“Excusable Neglect” – Excused

“Excusable Neglect” – Excused

Claims adjusters are some of the busiest people we know. Given the number of claims they handle and their fast paced work environment, it is almost inevitable that a rare mistake will be made. If you or someone in your company happens to allow a default judgment to be entered against an insured, there are some specific arguments that have proven to be successful in getting default judgments overturned.

In one such case, Smith Freed & Eberhard Partner, Ryan McLellan represented an insurance company and their insured (a resort) in a premises liability case. A guest at the resort filed a claim for injuries resulting in an alleged fall due to an improperly placed basket of socks in the resort’s golf store.

The prelitigation adjuster denied the claim and the guest filed suit against the resort. After suit was filed, the claim was assigned to a litigation adjuster. Unfortunately, the litigation adjuster on the claim inadvertently failed to assign counsel on the file and a default judgment was entered against the insured. After realizing that the default judgment had been entered, the insurer assigned the case to Ryan in hopes of getting it overturned. Within one week of getting the assignment, Ryan filed a Motion to Set Aside the Default Judgment arguing that the default was a result of excusable neglect. In the Motion, Ryan emphasized that the default judgment was the result of a subordinate employees failure to follow instructions to get counsel assigned as well as his failure to follow well-established company procedures to avoid default judgments.

Both the trial court and the Court of Appeals found these arguments persuasive and agreed that even in cases involving insurance companies, when a subordinate employee fails to follow a supervisors instructions, and the insurer at issue has established company policies to prevent defaults, a default judgment can be overturned. The trial court also noted that Ryan’s timely filing of the Motion to Set Aside was an important factor in the granting of the motion.