UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Nautilus Insurance Co.
v. Civil No. 18-cv-633-JD Opinion No. 2018 DNH 242 Gwinn Design and Build, LLC, et al.
O R D E R
Nautilus Insurance Company brought a declaratory judgment
action against Gwinn Design and Build, LLC; its owner, Richard
Gwinn; and Paul J. Stanton, who received a judgment in state
court against Gwinn Design and Gwinn, seeking to establish that
Nautilus has no obligation to cover the state court judgment.1
Nautilus moves for summary judgment on Counts V and VI. Stanton
objects to summary judgment.
Standard of Review
Summary judgment is appropriate when the moving party
“shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “A genuine issue of material fact only
exists if a reasonable factfinder, examining the evidence and
drawing all reasonable inferences helpful to the party resisting
1 Default has been entered as to Gwinn Design and Gwinn. summary judgment, could resolve the dispute in that party’s
favor.” Town of Westport v. Monsanto Co., 877 F.3d 58, 64-65
(1st Cir. 2017) (internal quotation marks omitted); Flood v.
Bank of Am. Corp., 780 F.3d 1, 7 (1st Cir. 2015). The facts and
reasonable inferences are taken in the light most favorable to
the nonmoving party. McGunigle v. City of Quincy, 835 F.3d 192,
202 (1st Cir. 2016).
Background
As alleged in Paul Stanton’s state court complaint, he
hired Gwinn Design in August of 2015 for a project to renovate
his home in Bedford. Stanton and Gwinn entered an updated
agreement in October of 2015.2 Stanton was not satisfied with
Gwinn Design’s work and notified Gwinn in April of 2016 that the
workmanship was faulty and incomplete. On March 28, 2017,
Stanton sent notice to Gwinn of his construction defect and
breach of contract claims. Gwinn did not respond to the notice.
Stanton brought suit against Gwinn in Hillsborough County
Superior Court in June of 2017. Gwinn did not respond, and
default was entered against him. Judgment in the amount of
2 Although Stanton’s state court complaint uses the date of October 2, 2016, for the updated agreement, taken in context, that year appears to be a typographical error.
2 $252,665.17 was entered by order of the court on September 13,
2017.
Gwinn Design was insured by Nautilus from May 18, 2015, to
May 18, 2016, under a policy of commercial general liability
insurance. The policy provides insurance for property damage if
caused by an “occurrence.” Doc. 1-3, at 10. The insurance
provided under the policy is also subject to exclusions. Doc.
1-3, at 11-12. In addition, the policy imposes certain duties
on the insured in the event of an occurrence, offense, claim, or
suit as a condition of coverage. Doc. 1-3, at 19.
Gwinn did not notify Nautilus of Stanton’s suit or of the
default and judgment entered against him.3 Stanton’s counsel
sent a letter to Nautilus in April of 2018, notifying Nautilus
of the judgment against Gwinn. In September, counsel provided
by Nautilus on behalf of Gwinn moved to have the state court set
aside the default judgment. In the motion, counsel represented
that Gwinn had failed to respond to the suit because of his
personal circumstances including his wife’s divorce action
against him. The motion was denied on October 11, 2018.
Nautilus filed suit in this court on July 23, 2018. In the
complaint, Nautilus seeks a declaratory judgment that it is not
3 Stanton states that he does not know whether Gwinn provided notice to Nautilus but provides no evidence to contradict Nautilus’s statement.
3 obligated under the policy to provide coverage to Gwinn for
Stanton’s claims and judgment. The complaint includes six
counts that raise separate grounds in support of a declaratory
judgment.
Discussion
Nautilus moves for summary judgment on Counts V and VII in
its complaint.4 The motion seeks a declaratory judgment that
Gwinn has waived coverage under the Nautilus policy by failing
to give notice of an accident and failing to give notice of a
claim or suit as required under the terms of the policy.5 Gwinn
did not respond to the motion. Stanton objects to the motion
for summary judgment.
In Count V, Nautilus alleges that Gwinn breached his duty
under the terms of the policy to give notice of an accident.
Nautilus cites Section IV, Part 2.a which requires an insured to
give notice of an “occurrence”. In Count VII, Nautilus alleges
4 Nautilus cites Count VI but the complaint does not include a Count VI; the counts alleged skip from Count V (Breach of Duty to Give Notice of An Accident) to Count VII (Breach of Duty to Give Notice of A Claim or Suit). Therefore, the court presumes that Nautilus intended to refer to Counts V and VII.
5 Although Nautilus also discusses an insured’s duty of cooperation in the motion, it did not allege a count in the complaint based on that duty.
4 that Gwinn breached his duty to give notice of a claim or suit,
and cites Section IV, Part 2.b and 2.c.
Section IV of the policy addresses “Commercial General
Liability Conditions.” Part 2.a of Section IV provides that the
insured “must see to it that [Nautilus is] notified as soon as
practicable of an ‘occurrence’ or an offense which may result in
a claim.” Doc. 1-3, at 19. Part 2.b requires the insured to
notify Nautilus “as soon as practicable” if “a claim is made or
‘suit’ is brought against any insured.” Id. Section IV, Part
2.c requires the insured to send Nautilus copies of “any
demands, notices, summonses or legal papers received in
connection with the claim or ‘suit’,” to authorize Nautilus to
obtain information about the claim or suit, and to cooperate and
assist Nautilus in the defense against the claim or suit.
Under New Hampshire law, a breach of the notice requirement
in “an occurrence-based liability policy” precludes insurance
coverage only if the breach is substantial. Wilson v.
Progressive N. Ins. Co., 151 N.H. 782, 785 (2005). Three
factors are applied to determine whether a breach is
substantial. Id. Those factors are the length of the delay in
giving notice, the reasons for the delay, and whether the
insurer was prejudiced by the delay. Id.
5 Delay in providing notice, standing alone, does not
establish that the insurer was prejudiced. Id. Instead, the
insurer “must at the very least provide the court with facts
showing prejudice and not merely surmise that it may be
prejudiced because certain events may have occurred in the
abstract during the period of delay.” Id. As such, the insurer
bears the burden of showing that it has suffered prejudice.
Dover Mills P’ship v. Commercial Union Ins. Cos., 144 N.H. 336,
339 (1999).
A. Delay
It is undisputed in this case that Gwinn did not provide
notice to Nautilus of Stanton’s dissatisfaction with his work,
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Nautilus Insurance Co.
v. Civil No. 18-cv-633-JD Opinion No. 2018 DNH 242 Gwinn Design and Build, LLC, et al.
O R D E R
Nautilus Insurance Company brought a declaratory judgment
action against Gwinn Design and Build, LLC; its owner, Richard
Gwinn; and Paul J. Stanton, who received a judgment in state
court against Gwinn Design and Gwinn, seeking to establish that
Nautilus has no obligation to cover the state court judgment.1
Nautilus moves for summary judgment on Counts V and VI. Stanton
objects to summary judgment.
Standard of Review
Summary judgment is appropriate when the moving party
“shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “A genuine issue of material fact only
exists if a reasonable factfinder, examining the evidence and
drawing all reasonable inferences helpful to the party resisting
1 Default has been entered as to Gwinn Design and Gwinn. summary judgment, could resolve the dispute in that party’s
favor.” Town of Westport v. Monsanto Co., 877 F.3d 58, 64-65
(1st Cir. 2017) (internal quotation marks omitted); Flood v.
Bank of Am. Corp., 780 F.3d 1, 7 (1st Cir. 2015). The facts and
reasonable inferences are taken in the light most favorable to
the nonmoving party. McGunigle v. City of Quincy, 835 F.3d 192,
202 (1st Cir. 2016).
Background
As alleged in Paul Stanton’s state court complaint, he
hired Gwinn Design in August of 2015 for a project to renovate
his home in Bedford. Stanton and Gwinn entered an updated
agreement in October of 2015.2 Stanton was not satisfied with
Gwinn Design’s work and notified Gwinn in April of 2016 that the
workmanship was faulty and incomplete. On March 28, 2017,
Stanton sent notice to Gwinn of his construction defect and
breach of contract claims. Gwinn did not respond to the notice.
Stanton brought suit against Gwinn in Hillsborough County
Superior Court in June of 2017. Gwinn did not respond, and
default was entered against him. Judgment in the amount of
2 Although Stanton’s state court complaint uses the date of October 2, 2016, for the updated agreement, taken in context, that year appears to be a typographical error.
2 $252,665.17 was entered by order of the court on September 13,
2017.
Gwinn Design was insured by Nautilus from May 18, 2015, to
May 18, 2016, under a policy of commercial general liability
insurance. The policy provides insurance for property damage if
caused by an “occurrence.” Doc. 1-3, at 10. The insurance
provided under the policy is also subject to exclusions. Doc.
1-3, at 11-12. In addition, the policy imposes certain duties
on the insured in the event of an occurrence, offense, claim, or
suit as a condition of coverage. Doc. 1-3, at 19.
Gwinn did not notify Nautilus of Stanton’s suit or of the
default and judgment entered against him.3 Stanton’s counsel
sent a letter to Nautilus in April of 2018, notifying Nautilus
of the judgment against Gwinn. In September, counsel provided
by Nautilus on behalf of Gwinn moved to have the state court set
aside the default judgment. In the motion, counsel represented
that Gwinn had failed to respond to the suit because of his
personal circumstances including his wife’s divorce action
against him. The motion was denied on October 11, 2018.
Nautilus filed suit in this court on July 23, 2018. In the
complaint, Nautilus seeks a declaratory judgment that it is not
3 Stanton states that he does not know whether Gwinn provided notice to Nautilus but provides no evidence to contradict Nautilus’s statement.
3 obligated under the policy to provide coverage to Gwinn for
Stanton’s claims and judgment. The complaint includes six
counts that raise separate grounds in support of a declaratory
judgment.
Discussion
Nautilus moves for summary judgment on Counts V and VII in
its complaint.4 The motion seeks a declaratory judgment that
Gwinn has waived coverage under the Nautilus policy by failing
to give notice of an accident and failing to give notice of a
claim or suit as required under the terms of the policy.5 Gwinn
did not respond to the motion. Stanton objects to the motion
for summary judgment.
In Count V, Nautilus alleges that Gwinn breached his duty
under the terms of the policy to give notice of an accident.
Nautilus cites Section IV, Part 2.a which requires an insured to
give notice of an “occurrence”. In Count VII, Nautilus alleges
4 Nautilus cites Count VI but the complaint does not include a Count VI; the counts alleged skip from Count V (Breach of Duty to Give Notice of An Accident) to Count VII (Breach of Duty to Give Notice of A Claim or Suit). Therefore, the court presumes that Nautilus intended to refer to Counts V and VII.
5 Although Nautilus also discusses an insured’s duty of cooperation in the motion, it did not allege a count in the complaint based on that duty.
4 that Gwinn breached his duty to give notice of a claim or suit,
and cites Section IV, Part 2.b and 2.c.
Section IV of the policy addresses “Commercial General
Liability Conditions.” Part 2.a of Section IV provides that the
insured “must see to it that [Nautilus is] notified as soon as
practicable of an ‘occurrence’ or an offense which may result in
a claim.” Doc. 1-3, at 19. Part 2.b requires the insured to
notify Nautilus “as soon as practicable” if “a claim is made or
‘suit’ is brought against any insured.” Id. Section IV, Part
2.c requires the insured to send Nautilus copies of “any
demands, notices, summonses or legal papers received in
connection with the claim or ‘suit’,” to authorize Nautilus to
obtain information about the claim or suit, and to cooperate and
assist Nautilus in the defense against the claim or suit.
Under New Hampshire law, a breach of the notice requirement
in “an occurrence-based liability policy” precludes insurance
coverage only if the breach is substantial. Wilson v.
Progressive N. Ins. Co., 151 N.H. 782, 785 (2005). Three
factors are applied to determine whether a breach is
substantial. Id. Those factors are the length of the delay in
giving notice, the reasons for the delay, and whether the
insurer was prejudiced by the delay. Id.
5 Delay in providing notice, standing alone, does not
establish that the insurer was prejudiced. Id. Instead, the
insurer “must at the very least provide the court with facts
showing prejudice and not merely surmise that it may be
prejudiced because certain events may have occurred in the
abstract during the period of delay.” Id. As such, the insurer
bears the burden of showing that it has suffered prejudice.
Dover Mills P’ship v. Commercial Union Ins. Cos., 144 N.H. 336,
339 (1999).
A. Delay
It is undisputed in this case that Gwinn did not provide
notice to Nautilus of Stanton’s dissatisfaction with his work,
Stanton’s suit against him in state court, or the judgment
entered in state court. Counsel for Stanton notified Nautilus
of the judgment obtained against Gwinn in April of 2018.
Nautilus then attempted, unsuccessfully, to have the default
judgment set aside.
As such, Gwinn never provided notice. Nautilus was
informed of the suit two years after Gwinn knew that Stanton was
dissatisfied with his work and ten months after Stanton filed
suit. Therefore, the delay was significant.
6 B. Reasons for the Delay
Because Gwinn has also defaulted in this case and did not
respond to Nautilus’s motion, he has provided no explanation for
his failure to give notice of Stanton’s claims and suit.
Stanton points to Gwinn’s personal circumstances that were
stated in the state court case to explain Gwinn’s failure to
give notice. Specifically, that Gwinn did not open court
notices because he mistakenly believed that they pertained to
his divorce rather than to Stanton’s suit and that his personal
circumstances made him non-responsive during the suit. Nautilus
submits evidence that Gwinn deliberately chose not to give
notice of the suit to Nautilus.6
Even if Gwinn’s personal circumstances adequately explained
his failure to notify Nautilus, Stanton has not provided reasons
why Gwinn did not notify Nautilus in April of 2016 when he was
given notice of Stanton’s dissatisfaction with his work. There
is no adequate explanation for the delay that supports a basis
for excusing Gwinn’s failure to give timely notice.
6 In objecting to Gwinn’s motion for reconsideration in state court (which was filed on his behalf by Nautilus), Stanton represented that during the state court hearing on periodic payments, held on February 6, 2018, Gwinn “testified that although he had an applicable insurance policy, he had chosen not to put his insurance carrier on notice of this action.” Document 21-2, ¶ 17.
7 C. Prejudice
Nautilus contends that it was prejudiced by Gwinn’s failure
to provide notice because the delay prevented it from responding
to Stanton’s claims. Specifically, due to the delay, Nautilus
lost the opportunity to resolve the matter with Stanton before
suit was brought and then lost the opportunity to present a
defense in the suit. Gwinn defaulted, which resulted in an
uncontested judgment.
Stanton appears to argue that Nautilus cannot claim
prejudice because it did not file a motion to reconsider the
default judgment in state court until five months after it knew
of the suit and the judgment. Stanton does not explain how the
time between notice and Nautilus’s response made any difference
in the outcome. The default judgment had already been entered
against Gwinn, and there is no suggestion that an earlier motion
to reconsider or to set aside the judgment would have been
successful.
Therefore, Nautilus has shown that it was prejudiced by the
delay in receiving notice of Stanton’s claims, suit, and
judgment. See, e.g., Sphere Drake Ins., PLC v. Madrigal Rental,
Inc., 225 Fed. Appx. 498, 499 (9th Cir. 2007); Founders Ins. Co.
v. Richard Ruth’s Bar & Grill LLC, 2016 WL 3189213, at *13-14
(D.S.C. June 8, 2016);
8 D. Result
Nautilus has shown that Gwinn did not provide notice of
Stanton’s dissatisfaction with his work, Stanton’s suit against
him, or the judgment. The delay before Nautilus was informed of
the suit and judgment was significant. In addition, Nautilus
has shown that it was prejudiced by the delay.
Therefore, Nautilus has shown that Gwinn’s breach of his
duty to notify was substantial. That breach precludes insurance
coverage for Stanton’s claims and the default judgment.
Conclusion
For the foregoing reasons, the defendant’s motion for
summary judgment on Counts V and VII (document no. 19) is
granted, which terminates the case.
The clerk of court shall enter judgment accordingly and
close the case.
SO ORDERED.
______________________________ Joseph A. DiClerico, Jr. United States District Judge
December 11, 2018
cc: Michael F. Aylward, Esq. Jaye Rancourt, Esq.