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Prime Ins. Co. v. Wright, 2019 WL 4678394 (Ind. Ct. App. 2019)

This case presented an unusual situation concerning whether a liability insurer facing potential future liability under an MCS-90 endorsement has an interest in existing litigation to seek to set aside a default judgment against its insured. Federal law requires motor carriers to demonstrate proof of financial responsibility by obtaining an MCS-90 Endorsement, which supersedes any policy conditions or exclusions that would relieve the insurer from having to pay for injuries for which the motor carrier is liable. The MCS-90 endorsement, however, permits the insurer to seek reimbursement from the insured for any payments made not otherwise covered by the liability policy.

In Wright, an insured truck driver, operating a truck on behalf of an entity known as Riteway, was involved in an accident that injured another motorist. The motorist filed a lawsuit against the driver and Riteway. However, Riteway would not cooperate with its liability insurer, Prime Insurance Company (“Prime”), in the defense of the litigation. As a result, Prime filed a separate declaratory judgment action asking the court to determine that it lacked any duty to defend or indemnify Riteway and its driver in the injured motorist’s lawsuit.

In the personal injury lawsuit, the injured motorist filed a motion for default judgment against the truck driver and Riteway. Prime sought and was granted permission to intervene in the personal injury action. The court conducted a hearing on the motion, and entered a default judgment in the amount of Four Hundred Thousand Dollars ($400,000.00) in favor of the motorist and against the driver and Riteway.

Prime answered the injured motorist’s complaint and moved to set aside the default judgment against Riteway. In the meantime, the court in the declaratory judgment action determined that Prime had no duty to defend or indemnify Riteway under the policy, and that to the extent that the MCS-90 endorsement applied and obligated Prime to make payments to the injured motorist, Riteway was obligated to reimburse Prime.

The trial court denied Prime’s motion to set aside the default judgment against Riteway. On appeal, Prime sought to overturn the trial court’s decision by contending that it possessed a continuing interest to question Riteway’s liability to the injured motorist. Specifically, Prime wished to contest the applicability of the MCS-90 Endorsement and any liability that Prime may have arising under it. Thus, Prime’s continuing interest was characterized as a “contingent interest” as it was “subject to a subsequent legal determination regarding applicability of the MCS-90 Endorsement.” Id.

The Court of Appeals affirmed the trial court’s denial of Prime’s motion to set aside the default judgment. Specifically, the Court found that Prime’s contingent interest was merely an attempt to relitigate Riteway’s liability to the injured motorist “in an effort to limit a potential future financial obligation” under the MCS-90 Endorsement. In support of its determination, the Court of Appeals stated:

Prime cannot both deny its obligation to its insured and, at the same time, seek to litigate questions relating to liability and damages. To allow Prime to do so would effectively grant Prime a second bite at the apple in its attempt to escape a potential future financial obligation.

Id.

This case does not represent a set of facts that often occurs. However, the decision provides guidance to a specific coverage situation, that may be helpful in the future.