{"id":895479,"date":"2019-01-31T10:17:08","date_gmt":"2019-01-31T17:17:08","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895479"},"modified":"2019-01-31T10:17:16","modified_gmt":"2019-01-31T17:17:16","slug":"inability-to-confirm-coverage-supports-setting-aside-insureds-default-judgment-on-grounds-of-extrinsic-mistake","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/inability-to-confirm-coverage-supports-setting-aside-insureds-default-judgment-on-grounds-of-extrinsic-mistake\/","title":{"rendered":"Inability to Confirm Coverage Supports Setting Aside Insured\u2019s Default Judgment on Grounds of Extrinsic Mistake"},"content":{"rendered":"\n

Christopher Kendrick and Valerie A. Moore | Haight Brown & Bonesteel<\/a> | December 17, 2018<\/p>\n\n\n\n

In Mechling v. Asbestos Defendants<\/em> (No. A150132, filed 12\/11\/18), a California appeals court affirmed the trial court\u2019s grant of an insurer\u2019s motion to set aside default judgments entered against its defunct insured pursuant to the trial court\u2019s inherent, equitable power to set aside defaults on the ground of extrinsic mistake, thereby allowing the insurer to intervene and defend its own interests in the case.<\/p>\n\n\n\n

In Mechling<\/em>, Fireman\u2019s Fund insured Associated Insulation of California, which was named as a defendant in asbestos litigation filed in 2009. Associated had ceased operating in 1974, but was somehow successfully served with the complaint and defaulted, leading to default judgments of several million dollars. Notice of the judgments was served on Associated but not Fireman\u2019s Fund.<\/p>\n\n\n\n

After entry of the default judgments, Fireman\u2019s Fund located insurance policies it thought might cover Associated. Fireman\u2019s Fund moved to set aside the defaults and default judgments on equitable grounds, arguing that the litigation presented a classic case of \u201cextrinsic mistake\u201d because service of the complaint on Associated did not provide notice to Fireman\u2019s Fund, \u201cresulting in a default judgment to a fault free party.\u201d According to Fireman\u2019s Fund, Associated was a suspended corporation and \u201ccould not and did not defend itself\u201d and, as a result, Fireman\u2019s Fund \u201cnever had the opportunity to participate in [the] lawsuit.\u201d<\/p>\n\n\n\n

Although the plaintiffs had given notice to Fireman\u2019s Fund for two of the four lawsuits, they ignored the fact that Fireman\u2019s Fund had responded by writing that it could not locate any policies covering Associated. Instead, the plaintiffs argued that Fireman\u2019s Fund could not claim ignorance and seek equitable relief without any showing of extrinsic mistake or diligence.<\/p>\n\n\n\n

The trial court granted Fireman\u2019s Fund\u2019s motion to set aside, and the appeals court agreed. The court said that a trial court has inherent power to vacate a default judgment on equitable grounds, including extrinsic mistake\u2014which is when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits. The court stated that:<\/p>\n\n\n\n

\u201cTo qualify for equitable relief based on extrinsic mistake, the defendant must demonstrate: (1) a meritorious case; (2) a satisfactory excuse for not presenting a defense to the original action; and (3) diligence in seeking to set aside the default once the fraud or mistake had been discovered.\u201d (Citing In re Marriage of Stevenot<\/em> (1984) 154 Cal.App.3d 1051.)<\/p>\n\n\n\n

The Mechling<\/em> court said that a meritorious case does not require showing certainty of success, but only \u201cfacts indicating a sufficiently meritorious claim to entitle it to a fair adversary hearing.\u201d And the court found that it was a reasonable inference from the facts that the plaintiffs\u2019 damages award would have been impacted had Fireman\u2019s Fund presented a defense and challenged plaintiffs\u2019 proof of causation and damages.<\/p>\n\n\n\n

The court rejected an argument that showing a meritorious case required attaching a proposed pleading in intervention or a declaration with \u201cevidence\u201d showing a meritorious defense. The court accepted Fireman\u2019s Fund\u2019s arguments as sufficient and stated that Fireman\u2019s Fund would obviously file a responsive pleading if granted a set aside.<\/p>\n\n\n\n

The Mechling<\/em> court also found that Fireman\u2019s Fund had articulated a satisfactory excuse for not presenting a defense to the lawsuits. It was not a named party and was not served with the complaints or other relevant pleadings. Although it had received notice, it had notified the plaintiffs that it had \u201csearched all available records\u201d and had \u201cnot located any reference or policies of insurance issued to Associated.\u201d Fireman\u2019s Fund had invited the plaintiffs to provide information showing Fireman\u2019s Fund issued insurance policies to Associated, but they did not respond. The court found that Fireman\u2019s Fund\u2019s letter to the plaintiffs supported the conclusion that Fireman\u2019s Fund had a satisfactory excuse for not defending the lawsuits: \u201cIt did not believe Associated was its insured.\u201d<\/p>\n\n\n\n

Thus, the court affirmed the order setting aside the default judgments, stating that: \u201cIn our view, this case presents exceptional circumstances warranting equitable relief. Fireman\u2019s Fund was denied an opportunity to present its case in court because it was not served with any of the relevant pleadings, did not have notice of two of the lawsuits, and did not believe it had a duty to defend Associated. We conclude the trial court did not abuse its discretion by granting Fireman\u2019s Fund\u2019s motion for equitable relief.\u201d<\/p>\n\n\n\n

This document is intended to provide you with information about insurance law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.<\/p>\n\n\n\n


<\/p>\n","protected":false},"excerpt":{"rendered":"

Christopher Kendrick and Valerie A. Moore | Haight Brown & Bonesteel | December 17, 2018 In Mechling v. Asbestos Defendants (No. A150132, filed 12\/11\/18), a California appeals court affirmed the trial court\u2019s grant of an insurer\u2019s motion to set aside default judgments entered against its defunct insured pursuant to the trial court\u2019s inherent, equitable power to set… Continue reading Inability to Confirm Coverage Supports Setting Aside Insured\u2019s Default Judgment on Grounds of Extrinsic Mistake<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9914],"tags":[9895,34,10724,10593],"class_list":["post-895479","post","type-post","status-publish","format-standard","hentry","category-insurance-coverage","tag-advise-consult","tag-asbestos","tag-extrinsic-mistake","tag-insurance-coverage-disputes","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nInability to Confirm Coverage Supports Setting Aside Insured\u2019s Default Judgment on Grounds of Extrinsic Mistake - 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