Insurers Litigating the '70s Get a Break

Mechling v. Asbestos Defendants, No. A150132 (D1d5 Dec. 11, 2018)

Plaintiffs claim they were exposed to asbestos due to the actions of a long-dead company that stopped operating in 1974. Some of them sent demands to DeadCo’s potential Insurer. Others did not. Insurer was unable to locate any policy providing coverage to DeadCo. 

Plaintiffs sued DeadCo. They did not serve or join Insurer. Unsurprisingly DeadCo didn’t answer—it had long been suspended. So Plaintiffs’ get default judgments. Sometime thereafter, Insurer found some old policies showing that DeadCo was, in fact, their insured. So Insurer moved to intervene and vacate the defaults based on extrinsic mistake. The trial court granted the motion. Plaintiffs appeal.

As the Court of Appeal explains, courts have an inherent equitable power to relieve a party from a judgment that is entered based on extrinsic mistake. That’s a mistake—unrelated to conduct in the litigation itself—that somehow results in a party’s failure to get a fair disposition on the merits of the dispute.
To get relief, the defendant needs to show: “(1) a meritorious case; (2) a satisfactory excuse for not presenting a defense to the original action; and (3) diligence in seeking to set aside the default once the fraud [or mistake] had been discovered.” 

The first prong isn’t as big of a deal as it sounds. “Meritorious” doesn’t mean you need to prove you will win. Just that you have a case that’s worth deciding on the merits. And, affording the trial court the deference it gets on these kinds of discretionary decisions, Insurer made that showing. On these facts, the second and third factors aren’t too hard either. Insurer didn’t know it had policies until after the judgments were entered. We are, after all, talking about coverage for events that happened 44-plus years ago. For some of the litigation, they didn’t even have notice that cases were filed. And once Insurer figured out there was a potential for coverage, it promptly moved to intervene and vacate the defaults.

Affirmed.