Cressman v. National Union Fire Insurance Company of Pittsburgh, PA

Filing 25

ORDER denying 10 Motion for Default Judgment; granting 14 Motion to Set Aside Default. Signed by U.S. District Judge Karen E. Schreier on 12/20/2017. (JLS)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
DEAN EDWARD CRESSMAN,

4:17-CV-04041-KES

Plaintiff,
vs.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,

ORDER DENYING PLAINTIFF’S
MOTION AND GRANTING
DEFENDANT’S MOTION

Defendant.
Plaintiff, Dean Cressman, brought this lawsuit against defendant,
National Union Fire Insurance Company of Pittsburgh, PA, for underinsured
motorist benefits after plaintiff’s car accident. Plaintiff moves for a default
judgment after the Clerk’s entry of default. Docket 10. Defendant moves to set
aside the entry of default. Docket 14. For the reasons stated below, this court
denies plaintiff’s motion and grants defendant’s motion.
BACKGROUND
In 2011, while driving an employer-owned vehicle, plaintiff was in a
motor vehicle accident. Docket 1 ¶ 5-8. He settled with the other driver’s
insurance company for $80,000 and sought to obtain additional insurance
benefits from defendant because defendant provided underinsured motorist
coverage to plaintiff’s employer. Id. ¶ 11. Plaintiff alleges that defendant has
refused to pay the underinsured motorist benefits to plaintiff. Id. ¶ 17-18.
On March 28, 2017, counsel for plaintiff sent a letter to David Becker,
the claims representative assigned to handle plaintiff’s claim, stating that he

intended to serve the summons and complaint in this case on defendant.
Docket 18 at 1-2. This was also the date plaintiff’s complaint was filed.
See Docket 1. In accordance with SDCL § 58-6-39, plaintiff’s counsel
transmitted the summons and complaint to the South Dakota Division of
Insurance for service. Docket 7 at 1. The Division of Insurance executed an
admission of service on behalf of defendant on March 30, 2017. Docket 5.
Under Federal Rule of Civil Procedure 12(a)(1)(A), a defendant must serve
an answer within 21 days after being served with the summons and complaint.
Defendant did not file an answer or another responsive pleading within 21 days
of being served with plaintiff’s summons and complaint. In support of its
motion to set aside the default, defendant explained that the summons and
complaint were inadvertently overlooked. Docket 17. Specifically, on April 6,
2017, Anne Brenner, a claims management analyst for AIG, the parent
company of defendant, received an email from AIG’s legal department with
plaintiff’s summons and complaint. Id. Ms. Brenner testified that she
“inadvertently failed to read the email” and thus failed to inform Mr. Becker or
anyone at ESIS that service had been made. Id. Mr. Becker also maintains that
he never received confirmation that the summons and complaint had actually
been served. Docket 18. On April 21, 2017, Mr. Becker emailed Ms. Brenner,
asking if service was made, but he did not receive a response. Id. On April 27,
2017, Mr. Becker emailed plaintiff’s counsel to ask if service was completed. Id.
On May 3, 2017, plaintiff submitted an application for entry of default.
Docket 6. Under Federal Rule of Civil Procedure 55(a), the Clerk of Court filed
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an entry of default in plaintiff’s favor and against defendant (Docket 8), and an
amended entry of default on May 4, 2017. Docket 9. On May 4, 2017, plaintiff’s
counsel responded to Mr. Becker with a copy of plaintiff’s application for entry
of default. Docket 18.
Mr. Becker states that immediately after he received this May 4 email, he
retained local counsel and began investigating the matter. Id. Plaintiff filed this
motion for a default judgment under Federal Rule of Civil Procedure 55(b)(2) on
May 4, 2017. Docket 10. That same day, counsel for defendant noted his
appearance. Docket 12. On May 8, 2017, defendant filed its motion to set aside
the clerk’s entry of default. Docket 14.
DISCUSSION
Federal Rule of Civil Procedure 55(c) allows a court to set aside an entry
of default for good cause. To determine if good cause exists, the court weighs
“whether the conduct of the defaulting party was blameworthy or culpable,
whether the defaulting party has a meritorious defense, and whether the other
party would be prejudiced if the default were excused.” Stephenson v. ElBatrawi, 524 F.3d 907, 912 (8th Cir. 2008) (quotation omitted). Setting aside
an entry of default requires a lesser showing of excuse than setting aside a
default judgment. Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 783 (8th Cir.
1998) (citation omitted). “[I]t is likely that a party who promptly attacks an
entry of default, rather than waiting for a grant of a default judgment, was
guilty of an oversight and wishes to defend the case on the merits.” Id. at 784.
The court also has discretion to enter a default judgment when a party moves
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for one. Fed. R. Civ. P. 55(b)(2). But there is a judicial preference to adjudicate
claims on their merits. Johnson, 140 F.3d at 784.
I.

Culpability or Blameworthiness
Heavily focusing on the culpability or blameworthiness factor, Eighth

Circuit precedent consistently “distinguish[es] between contumacious or
intentional delay or disregard for deadlines and procedural rules, and a
‘marginal failure’ to meet pleading or other deadlines.” Johnson, 140 F.3d at
784.
The court finds that defendant’s actions were not an intentional delay or
disregard for court deadlines. Rather, defendant had an internal
communication error when Ms. Brenner inadvertently failed to forward the
email she received regarding plaintiff’s summons and complaint. Plaintiff
argues that Mr. Becker “was undeniably aware that an action had been filed”
by March 28, 2017. Docket 20 at 7. The court disagrees. Mr. Becker received
an email from plaintiff’s counsel on March 28, which stated that he “was
getting National Union served . . . .” Docket 18-1. Nowhere in this letter did
plaintiff’s counsel tell Mr. Becker that the action had already been filed or
would be filed that day. Mr. Becker also attempted to follow up on this
March 28 email twice by asking if service had been made.
Defendant’s communication misstep was promptly remedied by
defendant when Mr. Becker received notice of the Clerk’s entry of default. He
immediately hired local counsel, who noted his appearance in this case the day
after the Clerk’s amended entry of default was entered. Counsel for defendant
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then filed a motion to set aside the default four days later, which is more
reason to construe defendant’s failure to respond within 21 days as a mistake
remedied by a “prompt attack” on the entry of default rather than a purposeful
delay.
II.

Meritorious Defense
To determine if the defendant has a meritorious defense, the court

“examin[es] ‘whether the proffered evidence would permit a finding for the
defaulting party.’ ” Stephenson, 524 F.3d at 914 (quoting Johnson, 140 F.3d at
785). Defendant maintains that in order for plaintiff to recover underinsured
motorist benefits from defendant, plaintiff “must prove damages in excess of
the tortfeasor’s policy limits and defendant will be given a credit for the
tortfeasor’s limits of $100,000.00” in this case. Docket 24 at 5. Defendant has
offered evidence that Mr. Becker, the claims agent handling plaintiff’s claim,
never received plaintiff’s medical records and bills. Docket 18. Thus,
defendant’s defense is that plaintiff has not provided sufficient evidence to
support his claim for damages. Docket 24 at 6.
While defendant has not provided a lot of factual evidence to support its
defense, it cannot obtain that factual support until it receives plaintiff’s medical
records. The court finds this to be a viable defense that is sufficient to set aside
a Clerk’s entry of default.
III.

Prejudice to Plaintiff
Finally, defendant argues that plaintiff would not be prejudiced if the

Clerk’s entry of default is set aside. Docket 16 at 5. It is well established that
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“delay alone, or the fact the defaulting party would be permitted to defend on
the merits,” does not establish prejudice to the plaintiff. Stephenson, 524 F.3d
at 915. Loss of evidence, increased discovery difficulties, or greater
opportunities for fraud and collusion are some of the more concrete ways a
plaintiff may be prejudiced if a default is set aside. Id. (quotation omitted).
Plaintiff has not provided an argument to support how he would be
prejudiced if the Clerk’s entry of default were set aside, and the court has not
found one. There is no indication that evidence has been lost or discovery will
be more difficult if the Clerk’s entry of default is set aside.
CONCLUSION
Having considered all three factors in light of the judicial preference to
adjudicate claims on their merits, the court finds that there is good cause to
set the entry of default aside. Thus, it is
ORDERED that plaintiff’s motion for default judgment (Docket 10) is
denied.
IT IS FURTHER ORDERED that defendant’s motion to set aside the
Clerk’s entry of default (Docket 14) is granted.
DATED this 20th day of December, 2017.
BY THE COURT:
/s/Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

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