April 13, 2018

Simple Neglect Is Not Excusable; Wamsley v. Tree City Village

Category: Indiana Law Review | Author: | Share:

This case should serve as a warning to all of the small business owners around the State.

Joseph and Wamsley were neighbors in an apartment complex. Joseph was cleaning his gun one day, when it discharged and hit Wamsley, injuring her. Wamsley hired Attorney Vick to represent her.

Vick sent a letter to the landlord, notifying it of his representation of Wamsley and asking that the landlord’s insurer be put on notice. A couple of weeks later, Vick received a letter from the insurer, and the two exchanged certain information. Ultimately, the insurer denied Wamsley’s claim.

Vick then filed a complaint on Wamsley’s behalf. He served the complaint on the landlord but did not send a copy to the insurer. The landlord also did not send a copy to the insurer. Rather, the landlord sent Vick a letter and filed the complaint away in a cabinet.

When the landlord did not timely answer the complaint, Wamsley moved for default judgment. The trial court granted that motion, only to have the landlord appear and move to vacate the default, arguing excusable neglect. The trial court granted the landlord’s motion, and Wamsley appealed.

On appeal, the landlord argued that its neglect in failing to timely respond to the complaint should be excused for two reasons: (1) “Wamsley failed to notify the insurer of the existence of the Complaint[;]” and (2) Landlords believed they “had done all that was required of them by allowing the insurer [to] handle the claim.” The Court addressed each argument in turn.

First, the Court was not inclined to excuse the landlord’s conduct by blaming Wamsley for not notifying the carrier of the complaint. It noted that the Indiana Supreme Court had previously found that plaintiff’s counsel’s failure to notify the carrier of the entry of a lawsuit would not, standing alone, justify the trial court in setting aside the default judgment. And it unfavorably compared the landlord’s conduct in this case to those in cases finding excusable neglect.

The case before us is more analogous to Smith, and distinguishable from both Boles and McGee. Unlike in Boles, here, the Landlords never sent the complaint to their Insurer. And unlike the attorney in McGee, Vick properly served the Landlords, and he never actively ignored inquiries made by the Landlord or the Insurer. Rather, similar to the situation in Smith, the Landlords failed to take any action with regard to the complaint, except for notifying Vick of an immaterial defect. However, unlike the circumstances in Smith, here the Landlords personally received the complaint and summons, acknowledged receiving it, and then New Generation Management, Inc.’s president placed it in a file cabinet for storage.

Wamsley was under no obligation to inform the carrier that she had filed a complaint, so her failure to do so was not excusable neglect.

The Court next looked to whether the landlord’s belief that it had done all that was required to comply with its policy was excusable neglect. And the Court again drew an unfavorable comparison between the landlord and litigants in earlier cases.

This was not an example of a breakdown in communication, but rather a complete lack of communication. Landlords’ counsel at the hearing to set aside default judgment acknowledged, “Whether the defendant should have told her insurer after she got a copy of the complaint, clearly, she should have.” In Whittaker, Flying J, and Coslett, each defendant contacted their insurance agency about the suit, and in each case the breakdown in communication occurred after the insurers had been notified. Here, the Landlords never sent a copy of the complaint or summons to the Insurer, and there is no evidence that the Landlords ever had had any discussions about the suit with the Insurer prior to the trial court’s entry of default judgment.

While the landlord may not have as much legal sophistication as a bank, it was “certainly experienced with litigation and the judicial procedural process through eviction proceedings, if nothing else,” and should have known that it needed to respond to the complaint. The landlord’s failure to do so showed “a striking lack of attention” that the Court was not inclined to excuse. Thus, the Court found that the trial court abused its discretion when it vacated the default judgment.

Lessons:

  1. A plaintiff’s attorney has no duty to inform a defendant’s insurer that a complaint has been filed.
  2. Whether neglect is excusable may differ based on the sophistication of the party.
  3. A landlord that regularly uses the legal system should know that it needs to respond to a complaint.