California Court Remands Grant of Relief from Default Judgment California Court of Appeals, February 19, 2019

CALIFORNIA — In 2010, Donna O’Balle filed a complaint against numerous defendants alleging personal injuries from exposure to asbestos dating back to the 1980’s. Associated Insulation of California, Inc. (Associated), one of the defendants, was served, but did not respond, having gone out of business long before. O’Balle filed a request for entry of default against Associated. Almost a year later, O’Balle sent notice of the suit to Fireman’s Fund, seeking coverage on behalf of Associated. Fireman’s Fund was unable to locate any policy it had issued to Associated and therefore denied coverage. A default judgment of $2.2 million was entered against Associated.

Approximately three years after denying coverage, Fireman’s Fund located a policy it had issued to Associated. It then set about seeking to repair litigation against Associated in hundreds of asbestos lawsuits, including O’Balle’s. The trial court in O’Balle’s case granted relief from the default judgment on “equitable principles”, but did not elaborate further. O’Balle appealed, arguing that there were no equitable grounds to set aside the default judgment.

On appeal, the court could not determine from the record when Fireman’s Fund had discovered the policy it issued to Associated and therefore whether Fireman’s Fund had demonstrated “diligence in seeking to set aside the default once [the policy was] discovered.” As a result, the court remanded the matter to the trial judge for an explanation of how the judge had exercised discretion in granting Fireman’s Fund’s motion for relief from the default judgment.

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