Opinion ID: 2636388
Heading Depth: 1
Heading Rank: 4

Heading: Entry of default against Leach was sufficient to bind American Family

Text: On cross-appeal, American Family asserts that the district court improperly prohibited it from arguing that Leach was not liable for Matthew's injuries. After American Family denied the LoMastros' claim for benefits, the LoMastros notified American Family of the suit pending against Leach, of his failure to answer the complaint, and their intent to seek entry of default. American Family took no action regarding the suit until nearly six months laterafter default against Leach had been enteredwhen American Family moved to intervene. Although the district court allowed American Family to intervene, it determined that American Family was precluded by the entry of default from contesting Leach's liability. American Family never moved to set aside the default, but argues on cross-appeal that it should be allowed to contest Leach's liability. We disagree. In Nevada, an insurance company is bound by the result of an action between its insured and an uninsured motorist when the carrier has notice of the action but elects not to intervene. [6] In this case, American Family intervened to argue that the LoMastros are not legally entitled to recover from Leach and therefore are not entitled to recover uninsured motorist benefits. Thus, American Family intervened to defend Leach and became a codefendant to the action, permitted to raise all defenses available to Leach. [7] Generally, entry of default against one codefendant who fails to answer or whose answer is stricken does not preclude an answering codefendant from contesting liability. [8] In fact, if the answering codefendant successfully contests the defendants' joint liability, default judgment should not be granted against the defaulting codefendant. [9] However, when an intervenor intervenes, it is bound by all prior orders and adjudications of fact and law as though [it] had been a party from the commencement of the suit. [10] Prior decrees should only be set aside, on the motion of the intervenor, if such decrees `would deprive the intervenor of substantial rights which [it] has not been remiss in pressing.' [11] At the time of American Family's intervention, default had been entered against Leach but the district court had not yet made a judgment in default. [12] This court has rarely addressed the distinction between entry of default and entry of default judgment. A party may obtain entry of default against a party that fails to file a responsive pleading within the time mandated. [13] Entry of default acts as an admission by the defending party of all material claims made in the complaint. [14] Entry of default, therefore, generally resolves the issues of liability and causation and leaves open only the extent of damages. [15] The parties do not cite any cases discussing the effect of entry of default on a later intervenor, nor do they contest that American Family should have been permitted to intervene. [16] We conclude that when an intervenor wishes to assert defenses to liability on behalf of the original defendant, it must intervene before entry of default or move to set aside the default. In this case, American Family not only had notice of the pending suit against Leach but notice of the LoMastros' intent to seek entry of default; still, American Family waited to intervene until after default was entered against Leach, and after American Family intervened it chose not to file a motion to set aside the default. American Family argues that because it intervened, it was able to assert all defenses available to Leach, but in attempting to contest Leach's liability, American Family disregards the timing of its intervention and the defenses that were available to Leach at that time. After entry of default, Leach was limited to contesting the amount of damages. Likewise, because American Family intervened after the entry of default, despite having notice of the LoMastros' intent to seek default, it was limited, on the claims against Leach, to contesting the amount of damages, or alternatively, it could have moved to set aside the entry of default. [17] Nevertheless, American Family argues that under Allstate Insurance Co. v. Pietrosh [18] it would have been bound only upon the entry of default judgment. That argument appears premised on this court's statement that when an insurance company has notice and an opportunity to intervene in an action, it will be bound by the court's judgment against the uninsured motorist. [19] American Family's contention in regard to Pietrosh is meritless. Nothing in this court's conclusion in Pietrosh indicates that insurers are only bound by default judgments. [20] Indeed, in Pietrosh, we imposed a duty on insurance companies to take affirmative action to defend their right to deny a claim. [21] We invalidated an exclusion in an uninsured motorist policy that a judgment obtained against an uninsured motorist would not bind the insurer unless the insurer consented to the litigation. [22] We recognized that the exclusion would be reasonable if the insurance company did not have notice of the litigation or if judgment was obtained by default but held that an insurance company with notice should be bound by a judgment obtained through adversarial proceedings despite contrary rules regarding privity in using a judgment against a party by estoppel. [23] We then expanded on the Pietrosh analysis in State Farm Mutual Automobile v. Christensen, ultimately determining that a default judgment bound an insurer that chose not to intervene in the action against the uninsured motorist. [24] In this case, American Family not only had notice of the pending suit against Leach but notice of the LoMastros' intent to seek entry of default; still, American Family waited to intervene until after default was entered against Leach. Our reasoning in Pietrosh, which was expanded in Christensen, supports our conclusion that the entry of default bound American Family in this case. Finally, American Family asserts that the district court improperly applied Eckerson v. Rudy to hold that it was bound by the entry of default against Leach. [25] We agree with American Family that the analysis in Eckerson is inapplicable to this case. In Eckerson, this court affirmed a district court order denying a motion to intervene because not only was a default judgment entered against the defendant, but the judgment had been satisfied. [26] In a similar case involving an underinsured motorist claim, Lopez v. Merit Insurance Co., this court stated that Eckerson was consistent with other cases preventing intervention after the entry of a final judgment and reversed a district court order allowing an insurance company to intervene in a case against an underinsured driver. [27] In Lopez, we specifically declined to address whether the default judgment against the underinsured driver would bind the insurance company in a later proceeding. [28] Eckerson and Lopez are inapposite because both cases address the timeliness of motions to intervene; in this case, we address the effect of the entry of default against the uninsured motorist on an intervenor and neither the LoMastros nor American Family are challenging the district court's order granting the motion to intervene in this appeal. [29] Although the district court improperly applied the Eckerson analysis, it correctly determined that American Family was bound by the entry of default. [30] In conclusion, American Family's arguments that it should not be bound by the entry of default against Leach are unpersuasive. We affirm the order of the district court precluding American Family from contesting Leach's liability for Matthew's death.