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The Three Million Dollar Question: Are Method of Service and Proof of Service Synonymous?

Western District Court of Appeals finds that Plaintiffs Failed to Prove Proper Service Upon Insurer Before Taking Default Judgment

On April 29, 2014, the Missouri Court of Appeals affirmed a Boone County trial judge’s order setting aside a three million dollar default judgment more than two years after the default judgment was entered. The Plaintiffs, Ray Charles and Sue Bate, were parties injured in a motor vehicle accident. They sued the insurer of Ray Charles Bates’ employer, Greenwich, alleging that he was entitled to underinsured motorist benefits under the employer’s policy. Plaintiffs attempted to serve Greenwich pursuant to the process set forth in R.S.Mo. §375.906. A sheriff served a copy of the Plaintiff’s lawsuit against Greenwich upon an agent of the Missouri Department of Insurance. That agent then mailed the lawsuit to Greenwich using regular, first class mail which did not provide any verification that Greenwich would be actually served with the lawsuit.

Plaintiffs filed with the court an affidavit of an agent of the Missouri Department of Insurance attesting that the suit was mailed using regular, first class mail but provided no proof that Greenwich was actually served with the lawsuit. Without any proof before the trial court that Greenwich was actually served with Plaintiffs’ lawsuit, Plaintiffs took a default judgment in the amount of three million dollars. Plaintiff’s then waited over a year before seeking to collect on the judgment. Under Missouri law, the burden upon a party seeking to set aside a default judgment within one year of the judgment being entered is a relatively light burden. After one year, however, a default can only be set aside if the judgment is void or in other limited contexts. A default judgment is void if the court lacked personal or subject matter jurisdiction at the time the judgment was entered.

On August 6, 2012, Greenwich’s attorneys filed an Entry of Appearance and a Motion to Set Aside the Default Judgment as Void for Lack of Personal Jurisdiction. Greenwich argued, under Missouri Supreme Court Rules, that Plaintiffs were required to file proof of service with the court, being a return receipt signed by Greenwich’s agents, before a default judgment could be taken against it. Plaintiffs’ argued that to take a default they were only required to serve the Missouri Department of Insurance and that the Department of Insurance could simply send the lawsuit to Greenwich via regular mail under the terms of R.S.Mo. §375.906. The trial judge disagreed, setting aside the judgment for lack of personal jurisdiction over Greenwich.

With three million dollars on the line, the Bates appealed. On appeal, the Western District found that the Bates’ had confused the distinction between method of service and proof of service which are differentiated under the Missouri Supreme Court Rules 54.15, 54.18, and 54.20. As such, the Court of Appeals held that the trial court lacked jurisdiction to enter a default judgment against Greenwich and affirmed the trial judge’s decision to set aside that judgment for lack of personal jurisdiction.

Greenwich was represented in this lawsuit and appeal by Steven J. Hughes, Robyn G. Fox, and Natalie J. Higgins. For more information on our legal team, see their profile for direct contact information.

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