Even When Insured Fails to Defend Suit It is Difficult to Obtain Judgment

Hard Work Pays and Default Judgment Entered for Failure to Pay Additional Premium

Starr Underwriting Agency, Inc., (“Starr”), sued S A S Services Group, Inc. (“S A S”) alleging one claim for breach of contract for failure to pay additional premium on Workers’ Compensation Premium after audit. In Starr Underwriting Agency, Inc. v. S A S Services Group, Inc., No. 2:21-cv-02622-CAS(JPRx), United States District Court, C.D. California (September 20, 2021).


S A S was served with the operative complaint and a copy of the summons by personal service (“Proof of Service”) was submitted to the court. Defendant S A S did not answer nor otherwise respond to plaintiffs complaint.

Thereafter Starr requested the Clerk of Court to enter default against S A S. The Clerk entered default.

Starr, thereafter, filed a motion for default judgment by the Court. Starr served S A S and filed a notice of non-opposition to the plaintiffs motion for default judgment by the Court.


Starr is an insurance agency that acts as the servicer for Pacific Indemnity Company on certain insurance policies. Starr alleged that S A S is incorporated in the State of California with its principal place of business in El Segundo, California. Starr alleged that at the request of defendant S A S, Starr issued a workers’ compensation policy, (“WC policy”) which covered the time period from January 15, 2018 to January 15, 2019. The WC policy is an insurance contract in which Starr, as the servicer for Pacific Indemnity, provides insurance coverage for S A S in exchange for payment of premiums.

The estimated payroll for the WC policy term was $11,551,500.00. Starr performed an audit of S A S’s books as related to the WC policy. Based on the results of the audit’s findings, Starr revised the audit of the WC policy and determined the actual payroll was $19,683,797.00. The difference between the estimated and actual payroll led to an increase in the insurance premium and surcharges of $349,123.00 ($9,689.00 state surcharges plus $339,443.00 premium). Payment of the revised audit was due no later than October 31, 2020. Defendant has failed to remit payment of the balance owed to plaintiff pursuant to the terms of the WC policy.


Starr has satisfied the procedural requirement for entry of default judgment under the Federal and Local Rules, and the Court proceeds to the merits of its motion.

Risk of Prejudice to Plaintiff

S A S has not participated in the action to date, and Starr will therefore be prejudiced if default judgment is not entered in its favor.

Sufficiency of the Complaint and the Likelihood of Success on the Merits

For the purposes of default judgment, all well-pleaded allegations in the complaint, except those relating to damages, are assumed to be true. To prevail on a claim for breach of contract under California law, a plaintiff must establish:

  1. the existence of the contract,
  2. plaintiffs performance or excuse for nonperformance,
  3. defendant’s breach, and
  4. the resulting damages to the plaintiff.

Plaintiff sufficiently alleged the elements of a breach of contract claim. Moreover, plaintiff alleges that it has fulfilled its contractual obligations by providing insurance coverage afforded by the WC policy. By providing insurance to S A S, plaintiff had demonstrated performance under the contract. Finally, by failing to remit payment of the cost of the final premium based on the results of the audit, defendant has breached the contract. Plaintiff alleged that S A S’s breach has caused plaintiff to suffer damages including a balance owed on the WC policy of $349,132.00.

Sum of Money at Stake in the Action

If the sum of money at issue is reasonably proportionate to the harm caused by the defendant’s actions, then default judgment is warranted.

The total amount plaintiff seeks to recover is $377,145.62, plus post-judgment interest. The Court observed that the damages alleged by plaintiff are a straightforward computation of damages owed by defendant based on the contract. Therefore, the amount at stake appeared appropriate given the nature of the misconduct alleged.

Possibility of a Dispute Concerning a Material Fact

Starr filed a well-pleaded complaint alleging the facts necessary to establish its claims, and the court clerk entered default against S A S. Accordingly, no dispute has been raised regarding the material averment of the complaint, and the likelihood that any genuine issue may exist is, at best, remote.

Possibility of Excusable Neglect

Here, the possibility of excusable neglect is remote. Where a defendant is properly served with the Complaint, the notice of entry of default, as well as the papers in support of the instant motion, there is little possibility of excusable neglect.

Policy Favoring Decisions on the Merits

A party’s failure to answer or appear makes a decision on the merits impractical, if not impossible. Notwithstanding the strong policy presumption in favor of a decision on the merits, where a defendant’s failure to appear and respond makes a decision on the merits impractical, if not impossible, default judgment is appropriate. Thus, S A S’s failure to appear or otherwise respond makes a decision on the merits in this case impractical, if not impossible.

Relief Sought by Plaintiffs

The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true. Moreover, the movant seeking default judgment must prove the damages sought, and although the Court may hold an evidentiary hearing to determine the amount of damages, no hearing is necessary if the amount of damages can be determined from definite figures contained in the documentary evidence or in detailed affidavits.


The Court granted plaintiffs motion for default judgment. The Court ordered that judgment be entered against defendant, and that defendant shall be liable to plaintiff in the amount of $349, 132.00 plus $465.67 in costs plus $27,547.95 in prejudgment interest, along with an additional $95.65 per day until default judgement is entered and post-judgment interest.


When a defendant fails to respond to a suit seeking damages he, she or it basically admits the allegations of the complaint. Courts, when asked to enter a judgment on default, even when it is as obvious was the failure of S A S to pay the premium it promised to pay when it acquired the workers’ compensation policy, are wary of default judgments. Starr, to collect, was required to jump through multiple hoops to get the demand of the complaint and the damages requested. S A S probably hoped it would be too difficult to get a judgment and saved the attorneys fees to fight a suit that it clearly owed. Insurers, like those represented by Starr should never allow a premium default to go by the wayside.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/  The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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