Granite State Insurance Company v. Rainier Arms LLC

Background

Granite State Insurance Company brought this declaratory judgment action against Rainier Arms LLC. Granite State sought a declaration that commercial general-liability policies issued to Rainier between 2008 and 2022 did not require Granite State to defend or indemnify Rainier against claims asserted in three related federal lawsuits: the New York Action, the Buffalo Action, and the Rochester Action. Those lawsuits concern allegations that defendants improperly sold or shipped “ghost guns” into New York and contributed to gun violence and related injuries.

The complaint was filed on August 29, 2023, and Rainier was served on August 31, 2023. After Rainier did not respond, Granite State filed a certificate of default, which the Clerk entered on October 4, 2023. The court then directed Granite State to seek default judgment by October 24, 2023.

Rainier’s request

Rainier filed a letter-motion under Federal Rule of Civil Procedure 55(c), which allows a court to set aside an entry of default for “good cause.” Rainier said its failure to respond was not deliberate: it mistakenly believed that the related lawsuits’ stays meant that this insurance case did not require a response. Rainier said it promptly retained counsel after learning that an appearance was required.

Rainier also argued that Granite State would not be prejudiced by setting aside the default. According to Rainier, discovery had not begun in the related lawsuits, and the insurance case depended on information from those proceedings. Granite State did not consent to vacating the default but indicated that it did not oppose Rainier’s application.

Rainier further asserted a potentially complete defense. It argued that an insurer’s duty to defend is broader than its duty to indemnify and may apply when allegations potentially fall within policy coverage. Rainier disputed Granite State’s positions that the underlying lawsuits did not allege an accidental “occurrence,” covered bodily injury, damages within the policy periods, or damages rather than only injunctive relief. These were Rainier’s arguments supporting relief from default, not a final ruling on whether the policies provided coverage.

Ruling

The court granted Rainier’s letter-motion to vacate the entry of default. The court directed Rainier to respond to the complaint on or before November 3, 2023. The court denied the pending motion for default judgment without prejudice as moot. The order therefore addressed Rainier’s default and the default-judgment request; it did not decide the underlying insurance-coverage dispute.