From the desk of Kyle Riley: When a default judgment has been entered, the defaulted party is obligated to pay the amount of the judgment unless they are able to set aside the judgment. In most cases, the amount of the default judgment is the full amount of the damages sought by the plaintiff in the complaint. So, what happens when the complaint does not contain any allegation as to the amount of damages sought by the plaintiff? Recently, the Oregon Court of Appeals addressed whether a default judgment predicated on a complaint without a specific damages allegation, was valid. Relying on its prior interpretation of ORCP 67C, the Court of Appeals held that the trial court did not have jurisdiction to enter a default judgment in any amount when the complaint did not contain any specific damages allegations and the non-appearing defendant was not provided reasonable notice and an opportunity to be heard.
Claims Pointer: A default judgment based on a complaint which does not contain an allegation as to the specific amount of damages sought is void.
Portland General Elec. Co v. Ebasco Services, Inc., in the Court of Appeals of the State of Oregon (Case No. A143752, February 8, 2012).
After settling a personal injury claim involving asbestos exposure at one of its plants, PGE sued its insurance carriers for breaching their policies by refusing to indemnify PGE with regard to this claim. One of PGE’s insurers, Lexington Insurance Company, contracted to provide a 16% share of an excess liability policy which provided coverage of up to $5,000,000. Thus, Lexington’s maximum exposure under this policy was $800,000.
In its complaint, PGE alleged that it settled the personal injury claim for a “reasonable amount.” The complaint did not contain any allegation or damage prayer stating how much money PGE was seeking in this lawsuit. The complaint did reference the $5,000,000 excess liability policy which was attached to the complaint. However, the complaint did not allege that PGE was seeking damages in the amount of the full limits of coverage available under the policy.
After Lexington failed to timely appear in the case, PGE moved for entry of a limited judgment against Lexington in the amount of $800,000, plus costs and attorney fees. The trial court granted PGE’s motion and entered a default judgment against Lexington. After Lexington unsuccessfully attempted to set aside the default judgment at the trial court level, it filed an appeal seeking vacation of the default judgment.
On appeal, Lexington argued that the trial court lacked jurisdiction to enter a default judgment because PGE’s complaint did not contain an allegation as to the amount of damages it was seeking. Previously, in Montoya v. Housing Authority of Portland, 192 Or App 408, 416 (2004), the Court of Appeals held that, under ORCP 67C, default judgments are void to the extent the judgment awards damages exceeding those sought in the complaint unless reasonable notice and an opportunity to be heard is provided. ORCP 67C provides the following:
“Every judgment shall grant the relief to which the party in whose favor it is rendered is entitled. A judgment for relief different in kind or exceeding the amount prayed for in the pleadings may not be rendered unless reasonable notice and an opportunity to be heard are given to any party against who judgment is to be entered.”
Lexington submitted that the judgment was void because PGE’s complaint did not seek any damages and no notice was provided before entry of the Judgment. In response, PGE argued that the complaint’s reference to the attached policy which provided that its policy limits were $5,000,000 was a sufficient allegation as to the amount of damages it was seeking because Lexington knew that it was responsible for 16% of the coverage available under the policy.
The Court of Appeals agreed with Lexington and found that PGE’s reference to the policy was not sufficient when PGE did not allege that it was seeking the full limits of coverage available under the policy. Relying on its interpretation of ORCP 67C in Montoya, the Court held that the default judgment against Lexington was void because PGE failed to allege a specific amount of damages in its complaint and no notice was provided to Lexington.
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