29 Cal. App. 5th 1241
Cal. Ct. App. 5th2018Background
- Four consolidated asbestos personal-injury actions (Mechling, Greely, Barstad, Corns) resulted in default judgments against Associated Insulation of California after Associated failed to respond to complaints. Defaults entered in 2013 and 2015, judgments totaling millions.
- Plaintiffs served Associated but did not serve Fireman’s Fund (an insurer later identified as potentially covering Associated). Associated appears to have ceased operations in 1974 and had suspended corporate status.
- Fireman’s Fund located possible policies after the judgments, retained counsel in February 2016, and in July 2016 moved to set aside the defaults and default judgments on equitable grounds, arguing extrinsic mistake because it never received notice and therefore had no opportunity to defend.
- Plaintiffs opposed, citing a 2012 letter from Fireman’s Fund denying coverage (and asking for policy documentation) as evidence Fireman’s Fund had actual notice earlier; they also criticized Fireman’s Fund for not submitting a proposed pleading or detailed declarations of a defense.
- The trial court granted Fireman’s Fund’s motions, setting aside defaults and judgments on equitable grounds; the court of appeal affirmed, applying the extrinsic mistake framework and reviewing for abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's (Fireman’s Fund) Argument | Held |
|---|---|---|---|
| Whether a nonparty insurer not served may obtain equitable vacatur of default judgments against its insured based on extrinsic mistake | Fireman’s Fund had notice (via its 2012 letter) and failed to show extrinsic mistake, diligence, or a meritorious defense; default should stand | It was not served or otherwise given notice of the suits or defaults, had a satisfactory excuse, acted diligently once it located policies, and can show a meritorious defense warranting a hearing on the merits | Affirmed: court did not abuse discretion in vacating defaults for extrinsic mistake; exceptional circumstances justified relief |
| What showing is required to prove a "meritorious defense" for equitable relief from default | Plaintiffs: Fireman’s Fund needed a proposed pleading or declarations with substantive evidence of a defense | Fireman’s Fund: only a minimal showing is required; retention of counsel and plausible facts suffice to infer a meritorious defense and entitlement to a hearing | Held: minimal showing suffices; court reasonably inferred a meritorious defense from the circumstances and counsel retention |
| Whether Fireman’s Fund provided a satisfactory excuse for failing to defend originally | Plaintiffs: prior 2012 coverage-denial letter shows Fireman’s Fund had notice and cannot claim ignorance | Fireman’s Fund: 2012 letter shows it did not believe Associated was an insured; it was not served with pleadings and had no notice of two of the suits | Held: Fireman’s Fund presented a satisfactory excuse—was not served and had no pre-judgment notice for two suits |
| Whether Fireman’s Fund acted with sufficient diligence once it discovered the defaults | Plaintiffs: Fireman’s Fund failed to state when it learned of defaults and did not promptly intervene | Fireman’s Fund: it located policies, retained counsel in Feb 2016, and moved within months—reasonably diligent under the circumstances | Held: Trial court reasonably found Fireman’s Fund acted with sufficient diligence; relief not an abuse of discretion |
Key Cases Cited
- Rappleyea v. Campbell, 8 Cal.4th 975 (1994) (framework for equitable vacatur of default judgments; extrinsic mistake standard)
- Aldrich v. San Fernando Valley Lumber Co., 170 Cal.App.3d 725 (1985) (equitable relief for defaults; extrinsic mistake analysis)
- In re Marriage of Park, 27 Cal.3d 337 (1980) (minimal showing for meritorious defense to obtain hearing on merits)
- In re Marriage of Stevenot, 154 Cal.App.3d 1051 (1984) (three-pronged extrinsic mistake factors: meritorious defense, excuse, diligence)
- Olivera v. Grace, 19 Cal.2d 570 (1942) (meritorious factor satisfied where facts support that defense would affect outcome)
- Sargon Enterprises, Inc. v. University of Southern California, 55 Cal.4th 747 (2012) (abuse-of-discretion standard of review explained)