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Vacation of Default Judgment Denied Where Insurance Adjuster Acknowledged Lawsuit Prior to Lengthy Delay in Responding to Complaint

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In New Jersey, vacating a default judgment requires a specific burden of proof and the decision to do so is up to the discretion of the court. R. 4:50-1 provides several grounds for a court to relieve a party from a final judgment or order including mistake, excusable neglect or “any other reason justifying relief from the operation of the judgment or order.” To set aside a default judgment, a defendant must generally demonstrate that his or her failure to timely answer was due to excusable neglect and that they have a meritorious defense to the lawsuit.

The Appellate Division recently addressed these issues in Marion LLC v. Adams Construction and Demolition, Inc., where plaintiff and defendant Adams entered into a construction contract whereby Adams agreed to perform certain services for plaintiff. After Adams refused to provide adequate information to allow plaintiff to obtain a loan, plaintiff filed suit for breach of contract. An adjuster from Adams’ liability insurer contacted plaintiff’s counsel shortly after service of the Summons & Complaint, requesting proof of service and additional time to respond. However, no further contact was made, and plaintiff later successfully moved for a default judgment. Almost two years later, plaintiff moved to enforce litigant’s rights and Adams cross moved to vacate the default judgment.  

In affirming the trial court’s decision to deny the motion to vacate the default, the Appellate Division found that Adams failed to establish a basis to vacate the default judgment and that the motion was untimely as it should have been made within one year after the judgment was entered. The Court rejected Adams’ attempt to question the validity of service of process and claim that they had no knowledge of the lawsuit observing, among other things, that the insurance adjuster’s call to plaintiff’s counsel proved that the defendants were aware of the pending litigation.

The Marion decision shows that contact by an insurance company after service of a Summons & Complaint can be used as evidence of an insured’s knowledge of a pending lawsuit and that courts will not forgive lengthy unexcused delays in responding to a lawsuit. The case highlights the importance of timely doing so and in moving to vacate a default judgment.

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