Sharon Sanders v. Lee County School Dist. No. 1

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 11-2271
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Brian Schuster, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* District of Nebraska.
Quanta Specialty Lines Insurance *
Company, * [UNPUBLISHED]
*
Appellee. *
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Submitted: January 5, 2012
Filed: February 28, 2012
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Before LOKEN, BYE, and COLLOTON, Circuit Judges.
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PER CURIAM.
Brian Schuster appeals the district court’s adverse grant of judgment on the1
pleadings in his breach-of-contract action, which was governed by New York law.
He alleged that Quanta Specialty Lines Insurance Company (Quanta) breached the
terms of a professional liability policy in bad faith when Quanta refused to represent
and indemnify him with respect to multiple legal proceedings, and when Quanta
failed to obtain a release of claims against him.
The Honorable Laurie Smith Camp, Chief Judge, United States District Court1
for the District of Nebraska.

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Under New York law, absent bad faith, an insurer has discretion to make
payments pursuant to a “first in time, first in right” principle, and an insurer has no
duty to pay out claims ratably or consolidate them. See In re Sept. 11 Prop. Damage
Litig., 650 F.3d 145, 151, 153 (2d Cir. 2011). In addition, “proof that a demand for
settlement was made is a prerequisite to a bad-faith action for failure to settle.” See
Pavia v. State Farm Mut. Auto. Ins. Co., 626 N.E.2d 24, 28 (N.Y. 1993). We agree
with the district court that Schuster’s allegations were insufficient to support an
inference that Quanta acted in bad faith. See Porous Media Corp. v. Pall Corp., 186
F.3d 1077, 1079 (8th Cir. 1999) (de novo standard of review). Schuster did not
dispute that additional insureds exhausted the policy’s limit of liability through an
interpleader action in federal court. Further, he admits that he did not participate in
the interpleader action even though Quanta notified him of the action, and he did not
allege that any demand for settlement of the claims against him was made.
We also conclude that the district court did not abuse its discretion in failing
to invite an amended complaint. See Carlson v. Hyundai Motor Co., 164 F.3d 1160,
1162 (8th Cir. 1999). Accordingly, we affirm. See 8th Cir. R. 47B.
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