UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Nautilus Insurance Co.

v. Civil No. 18-cv-633-JD Opinion No.

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.,

(1st Cir. 2017) (internal quotation marks omitted); Flood v.

Bank of Am. Corp.,

(1st Cir. 2015). The facts and

reasonable inferences are taken in the light most favorable to

the nonmoving party. McGunigle v. City of Quincy,

(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.”

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.,

(2005). Three

factors are applied to determine whether a breach is

substantial.

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.

5 Delay in providing notice, standing alone, does not

establish that the insurer was prejudiced.

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.”

As such, the insurer

bears the burden of showing that it has suffered prejudice.

Dover Mills P’ship v. Commercial Union Ins. Cos.,

(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.,

(9th Cir. 2007); Founders Ins. Co.

v. Richard Ruth’s Bar & Grill LLC,

, 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.

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