2.2.7 Setting Aside Default Judgments

JurisdictionArizona

The right of an insurance carrier to move the court to set aside a default judgment against its insured, either on behalf of the insured or on its own behalf, is well recognized in Arizona.[434] The same equitable considerations applicable to a defaulting defendant also apply to carriers.[435]

[T]he rendition of judgment against the insured serves a dual purpose; . . . it not only creates a judgment debt in favor of the injured party, but at the same time it creates a debt under the insurance contract between the judgment debtor and his insurer; and that for this reason, the insurer should have a right to defend against the default judgment.[436]

Rule 60(C)(6), Arizona Rules of Civil Procedure, "permits an even more liberal holding in a case where an insurance company-through no fault of its own-has not had the opportunity of defending a suit on its merits."[437]

As a non-party with standing, the insurer enters the litigation without having received notice of the proceedings otherwise provided to a party by service of process. It, therefore, does not have legal notice of a default judgment entered against its insured unless it received this information by other means. The lack of notice is a reason, beyond those set forth in the first five parts of rule 60(c), for the trial court to exercise its discretion and set the default judgment aside.[438]

In order to obtain relief, the carrier must file a motion to set aside the default within a reasonable time.[439]

In Beal v. State Farm Mutual Automobile Insurance Co.,[440] the carrier knew that a complaint had been filed, but not served, against its insured. The carrier and claimant participated in settlement negotiations. The complaint was served, but the carrier did not receive notice of the service and the time to answer had begun to run. A default was taken against the insured, but the court set it aside, holding that the...

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