Strategies, Challenges, and Answers

When Is It Too Late For A UM/UIM Carrier To Intervene In The Underlying Litigation?

Eric and Erwin Lopez were hurt when a negligent and underinsured driver hit their car.  They sued the driver.  As discovery progressed, Eric and Erwin convinced the driver to settle.  However, they would not give the negligent driver a release.  Instead, they offered the driver a Covenant Not to Execute against him in excess of his bodily injury liability limits.  The negligent and underinsured driver accepted.  The bodily injury liability limits were paid and the Covenant provided.  However, the litigation continued.

With nothing else at risk, the underinsured driver put up no further defense.  Eric and Erwin sent a letter to their UIM carrier Merit Insurance demanding payment of the Merit’s UIM limit of $15,000.  Merit offered what it thought was the proper amount.  Eric and Erwin rejected the offers and told Merit that the trial was coming up in three months and they intended to proceed.  Merit did not intervene.

When no one showed up to defend, the court gave Eric and Erwin defaults and allowed them to prove up their damages, $ 108,263.75 for Eric and $ 105,562.35 for Erwin, plus their costs and interest. They entered their judgments.  No one appealed.

Ten months later, Merit decided to challenge these judgments and filed a Motion to Set Aside the Default Judgments and to Intervene.  Merit argued that it did not get appropriate notice of the action and the trial.  The district court granted both Motions.

Eric and Erwin appealed.  The Supreme Court accepted their interlocutory appeal.

In the opinion of Lopez v. Merit Ins. Co., 109 Nev. 553; 853 P.2d 1266; 1993 Nev. LEXIS 91 (1993), the Nevada Supreme Court told Merit that its attempt to intervene was too late.  NRS 12:130(1) says anyone who has an interest in the litigation has the right to intervene, but that the intervention must happen before trial.

The court said that Merit’s request to intervene was too late.  Because the request to intervene came too late, Merit was never a party to the action between Eric, Erwin and the negligent driver.  Thus Merit could not ask for the judgment to be set aside.  The Supreme Court allowed the judgments to stand.

The Supreme Court said that the question of whether Merit would be bound by the judgment was a decision for another day.  But even though that decision was not ripe, the answer was a forgone conclusion.  A UM/UIM carrier that has notice of and an opportunity to intervene in the underlying bodily injury liability action and fails to do so is bound by the outcome of that action.  State Farm Mut. Auto. Ins. Co. v. Wharton, 88 Nev. 183, 187, 495 P.2d 359, 362 at n. 7 (1972); State Farm Mut. Auto. Ins. Co. v. Christensen, 88 Nev. 160, 494 P.2d 552 (1972). Allstate Ins. Co. v. Pietrosh, 85 Nev. 310, 454 P.2d 106 (1969).

Mike Mills is prepared to talk to you about whether your insurance company should intervene in the underlying action and when is the best time to do so.  If you have other questions about UM / UIM law, please contact Mike Mills at 702-240-6060.  He will happily speak with you.

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