Third Department Affirms Lower Court's Granting of Allstate's Motion to Compel Plaintiff to Accept Its Late Answer

NO-FAULT – DEFAULT JUDGMENT – LATE ANSWER
Dinstber v. Allstate Ins. Co.
(3rd Dept., decided 7/22/2010)

I rarely post here about cases involving default judgment motions against insurers because those cases don't usually involve substantive issues of insurance coverage law.  Although this case is no exception, it does provide a good review of New York's procedural law on when a court may exercise its discretion in granting a defendant's application for leave to serve a late answer.

In New York, a party seeking to avoid a default judgment for not having timely appeared and answered must establish two things:  (1) a reasonable excuse for the delay or default; and (2) the assertion of one or more meritorious defenses to the plaintiff's complaint.  The decision to allow late service of an answer is a discretionary one, " to be made by the court based on all relevant factors, including the extent of the delay, whether there has been prejudice to the opposing party, whether there has been willfulness, and the strong public policy in favor of resolving cases on the merits[.]"

In January 2002, experienced pro se plaintiff George C. Dinstber, III reported to Allstate, his no-fault insurance carrier, that a car he was driving was struck from behind.  Allstate denied coverage for the claim in July 2002.  Almost six years later, Dinstber commenced this action for breach of contract and bad faith.

Dinstber served his summons and verified complaint on the New York State Insurance Department on July 29, 2008 pursuant to Insurance Law § 1212.  However, Allstate allegedly did not receive those pleadings until August 21, 2008.  Although Allstate's counsel served an answer on August 28, 2008, Dinstber rejected it because it was not verified.  On September 4, 2008 — one day after receiving plaintiff's letter of rejection — Allstate's counsel served a second answer, virtually identical to the first but properly verified, which Dinstber rejected as as untimely.  Allstate then then promptly moved to extend its time to answer and to compel plaintiff to accept late service of its answer.  Dinstber cross-moved for a default judgment.  Cortland County Supreme Court (Rumsey, J.) granted Allstate's motion and denied Dinstber's cross motion.  Plaintiff appealed.

In AFFIRMING the lower court's order granting Allstate's motion, the Third Department held:

Pursuant to CPLR 3012 (d), Supreme Court has the discretion to permit late service of an answer upon the demonstration of a reasonable excuse for the delay or default (see Rickert v Chestara, 56 AD3d 941, 942 [2008]; Watson v Pollacchi, 32 AD3d 565, 565 [2006]). "To that end, '[w]hether there is a reasonable excuse for a default is a discretionary, sui generis determination to be made by the court based on all relevant factors, including the extent of the delay, whether there has been prejudice to the opposing party, whether there has been willfulness, and the strong public policy in favor of resolving cases on the merits'" (Rickert v Chestara, 56 AD3d at 942, quoting Harcztark v Drive Variety, Inc., 21 AD3d 876, 876-877 [2005]; see Watson v Pollacchi, 32 AD3d at 565). Also relevant is whether the untimely answer sets forth a meritorious defense to plaintiff's complaint (see Rickert v Chestara, 56 AD3d at 942; Watson v Pollacchi, 32 AD3d at 565). 

Here, contrary to plaintiff's assertion, we find that defendant proffered both a reasonable excuse for its delay in serving a verified answer and a sufficiently meritorious defense to the claims.  Defendant proffered several reasons for its delay.  First, defendant submitted evidence that it did not actually receive the complaint from the Insurance Department until one week before the time to answer expired and that an incorrect date of service on the transmittal sheet caused further delay in the complaint being referred to counsel.  After unsuccessfully attempting to contact plaintiff to obtain an extension of time to serve an answer, defendant effected such service one day after counsel's receipt of the complaint.  Secondly, defendant alleged law office failure in neglecting to include the verification with the initial answer, which was timely served.  In our view, these circumstances established a reasonable excuse for the default (see CPLR 2005).

We also note that defendant's answer set forth a myriad of defenses including, among others, failure to state a cause of action, failure to comply with the terms and conditions of the policy, fraud or perjury on plaintiff's part and that the claim is time-barred. In addition, defendant's attorney provided Supreme Court with the original denial of coverage letter, which set forth in detail the reasons why plaintiff's claim for benefits was denied. Such assertions set forth a sufficiently meritorious defense for purposes of defendant's motion (see Chase Manhattan Automotive Fin. Corp. v Allstate Ins. Co., 272 AD2d 772, 774-775 [2000]).

In view of defendant's reasonable excuse for the default, the minimal delay, defendant's expeditious motion to compel acceptance of the answer, the absence of proof that the default was willful or any indication that plaintiff was prejudiced by the delay, and the existence of an arguably meritorious defense, we conclude that Supreme Court's decision to grant defendant's motion to extend the time to answer and to compel plaintiff to accept service was a proper exercise of its discretion (see Rickert v Chestara, 56 AD3d at 942; Acker v VanEpps, 45 AD3d 1104, 1105, 1106 [2007]).

Reasonable excuse for the default.  Minimal delay.  Not willful.  Expeditious motion.  Absence of any prejudice to plaintiff.  Asserted meritorious defenses.  All these were factors that supported the motion court's exercise of discretion in granting Allstate leave to serve a late answer.

Will there be another petition to the the United States Supreme Court for a writ of certiorari, as there was the last time plaintiff lost an appeal against another one of his no-fault carriers?