N. Mgmt. Servs., Inc. v. Navigators Specialty Ins. Co.

• Decision Date: 22 June 2022
• Docket Number: Case No. 2:21-cv-00194-DCN
• Citation: 608 F.Supp.3d 996
• Parties: NORTHERN MANAGEMENT SERVICES, INC., Plaintiff, v. NAVIGATORS SPECIALTY INSURANCE CO., Defendant.
• Court: U.S. District Court — District of Idaho

608 F.Supp.3d 996

NORTHERN MANAGEMENT SERVICES, INC., Plaintiff,

v.NAVIGATORS SPECIALTY INSURANCE CO., Defendant.

Case No. 2:21-cv-00194-DCN

United States District Court, D. Idaho.

Signed June 22, 2022

Ethan M. Knott, Pro Hac Vice, Shattuck Ely, Pro Hac Vice, Fellows LaBriola LLP, Atlanta, GA, Peter J. Smith, IV, Smith + Malek, PLLC, Coeur d'Alene, ID, for Plaintiff.

A. Dean Bennett, Zachary Shane Zollinger, Holland and Hart LLP, Boise, ID, for Defendant.

MEMORANDUM DECISION AND ORDER

David C. Nye, Chief United States District Court Judge

I. INTRODUCTION

Pending before the Court is Defendant Navigators Specialty Insurance Co.’s Motion for Judgment on the Pleadings (the "Motion"). Dkt. 27. The Court held a hearing on the Motion on May 24, 2022, and took it under advisement. Now, for the reasons stated below, the Court GRANTS the Motion.

II. BACKGROUND

Northern Management Services, Inc. ("Northern Management") provides building management services to various federal entities, including federal courts. In an underlying lawsuit, Donald Russell sued Northern Management after he fell twenty feet through a grate atop a federal courthouse in Virginia.¹ Northern Management did not make an appearance in the case, so Russell moved for default judgment. The court granted default judgment and conducted a trial on damages. The jury awarded over five million dollars to Russell, plus pre- and post-judgment interest, and then that award was reduced to match the ad damnum clause in Russell's complaint. Russell then attempted to execute his judgment, which prompted Northern Management to make a belated appearance. Northern Management attempted, and failed, to set aside the default and vacate the judgment.

After failing to vacate the judgment, Northern Management filed a claim for coverage with its excess insurer, Navigators Specialty Insurance Co. ("Navigators"). Having no notice of the underlying lawsuit until this late juncture, Navigators denied Northern Management's claim.

Northern Management then filed the instant lawsuit against Navigators, bringing a single claim for breach of contract. On February 11, 2022, Navigators filed a Motion for Judgment on the Pleadings. Dkt. 27.

In its Motion, Navigators contends that it properly denied coverage because Northern Management did not satisfy the notice provisions of the excess insurance policy. The relevant provisions of the policy are stated below:

6. Duties When There is an "Event," Claim or Suit

a. You must see to it that we and any other insurers who could provide coverage are notified as soon as practicable of any "event" which may be reasonably expected to result in a claim under this policy. To the extent possible, notice should include:

i. how, when and where the "event" took place;

ii. the names and addresses of any injured persons and witnesses; and

iii. the nature and location of any injury or damage arising out of the "event."

b. If a claim is made or a suit is brought against any insured which may be reasonably expected to result in a claim under this policy, you must:

i. immediately record the specifics of the claim or suit and the date received; and

ii. notify us, and any other insurers who could provide coverage, as soon as practicable.

c. You and any other involved insured must:

i. immediately send us, and any other insurers who could provide coverage, copies of any demands, notices, summonses or legal papers received in connection with a claim or suit which may be reasonably expected to result in a claim under this policy;

ii. authorize us to obtain records and other information;

iii. cooperate with us in the investigation or settlement of the claim, issues relating to coverage under this policy or defense against the suit; and

iv. assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of the injury or damage to which this insurance may apply.

Dkt. 27-3, at 7 (Policy § 4, condition 6).²

Northern Management does not dispute the terms of the policy or that it was late in giving notice. Instead, Northern Management's entire case is predicated on the argument that Navigators had to show that it was prejudiced by Northern Management's untimely notice.

In the Motion, Navigators contends that Idaho law does not require a showing a prejudice.³ Northern Management argues in response that excess insurers must show prejudice and, in the alternative, requests certification of the question to the Idaho Supreme Court.

III. LEGAL STANDARD

A. Rule 12(c)

Rule 12(c) of the Federal Rules of Civil Procedure states: "After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." The standard governing a Rule 12(c) motion for judgment on the pleadings is "functionally identical" to that governing a Rule 12(b)(6) motion. United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc. , 637 F.3d 1047, 1054 n.4 (9th Cir. 2011). "For purposes of the motion, the allegations of the non-moving party must be accepted as true, while the allegations of the moving party which have been denied are assumed to be false." Hal Roach Studios, Inc. v. Richard Feiner & Co. , 896 F.2d 1542, 1550 (9th Cir. 1989). "Judgment on the pleadings is proper when the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law." Id. "However, judgment on the pleadings is improper when the district court goes beyond the pleadings to resolve an issue; such a proceeding must properly be treated as a motion for summary judgment." Id.

"When considering a motion for judgment on the pleadings, this court may consider facts that ‘are contained in materials of which the court may take judicial notice.’ " Heliotrope Gen., Inc. v. Ford Motor Co. , 189 F.3d 971, 981 n.18 (9th Cir. 1999) (citation omitted). "A court may take judicial notice of ‘matters of public record,’ " such as court documents. Lee v. City of Los Angeles , 250 F.3d 668, 689 (9th Cir. 2001) (quoting Mack v. S. Bay Beer Distribs., Inc. , 798 F.2d 1279, 1282 (9th Cir. 1986) ).

As with traditional motions to dismiss, if a court grants a motion for judgment on the pleadings, leave to amend should be granted unless "the Court is satisfied that an amendment could not cure the deficiency." Harris v. Cnty. of Orange , 682 F.3d 1126, 1135 (9th Cir. 2012).

B. Certification to the Idaho Supreme Court

Idaho Appellate Rule 12.3 provides that a United States District Court may certify a question of law to the Idaho Supreme Court if two conditions are met: (1) the question certified is a controlling question of law in the pending action as to which there is no controlling precedent in the decisions of the Idaho Supreme Court; and (2) the immediate determination of Idaho law with regard to the certified question would materially advance the orderly resolution of the litigation in the United States Court. Idaho App. R. 12.3(a) ; see also White v. Valley Cnty. , 2012 WL 13018504, at *1 (D. Idaho Aug. 10, 2012).

Certification is generally beneficial to assure that state law will be applied uniformly and in accordance with the interpretations given by each state's high court, state courts will have the benefit of having the final say on a matter of state law, and federal courts can avoid the difficult task of attempting to divine how a state court would rule on a matter of state law. See Lehman Bros. v. Schein , 416 U.S. 386, 391, 94 S.Ct. 1741, 40 L.Ed.2d 215 (1974) (noting that certification "does, of course, in the long run save time, energy, and resources and helps build a cooperative juridical federalism").

"Use of the certification procedure in any given case ‘rests in the sound discretion of the federal court.’ "

Micomonaco v. Washington , 45 F.3d 316, 322 (9th Cir. 1995) (quoting Lehman Bros. , 416 U.S. at 391, 94 S.Ct. 1741 ).

IV. ANALYSIS

Idaho law does not require that an insurer show prejudice before denying a claim. Viani v. Aetna Ins. , 95 Idaho 22, 501 P.2d 706, 712 (Idaho 1972), overruled in part and on other grounds by Sloviaczek v. Estate of Puckett , 98 Idaho 371, 565 P.2d 564 (1977). Northern Management argues that this rule applies only to primary insurers, and that it is a matter of first impression whether Idaho requires an excess insurer to show prejudice. Northern Management argues that this Court should hold Idaho law requires a showing of prejudice or, alternatively, should certify the question to the Idaho Supreme Court.

On the other hand, Navigators argues that controlling Idaho precedent regarding late notice and prejudice applies equally to primary and excess insurers. As Navigators sees it, the Idaho Supreme Court had a contract-based rationale rather than a policy-based rationale when it rejected the prejudice rule of other jurisdictions, and the contract-based rationale does not support any distinction between primary and excess insurers.

The Idaho Supreme Court held in Viani that notice provisions are a condition precedent to insurance coverage, and therefore the insurer could deny coverage on that basis without also needing to demonstrate prejudice. Id. " Viani remains the law in Idaho concerning the issue of notice and the required showing when an insured does not comply with the notice provisions of an insurance policy." Blue Cross of Idaho Health Serv. v. Atl. Mut. Ins. , 2011 WL 162283, at *13 n.12 (D. Idaho January 19, 2011). Under Viani , "prejudice to the insurer [is] irrelevant." Id. at *21 (citing Viani , 501 P.2d 706 ).

Viani reaffirmed "the rule originally announced by [the Idaho Supreme Court] in Berg v. Associated Employers' Recip. and Ill. Indem. Exch. , 47 Idaho 386, 279 P. 627 (1929)." Viani , 501 P.2d at 714. In Berg , the Idaho Supreme Court held, "At least a reasonable or substantial compliance with the provisions of the contract relating to the furnishing of the information therein is a condition precedent to...