Westchester Fire Insurance Company v. Northwest Airlines, Inc. (Civil Procedure)
Filed October 28, 2009
Cite as 07-17383

Airline Company has Standing to Intervene

Phil Mendez was the owner and operator of Professional Aircraft Line Services (PALS), an aircraft maintenance business. Northwest Airlines (Northwest) was one of Mendez’s customers under an agreement that the latter would purchase and maintain commercial general liability insurance.

Consequently, Mendez insured its business with Airport Owners and Operators General Liability Policy issued by Westchester Fire Insurance Company (Westchester). The policy provided that Mendez should give prompt notice to any possible claim.

Subsequently, one of Northwest’s aircrafts sustained a substantial damage when it rolled down in an embankment at McCarran Airport. One of Mendez’s employees was at the cockpit at that time of the accident but failed to report it to Westchester.

Northwest through a letter notified Mendez of its claim and requested that the latter forward the correspondence to Westchester. However, Mendez failed to notify Westchester.

Ace USA (Ace), Westchester’s claims agent, tried to contact Mendez to inform the latter to communicate with Westchester and remind him of his obligations under the policy.

At one instance, Mendez contacted Ace and promised to provide all documents in his possession regarding the claim. Mendez even agreed to include information from Federal Aviation Administration allegedly absolving him of any liability. But Mendez failed on his promise and never made contact with Ace.

Meanwhile, Northwest obtained a default judgment against Mendez. Thereafter, Ace in a letter and on Westchester’s behalf, denied the coverage of Mendez for his failure to cooperate and notify it or Westchester of the lawsuit. Westchester offered to provide Mendez counsel in an attempt to set aside the judgment in favor of Northwest but Mendez did not respond.

Westchester filed an action for declaratory judgment in federal district court in Nevada. Northwestern intervened.

The court ruled that Northwest was bound by the default judgment entered against Mendez. The court denied several motions by Northwest including a motion for leave to file an answer.

Northwest filed a timely appeal.

The US Court of Appeals, Ninth Circuit, ruled that Northwest could not be barred by the default of Mendez from presenting arguments. Northwestern had standing to appeal the district court’s grant of default judgment in favor of Westchester as the district court based its default judgment on default issued against Mendez for repeatedly failing to appear for deposition.

Moreover, Northwestern has the right to defend against an action in its own right. Hence, the district court should not have entered a default judgment against all defendants based solely on Mendez’s failure to appear.