13 Fla. L. Weekly Supp. 668a

Insurance — Personal injury protection — Default — Vacation — Denial — Excusable neglect — Where insurer showed that policies and procedures for handling litigation were in place, but litigation claims adjuster failed to retain outside counsel and then went on emergency medical leave, and arrangements made to handle matter in adjuster’s absence failed, insurer demonstrated excusable neglect — Meritorious defense — Where insurer alleged in answer and affirmative defenses filed with motion to set aside final judgment that benefits were exhausted and that medical provider failed to timely submit bills and failed to deliver demand letter, insurer raised meritorious defenses — Due diligence — Where insurer alleged that it either did not receive copies of default judgment and default final judgment or that copies were misplaced and it first became aware of judgment when provider’s counsel contacted adjuster about execution, insurer retained counsel upon learning of judgment, and motion to set aside judgment was filed three weeks later, insurer acted with due diligence — Order denying motion to set aside final judgment is quashed

U.S. SECURITY INSURANCE COMPANY, Appellant, v. ORLANDO SURGERY CENTER II, LTD., Appellee. Circuit Court. 9th Judicial Circuit (Appellate) in and for Orange County. Case No. CVA104-15. L.C. Case No. 2003-CC-3186. February 17, 2006. Non-Final Appeal from County Court for Orange County, Jerry L. Brewer, Judge. Counsel: Catherine M. Aebel, Barr, Murman, Tonelli, Slother & Sleet, Tampa, for Appellant. Franklin T. Walden, Law Offices of Franklin T. Walden, Winter Park, for Appellee.

(BEFORE Gridley, Whitehead, and O’Kane, JJ.)

OPINION AND ORDER QUASHING TRIAL COURT’S ORDER

(PER CURIAM.) Appellant, U.S. Security Insurance Company, seeks review of the trial court’s Order denying Appellant’s Motion to Set Aside Final Judgment. This Court has jurisdiction.¹ This Court dispenses with oral argument pursuant to Florida Rule of Appellate Procedure 9.320. For the reasons discussed below, the trial court’s Order denying Appellant’s Motion to Set Aside Final Judgment is reversed.

Appellee, Orlando Surgery Center II, Ltd., filed a Complaint against Appellant seeking payment for medical services provided to Bobby Smith for injuries arising out of an automobile accident on March 6, 2003. At the time of the accident, Smith was driving a car owned by Debbie McCray Chaney and insured by Appellant. Appellant was served with the Complaint on or about March 27, 2003.

The Clerk of Court entered a default on June 9, 2003. A Default Final Judgment was entered on September 29, 2003. A Writ of Execution was issued on October 29, 2003.

On November 23, 2003, Appellant filed a Motion to Set Aside Final Judgment. Appellant asserted excusable neglect, supported by two affidavits, a meritorious defense as set forth in an attached Answer and Affirmative Defenses, and due diligence.

A hearing was held on Appellant’s Motion before the Honorable Jerry L. Brewer on February 17, 2004. The court issued an Order denying Appellant’s Motion to Set Aside Final Judgment on February 18, 2004.

On March 10, 2004, Appellant filed a Notice of Non-Final Appeal. Appellant filed its Initial Brief and Appendix on May 28, 2004. Appellee filed an Answer Brief on September 1, 2004. Appellant filed its Reply Brief on October 12, 2004.

On November 5, 2004, this Court entered an Order Directing Appellant to File a Complete Copy of Exhibit. On November 22, 2004, Appellant filed a Notice of Filing Affidavit of Farah Florestal in Compliance with Court’s Order Dated November 2, 2004.

In order for an appellate court to reverse an order denying a motion to set aside a default judgment, a gross abuse of discretion must be shown. Safetitle, Inc. v. Fidelity Nat’l Title Ins., 701 So. 2d 565 (Fla. 5th DCA 1997); Tire Kingdom, Inc. v. Bowman, 480 So. 2d 221 (Fla. 5th DCA 1985). Discretion is abused when the judicial action is arbitrary, fanciful or unreasonable. Canakaris v. Canakaris, 382 So. 2d 1197, 1203 (Fla. 1980). If there is “any reasonable doubt in the matter of vacating a default, it should be resolved in favor of granting the application and allowing trial upon the merits of the case.” North Shore Hosp., Inc. v. Barber, 143 So. 2d 849, 853 (Fla. 1962). “[T]his court must remain cognizant of Florida’s ‘long standing policy of liberality toward the vacating of defaults’ when a defendant has demonstrated excusable neglect and has presented a meritorious defense.” KFC USA, Inc. v. Depew, 879 So. 2d 55, 56 (Fla. 5th DCA 2004).

Florida Rule of Civil Procedure 1.500(d) provides that “[t]he court may set aside a default, and if a final judgment consequent thereon has been entered, the court may set it aside in accordance with rule 1.540(b).” Florida Rule of Civil Procedure 1.540(b) provides, in pertinent part, that the court may relieve a party from a final judgment based upon mistake, inadvertence or excusable neglect.

“To be relieved of a default, a defendant must demonstrate excusable neglect, a meritorious defense and due diligence in seeking relief.” Dawkins, Inc. v. Huff, 836 So. 2d 1062, 1064 (Fla. 5th DCA 2003), citing Decubellis v. Ritchotte, 730 So. 2d 723, 727-28 (Fla. 5th DCA 1999). In its Order, the trial court did not specify on what grounds Appellant’s Motion was denied, therefore all three requirements will be reviewed.

Excusable Neglect

“To establish excusable neglect, a party must file affidavits or sworn statements that set forth the facts explaining or justifying the mistake or inadvertence.” Moreno Constr. Inc. v. Clancy & Theys Constr. Co., 722 So. 2d 976, 977 (Fla. 5th DCA 1999). Appellant filed the affidavits of Farah Florestal and Angel Betancourt in support of its claim of excusable neglect.

Florestal, a litigation claims adjuster, stated that she became responsible for the underlying claim in April 2003. The Complaint was not handled according to Appellant’s policies and procedures and Appellant failed to retain counsel to properly answer the Complaint within twenty days. Florestal also stated that she was placed on immediate medical leave for pregnancy complications in May 2003. She was on leave until August 2003. At the hearing, counsel advised the trial court that Florestal suffered a double miscarriage that required hospitalization.

Upon learning of Florestal’s medical leave, Betancourt, Florestal’s supervisor, put in place Appellant’s policies and procedures to handle the claim during her absence. Betancourt stated that Appellant’s policies and procedures were not followed, leading to the entry of a default final judgment against Appellant in this matter.

In its Initial Brief, Appellant argues that these affidavits were sufficient to establish excusable neglect on its part. Appellee argues that Florestal’s affidavit does not explain what happened to the suit papers after they were received. Appellee argues that Appellant’s failure to file any responsive pleadings constituted gross negligence and was not excusable neglect.

“Where inaction results from a clerical or secretarial error, reasonable misunderstanding, a system gone awry or any other foibles to which human nature is heir, then upon timely application accompanied by a reasonable and credible explanation the matter should be permitted to be heard on the merits.” Gateway American Bank of Florida v. Lucky Jet Corp., 720 So. 2d 1141, 1142 (Fla. 4th DCA 1998), quoting Somero v. Hendry Gen. Hosp., 467 So. 2d 1103, 1106 (Fla. 4th DCA 1985). “A defendant’s neglect in responding to a complaint is excusable when the inadvertence was due to the mishandling or misfiling of suit papers.” Atlantic Asphalt & Equipment Co. v. Mairena, 578 So. 2d 292, 293 (Fla. 3d DCA 1991), quoting Hialeah, Inc. v. Adams, 566 So. 2d 350, 351 (Fla. 3d DCA 1990).

Where service papers are lost because a corporate policy for handling them breaks down, such failure can constitute excusable neglect. Mercury Marine Industries, Inc. v. Dillon, 779 So. 2d 356 (Fla. 2d DCA 2000); see also Acceleration Nat’l Ins. Co. v. Simmons, 769 So. 2d 1146 (Fla. 5th DCA 2000); Carter, Hawley, Hale Stores, Inc. v. Whitman, 516 So. 2d 83 (Fla. 3d DCA 1987). And, where a corporation shows by affidavit that it had an established corporate policy and that policy was not followed in a particular instance because the person charged with handling the legal documents left the company shortly after delivery of the documents to him, a party can demonstrate excusable neglect. Marshall Davis, Inc. v. Incapco, Inc., 558 So. 2d 206 (Fla. 2d DCA 1990).

Both Betancourt and Florestal stated that there were policies and procedures in place for handling litigation. Outside counsel was not properly retained to respond to Appellee’s complaint and then Florestal went out on an emergency medical leave. Betancourt made arrangements to handle this matter in Florestal’s absence, but they failed. The Court finds that Appellant has demonstrated excusable neglect.

Meritorious Defense

“A defendant who seeks to vacate a default judgment may not make conclusory assertions that it has a meritorious defense, but must disclose those defenses in a defensive pleading or affidavit.” Net One, LLC v. Christian Telecom Network, LLC, 901 So. 2d 417, 419 (Fla. 5th DCA 2005); DeRuyter v. State, 521 So. 2d 135, 137 (Fla. 5th DCA 1988) (meritorious defense may be shown by either an unverified pleading or an affidavit). If a defendant is asserting a factual defense, the ultimate facts establishing the defense must be set forth in a verified answer, sworn motion, affidavit, or by other competent evidence. Geer v. Jackson, 880 So. 2d 717 (Fla. 2d DCA 2004), citing Westinghouse Elev. Co. v. DFS Constr. Co., 438 So. 2d 125, 126-27 (Fla. 2d DCA 1983). A defendant may show legal grounds constituting a meritorious defense in an unverified pleading. Id.

Appellant filed an Answer and Affirmative Defenses with its Motion to Set Aside Final Judgment. Appellant raised the following Affirmative Defenses: 1) Appellee failed to timely submit all bills as required by section 627.736(5)(c), Florida Statutes; 2) Appellee failed to state a cause of action because it did not attach a copy of the insurance policy; 3) Expenses claimed by Appellee were not reasonable and necessary as related to the motor vehicle accident; 4) Appellee failed to submit any bills which were presently overdue by thirty days; 5) Appellee lacked standing to sue as there was no valid assignment; 6) Appellee failed to comply with section 627.736(11), Florida Statutes, because it failed to provide written notice of intent to initiate litigation; and 7) benefit limits would be exhausted before reaching Appellee’s bills.

Appellant argues that it has stated a meritorious defense of exhaustion of benefits. In her affidavit, Forestal stated that the total PIP benefits under Ms. Chaney’s policy were $10,000.00. Appellant received medical bills totaling $29,749.00 from several providers, including Appellee, and according to the PIP/Medical Payment Record, the PIP benefits would be exhausted before Appellee’s medical bills were reached in line for payment. Appellant attached a copy of the PIP/Medical Payment Record as an exhibit to its Motion to Set Aside Final Judgment.

Appellant argues that it has also stated a meritorious defense based upon Appellee’s failure to timely submit its bills in violation of section 637.736(5)(c)(1), Florida Statutes. Forestal stated in her affidavit that Appellee submitted bills for medical services provided on May 9, 2002 and August 29, 2002, that were not received by Appellant until July 9, 2002 and September 10, 2002, respectively.

Finally, Appellant argues that it has stated a meritorious defense based upon Appellee’s failure to satisfy a condition precedent required by section 637.736(1), Florida Statutes. Appellant argues that Appellee did not deliver a demand letter to Appellant providing notice of impending litigation in violation of the statute.

The Court finds that Appellant has raised meritorious defenses.

Due Diligence

The final question issue before this Court is whether Appellant acted with due diligence in seeking to set aside the default and default judgment.

In this case, a clerk’s default was filed on June 9, 2003. The Default Final Judgment was entered on September 29, 2003. A Writ of Execution was issued on October 29, 2003.

At the hearing on Appellant’s Motion, counsel advised the trial court that either Appellant did not receive the Default Judgment and the Default Final Judgment or copies of those documents were misplaced. Counsel advised the trial court that Florestal became aware of the Final Judgment when Appellee’s counsel contacted her about the execution via telephone. Upon receiving notice of the Final Judgment, Florestal attempted to resolve the matter with Appellee’s counsel by explaining what had caused the default. When she was unable to resolve the matter, she retained counsel who filed a Motion to Set Aside Final Judgment on November 24, 2003.

Generally, a court may look to the circumstances presented to determine whether the time within which a motion to set aside is filed was reasonable. See Venero v. Balbuena, 652 So. 2d 1271 (Fla. 3d DCA 1995). Where a party promptly secures counsel upon learning of a default and files a motion to set aside, the requirement of due diligence is satisfied. See Acceleration National Insurance Company v. Simmons, 769 So. 2d 1146, 1147 (Fla. 5th DCA 2000) (Acceleration showed due diligence in immediately hiring attorneys to set aside default); Venero v. Balbuena, at 1271 (party promptly secured counsel and filed motion within reasonable time after learning of default).

Here, Appellant secured counsel to move to set aside the final judgment upon learning of the Final Judgment from Appellee’s counsel. Approximately three weeks passed between Appellant’s notice of the Final Judgment and Appellant’s Motion to Set Aside Final Judgment. The Court finds that Appellant acted with due diligence.

Based upon the foregoing, it is hereby

ORDERED AND ADJUDGED that the trial court’s Order denying the Motion to Set Aside Final Judgment is QUASHED and this matter is REMANDED to the trial court for proceedings consistent with this opinion. (GRIDLEY, WHITEHEAD, and O’KANE, JJ., concur.)

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¹The trial court’s order denying the motion to set aside the default final judgment is a nonfinal order. The Court, as a circuit court sitting in its appellate capacity, only has jurisdiction to review nonfinal orders as established by general law. See Blore v. Fierro, 636 So. 2d 1329, 1331 (Fla. 1994) (“The authority for appeals to the circuit court is established solely by general law as enacted by the legislature.”). The Notice of Appeal does not refer to any general law providing this Court with jurisdiction to review a nonfinal order denying a motion to set aside a default final judgment. Although the Court may not review the order setting aside the default final judgment by way of an appeal, review of the order is available via a petition for writ of certiorari. Therefore, the Court treats this proceeding as one in certiorari, because if a party seeks an improper remedy, the Court must treat the matter as if the proper remedy had been sought. Fla. R. App. P. 9.040(c).

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