Ex parte GRE Ins. Group

• Decision Date: 16 November 2001
• Citation: 822 So.2d 388
• Parties: Ex parte GRE INSURANCE GROUP. (Re Glenda Galvin et al. v. Jason M. Anderson et al.)
• Court: Alabama Supreme Court

822 So.2d 388

Ex parte GRE INSURANCE GROUP.

(Re Glenda Galvin et al. v. Jason M. Anderson et al.)

1001453.

Supreme Court of Alabama.

November 16, 2001.

Vann A. Spray, Joseph H. Driver, and Brett A. Ross of Carr, Allison, Pugh, Howard, Oliver & Sisson, P.C., Birmingham, for petitioner.

Lawrence T. King and Richard F. Horsley of Goozée, King & Horsley, L.L.P., Birmingham, for respondent Glenda Galvin.

WOODALL, Justice.

GRE Insurance Group ("GRE") petitions this Court for a writ of mandamus directing Judge Hugh Beaird to vacate an order striking GRE's amended answer to a complaint filed against it by Glenda Galvin and others. We grant the petition.

This dispute began when an automobile operated by Glenda Galvin and also occupied by Timothy Galvin, Amanda Galvin, Megan Jamora, and Olivia Jamora was struck by an automobile operated by Jason Anderson. On May 21, 1999, Glenda Galvin and each of the occupants in her vehicle (hereinafter collectively referred to as "Galvin") sued Anderson, seeking damages for personal injuries allegedly suffered in the accident.

On February 22, 2000, Galvin amended her complaint to seek underinsured-motorist benefits from GRE under a policy it had with Glenda Galvin. On May 23, 2000, Galvin moved for an "Entry of Default" against GRE, and requested a hearing to prove damages. An entry of default was made against GRE.¹ On June 20, 2000, without the knowledge or consent of GRE, Galvin settled her claims with Anderson, and released Anderson from further liability. On July 20, 2000, Galvin and Anderson filed a stipulation of dismissal, and on July 25, 2000, the trial court dismissed the action.² The same day, GRE answered the complaint. On July 31, 2000, GRE moved to set aside the entry of default. Galvin did not oppose the motion to set aside, and, on August 2, 2000, the trial court granted the motion.

On August 15, 2000, GRE amended its answer, alleging that Galvin was "precluded from recovering underinsured motorist insurance benefits [because of her failure] to ... obtain [GRE's] permission to settle with the underlying tortfeasor." Galvin moved to strike the amended answer, alleging that she was not obligated to provide notice of a "potential settlement" while GRE was in default. "In fact," she alleged, "since [GRE] was in default, [it] waived any rights to defend based upon anything that occurred while it was in default."

On April 5, 2001, the trial court granted Galvin's motion to strike GRE's amended answer. The trial court's order stated, in pertinent part:

"[T]he court is of the opinion that [Galvin's] Motion to Strike defendant's Amended Answer should be granted, since the settlement in this case occurred while [GRE] was in default, and, therefore, the cases of Lambert v. State Farm Insurance Co., 576 So.2d 160 (Ala. 1991), and Overstreet v. Safeway [Insurance Co. of Alabama], 740 So.2d 1053 (Ala.1999), are not applicable in this situation, and furthermore, defendant should be estopped from taking advantage of its own dilatoriness and negligence...."

GRE now seeks a writ of mandamus, directing the trial court to vacate that order.

"[A] writ of mandamus is an extraordinary remedy, which requires the petitioner to demonstrate a clear, legal right to the relief sought, or an abuse of discretion." Ex parte Palm Harbor Homes, Inc., 798 So.2d 656, 660 (Ala.2001). See also Ex parte Edgar, 543 So.2d 682, 684 (Ala.1989).

"[A] party may amend a pleading without leave of court ... at any time more than forty-two (42) days before the first setting of the case for trial, and such amendment shall be freely allowed when justice so requires." Ala. R. Civ. P. 15(a) (emphasis added). "`[R]efusal of an amendment must be based on a valid ground,'" Ex parte Bailey, 814 So.2d 867, 869 (Ala.2001) (quoting Stead v. Blue Cross-Blue Shield of Alabama, 294 Ala. 3, 6, 310 So.2d 469, 471 (1975)) (emphasis omitted), such as "actual prejudice or undue delay." Ex parte Thomas, 628 So.2d 483, 486 (Ala.1993).

Neither the facts nor the allegations in this case support a finding of undue delay or of prejudice. There was no undue delay, because GRE filed its amended answer soon after learning of Galvin's settlement with Anderson. More specifically, Galvin and Anderson stipulated to the dismissal of the cause on July 20, 2000, and an order of dismissal was entered five days later. Galvin concedes that she did not notify GRE of the settlement and the release of Anderson before July 20. Apparently, GRE first learned of the settlement as a result of the dismissal order. Approximately 20 days later, on August 15, 2000, GRE filed the amended answer that is the subject of this petition. Thus, GRE's amended answer was not untimely.

Galvin claims that she would be prejudiced if the amendment is allowed. In particular, she states: "Because `actual prejudice' to the opponent of the amendment is a criterion to be considered when allowing or disallowing an amendment to the pleading, ... it bears mentioning the obvious: allowing the amendment effectively extinguishes Glenda Galvin's claim against GRE, in all probability. How much more prejudice could exist?" Brief of Respondent, at 14 (emphasis in original).

Galvin, however, misunderstands the meaning of "prejudice" in the context of the test for allowing amendments. "[I]t is obvious that an amendment, designed to strengthen the movant's legal position, will in some way harm the opponent." Cuffy v. Getty Ref. & Mktg. Co., 648 F.Supp. 802, 806 (D.Del.1986). "In the context of a [Rule] 15(a) amendment, prejudice means that the nonmoving party `must show that it was unfairly disadvantaged or deprived of the opportunity to present facts or evidence which it would have offered had the... amendments been timely.'" Id. (Emphasis added.) (Quoting Heyl & Patterson Int'l v. F.D. Rich Housing of Virgin Islands, Inc., 663 F.2d 419, 426 (3d Cir. 1981).) "And by prejudice to the rights of the other party is meant, without loss to him other than such as may result from establishing the claim or defense of the party applying." McDaniel v. Hoblit, 34 Wyo. 509, 515, 245 P. 295, 297 (1926)(emphasis added). In other words, the defense asserted in the amended answer is not prejudicial, merely because it might constitute a meritorious defense to the plaintiff's claim.

Indeed, Galvin's only arguments are addressed to the merits of GRE's defense. Galvin does not dispute that she was contractually obligated to obtain GRE's consent before she settled her claims against Anderson and released Anderson from further liability, and that she failed to do so. Nevertheless, she reasons, as did the trial court, that because GRE was in default it should be estopped to allege that Galvin had breached the notice provisions of the insurance contract as a defense to her claim for underinsured-motorist benefits.

This estoppel argument constitutes a substantive defense to GRE's defense. Thus, it goes directly to the merits of Galvin's claim against GRE. However, an amendment "should be denied on the merits `only if it asserts clearly frivolous claims or defenses.'" Becker v. University of...