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When Insurance Carriers Fail: The Limits of “Reasonable Excuse”
When a defendant relies on their insurance company to handle a lawsuit, what happens if the insurer drops the ball? A recent New York appellate decision explores the boundaries of what constitutes a “reasonable excuse” for defaulting in court when an insurance carrier fails to respond to litigation.
Generally, New York courts have been sympathetic to defendants who properly notify their insurance brokers about lawsuits, only to have their insurers fail to appoint counsel or respond. This situation has traditionally been viewed as grounds for a reasonable excuse to vacate a default judgment. However, the Gecaj v Gjonaj Realty & Mgt. Corp. decision demonstrates that this protection has important limits.
The case highlights a critical distinction: once a defendant receives notice that the plaintiff is seeking a default judgment, they can no longer claim ignorance about their insurer’s inaction. This ruling adds nuance to existing precedent on default judgments and provides important guidance for defendants facing similar circumstances.
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Gecaj v Gjonaj Realty & Mgt. Corp., 2017 NY Slip Op 03109
“While we concede that, generally, when a defendant provides the summons and complaint to its insurance broker, and the insurer, thereafter, fails to appoint counsel to appear in the action on behalf of defendant, this is considered to be a reasonable excuse (see generally Rodgers, 69 AD3d at 510-511) However, on the facts presented here, defendants did not establish a reasonable excuse for their default. An assertion by a defendant that it believed its insurer “was providing a defense is unsubstantiated and unreasonable in light of conceded receipt of the plaintiff’s motion for leave to enter a default judgment,” as receipt of such a motion puts the defendant on notice that the insurer has, in fact, not answered the complaint since the commencement of the action (Trepel v Greenman-Pedersen, Inc., 99 AD3d 789, 791 ; see also Spitzer v Landau, 104 AD3d 936, 937 ).”
**It is a very interesting discussion.
Key Takeaway
This decision establishes that defendants cannot indefinitely rely on the “insurance carrier failure” excuse once they receive notice of a motion for default judgment. At that point, they are on constructive notice that their insurer has not responded, making continued reliance on the insurer’s defense unreasonable. Defendants must take affirmative action to protect their interests when such notice is received.
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Legal Context
Why This Matters for Your Case
New York law is among the most complex and nuanced in the country, with distinct procedural rules, substantive doctrines, and court systems that differ significantly from other jurisdictions. The Civil Practice Law and Rules (CPLR) governs every stage of civil litigation, from service of process through trial and appeal. The Appellate Division, Appellate Term, and Court of Appeals create a rich and ever-evolving body of case law that practitioners must follow.
Attorney Jason Tenenbaum has practiced across these areas for over 24 years, writing more than 1,000 appellate briefs and publishing over 2,353 legal articles that attorneys and clients rely on for guidance. The analysis in this article reflects real courtroom experience — from motion practice in Civil Court and Supreme Court to oral arguments before the Appellate Division — and a deep understanding of how New York courts actually apply the law in practice.
About This Topic
Default Judgments in New York Practice
Default judgments arise when a party fails to answer, appear, or respond within required time limits. Vacating a default under CPLR 5015 requires showing a reasonable excuse for the failure and a meritorious defense or cause of action. In no-fault practice, defaults occur frequently in arbitration and court proceedings, and the standards for granting and vacating defaults have generated substantial case law. These articles analyze default practice, restoration motions, and the circumstances under which courts excuse procedural failures.
90 published articles in Defaults
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Disclaimer: This article is published by the Law Office of Jason Tenenbaum, P.C. for informational and educational purposes only. It does not constitute legal advice, and no attorney-client relationship is formed by reading this content. The legal principles discussed may not apply to your specific situation, and the law may have changed since this article was last updated.
New York law varies by jurisdiction — court decisions in one Appellate Division department may not be followed in another, and local court rules in Nassau County Supreme Court differ from those in Suffolk County Supreme Court, Kings County Civil Court, or Queens County Supreme Court. The Appellate Division, Second Department (which covers Long Island, Brooklyn, Queens, and Staten Island) and the Appellate Term (which hears appeals from lower courts) each have distinct procedural requirements and precedents that affect litigation strategy.
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