Second Department Affirms Vacatur of Default Judgment Against No-Fault Insurer

NO-FAULT – VACATING DEFAULT JUDGMENT – REASONABLE EXCUSE
Westchester Med. Ctr. a/a/o Diedre Walsh v. Hartford Cas. Ins. Co.
(2nd Dept., decided 1/27/2009)

Under New York CPLR Rule 5015(a)(1), a party seeking to vacate a default judgment taken against it must demonstrate (1) a reasonable excuse for its delay in appearing and answering, and (2) a meritorious defense to the action.

Plaintiff medical provider sued Hartford for unpaid no-fault billing(s).  Hartford did not timely appear and answer, and plaintiff obtained a default judgment in the principal sum of $16,571.91 against it.  Hartford successfully moved to vacate the default judgment, and plaintiff appealed.

In AFFIRMING Nassau Supreme's vacatur of the default judgment, the Second Department held:

Here, the defendants established that their employee reasonably believed that the action had been discontinued after she advised the plaintiff's counsel's office that no-fault benefits had been exhausted, thereby demonstrating a reasonable excuse for the short period of time in which they failed either to appear or to answer the complaint (see New York Univ. Hosp. Tisch Inst. v Merchants Mut. Ins. Co., 15 AD3d 554, 554-555). In addition, the defendants established that the policy limits had been partially exhausted through the payment of claims for prior services (see 11 NYCRR 65-3.15; Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 301; Montefiore Med. Ctr. v Government Empls. Ins. Co., 34 AD3d 771, 772; New York & Presbyt. Hosp. v Allstate Ins. Co., 28 AD3d 528, 528-529), thereby demonstrating the existence of a potentially meritorious defense to the action. Finally, the plaintiff did not demonstrate prejudice from the defendants' relatively short delay in appearing and answering, and public policy favors the resolution of cases on the merits (see Verde Elec. Corp. v Federal Ins. Co., 50 AD3d at 673).

The motion court's decision is not available online, and this appellate decision does not explain why it was reasonable for Hartford's representative to believe that this action would be discontinued after advising plaintiff's counsel's office that the assignor's no-fault benefits had been exhausted.  And I'm not sure what "partially exhausted" means exactly, or why it represents a potentially meritorious defense to a provider's no-fault claim, but my uncertainty doesn't matter.  Both the motion and appellate court found that Hartford had established a reasonable excuse (we thought the action would be discontinued) and meritorious defense (no-fault limits were partially exhausted), and plaintiff suffered no prejudice from the short delay in appearing and answering.  Vacatur of the default judgment was, therefore, warranted.