Judge: Bruce G. Iwasaki, Case: 18STCV01351, Date: 2023-01-27 Tentative Ruling



Case Number: 18STCV01351    Hearing Date: January 27, 2023    Dept: 58

Judge Bruce G. Iwasaki

Department 58


Hearing Date:             January 27, 2023

Case Name:                Jane Doe v. Standard International Management, LLC, et al.

Case No.:                   18STCV01351

Matter:                        Motion for leave to intervene

Moving Party:             Zurich American Insurance Company

Responding Party:      Plaintiff Jane Doe

 

Tentative Ruling:      The motion for leave to intervene is granted.  The motion to vacate default is denied.  Zurich is ordered to comply with Code of Civil Procedure section 387, subdivision (e).

 

Jane Doe (Plaintiff) sued Defendants Standard International Management, LLC and Does 1-50 for invasion of privacy, negligence, premises liability, and negligent hiring. 

 

Plaintiff alleged that while she was staying in Defendant’s hotel, two male employees broke into her room by cutting through the door latch.  After she confronted them in a state of undress, the men left the room.  She alleges that she is a sexual abuse survivor and the incident caused severe emotional trauma and anxiety.

 

            In December 2019, Plaintiff amended the Complaint to add in Jared Murphy (Murphy) as a defendant.  The hotel’s insurance company, Zurich American Insurance Company (Zurich), agreed to represent Murphy and filed an Answer on his behalf in February 2022.  Murphy then refused to cooperate with Zurich’s counsel.  The Court subsequently issued an order to compel Murphy to attend his deposition, but he still failed to appear.  On September 19, 2022, Murphy’s Answer was stricken and the Court entered default against him.

 

            Zurich now moves to intervene in this case and set aside Murphy’s default.  It argues that it has a direct interest because under Insurance Code section 11580, a judgment creditor (Plaintiff) who obtains a default judgment against Murphy may seek to enforce the judgment against Zurich.  In addition, it seeks to set aside Murphy’s default.

 

            Plaintiff filed an untimely opposition, arguing that Murphy “abdicated any right to contest the allegations against him” and that Zurich may only defend itself.  The Court has discretion to disregard Plaintiff’s opposition.  Zurich, however, filed a reply.  Accordingly, the Court will consider the merits.

 

Motion to Intervene

 

California Code of Civil Procedure section 387, subdivision (a) provides that, “[u]pon¿timely application, any person, who has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both, may intervene in the action or proceeding.¿ An intervention takes place when a third person is permitted to become a party to an action or proceeding between other persons, either by joining the plaintiff in claiming what is sought by the complaint, or by uniting with the defendant in resisting the claims of the plaintiff, or by demanding anything adversely to both the plaintiff and the defendant.” 

 

To establish a direct and immediate interest in the litigation for purposes of permissive intervention, a non-party seeking intervention must show a “‘direct or immediate’” interest “‘that the intervener will either gain or lose by the direct legal operation of the judgment.’” (Simpson Redwood Co. v. State of California¿(1987) 196 Cal.App.3d 1192, 1201.)¿ “Whether the intervener’s interest is sufficiently direct must be decided on the facts of each case¿. . . .¿And section 387 should be liberally construed in favor of intervention.”¿ (Id.¿at p. 1200.)  “In order that a party may be permitted to intervene it is not necessary that his interest in the action be such that he will inevitably be affected by the judgment.¿ It is enough that there be a substantial probability that his interests will be so affected.¿ ‘The purposes of intervention are to protect the interests of those who may be affected by the judgment.’”¿ (Timberidge¿Enterprises, Inc. v. City of Santa Rosa¿(1978) 86 Cal.App.3d 873, 881-882, original italics.)¿ 

 

When “[p]resented with a motion for intervention, the court must determine whether the intervenor has established (1) it has a direct interest in the lawsuit; (2) intervention would not enlarge the issues raised by the original parties; and (3) the intervenor would not ‘tread on the rights of the original parties to conduct their own lawsuit.’” (Bame v. City of Del Mar (2001) 86 Cal.App.4th 1346, 1364.)

 

An insurance carrier who is not a party to an action can intervene on behalf of its insured when the insurance carrier could be subject to a subsequent action under Insurance Code section 11580.¿ (Reliance Insurance Co. v. Superior Court¿(2000) 84 Cal.App.4th 383, 386 [“An insurer’s right to intervene in an action against the insured, for personal injury or property damages, arises as a result of Insurance Code section 11580”].)¿ “Section 11580 provides that a judgment creditor may proceed directly against any liability insurance covering the¿defendant, and¿obtain satisfaction of the judgment up to the amount of the policy limits. [Citation.] Thus, where the insurer may be subject to a direct action under Insurance Code section 11580 by a judgment creditor who has or will obtain a default judgment in a¿third party¿action against the insured,¿intervention is appropriate.”¿ (Id. at pp. 386-387;¿see also¿Jade K. v.¿Viguri¿(1989) 210 Cal.App.3d 1459, 1468 [permitting an insurer to intervene in lawsuit to litigate liability and damage issues].)¿ 

 

Analysis

 

Zurich is the insurance carrier that provided coverage for Defendant Standard International Inc. and its employees on the day of the incident.  (Tamaddon Decl., ¶¶ 2-3.)  Zurich seeks to intervene because its counsel has made several attempts to reach Murphy, who has refused to cooperate.  (Id. at ¶ 4; Gutierrez Decl., ¶¶ 6-8.)  Such efforts included sending a reservation of rights letter to Murphy, reserving Zurich’s right to decline coverage if Murphy continued to refuse to cooperate.  (Tamaddon Decl., ¶ 4.)  Zurich seeks to intervene to protect its own interest, which will be adversely affected if it does not intervene, and judgment is entered against Murphy.  (Id. at ¶ 6) 

 

Zurich has presented sufficient facts to grant leave to intervene.  As Murphy is uncooperative and in default, a default judgment may be entered against him, which may expose Zurich to liability.  (Reliance Insurance Co. v. Superior Court, supra, 84 Cal.App.4th at p. 385 [“intervention by an insurer is permitted where the insurer remains liable for any default judgment against the insured, and it has no means other than intervention to litigate liability or damage issues”].)  While a reservation of rights letter was mailed to Murphy, “an insurer providing a defense under a reservation of rights has not ‘lost its right to control the litigation’ [citation], and therefore retains a direct interest in the case.”  (Gray v. Begley (2010) 182 Cal.App.4th 1509, 1523; see also Jade K. v. Viguri, supra, Cal.App.3d at pp. 1468, 1472 [insurer had a right to intervene even when it tendered a defense under a reservation of rights].)

 

Plaintiff argues that Zurich can only defend its own interests.  This position has not been thought through carefully enough. “[A]n intervening insurer is not bound by a default taken against its insured . . . A party’s default does not bind nondefaulting codefendants, even when the basis for the action against the codefendants is vicarious liability arising from the acts of the defaulting defendant. Thus, an insurer intervening in an action to pursue its own interests after its insured has defaulted is not required to vacate the insured’s default as to itself; the insured’s default simply has no effect on the insurer.”  (Western Heritage Insurance Co. v. Superior Court (2011) 199 Cal.App.4th 1196, 1211.)  It is because of Murphy’s default and failure to protect his own interests that necessitated Zurich to move to intervene.  Thus, the Court grants the motion for leave to intervene.

 

Motion to vacate default 

 

            Zurich also seeks to set aside Murphy’s default.  Plaintiff opposes, arguing that there is no relief for Murphy’s intentional conduct.

 

Code of Civil Procedure section 473, subdivision (b) provides for either discretionary or mandatory relief from certain prior actions or proceedings in the trial court. (Luri¿v. Greenwald¿(2003) 107 Cal.App.4th 1119, 1124.)  “‘Under the discretionary relief provision, on a showing of “mistake, inadvertence, surprise, or excusable neglect,”¿the court has discretion to allow relief from a “judgment, dismissal, order, or other proceeding taken against”¿a party or his or her attorney.¿¿Under the mandatory relief provision, on the other hand, upon a showing by attorney declaration of “mistake, inadvertence, surprise, or neglect,”¿the court shall vacate any “resulting default judgment or dismissal entered.”’ [Citation.] Applications seeking relief under the mandatory provision of section 473 must be ‘accompanied by an attorney’s sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect.’ The mandatory provision¿further adds that ‘whenever relief¿is granted based on an attorney’s affidavit of fault [the court shall] direct the attorney to pay reasonable compensatory legal fees and costs¿to opposing counsel or parties.’”  (Ibid.; Code Civ. Proc., § 473, subd. (b).)¿¿

 

Zurich cites to Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 885 for the proposition that an insurer may move to vacate the default of its insured.  In Clemmer, the insurer first found out about the wrongful death action against its insured “on the day before the hearing on default judgment following [insured’s] default.”  (22 Cal.3d at p. 884.)  Thus, it was likely the insurer “would have had little difficulty making out a case for a ‘mistake, inadvertence, surprise or excusable neglect.’”  (Id. at p. 886.)  

 

Zurich makes no such showing here.  While the Court agrees that Zurich may move to vacate the default, Zurich does not explain the “mistake, inadvertence, surprise or excusable neglect.”  (See also Jade K. v. Viguri, supra, 210 Cal.App.3d at p. 1470 [reversing trial court’s denial of a motion to vacate default judgment because the insured “did not notify [insurer] of [plaintiff’s] lawsuit or request defense under the [] policy until after entry of default”].)  Here, Murphy was represented by attorney Edgar J. Gutierrez, an attorney appointed for him by Zurich.  (Gutierrez Decl., ¶ 2.)  Gutierrez filed an Answer on behalf of Murphy.  (Id. at ¶ 3.)  Zurich does not argue that it was surprised because it received notice of this case one day before default judgment or after entry of default.  (Clemmer, supra, 22 Cal.3d at p. 884; Jade K., supra, 210 Cal.App.3d at p. 1470.)  Without such a showing, the Court denies the request to vacate the default.

 

Conclusion

 

            The motion for leave to intervene is granted.  The motion to vacate default is denied.  Zurich is directed to comply with Code of Civil Procedure section 387.