The Unopposed Loss -- Court Denies Declaratory Judgment to No-Fault Insurer Based Solely on Default of Non-Answering Defendants

NO-FAULT – HIT-AND-RUN – AFFIRMATIVE ACTION – DEFAULT JUDGMENT – DECLARATORY JUDGMENT – INJUNCTIVE RELIEF

Ameriprise Ins. Co. v. Kim
(2nd Dept., 7/29/2020)

We've run into this before.

Your insurer client brings a global affirmative action against all carbon-based life-form claimants and their health care(less) assignee-providers spawned from a single, reported motor vehicle accident, seeking declaratory and injunctive relief.  All of the defendants are served, but most if not all them don't answer or move against the complaint.  Your client makes a motion for a default judgment against the non-answering defendants, who don't appear and oppose the motion.  Your client proves up good service of the summons and complaint, the non-answering defendants' default, and the facts constituting your client's claim.

Mark it down as a win, right?  Wrong.

In AFFIRMING Supreme Court's denial of Ameriprise's default judgment motion, the Second Department reminded:

"A plaintiff seeking leave to enter a default judgment must file proof of proper service of the summons and the complaint, the defendant's default, and the facts constituting the claim" (Global Liberty Ins. Co. v Surgery Ctr. of Oradell, LLC, 153 AD3d 606, 606; see CPLR 3215[f]). "[A] default judgment in a declaratory judgment action will not be granted on the default and pleadings alone for it is necessary that [the plaintiff] establish a right to a declaration'" against the defendants (JBBNY, LLC v Dedvukaj, 171 AD3d 898, 902, quoting Dole Food Co., Inc. v Lincoln Gen. Ins. Co., 66 AD3d 1493, 1494; see Merchants Ins. Co. of N.H. v Long Is. Pet Cemetery, 206 AD2d 827, 828).

Here, while the plaintiff submitted proof of proper service of the summons and the complaint, the non-answering defendants' default, and the facts constituting the plaintiff's claim, the plaintiff's submissions in support of the motion failed to establish its right to the declarations sought (see JBBNY, LLC v Dedvukaj, 171 AD3d at 903). As such, we agree with the Supreme Court's determination denying that branch of the plaintiff's motion which was for leave to enter a default judgment against the non-answering defendants.

Take-Away Point #1:  Establishing one's entitlement on motion to declaratory relief requires more than what is minimally required to obtain a default judgment.  Insurers must "establish their right" to the declaration, with a quantum of evidence equivalent to what is needed to avoid a directed verdict at trial.

Take-Away Point #2:  Although not apparent from this short memorandum decision, even if the movant establishes its right to a declaration, the decision whether to grant a declaratory judgment rests within the sound discretion of the court (CPLR 3001) and is "dependent upon facts and circumstances rendering it useful and necessary."  Denial of a default judgment is proper if the declaratory relief sought clearly affects the rights of other parties not alleged to be in default.  See Merchants Ins. Co. of N.H. v Long Is. Pet Cemetery, 206 AD2d 827, 828).