Monday, July 7, 2008

Oversight Leads To Default Judgment

The Wisconsin Supreme Court affirmed a default judgment entered against a company that insured doctors because counsel had neglected to file a responsive pleading on behalf of the company when pleadings were filed on behalf of the individual defendants in a medical malpractice case. the court summarized the key facts:

PIC [the insurer] explained its failure to serve an answer timely as follows: PIC hired counsel to represent PIC and all of PIC's codefendants (most of whom were PIC's insureds) in the action; the counsel hired by PIC intended to serve an answer timely on behalf of all defendants in the action, including PIC; the counsel timely served an answer (which denied the liability of all defendants) on behalf of PIC's codefendants but inadvertently omitted PIC's name from the caption of the answer; counsel's inadvertent omission of PIC's name stemmed from a clerical or computer-based error without PIC's, counsel's, or counsel's staff's fault; the parties continued to litigate the action for more than nine months before anyone noticed PIC's failure to answer and for more than one year before the plaintiff moved for default judgment against PIC; the plaintiff and all other parties knew or believed all along that the counsel representing PIC's codefendants was also representing PIC; and the counsel hired by PIC immediately filed an amended answer including PIC's name in the caption when counsel's prior omission was finally called to his attention.

The court engaged in a lengthy analysis of precedent in Wisconsin and other jurisdictions in concluding that a timely filing on behalf of the individual defendants did not preclude a default against the insurer.

A dissent of three justices would find that default was improper for what it characterized as a scrivener's error:

The majority opinion affirms the court of appeals' conclusion that PIC's failure to answer within the statutorily prescribed time results in the following conclusive factual findings:  (1) PIC's insureds were negligent; and (2) PIC's insureds' negligence was causal of plaintiffs' damages.  PIC's insureds, in their answer to the amended complaint, denied that their conduct was negligent and denied that their conduct caused plaintiffs' damages, which denials joined those issues of fact and have not been stricken or proven false.  Under the direct action statute, Wis. Stat. ยง 632.24, PIC cannot be liable unless its insureds' conduct was negligent and a cause of plaintiffs' damages. (citation omitted) Therefore, the matter should be returned to the circuit court to litigate the contested factual questions relating to PIC's insureds' conduct. Because the majority opinion disconnects PIC's liability from the insureds' conduct, contrary to the legislative directive, I respectfully dissent.

(Mike Frisch)

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