Set Aside of Default Judgment Against Insurer Affirmed on Grounds of Equity Court of Appeal, First District, Division 5, California, December 11, 2018

CALIFORNIA — Several plaintiffs consolidated suit against multiple defendants including Associated Insulation of California (Associated) alleging exposure to asbestos for which the defendants were liable. Associated did not file a response to the complaint. Accordingly, the plaintiffs moved for default judgments in 2013 and again in 2015. The default judgments varied in amounts from $350,000 to $1,960,458. A notice of default had been served upon Associated but not its insurer, Fireman’s Fund (Fireman). Fireman shortly thereafter located policies indicating potential coverage and moved to set aside the default judgments on grounds of “extrinsic mistake”. The plaintiffs opposed Fireman’s request for equity. The trial court granted Fireman’s motion on the grounds of extrinsic relief.

The court started of its analysis by setting the standard for vacating a default judgment on equitable grounds. One ground includes extrinsic mistake “a term broadly applied when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits.” To establish the right to equitable relief under extrinsic mistake, a party must establish 1) a meritorious case 2) a satisfactory excuse for not presenting a defense to the original action and 3) a diligence in seeking to set aside the default once the fraud or mistake has been discovered.” The court quickly concluded that the trial court had not abused its discretion by granting the motion to set aside. Here, the court noted that Fireman and Associated had not defended the suit and that the allegations of exposure occurred years ago. Moreover, the default judgments were in excess of a million dollars without the plaintiff having established the plaintiff’s injuries. The plaintiffs took the position that Fireman had not attached anything to its pleadings to assert a meritorious defense. Case law was cited by the plaintiff for this proposition which the court rejected. On the other hand, Fireman gave a satisfactory reason for why it had not presented a defense and established diligence in attempting to set aside the judgment once it had been ascertained. Accordingly, the court was convinced of the exceptional circumstances creating the need for a set aside. Consequently, the set aside was affirmed.

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