Court Opinion

ID: 9608281
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:08:46.990596+00
Date Added: 2024-06-11T09:00:56.855810
License: Public Domain

BACA, Chief Justice (Dissenting).  I respectfully disagree with the majority’s determination that the trial court erred in granting partial summary judgment in favor of Burge. Having received adequate notice of the claim filed against Sanchez and having opted not to timely intervene, I believe that Mid-Continent Casualty Company should be bound by the default judgment rendered against Sanchez in Burge I.  As a direct result of the terms of the uninsured motorist policy, the trial court granted summary judgment in favor of Burge. The pertinent language of the uninsured motorist policy states: No judgment against any person or organization alleged to be legally responsible for the bodily injury shall be conclusive, as between the insured and the company, of the issues of liability or such person or organization or of the amount of damages to which the insured is legally entitled unless the insured has given the company adequate notice of filing and pendency of the action against the uninsured motorist by the insured. (Emphasis added). I read this paragraph as providing that if the insured sues the uninsured motorist directly, the insured can take the resulting judgment to the insurance carrier and receive payment on the judgment up to policy limits, provided the insurance carrier received adequate notice of the action and the defendant was in fact uninsured.  The central issue is whether “judgment” as used in this insurance policy includes default judgments. I find that for this policy it does. The fact that the judgment was by default is of no significance with regard to this particular policy because the policy does not define “judgment” to exclude a default judgment. Instead, the policy requires only that Sanchez was uninsured when the accident occurred, that Burge is legally entitled to coverage, and that he give Mid-Continent adequate notice of his action against Sanchez.  The record indicates that Sanchez was in fact uninsured when the accident occurred. The record also indicates that Burge satisfied his contractual duty to provide Mid-Continent with timely notice of the claim against Sanchez. Specifically, the record indicates that Burge filed an action against and served process on Sanchez. As required under the policy, he immediately notified Mid-Continent of the action. Burge also mailed Mid-Continent a copy of the motion for default judgment before filing that motion. Finally, the record clearly shows that Burge met his burden of proving legal entitlement to coverage. See State Farm Mut. Auto. Ins. Co. v. Maidment, 107 N.M. 568, 572, 761 P.2d 446, 450 (Ct.App.), cert. denied, 107 N.M. 413, 759 P.2d 200 (1988). After Sanchez failed to answer the complaint, Burge sought and obtained a default judgment. Having determined liability issues, the court held a subsequent hearing and determined Burge’s damages. Burge established Sanchez’ liability for the accident and the extent of that liability, thereby establishing legal entitlement to coverage. United Nuclear Corp. v. General Atomic Co., 96 N.M. 155, 240, 629 P.2d 231, 316 (1980) (stating that “[u]pon the default, the allegations of the complaint are taken as true”), cert. denied, 451 U.S. 901, 101 S.Ct. 1966, 68 L.Ed.2d 289 (1981). Thus, Burge did everything required of him under the contract, including providing Mid-Continent with adequate notice.  Significantly, the burden of establishing comparative negligence was on Sanchez and Mid-Continent. See Armstrong v. Industrial Elec. & Equip. Serv., 97 N.M. 272, 274, 639 P.2d 81, 83 (Ct.App.1981). As of April 1991, Mid-Continent was aware that Burge drank heavily the night before the accident and that witness statements contradicted Burge’s account of the accident. On June 11, 1992, over one month before the default judgment was rendered, Mid-Continent received complete medical records that showed Burge’s blood-alcohol level at the hospital. Clearly, this information would have been useful to Sanchez in his own defense. Yet there is no indication that Mid-Continent attempted to provide Sanchez with the evidence in order to reduce or eliminate its own potential loss under the policy. By June 11, Mid-Continent had notice of the action and evidence implicating Burge’s comparative negligence. Having no indication that Sanchez would answer and defend, it was incumbent upon Mid-Continent to plead and attempt to prove Burge’s comparative negligence to protect itself under the policy. Burge had no duty to warn Mid-Continent that Sanchez might not adequately defend against his claim. Having received timely notice of the action and having failed to timely intervene, Mid-Continent can not now successfully claim a denial of procedural due process.  Both New Mexico and Oklahoma recognize that ambiguities in a policy will be construed in favor of the insured. See, e.g., Knowles v. United Servs. Auto. Ass’n, 113 N.M. 703, 705, 832 P.2d 394, 396 (1992) (“When insurance contract is ambiguous, it must be construed against the insurance company as the drafter of the policy.”) and Littlefield v. State Farm Fire & Casualty Co., 857 P.2d 65, 69 (Okla.1993) (“Insurance contracts are contracts of adhesion. If susceptible of two constructions, the contract will be interpreted most favorably to the insured and against the insurance carrier.”). Having drafted the uninsured motorist policy, Mid-Continent had an opportunity to unambiguously exclude default judgments from having conclusive effect. It is not unusual, and, indeed, quite common, for an action by an insured against an uninsured motorist to result in a default judgment. Nonetheless, Mid-Continent failed to draft such an exclusion into the policy. I would not read such an exclusion into the policy. Knowles, 113 N.M. at 705, 832 P.2d at 396. Once Burge met his contractual obligations, Mid-Continent became contractually obligated to provide coverage. Thus, the trial court in Burge II properly granted partial summary judgment by construing the policy in favor of Burge and concluding that Mid-Continent was contractually obligated to pay.  Mid-Continent asserts that if the uninsured motorist policy is construed to include default judgments, Mid-Continent would be deprived of an opportunity to litigate Burge’s comparative negligence. I disagree.  It is well settled that an insurance carrier has a right to intervene in an action between an insured and an uninsured motorist. Lima v. Chambers, 657 P.2d 279, 281 (Utah 1982) (citing cases from various jurisdictions holding insurance carrier has right to intervene in action between insured and uninsured motorist). Intervention is proper when a person (1) has an interest relating to the subject matter of the action; (2) is so situated that the disposition of the action may impair or impede the ability to protect his interest; and (3) the interest is not adequately protected by existing parties. SCRA 1986, 1-024(A)(2) (Repl.Pamp.1992) (stating requirements for intervention as of right). Clearly, Mid-Continent knew it had an interest in the action between Burge and Sanchez and required notice of any action filed because under the terms of the contract, the resulting judgment would fix Mid-Continent’s contractual obligation to satisfy the judgment within policy limits. See Lima, 657 P.2d at 281. Nonetheless, Mid-Continent presumably believed that Sanchez could and would adequately protect its interest. It was only after the default judgment was rendered that Mid-Continent decided to intervene because Sanchez was not adequately protecting its interest.  The peculiar nature of uninsured motorist litigation suggests that an insurance carrier contemplating the insured’s comparative negligence may not be adequately represented by the uninsured motorist. While it may appear on the surface that the uninsured tortfeasor could adequately represent the insurance carrier’s interest in the action, such is not necessarily the case. Adequate representation often depends on whether there is a divergence of interest between the proposed intervenor and the party or on how effectively the party could represent the proposed intervenor in light of a legal disability or the trial strategy that the party may elect. Alsbach v. Bader, 616 S.W.2d 147, 151 (Mo. Ct.App.1981). “Generally, where the applicant’s interest is different from that of an existing party, the applicant’s interest is not represented.” Lima, 657 P.2d at 288. “Closely related to the question of similarity of interests is whether the interest of the applicant, even if assumed to be represented, is represented diligently. Representation is considered inadequate if the original party is not diligent in the defense of the action or allows a default judgment to be entered.” Id.  Where an uninsured defends pro se, it may be difficult to imagine the insurer’s interest to be adequately represented. Id. Additionally, an uninsured motorist, especially one who has no substantial assets to lose, has little if any incentive to diligently defend or, for that matter, to file a timely answer to the complaint. Similarly, an uninsured motorist, presuming his own total fault, may have no incentive to appear and defend in the action, thus conceding total fault. Certainly, an uninsured motorist who does not appear cannot adequately represent the insurance carrier’s interest. Id.; State v. Craig, 364 S.W.2d-343, 346 (Mo.Ct.App.1963). An insurance carrier, whose contractual obligations become fixed by the resulting default judgment, must seek to intervene before that judgment is rendered. By neglecting to do so, the insurance carrier is in no better position than the defaulting uninsured motorist. Thus, having adequate notice of the action between Burge and Sanchez, and with cause and opportunity to intervene, Mid-Continent was afforded an opportunity to litigate the issue of comparative negligence.  Various jurisdictions apply the rule that an insurance carrier that neglects to intervene into an action between its insured and an uninsured motorist after receiving adequate notice of the action is often bound to the resulting judgment. See, e.g., Keel v. MFA Ins. Co,, 553 P.2d 153, 158-59 (Okla. 1976) (holding that where insurance carrier had adequate notice of suit between insured and uninsured motorist, it will be bound to the resulting judgment); Guillan v. Watts, 249 Kan. 606, 822 P.2d 582, 590 (Kan.1991) (holding that insurance carrier, with notice of action between insured and uninsured motorist and elects not to intervene, becomes bound by judgment, whether or not judgment was litigated); Briggs v. American Family Mut. Ins. Co., 833 P.2d 859, 862 (Colo.Ct.App.1992) (invalidating consent to sue clause and binding insurance carrier to default judgment in order to prevent relitigating liability and damages and to effectuate purpose of uninsured motorist policy); Champion Ins. Co. v. Denney, 555 So.2d 137, 139-40 (Ala.1989) (holding that insurance carrier will be bound by default judgment rendered in action by insured against uninsured motorist if “it had full notice and adequate opportunity to intervene and present any defenses and arguments necessary to protect its position”). I view this rule as being necessary to effectuate the intent of uninsured motorist coverage and the strong public policy against multiple litigation where the issues relating to the same subject matter can be resolved in one action. Keel, 553 P.2d at 158. To require the insured to proceed against the insurance carrier after having sued the uninsured tortfeasor “will put the insured plaintiff to the expense and delay of trying two lawsuits in order to collect one judgment.” Cf. Associated Indem. Corp. v. Cannon, 536 P.2d 920, 923 (Okla.1975) (quoting Holt v. Bell, 392 P.2d 361 (Okla.1964) (Jackson, J., dissenting) (discussing reason why insured should not be required to first sue uninsured motorist before suing insurance carrier), overruled by Keel, 553 P.2d 153).  The foregoing policies would be seriously undermined if an insurance carrier is allowed to sleep while its rights are litigated and, after it awakens to an unfavorable judgment, to relitigate the same issues. An insurance carrier who fails to intervene after receiving adequate notice of the pending action places an additional burden on the injured party by requiring him to litigate his claim twice. This serves neither the purpose of the uninsured motorist policy nor judicial economy. I conclude that for purposes of the uninsured motorist policy between Burge and Mid-Continent, “judgment” includes default judgment. Mid-Continent received timely notice of the action between Burge and Sanchez. Consequently, Mid-Continent is contractually obligated to the resulting judgment.  Mid-Continent argues that if it had intervened in Burge I and argued that Sanchez was not liable or only partially liable, it would have been in an adversarial position with Burge, creating a conflict of interest. Thus, Mid-Continent argues, the only appropriate forum to litigate Burge’s comparative fault was in Burge II. Although a conflict may arise, I disagree that it precludes intervention in this context.  I find Briggs particularly instructive. There, the insurance carrier argued that it could not be bound to a default judgment from an action between its insured and an uninsured motorist because intervention would have created a conflict of interest with its insured. Briggs, 833 P.2d at 863. The appellate court disagreed, stating “the insurer will not be undertaking the defense of the uninsured motorist by intervening, even though it may align itself on certain issues.” Id.; cf. Romero v. Fetter, 83 N.M. 736, 737-38, 497 P.2d 738, 739-40 (1972) (recognizing that although there may be multiple individuals on “each side” of an action, they remain separate “parties”). The court explained: [T]he potential for such conflict is inherent in uninsured motorist coverage. The conflict would not be extinguished, as the insurer implies, by requiring the insured to relitigate liability and damages in a separate action against the insurer. Many of the same conflicts would exist in the separate action as in a consolidated action where the insured and the insurer disagree on the amount of damages. Briggs, 833 P.2d at 863 (Citations omitted). The conflict of interest that Mid-Continent argues would have resulted had it intervened into Burge I was equally possible in Burge II. Indeed, Mid-Continent’s interests of minimizing its loss on the claim conflicts with Burge’s interest of maximizing his coverage. The conflict effectively existed even from the moment that the accident occurred. The policy against multiple litigation outweighs the possibility of a conflict of interest. See Vernon Fire & Casualty Ins. Co. v. Matney, 170 IndApp. 45, 351 N.E.2d 60, 65 (1976) (stating policy against multiple litigation and possible conflicting results renders conflict of interest insufficient to prevent insurance carrier from defending interests by intervention). The conflict is unavoidable and should not preclude intervention by an insurance carrier into an action between its insured and an uninsured motorist.  While I recognize the strong public policy disfavoring default judgments, see Sundance Mechanical & Util. v. Atlas, 109 N.M. 683, 691, 789 P.2d 1250, 1258 (1990), that policy is not hereby subverted. Rather, this approach emphasizes an insurer’s obligation to honor the insurance policy, which it wrote to include judgments by default, in order to fulfill the policy’s puipose. Further, I ftdly recognize an insurance carrier’s right to challenge its insured’s claim for coverage by asserting comparative negligence. However, an insurance carrier, believing its insured is comparatively negligent and having adequate notice and opportunity, cannot neglect to assert that claim only to burden the insured and the courts with multiple suits. Accordingly, I conclude that the trial court in Burge II properly granted partial summary judgment.  For the reasons stated, I respectfully dissent.