FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ATLANTIC CASUALTY No. 13-35133
INSURANCE COMPANY,
Plaintiff Appellee, D.C. No.
9:12-cv-00014-
v. DWM
JOHN P. GREYTAK; ORDER
TANGLEWOOD INVESTORS CERTIFYING
LIMITED PARTNERSHIP, QUESTION TO
Defendants-Appellants, MONTANA
SUPREME COURT
and
GTL, INC.,
Defendant.
Filed June 25, 2014
Before: M. Margaret McKeown and Paul J. Watford,
Circuit Judges, and Barbara Jacobs Rothstein, Senior
District Judge.*
Order
*
The Honorable Barbara Jacobs Rothstein, Senior District Judge for the
United States District Court for the Western District of Washington,
sitting by designation.
2 ATLANTIC CAS. INS. CO. V. GREYTAK
ORDER
ROTHSTEIN, District Judge:
I
Pursuant to Rule 15(3) of the Montana Rules of Appellate
Procedure, we respectfully request that the Montana Supreme
Court exercise its discretion to adjudicate the following
question of Montana law:
Whether, in a case involving a claim of
damages by a third party, an insurer who does
not receive timely notice according to the
terms of an insurance policy must
demonstrate prejudice from the lack of notice
to avoid defense and indemnification of the
insured.
The answer to this certified question will be determinative
of the appeal pending in our court in this diversity action. We
acknowledge that your Court may decide to reformulate the
question and that our phrasing of the question is not intended
to restrict your Court’s consideration of this request. We are
grateful for any guidance your Court can give us, whether or
not directly responsive to the question as we have phrased it.
II
In this diversity action, Defendants-Appellants John P.
Greytak and Tanglewood Investors Limited Partnership
(collectively, “Greytak”) appeal from the final judgment
entered following the granting of Plaintiff-Appellee Atlantic
ATLANTIC CAS. INS. CO. V. GREYTAK 3
Casualty Insurance Company’s (“Atlantic”) motion for
summary judgment.
This case stems from an underlying civil action filed in
Granite County, Montana, involving third-party GTL, Inc.
(“GTL”).1 At the time of the action GTL was insured by
Atlantic. On March 16, 2010, GTL filed suit against Greytak
for non-payment. On April 30, 2010, in a letter sent to GTL,
Greytak asserted the bases for various counterclaims
involving alleged construction defects. On November 5,
2010, still in state court, Greytak filed its counterclaims
against GTL. On April 13, 2011, GTL and Greytak reached
a written “settlement agreement.”2 The agreement required
GTL to notify Atlantic of Greytak’s counterclaims. GTL and
Greytak agreed that if Atlantic did not appear to defend the
case and did not file a separate declaratory action, GTL
would allow judgment to be entered in favor of Greytak in the
amount of $624,685.14 plus costs. If, on the other hand,
Atlantic did appear to defend the case, Greytak would “be
entitled to pursue its remaining claims to judgment . . . [and]
shall . . . ensure that GTL will have no financial responsibility
for such judgment . . . [Greytak] shall look solely to [Atlantic]
for the recovery of any judgment . . . .” If Atlantic filed a
declaratory action, Greytak agreed to “defend such claim on
behalf of GTL for the purpose of establishing coverage . . . .”
1
GTL did not appear to defend itself in district court and defaulted.
GTL is not a party to this appeal.
2
While styled a “settlement,” the agreement did not fully resolve the
case. GTL’s claims against Greytak were fully settled for a payment of
$20,000. However, Greytak’s counterclaims were not resolved.
4 ATLANTIC CAS. INS. CO. V. GREYTAK
The insurance policy issued by Atlantic to GTL (“the
Policy”) states that “[w]e will have the right and duty to
defend the insured against any ‘suit’ seeking . . . damages.”
The Policy also states that the insured “must see to it that we
are notified as soon as practicable of an ‘occurrence’ or an
offense which may result in a claim . . . [i]f a claim is made
or ‘suit’ is brought against any insured, you must . . . [n]otify
us as soon as practicable. You must see to it that we receive
written notice of the claim or ‘suit’ as soon as practicable.”
GTL notified Atlantic of Greytak’s counterclaims through
a letter mailed on May 23, 2011, more than a year after the
counterclaims had been asserted by letter, six months after
Greytak had filed the counterclaims in court, and after the
“settlement” had been reached between Greytak and GTL.
Greytak separately notified Atlantic of the counterclaims by
a letter dated August 5, 2011.
On January 23, 2012, Atlantic filed suit against GTL and
Greytak in the United States District Court for the District of
Montana, seeking declaratory relief. Atlantic sought a
declaration that it was not required to defend GTL from
Greytak’s counterclaims and that it was not required to pay
any portion of a judgment obtained against GTL on the
grounds that it had not been given timely notice as required
by the Policy language.
Greytak and Atlantic each filed motions for summary
judgment. The district court held a hearing and, on January
14, 2013, granted Atlantic’s motion for summary judgment
and denied Greytak’s motion for summary judgment. The
district court found that Atlantic did not have timely notice of
Greytak’s claims against GTL and, therefore, Atlantic was
excused from performance. In denying a motion for relief
ATLANTIC CAS. INS. CO. V. GREYTAK 5
from judgment filed by Greytak, the district court found that,
pursuant to Montana law, Atlantic was not required to
demonstrate that it was prejudiced by a lack of timely notice
regarding Greytak’s claims against GTL.3 Greytak timely
appealed.
III
The sole question under Montana law is whether, in a
case involving a claim of damages by a third party, an insurer
who does not receive timely notice according to the terms of
an insurance policy must demonstrate prejudice from the lack
of notice in order to avoid defense and indemnification of the
insured.
Atlantic argues that Montana law already answers this
question in the negative, relying primarily on language in
Steadele v. Colony Insurance Co., 260 P.3d 145 (Mont.
2011). In Steadele your Court considered a third-party claim
for damages due to construction defects under a commercial
general liability insurance policy similar to the policy at issue
in the instant case. Id. at 147–48. The language of the
Steadele policy stating that notice was to be given to the
3
In its decision, the district court wrote: “[T]he Montana Supreme Court
found a five month delay between filing of claims in the underlying
litigation and eventual notice to the insurer was deficient and barred
coverage. While the Montana Supreme Court mentioned Colony
Insurance Company was prejudiced by this delay, they did not elect to
impose a requirement that an insurer be prejudiced by deficient notice.
Given the opportunity to declare a notice-prejudice rule in the context of
third-party commercial claims, the Montana Court declined to do so.” Atl.
Cas. Ins. Co. v. GTL, Inc., 915 F. Supp. 2d 1169, 1178–79 (D. Mont.
2013) (internal citations omitted) (discussing Steadele v. Colony Ins. Co.,
260 P.3d 145 (Mont. 2011)).
6 ATLANTIC CAS. INS. CO. V. GREYTAK
insured “as soon as practicable” is identical to the language
of the Policy issued to GTL by Atlantic in this case. Id. at
149. Addressing the notice requirement, your Court held that
“this Court [has] held that a notice requirement in an
insurance policy ‘is a condition precedent, and failure to
comply therewith will bar a recovery under the policy, unless
the condition is waived by the company.’” Id. at 150
(quoting LaBonte v. Mut. Fire & Lightning Ins. Co., 241 P.
631, 635 (Mont. 1925)). Your Court affirmed its past holding
that “failure of the [insureds] to submit notifications of
accident and proof of loss to [the insurer] as soon as
practicable, as required by the policy, barred any claims for
reimbursement . . . .” Steadele, 260 P.3d at 150 (quoting
Riefflin v. Hartford Steam Boiler Inspection & Ins. Co.,
521 P.2d 675, 678 (Mont. 1974)). Your Court further held
that the Steadeles’ claim “depends entirely on the existence
of insurance coverage . . . [t]he scope of an insurer’s duty to
defend its insured . . . is determined by the language of the
insurance policy . . . [i]f there is no coverage under the terms
of the policy based on the facts contained in the complaint,
there is no duty to defend.” Steadele, 260 P.3d at 150 (citing
Grimsrud v. Hagel, 119 P.3d 47, 53 (Mont. 2005)). Based on
Steadele, Atlantic argues that your Court specifically
addressed the contractual provision at issue and has not
imposed a notice-prejudice requirement.
Greytak argues in response that Montana law requires that
an insurer demonstrate prejudice from lack of notice to avoid
defense and indemnification of its insured. Greytak points to
the discussion of prejudice in Steadele:
In this case, because Colony did not receive
notice of the claim, Colony was prejudiced in
that it was deprived of the ability to
ATLANTIC CAS. INS. CO. V. GREYTAK 7
investigate, to locate witnesses, to appoint
counsel, to engage in discovery, to negotiate
a settlement, and to develop a trial strategy.
Finally, we observe that this is not a case
where the insured failed to notify its carrier by
a few days or where the failure to notify was
de minimis. Rather, here, MCHC failed to
notify Colony for months after having been
served with the Steadeles’ summons and
complaint.
Steadele, 260 P.3d at 151.
Greytak also relies on your Court’s discussion of Steadele
in Newman v. Scottsdale Insurance Co., 301 P.3d 348 (Mont.
2013):
In Steadele, we concluded that the district
court properly granted the insurer’s motion
for summary judgment based upon its
complete lack of notice of the pendency of
any claim against its insured, until more than
60 days after a default judgment in the
approximate amount of $1.88 million had
been entered in favor of Steadele and against
the insured. When Steadele attempted to
recover the judgment amount from Colony,
Colony argued that the lack of notice of the
claim severely prejudiced it. We observed that
because of the lack of notice, Colony was
completely deprived of the ability to
investigate, locate witnesses, appoint counsel
8 ATLANTIC CAS. INS. CO. V. GREYTAK
or negotiate a settlement and therefore
suffered prejudice.
There are notable distinctions between
Steadele and the case before us . . . [t]he most
significant distinction, however, is that in
Steadele, Colony Insurance asserted from the
inception that because the insured never
notified it of the litigation, it was deprived of
the ability to investigate and assess the
validity of the claim.
Newman, 301 P.3d at 360 (internal citations omitted).
In Newman your Court rejected the insurer’s argument
that it had been prejudiced, holding that the argument was
“belied by the fact that [the insurer] made a conscious
decision to deny coverage . . . [and] did not ever seek to retain
counsel, investigate the claim, or develop a trial or settlement
strategy. Thus, not only is the prejudice argument irrelevant
in the face of waiver, it is wholly unsupported in the record.”
Id. at 361.
Greytak argues that the holdings in Steadele and Newman
establish a requirement under Montana law that an insurer
demonstrate prejudice from lack of notice to avoid defense
and indemnification of its insured.
We have found no Montana court decisions that resolve
the question of whether an insurer must demonstrate
prejudice due to lack of timely notice to avoid defense and
indemnification of its insured pursuant to a claim by a third
party. A declaration by your Court on this question would
guide us in resolving the parties’ dispute. Your acceptance of
ATLANTIC CAS. INS. CO. V. GREYTAK 9
the request for certification of this question will also be of
great assistance in correctly applying Montana law.
IV
The clerk of this court shall forward a copy of this order,
under official seal, to the Montana Supreme Court, along with
copies of all briefs and excerpts of record that have been filed
with this court. The parties shall notify the clerk of this court
within 14 days of any decision by the Montana Supreme
Court to accept or decline certification. If the Montana
Supreme Court accepts certification, the parties shall then
notify the clerk of this court within 14 days of the issuance of
that Court’s opinion. Submission of the questions presented
in this appeal will be vacated by separate order pending the
Montana Supreme Court’s response to this request.
V
The following is a list of counsel appearing in this matter:
Counsel for Appellants John P. Greytak and Tanglewood
Investors Limited Partnership:
Quentin M. Rhoades
1821 South Avenue West, Third Floor,
Missoula, MT 59801
(406) 721-9700
qmr@montanalawyer.com
10 ATLANTIC CAS. INS. CO. V. GREYTAK
Counsel for Appellee Atlantic Casualty Insurance Company:
Matthew Hutchison
22 Second Ave. West, Suite 4000, P.O. Box 728,
Kalispell, MT 59903-0728
(406) 755-5700
mkh@kvhlaw.com
Valori E. Vidulich
22 Second Ave. West, Suite 4000, P.O. Box 728,
Kalispell, MT 59903-0728
(406) 755-5700
vev@kvhlaw.com
Respectfully submitted,
M. Margaret McKeown and Paul J. Watford, Circuit Judges,
and Barbara J. Rothstein, Senior District Judge.