Monday, November 15, 2010

No Good Deed Goes Unpunished

Zenzillo v. Underwriters At Lloyd's London

(4th Dept., decided 11/12/2010)

If an insured's attorney grants and then terminates an indefinite extension for a defendant insurer to answer the insured's complaint, but no answer is forthcoming and the action lies dormant for two years, what happens?
a.  default judgment is granted against defendant insurer; or
b.  complaint is dismissed. 
Believe it or not, the correct answer is "b".  The complaint is dismissed. 

Plaintiff sued defendant for amounts allegedly owed plaintiff under her insurance policy with defendant.  On June 1, 2006, the parties' counsel stipulated to an indefinite extension of time for defendant to answer the complaint.  By letter dated January 19, 2007, plaintiff's counsel requested that defendant answer the complaint so that plaintiff could prosecute the action.  Defendant never did so but, on February 3, 2009, more than two years later, it moved to dismiss the complaint pursuant to CPLR 3215(c), which provides:
(c) Default not entered within one year. If the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed. A motion by the defendant under this subdivision does not constitute an appearance in the action.
Oneida County Supreme (Bernadette T. Romano, JSC) denied defendant's motion but the Appellate Division, Fourth Department, REVERSED, finding that plaintiff had failed to demonstrate "sufficient cause" for not treating the complaint as abandoned:
In opposition to the motion, plaintiff included an affirmation from plaintiff's counsel, who agreed that the January 19, 2007 letter terminated the stipulation extending defendant's time to answer.  Defendant therefore defaulted 20 days after January 19, 2007 by failing to appear in the action (see CPLR 320 [a]), and plaintiff failed to demonstrate sufficient cause why the complaint should not be dismissed (see CPLR 3215 [c]).
Although this outcome may seem harsh, plaintiff's two-year inaction after requesting an answer may imply a level of disinterest in prosecuting the action (as opposed to mere inattention by the insured's counsel).  Sometimes insureds sues their insurers hoping that the mere filing and service of a complaint will prompt a settlement offer on a declined claim.  But was this a calculated strategy by defense counsel of not answering the complaint and waiting just over two years to make a CPLR 3215(c) motion to dismiss?  The short memorandum decision does not indicate why no answer was served within 20 days of the indefinite extension's termination. 

Diary those answer due dates, folks.  Now add one year and circle that date in red. That's the drop-dead deadline to move for a default judgment.  A default not timely taken (i.e., within one year of the default date) can result in the action's dismissal. 

1 comment:

Anonymous said...

I have a solution for this as well- never extend them the courtsey again. Immediatley move for default against Llyods of London and their insureds and when they argue otherwise, show them this case and have a big laugh. That would nip this apparent "stategy" in the bud.