United States District Court, D. Nebraska
MEMORANDUM AND ORDER
M. GERRARD UNITED STATES DISTRICT JUDGE
defendant, Philadelphia Indemnity Insurance Company, issued a
commercial insurance policy to the plaintiff, the City of
South Sioux City, Nebraska. Pursuant to that policy,
Philadelphia agreed to indemnify the City for losses
sustained as the result of environmental contamination. The
City submitted a claim under that policy after it discovered
that hydrogen sulfide gas had backed up in the City's
sewer system. Philadelphia denied that claim. The City has
sued Philadelphia for breach of contract, and Philadelphia
has moved to dismiss that claim. For the reasons explained
below, that motion will be denied.
October 2016, the City began sending its sewage to Big Ox
Energy, LLC, a waste disposal provider located in South Sioux
City, Nebraska. Filing 1 at 2. Big Ox would remove methane
gas from the City's sewage and discharge the treated
waste back into the City's sanitary system
(i.e., sewage system). Filing 1 at 2. But soon after
the sewage returned to the City, residents began reporting an
intense and unpleasant odor emanating from their plumbing.
Filing 1 at 2. At some point, the residents discovered that
the odor was the result of hydrogen sulfide gas that had
backed up in the City's sewage system. Filing 1 at 3.
Those residents filed tort claims against the City for
property damage and bodily harm caused by the odor. Filing 1
to the City, the backup of hydrogen gas was a result of
contaminated sewage that had been discharged from Big
Ox's facility. See filing 1 at 3. So, the City
filed a claim with Philadelphia seeking indemnification under
its environmental liability policy. See filing 1 at
3, filing 1-2 at 10. Pursuant to the policy, Philadelphia
agreed to indemnify the City for losses "arising out of
contamination on, under or migrating from [the] insured
location"-which the policy specifically defined as 1615
1st Ave, South Sioux City, Nebraska (i.e. the
address of City Hall). Filing 1-2 at 14 (emphasis omitted).
The policy also contained a "non-owned location"
endorsement which provided additional coverage for damages
"arising out of contamination on, under or migrating
from a non-owned location." Filing 1-2 at 28 (emphasis
omitted). Philadelphia denied the City's claim, and the
City has sued Philadelphia for its denial of coverage.
complaint must set forth a short and plain statement of the
claim showing that the pleader is entitled to relief.
Fed.R.Civ.P. 8(a)(2). This standard does not require detailed
factual allegations, but it demands more than an unadorned
accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The complaint need not contain detailed factual
allegations, but must provide more than labels and
conclusions; and a formulaic recitation of the elements of a
cause of action will not suffice. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). For the purposes of a
motion to dismiss a court must take all of the factual
allegations in the complaint as true, but is not bound to
accept as true a legal conclusion couched as a factual
survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a
complaint must also contain sufficient factual matter,
accepted as true, to state a claim for relief that is
plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Id. Where the well-pleaded facts do not
permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged-but has not shown-that
the pleader is entitled to relief. Id. at 679.
whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial
experience and common sense. Id. The facts alleged
must raise a reasonable expectation that discovery will
reveal evidence to substantiate the necessary elements of the
plaintiffs claim. See Twombly, 550 U.S. at 545. The
court must assume the truth of the plaintiffs factual
allegations, and a well-pleaded complaint may proceed, even
if it strikes a savvy judge that actual proof of those facts
is improbable, and that recovery is very remote and unlikely.
Id. at 556.
deciding a motion to dismiss under Rule 12(b)(6), the Court
is normally limited to considering the facts alleged in the
complaint. If the Court considers matters outside the
pleadings, the motion to dismiss must be converted to one for
summary judgment. Fed.R.Civ.P. 12(d). However, the Court may
consider exhibits attached to the complaint and materials
that are necessarily embraced by the pleadings without
converting the motion. Mattes v. ABC Plastics, Inc.,
323 F.3d 695, 697 n.4 (8th Cir. 2003).
parties' dispute turns on the legal significance of the
"non-owned location" endorsement. As briefly noted
above, the underlying insurance policy contains a
"non-owned location" endorsement requiring
Philadelphia to indemnify the City for any losses it becomes
legally obligated to pay "arising out of contamination
on, under or migrating from a non-owned location."
Filing 1-2 at 28. Philadelphia acknowledges that the City
purchased a "non-owned location endorsement" and
does not dispute its enforceability. Rather, the parties'
disagreement turns on whether the endorsement covers
contamination in this particular instance.
raises two arguments as to why, in its view, the City's
claim must be dismissed. First, Philadelphia claims that
"the non-owned location" endorsement only provides
coverage for materials generated at the City's insured
location. Filing 12 at 13. And because the City's
complaint fails to allege facts tracing the contamination to
waste generated at the "insured location"
(i.e., City Hall), Philadelphia urges dismissal.
Second, Philadelphia claims that even if the "non-owned
location" definition includes waste not linked to its
"insured location, " the City's complaint still
fails to state a claim for relief. To that end, Philadelphia
contends that the contamination arose out of, and migrated
from, the City's sewage system. And because the
City's sewage system is owned and operated by the City,
Philadelphia says, there is no coverage under the
"non-owned location" endorsement. Filing 12 at 11.
former contention is easily disposed of, so the Court will
begin there. In support of its argument that the
"non-owned location" endorsement only provides
coverage for materials generated at the City's insured
location, Philadelphia points to the definition of
"non-owned location." The endorsement specifically
defines a "non-owned location" as "a facility
used for the recycling, treatment, storage or disposal of the
insured's waste or materials generated at [the] insured
location, but only if at the time the facility accepts the
insured's waste" the facility was not owned or
operated by the ...