operating's insurance policy with Twin City includes an exclusion that applies to Mau in his capacity as ...


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