Michigan Court of Appeals; Docket #286140; Published
Judges M.J. Kelly, K.F. Kelly, and Shapiro; unanimous
Official Michigan Reporter Citation: 285 Mich. App. 529, Link to Opinion 
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Defaults and Default Judgments
CASE SUMMARY:
In this unanimous published opinion by Judge Shapiro, the Court of Appeals held that where an insurance policy contains an exclusionary clause that is triggered by settlement obtained without the insurer’s consent, if the judgment is set aside, the exclusion no longer applies.
The plaintiff in this case was injured in a motor vehicle accident involving an uninsured driver and sought benefits under her policy with defendant Meemic Insurance Company. However, she also filed an action against the driver and obtained a default judgment in the amount of $50,000. After receiving no response from defendant Meemic regarding her uninsured claim, plaintiff filed this action. Defendant moved for summary disposition, arguing that plaintiff violated the policy’s “no settlement/no judgment” clause when she obtained the default judgment against the at-fault driver without Meemic’s consent.
After defendant filed its motion, but before the motion was heard, the default judgment was set aside. At the hearing on the motion for summary disposition, plaintiff argued that the motion should be denied because she was no longer in violation of the contract. Plaintiff also argued that defendant waived this argument through its failure to respond to plaintiff’s request for arbitration for over two years. The trial court disagreed and granted the motion.
In reversing, the Court of Appeals noted that it is settled that judgments that are set aside are nullities. Therefore, when the judgment against the at-fault driver was set aside, it was as if the judgment had never been entered and the exclusionary clause was no longer applicable. Furthermore, because the judgment was set aside and, therefore, rendered null and void, defendant regained its subrogation rights and could subsequently seek to recoup funds paid. In this regard, the court stated:
“It is well settled that judgments that have been set aside are nullities. . . . Thus, when the default judgment against Gonzales was set aside, it was ‘the same as if no judgment had ever been rendered,’ id., and without a judgment against Gonzales, the exclusionary clause of the insurance policy was no longer applicable. . . .
Because the setting aside of a default judgment renders that judgment a nullity, insurers in such cases have regained their subrogation rights, such that there is no destruction of the insurer’s ability to recoup funds it has paid.
Accordingly, we hold that where an insurance policy contains an exclusionary provision that is triggered upon settlement or judgment without the knowledge and consent of the insurer, if the default judgment or settlement is set aside such that an insurer retains its right of subrogation, the exclusion does not apply.”
