From the Desk of Kyle Riley: In this case, the Washington Court of Appeals held that a prevailing party’s intentional delay in collecting on a default judgment or order is not an unfair or deceptive act that waives the one year deadline to vacate a default judgment.
Claims Pointer: Insurers should respond promptly to civil complaints. Failing to properly appear may expose a defendant to a default judgment and vacating that judgment can be very difficult. Washington courts are willing to vacate default judgments, but only in limited circumstances, the facts of which can be difficult to establish, on the part of the party moving to vacate.
Trinity Universal Ins. Co. of Kan. v. Ohio Cas. Ins. Co. in the Court of Appeals of the State of Washington, Division I, No. 67832-9–I, — P3d —- (March 18, 2013).
Philip Riley (“Riley”) was injured while working on a construction project. At the time, Riley was employed by Cascade Construction (“Cascade”), a subcontractor on the project. Cascade was insured by Trinity Universal Insurance (“Trinity”). Riley sued the project’s general contractor, Millennium Building (“Millennium”). Millennium tendered defense of the lawsuit to its insurer, Ohio Casualty Insurance (“Ohio”). Ohio then tendered the defense to Trinity, claiming that Millennium was an additional insured under the policy Trinity issued to Cascade. Trinity accepted tender in January 2009, then attempted to tender the defense back to Ohio, in August 2009. Ohio refused to accept the retender. Trinity continued to defend Millennium, eventually settling with Riley for $225,000.
Trinity then sued Ohio for subrogation, equitable contribution, insurer bad faith, and statutory claims under the Consumer Protection Act and Insurance Fair Conduct Act. Ohio failed to appear or file an answer and Trinity was awarded a default judgment. The total judgment was $764,271, which included trebled damages, defense costs, and attorney fees. Trinity strategically waited 1 year and 5 days to attempt to collect on the judgment. After learning of the judgment, Ohio moved to vacate the judgment on numerous grounds, essentially arguing that because it was not properly served, its failure to appear was inadvertent. That motion was denied, and Ohio appealed.
On review, the Court of Appeal looked to CR 60(b)(1), Washington’s rule on vacating default judgment. Under that rule, a defendant moving to vacate a judgment must prove four factors: (1) its failure to appear was due to mistake, inadvertence, surprise, or excusable neglect; (2) there is substantial evidence supporting a prima facie defense; (3) it acted with due diligence after notice of the default judgment; and (4) vacating the default judgment would not cause the plaintiff substantial hardship. A CR 60(b) motion must be brought within one year after the default order or judgment is entered.
The Court rejected Ohio’s argument that, because Trinity purposefully delayed executing on the judgment, the motion should be vacated. Even though Trinity waited over a year to collect the judgment, in order to gain a procedural advantage, doing so was not unfair or deceptive. It was Ohio’s responsibility to file a motion to vacate judgment within one year of the default order. Without such a motion, Ohio’s arguments were time barred. The Court did dismiss the statutory claims and attorney fees, because there was not evidence that the insured had assigned the claims to Trinity and without evidence of an assignment, the court lacked subject matter jurisdiction to enter this portion of the judgment.
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