United States Court of Appeals

For the First Circuit

No. 14-2182
CARDIGAN MOUNTAIN SCHOOL,
Plaintiff, Appellant,
v.
NEW HAMPSHIRE INSURANCE COMPANY,
Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Landya B. McCafferty, U.S. District Judge]

Before
Howard, Selya, and Barron,
Circuit Judges.

Scott H. Harris, with whom Nicholas C. Casolaro, Andrew R.

Hamilton, and McLane, Graf, Raulerson & Middleton, P.A. were on
brief, for appellant.
Mark D. Sheridan, with whom Jason F. King, Sean P. Neafsey,
and Squire Patton Boggs (US) LLP were on brief, for appellee.

May 27, 2015

BARRON, Circuit Judge.

action

for

declaratory

This appeal arises out of an

judgment.

The

plaintiff,

now

the

appellant, is a private middle school in Canaan, New Hampshire.

The school seeks to prove that, nearly fifty years ago, the
insurance company that is the defendant, and now the appellee,
issued the school an insurance policy that covers a claim that the
school recently received concerning events allegedly occurring
during the 1967-1968 academic year.
The twist is that while the school can document that it
had a policy with the insurance company at some point, it cannot
find a copy of the policy for the year in question.

And the

insurance company has told the school that it cannot confirm the
existence of the policy.

Thus, the company contends that it is

not obliged to cover the claim and, more significantly for present
purposes, that the school's complaint should be dismissed because
it fails to make a plausible case that such a policy ever existed.
The District Court sided with the insurance company and
dismissed the suit. But although the question is close, we reverse
and remand for further proceedings.
I.
In 2013, the Cardigan Mountain School received a demand
letter asserting a claim (about which we have been given no
details) based on events that allegedly occurred during the 1967- 2 -

1968 school year.

In response, the school asked the New Hampshire

Insurance Company to defend against the claim as the carrier of

the school's comprehensive general liability insurance policy at
that time.
The

New

Hampshire

Insurance

Company

rejected

the

request. The company explained that it had not been able to locate
any policy covering the school for the relevant time period, and
thus that it was not the school's carrier at that time and
therefore had no duty to defend against this claim now.
Not having found a copy of the policy in its own records,
the school filed this suit in New Hampshire state court under the
New Hampshire declaratory judgment statute.
Ann. 491:22.

See N.H. Rev. Stat.

The school sought a judgment "adjudicating and

decreeing the existence of, and Cardigan's rights under, any policy
issued by" New Hampshire Insurance Company.
New

Hampshire

Insurance

Company

--

which,

notwithstanding its name, is a Pennsylvania corporation with its

headquarters in New York -- removed the suit to federal court on
diversity-of-citizenship grounds.

See 28 U.S.C. 1332(a).

New

Hampshire Insurance Company then moved to dismiss the suit for

failure to state a claim.
The

District

See Fed. R. Civ. P. 12(b)(6).

Court

granted

New

Company's motion and dismissed the suit.

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Hampshire

Insurance

The District Court

concluded that the school's complaint did not plausibly show the
existence of the policy.1

The school appealed.2

II.

Under the Federal Rules of Civil Procedure, a complaint

must provide "a short and plain statement of the claim showing
that the pleader is entitled to relief."

Fed. R. Civ. P. 8(a)(2).

To meet that standard, a plaintiff "need not demonstrate that [it]

is likely to prevail" on its claim.

Garca-Cataln v. United

States, 734 F.3d 100, 102 (1st Cir. 2013).

Rather, the complaint

need include only enough factual detail to make the asserted claim
"plausible on its face."

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007)).

We review the District Court's dismissal of complaint

The District Court also held that the school's suit was
ripe for adjudication, because the school had received a demand
letter threatening legal action and the uncertainty over the
availability of insurance coverage had "significant implications"
for the parties' responses to that letter.
Neither party
challenges that ripeness holding on appeal.
2 The school does not challenge the District Court's separate
holding that New Hampshire law places the burden on the school to
prove the existence of the disputed insurance policy, rather than
placing the burden on New Hampshire Insurance Company to disprove
the existence of the policy, and we therefore do not address that
question in this appeal. See Kelley v. LaForce, 288 F.3d 1, 11
(1st Cir. 2002) (issues not raised in the appellant's brief are
waived). We thus resolve this appeal on the understanding that
the school bears the burden of persuasion on this issue.
- 4 -

for failure to state a claim de novo.

Garca-Cataln, 734 F.3d at

102.
To evaluate the sufficiency of a complaint under Rule 8,
we first must "distinguish 'the complaint's factual allegations
(which

must

be

accepted

as

true)

from

its

allegations (which need not be credited).'"

conclusory

legal

Id. at 103 (quoting

Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)).
We

then

must

"determine

whether

the

factual

allegations

are

sufficient to support 'the reasonable inference that the defendant

is liable . . . .'"

Id. (quoting Haley v. City of Boston, 657

F.3d 39, 46 (1st Cir. 2011)).

To perform this two-step analysis, though, we need to be
clear about the legal issue that is in dispute.

Here, the school

seeks to prove that the company must cover the claim made in the
2013 demand letter that the school received.
issue is narrower.

But on appeal, the

The sole legal question in dispute concerns

the existence of the policy, not whether that policy, if it exists,

covers the claim.
the

New

And that is because, as in the District Court,

Hampshire

Insurance

Company

seeks

the

complaint's

dismissal solely on the ground that the complaint does not make a
plausible case that the policy was ever in place.

See Goldman v.

First Nat'l Bank of Bos., 985 F.2d 1113, 1116-17 n.3 (1st Cir.
1993) ("[T]heories not raised squarely in the district court cannot
- 5 -

be surfaced for the first time on appeal." (quoting McCoy v. Mass.

Inst. of Tech., 950 F.2d 13, 22 (1st Cir. 1991))).
We thus look at the complaint to determine what facts it
sets forth concerning the existence of the policy. We then address
whether, accepting the truth of those facts, the complaint makes
out a plausible case that the policy does in fact exist.
A.
The allegations in the school's complaint do not include
a direct allegation that the insurance policy existed.
the

complaint

alleges

that

New

Hampshire

Insurance

In fact,
Company's

representative "has noted that she has searched for the policy and
been unable to find it, but has assured the [school] that her
search continues."

In place of a direct allegation, the complaint

relies on circumstantial evidence.

That evidence is as follows.

The complaint alleges that an accounting firm prepared

an audit report for the school dated September 1971.
is attached as an exhibit to the complaint.

That report

The report states

that from September 1970 to September 1971 the school had a

"Special Multi-Peril" insurance policy from the New Hampshire
Insurance Company.

And, according to the report, that policy

included $1,000,000 in "General Liability" coverage.

The complaint further states that Phillip Wheeler, "one
of the two principals in the [accounting] firm that prepared" that
- 6 -

audit report, "believes that had the school changed carriers"

between the 1969-1970 school year and the 1970-1971 school year,
"then the auditors would have noted the change."

No such change

is noted in the audit report.

To show that the policy was in place during the critical
1967-1968

school

year,

the

complaint

alleges

that

"Cornelius

Bakker, Cardigan's business manager between 1967 and 1970, is

certain the school had insurance during his tenure." The complaint
further alleges that Bakker "worked with A.B. Gile, Inc., a local
insurance brokerage, to secure Cardigan's insurance coverage."
And the complaint alleges that Bakker "does not believe Cardigan
changed carriers while he was business manager between 1967 and
1970."
The
allegation.

complaint

offers

one

additional,

bolstering

It alleges "[u]pon information and belief" that the

insurance brokerage the school used "had a close association with"

New Hampshire Insurance Company and "advised most of its commercial
clients like Cardigan to place their commercial lines of insurance
with" New Hampshire Insurance Company.
New Hampshire Insurance Company argues, and the District
Court held, that, except for the allegation concerning the audit
report, the complaint sets forth "nothing more than speculation
and conjecture."

New Hampshire Insurance Company thus argues that

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we are not "obligated to accept" those other allegations as true.

New Hampshire Insurance Company relies for that argument on the
Supreme Court's decisions in Ashcroft v. Iqbal, 556 U.S. 662
(2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
In each decision, the Supreme Court held that "the tenet
that a court must accept as true all of the allegations contained
in a complaint is inapplicable to legal conclusions."
U.S. at 678; see Twombly, 550 U.S. at 555.

Iqbal, 556

Iqbal illustrates the

sort of "conclusory statements" that are "not entitled to the

assumption of truth."

556 U.S. at 678-79.

Iqbal involved a suit by an individual -- Iqbal -- who

was

arrested

and

detained

terrorist attacks.

following

Id. at 666.

the

September

11,

2001,

After Iqbal was released, he

brought suit against a variety of federal officials, asserting

alleged

violations

of

his

constitutional

rights.

Id.

The

defendants included John Ashcroft, who had been the United States
Attorney General at the time, and Robert Mueller, then the Director
of the Federal Bureau of Investigation.

Id.

The Supreme Court explained that the complaint's "bald

allegations" that Ashcroft and Mueller were personally involved in
unconstitutional conduct were "conclusory" and thus should have
been

disregarded

by

the

district

court.

Id.

at

681.

In

particular, the Supreme Court held that statements that Ashcroft

- 8 -

and Mueller "'knew of, condoned, and willfully and maliciously

agreed

to

subject

confinement"

based

[the
on

plaintiff]'

his

to

"'religion,

harsh
race,

conditions
and/or

of

national

origin'" were not factual allegations that must be taken as true.

Id. at 680.

And the Court ruled the same with respect to Iqbal's

allegations that "Ashcroft was the 'principal architect'" of the

policy

and

that

executing it."

"Mueller

was

'instrumental'

in

adopting

and

Id. at 680-81.

These sorts of allegations, the Court explained, were

"nothing more than a 'formulaic recitation of the elements' of a
constitutional

discrimination

Twombly, 550 U.S. at 555).

claim."

Id.

at

681

(quoting

In contrast, Iqbal did credit as

factual those allegations in the complaint that made reference to

specific events.

See id. (crediting allegations including "that

'the [FBI], under the direction of Defendant MUELLER, arrested and

detained thousands of Arab Muslim men'").
The Supreme Court's decision in Twombly is similar.
Twombly was an antitrust suit. See 550 U.S. at 548. The plaintiffs
contended that the defendants had conspired "in restraint of trade"
in the local telephone market.

Id. (quoting 15 U.S.C. 1).

The

plaintiffs lacked any direct evidence of the existence of the

conspiratorial agreement on which their claim depended.
at 564.

See id.

Rather, the plaintiffs based their claim largely "on

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descriptions of parallel conduct" by the defendants -- similar

actions taken by putatively independent firms that, according to
the plaintiffs, showed that those firms were really acting in
concert.

Id. at 553-54, 564.

The Supreme Court credited those factual allegations of

parallel conduct, although it ultimately found them inadequate to

state a claim under 1.

See id. at 564-66.

But mixed in among

the plaintiffs' allegations about parallel conduct were "a few

stray statements speak[ing] directly of agreement."
n.9.

Id at 564 &

Those "stray statements," the Supreme Court held, were "on

fair reading . . . merely legal conclusions resting on the prior

allegations."
defendants

Id. at 564.

"have

entered

In particular, the allegation that the

into

contract,

combination

or

conspiracy . . . and have agreed not to compete with one another"

was, the Supreme Court held, no more than a legal conclusion based
on the allegations of parallel conduct.

Id. at 564-65.

And thus,

the Supreme Court held that this direct allegation of agreement

did not need to be taken as true.

See id.

New Hampshire Insurance Company contends that, under

Iqbal and Twombly, we are obliged to disregard the school's
allegations outlined above (save for the one concerning the audit
report).

But

New

Hampshire

Insurance

mistaken.
- 10 -

Company's

argument

is

The allegations in the school's complaint described

above

are

specific

individuals

with

and

relevant

plausibly known to them.

factual.
knowledge

The

complaint

who

are

refers

recalling

to

facts

Those allegations are thus like the

allegations of actual events in Iqbal and of parallel conduct in

Twombly that the Supreme Court took as true; they are specific and
appear to be based on the knowledge of particular individuals.
They are not bare recitations of the legal conclusion the suit
seeks to prove.

We thus conclude that the school's allegations

set forth above are entitled to the presumption of truth at the

motion to dismiss stage.
At
allegations

the

same

involve

time,

precisely

series

of

because

particular

these

factual

recollections

and

beliefs about the school's insurance practices and the role of the
auditor, the complaint provides at most circumstantial evidence
that the school had an insurance policy with this carrier at the
time in question.

And so we must proceed to the second step of

the analysis, and consider whether "the factual allegations are

sufficient

to

support

'the

reasonable

insurance policy at issue was in place.

at 103 (quoting Haley, 657 F.3d at 46).

- 11 -

inference

that'"

the

Garca-Cataln, 734 F.3d

B.
In undertaking our inquiry, we must "accept the truth of
all

well-pleaded

facts

and

draw

therefrom in the pleader's favor."

all

reasonable

inferences

Id. at 102 (quoting Grajales

v. P.R. Ports Auth., 682 F.3d 40, 44 (1st Cir. 2012)).

In doing

so, we recognize that "circumstantial evidence often suffices" to

render an asserted claim plausible in the pleading context.

Id.

at 103 (quoting Rodrguez-Reyes v. Molina-Rodrguez, 711 F.3d 49,

56 (1st Cir. 2013)).

But at bottom, this inquiry requires that we

"draw on [our] experience and common sense," Iqbal, 556 U.S. at

679, as the parties have cited no precedent to guide us on the
application of the Rule 8 standard to a lost-insurance-policy suit,
and we have found very little on our own.3

Instead, nearly every

lost-policy case we know of concerns what showing must be made to

survive summary judgment.

See, e.g., Bianchi v. Florists Mut.

See Radenbaugh v. State Farm Lloyds, No. 4:13-CV-339-A, 2013

WL 4442024, *2-*4 (N.D. Tex. 2013) (granting motion to dismiss
because, among other things, the complaint made no allegations
that the defendant insurance company had ever issued an insurance
policy to him); N. River Ins. Co. v. Bishop of Pueblo, No. 06-cv01971, 2008 WL 280842, *2 (D. Colo. 2008) (denying motion to
dismiss a counterclaim because the "ambiguities" and "issues of
fact" relating to the existence of a policy must be construed in
non-movant's favor); Lumbermens Mut. Cas. Co. v. Foster Wheeler
Corp., No. 88 C 4302, 1993 WL 394769, at *3 (N.D. Ill. Oct. 4,
1993) (holding, with little explanation, that unspecified
allegations in a complaint adequately alleged the existence of a
lost insurance policy).
- 12 -

Ins. Co., 660 F. Supp. 2d 434 (E.D.N.Y. 2009); S. Union Co. v.

Liberty Mut. Ins. Co., 581 F. Supp. 2d 120 (D. Mass. 2008); UTI
Corp. v. Fireman's Fund Ins. Co., 896 F. Supp. 362 (D.N.J. 1995);
Peterborough v. Hartford Fire Ins. Co., 824 F. Supp. 1102 (D.N.H.
1993).
In our view, although the question is close, the school's
allegations, and the "reasonable inferences" we must draw from
them, Garca-Cataln, 734 F.3d at 102 (quoting Grajales, 682 F.3d
at 44)), do make a plausible showing that New Hampshire Insurance
Company issued an insurance policy to the school for the 1967-1968
school year.

The school's allegation of the existence of a New

Hampshire Insurance Company policy for the 1970-1971 school year

is directly supported by the school's audit report from that year.
And the school's factual allegations tending to show no change in
coverage in the preceding three years are enough to plausibly
support the existence of coverage in the 1967-1968 school year.
The factual allegations are "circumstantial," to be
sure, but there is no requirement for direct evidence.
(quoting Rodrguez-Reyes, 711 F.3d at 56).

Neither is there a

"probability requirement" at the pleading stage.

U.S. at 556.

Id. at 103

Twombly, 550

Rather, the factual allegations need only be enough

to nudge the claim "across the line from conceivable to plausible,"

- 13 -

thus

"rais[ing]

reasonable

expectation

reveal evidence of" the lost policy.

that

discovery

will

Id. at 556, 570.

The school has alleged specific facts concerning an

audit report that tend to show that it had an insurance policy
from New Hampshire Insurance Company as of 1971.

And the school

has then linked that allegation to the recollections of specific

individuals who were involved in the relevant events and are of
the view both that the school had a general liability policy in
the preceding years, including the crucial 1967-1968 school year,
and that there had been no change in carrier during that period of
time.
New
school's

Hampshire

complaint,

in

Insurance
describing

Company
the

responds

recollections

that
of

the

these

persons, uses "carefully crafted words" in an effort to disguise

"the vagueness" of the key factual allegations.

New Hampshire

Insurance Company focuses in particular on the allegation that

Bakker "does not believe Cardigan changed carriers" between 1967
and 1970, which, New Hampshire Insurance Company says, is not the
same as saying that "Cardigan did not change carriers."
But in ordinary usage, the expression "I do not believe
[some event] occurred" may be synonymous with the expression "I
believe [some event] did not occur." We are required at this stage
of the proceedings to "draw all reasonable inferences in" the
- 14 -

school's favor.

Morales-Taon v. P.R. Elec. Power Auth., 524 F.3d

15, 17 (1st Cir. 2008).

And one reasonable inference from the

school's allegation is thus that Bakker's best recollection is

that the school did not change insurance carriers during his
tenure.

Moreover, the school pleads that Bakker was the person

who "worked with A.B. Gile, Inc., a local insurance brokerage, to

secure Cardigan's insurance coverage."

Given that assertion, it

is a reasonable (albeit not necessary) inference that, had there

been a change in coverage, Bakker would have known about it, due
to his asserted role in securing coverage for the school.

Thus,

Bakker's lack of a belief that there was a change in coverage (even

phrased as it was) is itself a relevant, factual assertion tending
to suggest that no such change in coverage occurred.4

New Hampshire Insurance Company also argues that Bakker

may have lacked knowledge regarding the crucial 1967-1968 policy,
because that policy could have been purchased before Bakker became
the school's business manager at an unspecified time in 1967. But
the school alleges that Bakker worked for the school during that
1967-1968 school year, and that Bakker believes the school did not
"change[] carriers while [Bakker] was business manager."
Any
change in insurance carrier between the 1967-1968 school year and
the 1969-1970 school year would thus have occurred "while [Bakker]
was business manager."
And so it is reasonable to think that
Bakker -- the one who was responsible for purchasing insurance -would have personal knowledge of such a change, even if -- as New
Hampshire Insurance Company suggests -- Bakker may not have been
the one who purchased the 1967-1968 policy. Moreover, as we have
discussed, the school's allegations also address the possibility
of a change in insurance after Bakker's tenure as business manager
ended at an unspecified time in 1970. The school alleges that any
change between the 1969-1970 and 1970-1971 school years would have
- 15 -

III.
This case is not one in which a plaintiff has selected
an insurance company at random and filed a declaratory judgment
action against it in the hopes that the plaintiff might get lucky
and find a policy.

The school's complaint instead provides a

plausible basis, beyond a mere possibility, for believing that New

Hampshire Insurance Company issued the policy in question. Whether
the school can elicit the evidence that will be required to make
the more demanding showing the school will need to make as the
suit moves forward is, of course, a different question that we
need not address in this appeal.

See Twombly, 550 U.S. at 556

(noting that "a well-pleaded complaint may proceed even if it

strikes

savvy

judge

that

actual

proof

of

those

facts

is

improbable, and 'that a recovery is very remote and unlikely'");

see also Metts v. Murphy, 363 F.3d 8, 10, 12 (1st Cir. 2014) (en
banc)

(vacating

the

dismissal

of

the

plaintiffs'

claim

as

"premature" and remanding "to allow a fuller development of the

evidence, and further legal analysis based on that evidence,"
before resolving the claim on the merits).

been noted on the 1970-1971 audit report, which showed the

existence of a New Hampshire Insurance Company policy and noted no
change in insurer from the prior year.
- 16 -

We thus reverse the District Court's dismissal of this

action for failure to state a claim, and we remand the case for
further proceedings consistent with this opinion.

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