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December 05, 2022

A Reminder:  He Who Hesitates May Be Lost

The Ninth Circuit Court of Appeals held in an unpublished decision in Chevron Env't. Mgmt. Co. v. Env't. Prot. Corp. (Chevron Env't. Mgmt. Co.), No. 20-16206, 2022 WL 10966098 (9th Cir. Oct. 19, 2022) that an insurer's attempt to intervene in an underlying action against its insured was untimely as the insurer received notice of its insured's suspended status five months before plaintiff obtained an $18 million default judgment against the insured.

National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) sought to intervene in an action brought against its insured, Environmental Protection Corp. ("EPC"), in which Chevron sought contribution from EPC to cover cleanup costs at a waste disposal site EPC operated from roughly 1970 to 1985.

In June 2019, Chevron sent a letter to National Union informing it of the suit against EPC, which it identified as a suspended corporation. In September 2019, a magistrate judge issued a report recommending that an $18 million default judgment be handed down against EPC, which the court formally entered in October of that year. After Chevron's attorneys informed National Union of the default judgment days later, National Union filed a motion to intervene in the action in November 2019. The district court denied the motion.

On appeal, National Union argued that National Union only learned that its interests would not be adequately protected by EPC, given its suspended status, when Chevron informed National Union of the default judgment in October 2019.

The Ninth Circuit disagreed and found that National Union was on notice that EPC would not adequately protect its interests months earlier, in June, 2019, when it received the letter from Chevron enclosing the Complaint which specifically alleged that EPC was a suspended corporation. While National Union asserted it did not receive the letter, the Ninth Circuit affirmed the district court's reliance on the "mailbox rule" and found that the assertion was not enough to rebut the presumption of receipt when there was an unsigned return receipt, the face of the receipt stated that the letter was delivered, the letter was not returned to sender, and the return receipts for two subsequent mailings on September 11, 2019 (just days before the judgment) and October 9, 2019 (six days after the judgment) that National Union indisputably received were also unsigned.

On these facts, the Ninth Circuit concluded that "the district court did not abuse its discretion in determining that all three factors -- the stage of the proceedings, the prejudice to the nonmoving party, and the length and reason for the delay -- weighed against the timeliness of National Union's motion." (Chevron Env't. Mgmt. Co., 2022 WL 10966098 at * 1.)

The holding in Chevron Env't. Mgmt. Co. highlights the danger of an insurer's delay in intervening in an action against an insured which is suspended from doing business. An insurer should act immediately to intervene upon notice that its insured is suspended.

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