Atlantic Casualty Insurance v. Greytak, 350 P.3d 63

GTL was sued by Greytak in Montana state court; Greytak asserted counterclaims for construction defects. GTL was insured by Atlantic Casualty under a CGL policy.
GTL and Greytak entered a settlement agreement in April 2011 that contemplated notice to Atlantic and permitted a stipulated judgment if Atlantic did not appear or file a declaratory action.
GTL notified Atlantic on May 23, 2011; Greytak separately notified Atlantic on August 5, 2011. Atlantic filed a federal declaratory-judgment action on January 23, 2012, seeking a ruling that it had no duty to defend or indemnify due to untimely notice.
The District Court granted summary judgment to Atlantic, holding the policy’s "as soon as practicable" notice clause was a condition precedent and that Montana law did not require Atlantic to show prejudice from late notice.
The Ninth Circuit certified the question to the Montana Supreme Court: whether an insurer who does not receive timely notice must demonstrate prejudice to avoid defense and indemnification of the insured.
Montana Supreme Court answered: yes — an insurer must prove prejudice from lack of timely notice before avoiding defense or indemnification; the Court did not resolve whether Atlantic was actually prejudiced on these facts.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an insurer who does not receive timely notice under the policy must demonstrate prejudice before denying defense/indemnity for a third-party claim	Greytak (third-party claimant) argued an insurer should bear the burden to show prejudice (or that untimely notice should not automatically bar coverage)	Atlantic argued the policy’s notice provision is a condition precedent and untimely notice alone can bar coverage without a showing of prejudice	Held: Yes. Under Montana law an insurer who did not receive timely notice must demonstrate prejudice from the lack of notice to avoid defense and indemnification
Whether the certified question required the Court to decide whether Atlantic was actually prejudiced here	Greytak argued Atlantic was not prejudiced and therefore cannot avoid coverage	Atlantic argued its defenses and factual record show prejudice	Held: The Court declined to decide the factual prejudice question as part of the certified legal question (left merits of prejudice inquiry to the lower courts)

Steadele v. Colony Ins. Co., 361 Mont. 459, 260 P.3d 145 (Mont. 2011) (policy notice requirement construed in light of insurer prejudice; insurer found prejudiced where it received notice only after entry of large default judgment)
Sorensen v. Farmers Ins. Exch., 279 Mont. 291, 927 P.2d 1002 (Mont. 1996) (adopted no-prejudice rule for underinsured motorist coverage; barred denial on technical ground absent material prejudice)
State Farm Mut. Ins. Co. v. Murnion, 439 F.2d 945 (9th Cir. 1971) (applying Montana law: notice is a condition precedent but insured may prove timeliness or excuse for delay)
Newman v. Scottsdale Ins. Co., 370 Mont. 133, 301 P.3d 348 (Mont. 2013) (insurer waives reliance on lack of notice if it relies on other grounds to deny coverage)
Estate of Gleason v. Central United Life Ins. Co., 379 Mont. 219, 350 P.3d 49 (Mont. 2015) (applied notice-prejudice rule in first-party context)
BNSF Ry. Co. v. Cringle, 359 Mont. 20, 247 P.3d 706 (Mont. 2010) (equitable application of procedural limits; cited for equitable principles supporting notice-prejudice inquiry)