- Court
- New York Supreme Court, Appellate Division, First Department
- Case Name
- Lotus Residences LLC v. Northfield Insurance Co.
- Slip Op. No.
- 2026 NY Slip Op 03272
- Decision Date
- May 26, 2026
- Docket No.
- Index No. 653599/20, Appeal No. 6732, Case No. 2025-02553
Background
This insurance coverage dispute arose from an underlying personal injury action. Lotus Residences LLC and related parties were involved in litigation with Northfield Insurance Company over coverage under a policy that contained an “employer exclusion.” Northfield also had a cross-claim against Castillo Contractors, Inc., seeking a declaration that there was no coverage under the policy based on the employer exclusion.
When Northfield moved for a default judgment against Castillo on its cross-claim, plaintiffs did not oppose the motion. The court entered a default judgment declaring no coverage based on the employer exclusion. Nearly a year later, plaintiffs moved to vacate the default judgment under CPLR 5015(a), arguing that the default judgment was premised on Northfield’s misrepresentation that the employer exclusion applied. Specifically, plaintiffs pointed to a 2020 Workers’ Compensation Board determination that the injured plaintiff in the underlying action was not Castillo’s employee.
Supreme Court (Sattler, J.) denied plaintiffs’ motion to vacate the default judgment. Plaintiffs appealed.
Holding
The First Department unanimously affirmed the denial of vacatur. The court found no grounds for vacatur under CPLR 5015(a)(3), which provides for relief based on fraud, misrepresentation, or other misconduct by an adverse party. Plaintiffs did not claim they lacked knowledge of the Workers’ Compensation Board’s decision at the time of Northfield’s motion, nor did they explain why they waited almost a year after entry of the default judgment to bring it to the court’s attention.
The court also rejected plaintiffs’ request for vacatur in the interest of justice. The default judgment against Castillo did not preclude plaintiffs from litigating against Northfield for coverage under the policy as additional insureds. Any effect the declaration might have on plaintiffs’ possible future interests was “too remote and contingent.” Conversely, vacating the default judgment would force Northfield to litigate coverage and indemnification issues with respect to Castillo, despite Castillo’s ongoing default.
Key Takeaways
- Parties who fail to oppose a motion for default judgment cannot later seek vacatur under CPLR 5015(a)(3) based on information they possessed at the time of the original motion but chose not to present.
- A motion to vacate a default judgment nearly a year after entry requires explanation for the delay, particularly when the grounds for vacatur were known at the time of the original motion.
- Vacatur in the interest of justice is not warranted when the default judgment does not preclude the movant from pursuing its own claims and the effect on the movant’s future interests is remote and contingent.
- Courts weigh the prejudice to the party who obtained the default judgment; requiring them to litigate against a defaulting party weighs against vacatur.
Why It Matters
This decision highlights the consequences of failing to participate in motion practice in coverage disputes. Parties with a stake in the outcome of coverage declarations must actively engage in the litigation process; standing by while default judgments are entered and then seeking vacatur months later is an uphill battle. The ruling also clarifies the scope of CPLR 5015(a)(3) relief, emphasizing that known information not presented during the original proceeding does not constitute the type of “misrepresentation” contemplated by the statute. Insurance coverage practitioners should ensure that all interested parties oppose motions that could affect their coverage rights.