Reasonable excuse/ default

When Insurance Companies Successfully Challenge Default Judgments

In no-fault insurance litigation, insurance companies sometimes face default judgments when they fail to respond to lawsuits within required timeframes. However, these defaults aren’t always final. Under New York Civil Practice Law and Rules (CPLR), defendants can seek to vacate defaults by establishing both a reasonable excuse for their failure to appear and a meritorious defense.

The recent Cautious Care Medical decision demonstrates how detailed corporate record-keeping practices can provide compelling evidence of a reasonable excuse. When an insurance company can prove through systematic documentation that they never received service of process, courts may find this sufficient to excuse their default. This case highlights the importance of maintaining comprehensive procedures for handling legal documents in the New York no-fault insurance context.

Jason Tenenbaum’s Analysis:

Cautious Care Med., P.C. v 21st Century Ins. Co., 2021 NY Slip Op 50785(U)(App. Term 2d Dept. 2021)

“In support of its motion, defendant submitted an affidavit by the person alleged to have received service of process, who stated that she always follows defendant’s practices and [*2]procedures for receipt of process. These practices and procedures would have created a record of the instant lawsuit, and defendant demonstrated that it does not have any such record. Defendant’s affiant further explained, in detail, that the records she created on July 8, 2015, the date service herein was allegedly made, as part of defendant’s practices and procedures, demonstrate that she received process in 14 other cases on that date. Under these circumstances, we find that the Civil Court did not improvidently exercise its discretion in determining that defendant had established a reasonable excuse for its default.”

Key Takeaway

Insurance companies can successfully vacate default judgments by demonstrating systematic record-keeping practices that would have documented service of process. When comprehensive corporate procedures show no record of receiving legal documents, and detailed evidence proves the system was functioning properly on the alleged service date, courts may find this constitutes a reasonable excuse for default.