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Atlantic Casualty Insurance Co. v. Greytak

United States Court of Appeals, Ninth Circuit

June 25, 2014

ATLANTIC CASUALTY INSURANCE COMPANY, Plaintiff Appellee,
v.
JOHN P. GREYTAK; TANGLEWOOD INVESTORS LIMITED PARTNERSHIP, Defendants-Appellants, and GTL, INC., Defendant

D.C. No. 9:12-cv-00014-DWM.

Counsel for Appellants John P. Greytak and Tanglewood Investors Limited Partnership: Quentin M. Rhoades, Missoula, MT.

Counsel for Appellee Atlantic Casualty Insurance Company: Matthew Hutchison, Valori E. Vidulich, Kalispell, MT.

Before: M. Margaret McKeown and Paul J. Watford, Circuit Judges, and Barbara Jacobs Rothstein, Senior District Judge.[*]

ORDER CERTIFYING QUESTION TO MONTANA SUPREME COURT

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 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

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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 . . . ."

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 ...


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