Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-35133/USCOURTS-ca9-13-35133-0/pdf.json

Parties Involved:
Atlantic Casualty Insurance Company
Appellee
GTL, Inc.

John P. Greytak
Appellant
Tanglewood Investors Limited Partnership
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ATLANTIC CASUALTY

INSURANCE COMPANY,

Plaintiff Appellee,

v.

JOHN P. GREYTAK;

TANGLEWOOD INVESTORS

LIMITED PARTNERSHIP,

Defendants-Appellants,

and

GTL, INC.,

Defendant.

No. 13-35133

D.C. No.

9:12-cv-00014-

DWM

ORDER

CERTIFYING

QUESTION TO

MONTANA

SUPREME COURT

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.

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 1 of 10
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

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 2 of 10
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.

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 3 of 10
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.”

GTLnotified 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

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 4 of 10
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 policymust 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)).

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 5 of 10
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

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 6 of 10
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

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 7 of 10
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

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 8 of 10
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

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 9 of 10
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.

 Case: 13-35133, 06/25/2014, ID: 9144979, DktEntry: 35, Page 10 of 10