[¶ 1.] In this appeal we hold that the release of a tortfeasor does not preclude an injured party from pursuing underin-sured benefits from its insurance carrier. We also hold that the trial court abused its discretion in refusing to set aside a default judgment.
FACTS
[¶ 2.] On November 21, 1998, Anthony McCord failed to stop at a flashing red light and collided with another vehicle. Chad Meier, his passenger, was injured. It is undisputed that McCord’s negligence was the sole cause of the accident. Therefore, liability was not disputed. The parties do dispute the amount of monetary damages Meier should receive.
*479 [¶ 3.] During the summer of 1999, Meier served a summons and complaint on McCord seeking personal injury damages. However, he did not file his lawsuit with the clerk of courts at that time. McCord, through his attorney, engáged in settlement negotiations with Scott Hoy, Meier’s attorney. As a result of these negotiations, McCord settled with Meier for $25,000, which equaled the policy limits of his liability policy. During this time, Hoy also notified Meier’s insurance carrier, Western National Mutual Insurance Company, of Meier’s lawsuit against McCord and of the $25,000 offer. Western National consented to the settlement and the • release of McCord.
[¶4.] Hoy informed Western National that Meier would seek benefits under his underinsured motorist coverage because the $25,000 settlement with McCord did not fully compensate Meier for his damages. On August 31, 1999, Mel Schwartz, who was Western National’s adjuster for this file, sent Hoy a letter stating that the company believed the settlement with McCord adequately compensated Meier for his injuries and that it would not offer additional monies from Meier’s underin-sured motorist benefits.
[¶ 5.] On September 7, 1999, Meier released McCord from all liability arising out of the accident. By mistake, Hoy sent the original release to Schwartz who received it on September 10,1999 and returned it to Hoy on September 13, 1999. Hoy claims the release allowed Meier to settle with McCord while permitting Meier to pursue the underinsured motorist claim against Western National.
[¶ 6.] In addition to correspondence, Hoy’s office spoke with Schwartz several times between August 31, 1999 and September 15, 1999 discussing Meier’s claim for underinsured motorist benefits under his Western National policy. The parties dispute the exact content of these conversations. Hoy contends Schwartz ultimately decided, on behalf of Western National, that the company would make no offer to Meier for underinsured motorist coverage and that it would not defend the suit. Western National argues that the only communication Schwartz made to Hoy’s office was that Western National denied Meier’s claim for underinsured motorist benefits.
[¶ 7.] Two days after the last conversation, Meier filed the original summons and complaint against McCord with the clerk of courts. On December 3, 1999, Hoy filed Meier’s motion for default judgment against McCord and mailed it to Western National. The very same day, the trial judge, without a hearing, granted default judgment in favor of Meier for $125,000. Although aware that the pleadings had been served on McCord, Western National did not receive notice of the filing of the lawsuit or the motion for default judgment until after the circuit court signed the default judgment. Western National contends it was entitled to notice of Meier’s intent to take default judgment against McCord and that Meier’s post default judgment notice did not provide adequate notice.
[¶ 8.] Upon being served with the judgment, Western National moved the trial court to set it aside. The trial court initially conducted a hearing, where he received affidavits and heard counsels’ respective arguments, which led him to direct a subsequent hearing for the purpose of resolving material conflicts between the affidavits provided by each party. After the second hearing, he concluded Schwartz purposefully misrepresented the facts in his initial affidavit and decided to disregard his testimony. The trial court denied Company’s motion to set aside the default judgment. Company appeals claiming: (1) the trial court *480 erred when it entered default judgment against McCord, a party previously released from liability; (2) it was entitled to notice of Meier’s intent to take default judgment; and (3) its failure to answer the complaint constitutes excusable neglect.
STANDARD OF REVIEW
[¶ 9.] Review of a grant or denial of a motion to set aside a default judgment is well settled. A party may obtain relief from a final judgment upon a showing of good cause. SDCL 15-6-55(c). We review a trial court’s decision concerning a default judgment under the abuse of discretion standard remembering that the trial court should exercise its discretion “liberally in accord with legal and equitable principles in order to promote the ends of justice.”
In re Estate of Nelson,
DECISION
[¶ 10.] 1. Release of the actual tortfea-sor does not preclude pursuit of un-derinsured motorist benefits.
[¶ 11.] Initially, Western National argues that Meier could not take a default judgment against McCord because he had been previously fully released from any liability arising out of the accident. Although this argument seems logical, it is contrary to South Dakota law. Further, it is not customary practice in the insurance industry in situations involving both a liability insurer and the injured party’s unde-rinsurer. Finally, under the facts of this case, it is disingenuous for Western National to advance this argument.
[¶ 12.] SDCL 58-11-9.4 requires all liability insurance policies sold in South Dakota to provide underinsured motorist coverage. Payments of underinsured motorist benefits are governed by SDCL 58-11-9.5, which provides:
Subject to the terms and conditions of such underinsured motorist coverage, the insurance company agrees to pay its own insured for uncompensated damages as its insured may recover on account of bodily injury or death arising out of an automobile accident because the judgment recovered against the owner of the other vehicle exceeds the policy limits thereon. Coverage shall be limited to the underinsured motorist coverage limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against.
(emphasis added). Furthermore, SDCL 58-11-9.6 states:
The issuer of the underinsured motorist coverage is subrogated to any amounts the insurer so pays and, upon payment, has an assignment of the judgment against the other party to the extent of the money paid. Refusal of the issuer of the underinsured motorist coverage to waive its statutory right of subrogation does not constitute bad faith. A liability insurer may pay the limits of the liability policy it issued without obtaining a complete release on behalf of its insured. Such payment does not abrogate any continuing duty to defend and does not constitute bad faith.
These statutes simply require the underin-surer to pay benefits to its insured for the amount of damages, if any, that exceeds the recovery from the liability insurer up to its policy limits. SDCL 58-11-9.6 grants *481 the underinsurer a statutory right of sub-rogation against the tortfeasor in the amount the underinsurer pays. The liability insurer has a continuing duty to defend until it obtains a complete release on behalf of its insured. SDCL 58-11-9.6.
[¶ 13.] This Court has recognized that before the liability insurer obtains a release for its insured it actively represents the same interests as the underin-surer, which is to minimize the recovery against its insured.
Weimer v. Ypparila,
[¶ 14.] Most important to the disposition of this issue is the contradiction between what Western National argues on appeal and what its adjuster, Schwartz, testified to at the second hearing. On appeal the company contends it believed the matter was resolved because it had received Meier’s release of McCord. This argument stands in stark contrast to Schwartz’s testimony. On cross-examination the following exchange occurred between Hoy and Schwartz:
Q: Now, what is the purpose of a Schmidt release as you understand it?
A: The purpose of a Schmidt release in the state of Minnesota is to notify there may be an underinsured motorist claim.
Q: And did you okay a Schmidt release to be signed by the plaintiff?
A: Yes.
Q: And that means that as far as the underinsured carrier goes the claim is still open as far as you understand how things are handled in Minnesota?
A: As I understand it, yes.
Q: And do you think that’s also true in South Dakota?
A: I treated it as the same notice of notification of procedure.
Q: Okay. So you would have-would agree with me then that at the time you okayed that Schmidt release you knew that Atlanta Casualty was going to pay their $25,000 minimum, and the claim was still left open as far as any potential claim with Western National?
A: There may be a potential underin-sured motorist claim.
Clearly, Schwartz, after eighteen years in the business of insurance, was familiar with this practice in the insurance industry. We have often stated that parties may not claim a “better version” of the facts on appeal than they testified to below.
Vaughn v. John Morrell & Co.,
[¶ 15.] 2. Refusal to set aside default judgment was an abuse of discretion.
[¶ 16.] The trial court rejected Schwartz’s testimony and subsequently refused to set aside the default judgment because it found he purposefully misrepresented the facts in his initial affidavit to the court. Schwartz’s initial affidavit indicated he had no contact with Meier’s attor *482 ney or office personnel after he returned the original release mistakenly sent to him on September 18, 1999. Before the second hearing, which was scheduled to help the judge decide between the parties’ conflicting affidavits, Schwartz filed a supplemental affidavit to correct his flawed initial affidavit.
[¶ 17.] Schwartz’s supplemental affidavit admitted he had phone contact with office personnel of Meier’s attorney on September 15, 1999. The trial court was not particularly concerned with the date discrepancy. The court, however, was concerned with Schwartz’s complete failure to mention the final phone conversation in his initial affidavit. In that conversation, Hoy’s office personnel contend they advised Schwartz of the consequences of Western National’s failure to plead or make an offer and Schwartz indicated the company would not defend the suit. The trial court questioned Schwartz about this failure and did not find his answers credible. We agree and further note that Schwartz’s supplemental affidavit asserts that he did not have access to the claim file when he executed his initial affidavit; however, on questioning from the court he indicated that he “mislooked” at the “documentation laying there.” After further examination by the court, Schwartz admitted he had copies of the documentation at the time he signed the initial affidavit. Schwartz attempted to draw a meaningless distinction between having copies of the documents and the originals. Although we share in the circuit court’s disgust with the discrepancies in Schwartz’s testimony, it was, nonetheless, an abuse of discretion to refuse to set aside the default judgment given the facts in this case and the strong preference that cases be decided on the merits.
[¶ 18.] SDCL 15-6-55(b) governs default judgments and provides in pertinent part, “[i]f the party against whom judgment by default is sought has
appeared,
in the action, he (or, if appearing by representative, his representative) shall be served with written notice of the application for judgment at least three days prior to the hearing on such application.” SDCL 15-6-55(b)(1) (emphasis added). We recently examined what constitutes an “appearance” for default judgment purposes.
Roso,
[¶ 19.]
Roso
recognized that courts “take an expansive view toward ‘appearance,’ in the context of default judgment, often finding it when a party shows an intent to defend.”
Id.
¶ 7 (citations omitted). Where a party has not made any formal appearances or filed papers, a court will look for evidence of active representation.
Id.
(citations omitted). We must remember that default judgment is an “extreme remedy.”
Id.
¶ 8 (citing
Tank v. Munstedt,
[¶ 20.] Parties who suffer a default judgment may seek relief under SDCL 15-6-60(b)(l), which permits relief from a final judgment for excusable neglect. In this context, we have stated that excusable neglect must be “of a nature that would cause a reasonably prudent person under similar circumstances to act similarly.” Pe
terson v. La Croix,
[¶ 21.] When considering cases involving SDCL 15-6-60(b), we must remember its purpose is “‘to preserve the delicate balance between the sanctity of final judgments and the incessant command of a court’s conscience that justice be done in light of all the facts.’ ”
Hrachovec,
[¶ 22.] Western National argues it made an appearance as defined in Roso and that its failure to file an answer was excusable neglect. It points to the contacts between Schwartz and Meier’s attorney and his office personnel as constituting an appearance entitling them to notice of intent to take default judgment prior to the date of the default judgment. It also contends that Meier’s failure to notify it that he had filed his summons and complaint against McCord with the clerk of courts is the reason it failed to answer. Meier hid this from the company until he had obtained a default judgment. We agree.
[¶ 23.] First, in
Roso,
we pointed out that “earnest negotiations” occurred evidenced by the active communication between the parties.
Roso,
[¶ 24.] Second, since Western National did not file a responsive pleading it must show (1) it acted with excusable neglect and (2) it has a meritorious defense in order to obtain relief from the final judgment.
Smith,
[¶ 25.] It is also important to note that McCord and his liability insurer appeared and negotiated a release with Meier. Thus, Western National had no knowledge it needed to answer a lawsuit because Meier failed to advise it that he had subsequently filed his lawsuit against McCord. In addition, although informal contacts occurred between Meier and Western National over several months, which we find constitute an appearance under SDCL 15-6-55(b), Meier failed to give the company the required notice of his intent to take default judgment. This failure is grounds to set aside the default judgment.
National Sur. Corp.,
[¶ 26.] As to the meritorious defense factor, Western National points out that Meier showed little evidence of his damages. We agree. Meier had special damages totaling $1907.60 plus a wage loss claim totaling $1050. His personal affidavit is the only evidence the circuit court had before it when entering default judgment. Western National contends that besides the statement in Meier’s affidavit stating he should be awarded $125,000 nothing else would indicate that Meier would be likely to obtain a substantial award. Again, we agree.
[¶ 27.] Under this factor, Western National need only make a prima facie showing of a meritorious defense.
National Sur. Corp.,
[¶ 28.] Reversed and remanded.