Opinion ID: 1834384
Heading Depth: 1
Heading Rank: 1

Heading: The Default Issue.

Text: Iowa Rule of Civil Procedure 236 provides in relevant part that [o]n motion and for good cause shown, ... the court may set aside a default ... for ... excusable neglect. In Central I, we emphasized the following factors the district court should focus on in determining excusable neglect constituting good cause: First, did the defaulting party actually intend to defend? Whether the party moved promptly to set aside the default is significant on this point. Second, does the defaulting party assert a claim or defense in good faith? Third, did the defaulting party willfully ignore or defy the rules of procedure or was the default simply the result of a mistake? Last, whether relief is warranted should not depend on who made the mistake. Central I, 513 N.W.2d at 756. INA presented evidence at the remand hearing on these factors. Following the hearing, the district court made detailed findings as to these factors, found as an ultimate fact excusable neglect constituting good cause, and granted INA's motion to set aside the default against it. In Central I, we discussed the principles governing our review of a district court ruling setting aside a default. See id. at 753-54. Our review of the remand record leads us to conclude there was substantial evidence to support the district court's findings of fact. The district court was well within its discretion in granting INA's motion to set aside the default. These facts are for the most part undisputed and include the following. INA received the suit papers at its home office in Philadelphia. CNI did not serve the local INA office in Des Moines. Nor did it send the suit papers there. A copy of the petition in the underlying case CNI had filed against INA's insureds was attached to the suit papers. Marie Faulhaber, INA claims representative in the Philadelphia office, handled the suit papers. She did so following regular company procedures. Faulhaber reviewed the suit papers. She erroneously concluded that the alleged insureds were the defendants in the lawsuit and that INA would only be involved if it provided coverage for those defendants. After checking the company records, Faulhaber concluded there was no coverage. Based on this conclusion and her erroneous belief that the alleged insureds were the defendants in the lawsuit, Faulhaber did not deliver the papers to INA's attorneys for an answer. The district court found that Faulhaber did notin defiance of the rules of civil procedureintentionally or willfully fail to arrange for a timely answer. The failure was the result of the mistake she had made in reviewing the suit papers. In addition, the district court found that INA actually intended to defend and had it not been for Faulhaber's mistake, a timely answer would have been filed. The court also found that had CNI advised INA's local office or INA's local attorneys that a suit had been filed and provided them with a courtesy copy of the suit papers, a timely answer would have been filed. Previously, CNI's counsel had advised INA's local counsel that it intended to take a default against INA's insureds in the underlying action. (For some unknown reason the same procedure was not followed in the present proceeding.) In these conversations, INA's local counsel told CNI's counsel there was no coverage and that INA would defend any action CNI brought to establish coverage. Once INA became aware of the default, it promptly moved to set it aside. Stanley K. Stevens, INA's local claims manager in Des Moines, learned of the default Friday, August 29, 1986. The motion to set aside the default was filed September 3, sixteen days after the default was entered. The district court found the filing on September 3 was prompt action by INA. The district court further found that INA hadthrough Stevens' affidavitasserted the existence of meritorious defenses to CNI's suit for coverage. The court noted that these defenses were asserted in INA's answer and that eventually these defenses carried the day on INA's successful motion for summary judgment. Finally, the district court found that relief would not be denied simply because the clientINArather than its attorneys made the mistake.