United States Court of Appeals
              For the Eighth Circuit
          ___________________________

                  No. 17-3005
          ___________________________

                      Eric D. Hayes

          lllllllllllllllllllllPlaintiff - Appellee

                             v.

Metropolitan Property and Casualty Insurance Company

        lllllllllllllllllllllDefendant - Appellant
          ___________________________

                  No. 17-3064
          ___________________________

                      Eric D. Hayes

         lllllllllllllllllllllPlaintiff - Appellant

                             v.

Metropolitan Property and Casualty Insurance Company

         lllllllllllllllllllllDefendant - Appellee
                        ____________

      Appeals from United States District Court
        for the District of Nebraska - Omaha
                   ____________
                              Submitted: May 16, 2018
                              Filed: November 9, 2018
                                   ____________

Before SMITH, Chief Judge, BEAM and COLLOTON, Circuit Judges.
                              ____________

BEAM, Circuit Judge.

       Metropolitan Property and Casualty Insurance Company (Met) appeals the
district court's1 entry of judgment in favor of Eric Hayes, its insured, following a
bench trial in a dispute over property coverage of a building that was destroyed by
fire. We affirm.

I.    BACKGROUND

       We relate the facts which were supported by substantial evidence at the trial
and from the district court's factual findings. We give deference to the district court's
position as the credibility judge in this bench trial. Kaplan v. Mayo Clinic, 

, 991 (8th Cir.), cert denied, 

(2017). Hayes's home at 480 South
6 Street, Springfield, Nebraska, was insured by Met under a homeowner's insurance
policy. Hayes used the detached garage of the residence as part of a home base for
his plumbing business, and in addition to living there himself with his children, he
also rented out the second and third levels of the residence to a tenant and her two
children. When Hayes insured the residence in 2007, Met argues that he indicated on
his application that the premises were not used to conduct business, and were not
used as rental property. However, the application, a five-page document, was not a

      1
        The Honorable Laurie Smith Camp, Chief Judge, United States District Court
for the District of Nebraska.

                                          -2-
model of clarity on either of these two points. It was apparent that the form was not
filled out by hand because pre-printed "x's" were used in the checked boxes. Hayes
testified that he did not recall personally completing the application in 2007; that he
worked with an independent insurance agent when it was filled out, and it was also
likely filled out with information from his sister, because his signature "stamp" was
used in the signature line instead of his actual handwritten signature, and she had his
authorization to use the stamp.

        With regard to tenants, the form asked whether "the residence [was] held
exclusively for rental?" and a pre-printed "x" was marked next to the letter "N" in
answer to that question. The form also asked for number of "families" and the
number "1" was printed in that box. With regard to the business, the form asked
whether "[a]ny farming or other business [was] conducted on premises?" and again,
a box indicating "no" was marked with a preprinted x. Hayes testified at trial that
while he did maintain some plumbing supplies at the property, very little of the
plumbing equipment was located in the detached garage due to limited space. He also
testified that he definitely did not "run" the plumbing business out of the premises,
although customers would on occasion contact him there about doing a plumbing job.
Further, Hayes had a separate commercial business insurance policy to cover the
plumbing business in the detached garage, (although the address for this business was
inadvertently and incorrectly listed on the insurance form as 680 South 6 Street,
Springfield, Nebraska, rather than 480), and Hayes testified that he believed the
commercial policy adequately covered his business. Hayes did not make a claim with
regard to the shop or business as a result of the fire.

       On January 24, 2013, the home was destroyed by a fire. Hayes was in Haiti on
a mission trip when the fire occurred. Hayes filed a claim with Met. Met made a
notation as of January 28, 2013, that it believed the fire was intentionally set. By
January 29, 2013, Met knew that Hayes was operating part of his business at the
detached garage near the premises, and that he leased the upper portion of the

                                         -3-
premises to tenants. Accordingly, in February 2013, Met sent Hayes a reservation of
rights letter, informing him that it was investigating the circumstances surrounding
the fire, and whether there had been a change in occupancy due to the business and
tenants.

       Hayes submitted multiple sworn proofs of loss, all of which were rejected by
Met for deficiency in form and documentation. On September 18, 2013, the state fire
marshal informed Met that there was insufficient evidence to charge anyone with
arson in connection with the fire at the insured premises. In October 2013, while the
investigation was ongoing, Met sent Hayes a policy renewal for the premises for the
effective dates of November 2013 through November 2014. In this renewal form,
there was a provision for "optional coverage" for Hayes's plumbing business venture.
In January 2014, Met concluded that Hayes had made material misrepresentations on
his 2007 insurance application. Met informed Hayes of this conclusion in April 2014,
and email communications between the parties' lawyers ensued. Part of the
discussion in that correspondence included whether, in return for agreeing not to sue
Met, Hayes would accept a check to cover the balance of what was owed on Hayes's
mortgage. Those talks never came to satisfactory fruition, and Hayes ultimately sent
a demand letter in the amount of $669,000 on July 30, 2014.

      On August 5, 2014, Met officially informed Hayes that it was denying the
claim, cancelling the policy ab initio based upon material misrepresentations, and
enclosed a check for all premiums Hayes had paid, with interest. Met also sent a
check to Springfield State Bank for $127,342.97 to satisfy the balance due on Hayes's
mortgage. Hayes returned the premium check and asked the bank to refuse to cash
the mortgage payment. The bank nonetheless accepted the check to satisfy the
mortgage payment.

       Hayes sued Met in October 2014 in state court for breach of contract and bad
faith denial/investigation. Met removed the matter to federal court on the basis of

                                         -4-
diversity jurisdiction. In February 2015, the district court2 dismissed the breach of
contract claim as time-barred. The bad faith claim proceeded to a bench trial that was
conducted on April 18 through April 20, 2017. The district court entered judgment
for Hayes on the bad faith claim at the conclusion of trial. As relevant, the court
found that the insurance form was filled out by the independent insurance agent and
signature stamped by Hayes's sister. Further, the court found that the form contained
ambiguous questions. Accordingly, the court held there was a lack of evidence that
Hayes knowingly provided false answers on the insurance application with the intent
to deceive. The court additionally held that Met did not suffer a detriment due to any
possible deception, and thus had no basis for rescission. The district court found that
even if Met had proved deception and detriment, it should be estopped from
rescinding the contract because of the eighteen-month delay between the time Met
found out Hayes had a tenant and a plumbing business (in January 2013), and the
time it rescinded (August 2014). The district court found that Hayes met his burden
to establish Met's bad faith refusal to to pay the claim.

       Subtracting the amounts Met paid for the mortgage, the deductible and a few
other small amounts, the total amount awarded by the district court was $493,455.
The court also directed Hayes's counsel to submit a request for reasonable attorney
fees. In a separate order, the district court awarded counsel attorney fees in the
amount of $86,160. In that same order, the district court denied Met's motion to alter
or amend its original order. Met appeals, alleging numerous errors discussed in turn
below–its primary contention being, however, that the bad faith claim could not lie
without the time-barred breach of contract claim earlier dismissed. Hayes cross-
appeals the dismissal of the contract claim as time-barred.




      2
       At the time the breach of contract claim was dismissed, the case was assigned
to the Honorable Lyle E. Strom, United States District Judge for the District of
Nebraska, now retired.

                                         -5-
II.   DISCUSSION

       We review the district court's findings of fact in the bench trial for clear error
and its legal conclusions de novo, overturning the factual findings only if they are not
supported by substantial evidence, based upon an erroneous view of the law, or we
are left with the definite and firm conviction that an error has been made. 

.

      A.     Bad Faith

       As the forum state, Nebraska law applies in this case. A bad faith claim in
Nebraska is established when a plaintiff shows that (1) there was no reasonable basis
for denying the claim and (2) the insurer knew of, or recklessly disregarded, the lack
of reasonable basis for denying the claim. Bailey v. Farmers Union Co-op. Ins. Co.,

, 599 (Neb. Ct. App. 1992).

       Met argues that because the contract was rescinded "ab initio," the court had
no jurisdiction over a bad faith claim, Hayes had no standing to pursue a bad faith
claim, and that the claim could not have existed in the absence of a contract at the
time of trial. Met further argues that the damages awarded on the bad faith claim
were contrary to Nebraska law because they were actually contractual damages, rather
than tort damages, and that by awarding damages, the district court effectively
awarded coverage under the rescinded contract.

      Hayes argues that he was not required to prevail on his breach of contract claim
in order to pursue his bad faith claim under Nebraska law, citing as his primary
source, Larette v. American Medical Security, Inc., 

, 48 (Neb. 2005)
(noting that an insured need not prevail on the breach of contract claim in order to
prevail on the bad faith claim; that they, in effect, stand alone). Hayes argues that,
indeed, the extent of Met's bad faith conduct is illustrated by Met's investigation of

                                          -6-
the claim for eighteen months, and that it was only then at the close of that period, did
it "void" or rescind the contract "ab initio." Its stated reason for rescission was based
upon facts that it knew within days of the fire.

       While Met is correct that there must have been a contract at some point in time
in order for there to be a bad faith claim, Met cannot insulate itself from a bad faith
claim by creating the fiction that a contract never existed by voiding or rescinding it
"ab initio." The cases Met cites do not stand for the proposition that an insurer can
do what it did here–discover there is liability after eighteen months of "investigating"
and rescind based upon misrepresentation evidence that was within its knowledge
five days after the fire. Braesch v. Union Insurance Co., 

(Neb.
1991), does not bear the weight Met places on it. In Braesch, the policyholders
settled with their insurer on a bad faith claim. The court discussed the context in
which a third party might assert a bad faith claim against an insurer, and the court
indicated that non-policyholders would not be allowed to bring a bad faith claim. 

Alleging that Hayes was never a "policyholder" because Met rescinded the
contract eighteen months after the fire occurred is more than a bit of a stretch. And,
as noted, the district court found that Met either wrongly rescinded Hayes's insurance
contract or was estopped from doing so based upon its actions. Nor does Lynch v.
State Farm Mutual Automobile Insurance Co., 

(Neb. 2008), support
Met's cause. Lynch stands for the proposition that when an insured has already
recovered more than the amount of its medical damages from a third party, the insurer
had no contractual duty to provide more medical benefits under the policy. 

       Met next argues that we should reverse the district court because it wrongly
shifted the burden of proof to Met on Hayes's bad faith claim. However, we disagree
with Met's assertion. We instead find that Hayes met his burden of proving the
elements of bad faith–that Met had no reasonable basis for denying the claim and did
so with knowledge or with reckless disregard of that fact. See 

. There is substantial evidence to support the district court's finding that Met

                                          -7-
had no reasonable basis for denying the claim, and that Met had knowledge of this
lack of basis. This knowledge was based upon the eighteen-month time frame
between when Met first knew of a possible problem and when it "rescinded" the
policy on that very basis. Further evidence of its knowledge or reckless disregard for
improperly denying the claim lies in the emails exchanged wherein Met tried to
secure a release from a bad faith suit in exchange for paying off Hayes's mortgage.

       The only burden the district court (properly) placed upon Met at trial was to
prove that it could avoid liability due to Hayes's alleged misrepresentations on his
insurance contract. Lowry v. State Farm Mut. Auto. Ins. Co., 

, 778
(Neb. 1988) (holding that insurer must plead and prove misrepresentation, reliance,
and deception). We agree with the district court that Met could not prove
misrepresentation or deception by Hayes, or any reliance thereupon by Met. We base
this conclusion upon our previous recitation of the circumstances surrounding when
the insurance form was filled out and the ambiguities on the form itself. Accordingly,
the district court correctly entered judgment for Hayes on the bad faith claim.

      B.     Damages and Attorney Fees

       Met next challenges the damages awarded, arguing that they were contractual
and not based upon the tort of bad faith, and cites Bailey for the proposition that
Hayes cannot recover policy-derived amounts for the tort action of bad faith. In
Bailey, the court of appeals held that an insured could not recover for emotional
distress when the harm was caused solely by breach of 

.
Here, there is no issue of emotional distress, and the district court specifically found
that Met improperly rescinded the contract, or in the alternative, that it was estopped
from doing so. Thus, we find that the district court properly calculated the economic
damages Hayes suffered as a result of Met's bad faith refusal to pay pursuant to the
provisions of the improperly rescinded contract. Ruwe v. Farmers Mut. United Ins.
Co., 

, 135 (Neb. 1991).

                                          -8-
       Met next challenges the award of attorney fees, repeating its argument that
there was no contract and no liability, and that accordingly the attorney fees cannot
be awarded under Nebraska Revised Statute § 44-359 (providing for reasonable
attorney fees when an insured has prevailed on a claim against an insurance
company). Met repeats its argument, prevalent throughout, that without a valid
insurance contract, Hayes cannot recover attorney fees. First, the district court
correctly found that Met had no basis for rescinding the contract, and even if it did,
it should be estopped from doing so. Second, the language of the attorney fee statute
belies the notion that a meritorious breach of contract action is required for fee
recovery. The insured must simply successfully "bring[] an action upon any type of
insurance policy." As we have stated, the legal fiction that no insurance policy exists
in this case is without support. Accordingly, the action was brought "upon the
policy," thus distinguishing this case from our opinion in Lienemann v. State Farm
Mutual Auto Fire & Casualty Co., 

, 342 (8th Cir. 1976), wherein we
disallowed an award of fees under this statute because the fees were based upon tort
principles, resulted in a judgment in excess of policy limits, and was unrelated to any
covenant in the policy. The judgment in the instant case, unlike Lienemann, is not
unrelated to any covenant in the insurance policy. As Met argued above, the damages
were calculated pursuant to the policy provisions. Accordingly, we find that under
the unique circumstances of this case, where a policy was improperly rescinded, we
agree with the district court that the Nebraska Supreme Court would likely allow fees
pursuant to Nebraska Revised Statute § 44-359. Thus, the district court did not abuse
its discretion in awarding reasonable attorney fees for this action "upon the policy."
Id.; see Adams Bank & Tr. v. Empire Fire & Marine Ins. Co., 

, 55
(Neb. 1993) (abuse of discretion standard of review for § 44-359). Accordingly we
affirm the award of reasonable attorney fees to Hayes.




                                         -9-
III.   CONCLUSION

       We affirm3 the district court.

COLLOTON, Circuit Judge, concurring in the judgment.

       The crux of the insurance company’s position on this appeal is that Eric Hayes
cannot bring a tort claim for bad faith denial of an insurance claim unless there was
an underlying insurance contract. The company (Met) argues that because it
rescinded the insurance contract with Hayes from the beginning, and Hayes did not
timely bring a breach of contract claim, there was no contract as a matter of law, so
the tort claim must fail as well.

       The straightforward answer to this contention is that Hayes did bring a timely
breach-of-contract claim. The district court ruled that the claim was untimely because
the limitations period is twelve months, and Hayes did not bring his claim until more
than a year after the loss from fire on January 24, 2013. The better reading of
Nebraska law, however, is that the limitations period is five years.

        The ordinary statute of limitations for contract actions in Nebraska is five
years, Neb. Rev. Stat. § 25-205, and no “insurance company shall issue . . . any policy
. . . containing . . . any provision limiting the time within which an action may be


       3
        Hayes's counsel conceded at oral argument that if he prevailed on his bad faith
claim, any resolution of the breach of contract claim was essentially unnecessary, as
it did not provide any new or different damages than those received for the bad faith
claim. Additionally, the district court's findings on rescission, with which we agree,
effectively restores the operation of the contract. Therefore, because we cannot
"grant any effectual relief" to Hayes on the breach of contract claim, we dismiss the
cross-appeal from the district court's dismissal of the contract as moot. Campbell-
Ewald Co. v. Gomez, 

, 669 (2016) (quotation omitted).

                                         -10-
brought to less than the regular period of time prescribed by [Nebraska’s] statutes of
limitations, unless otherwise prescribed by this chapter.” Neb. Rev. Stat. § 44-357.
A provision in Hayes’s policy prescribes a one-year limitations period. Met argues
that this shorter period is “otherwise prescribed” by Neb. Rev. Stat. § 44-501, which
requires fire insurance policies to “conform as nearly as practicable to . . . context,
provisions, agreements, and conditions with the 1943 Standard Fire Insurance Policy
of the State of New York,” because the New York policy contains a one-year
limitations period.

       The Nebraska Supreme Court, however, has held that where a fire insurance
policy contains both a one-year statute-of-limitations provision and “provisions
amending any terms of the policy which are in conflict with state statutes to confirm
with such statutes,” the limitations period prescribed by the policy must yield to the
five-year period prescribed by Nebraska law for contract actions. Hiram Scott
College v. Ins. Co. of N. Am., 

, 690 (Neb. 1971); see also Wulf v.
Farm Bureau Ins. Co. of Neb., 

, 641-42 (Neb. 1973). Hayes’s policy
included a provision stating that “[t]he terms of this Policy which are in conflict with
the statutes of the state in which the insured premises is located are hereby amended
to conform to such statutes.” Under the reasoning of Hiram Scott College, therefore,
the policy’s one-year limitations period is invalid. The applicable limitations period
under Nebraska law was five years, and Hayes’s breach-of-contract claim was timely.

      With a timely contract claim before it, the district court could properly address
whether Met validly rescinded the policy. I agree with the court that we should
uphold the district court’s conclusion that Met either wrongly rescinded the contract
or was estopped from doing so, and that Hayes was therefore a policyholder who
could bring a bad faith claim. Like the court, I would affirm the district court’s
finding of liability on the bad faith claim and the award of damages and attorney’s
fees. Because Hayes does not seek additional relief on his breach-of-contract claim,
a remand for further proceedings is unnecessary, and I concur in affirming the

                                         -11-
judgment of the district court. Under this analysis, it is unnecessary to address
whether a putative policyholder may bring a bad faith claim when the insurance
company purports to rescind the insurance contract ab initio and the policyholder
fails to bring a timely claim for breach of contract.
                            _________________________




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