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H.B.H. v. State Farm Fire and Casualty Co.9/10/1991
The sole question raised in this appeal is whether the trial court improperly denied State Farm Fire and Casualty Company's motion to intervene. Both the denial of a motion to intervene and the judgment entered in the proposed intervenor's absence are appealable. Anderson v. Martinez, 158 Ariz. 358, 359, 762 P.2d 645, 646 (App.1988); McGough v. Insurance Company of North America, 143 Ariz. 26, 30, 691 P.2d 738, 742 (App.1984). We conclude that the trial court erred by not permitting State Farm to intervene in the underlying action. Therefore we must reverse the entire judgment. United States Fidelity and Guaranty Co. v. Alfalfa Seed and Lumber Co., 38 Ariz. 70, 76-77, 297 P. 868, 870-71 (1931); Anderson, 158 Ariz. at 359, 762 P.2d at 646; McGough, 143 Ariz. at 30, 691 P.2d at 742.
FACTS AND PROCEDURAL HISTORY
H.B.H. filed an action against John Doe and his wife, seeking damages incurred when John Doe sexually molested the H. child on numerous occasions. At the time of the incidents, the Does had a State Farm homeowner's insurance policy and an umbrella policy. State Farm agreed to defend the Does under a reservation of rights. However, it filed a declaratory action in which it claimed that because sexual molestation was an intentional tort, the incidents were not covered by the policies.
On February 11, 1989, H.B.H. and the Does entered a Damron agreement which provided that the Does would withdraw their answer to the complaint and allow a default judgment to be entered against them. See Damron v. Sledge, 105 Ariz. 151, 460 P.2d 997 (1969). The Does agreed not to contest H.B.H.'s damages at the default hearing. In consideration, H.B.H.
agreed to limit the Does' personal liability to $32,500 and to collect any additional amount from State Farm.
Prior to the hearing on damages, State Farm moved to intervene pursuant to Rule 24(a), A.R.Civ.P. It claimed that it had a substantive interest in the outcome of the litigation because it could be bound by the principle of res judicata to the determination of the Does' liability and the amount of damages if its policies were found to cover the incidents at issue in the declaratory action. The trial court denied the motion.
Pursuant to the Damron agreement, the Does did not cross-examine H.B.H.'s witnesses or present any evidence at the default hearing on damages. The trial court entered judgment in favor of H.B.H. for $900,000. State Farm timely appealed the order denying its motion to intervene and the judgment.
Discussion
State Farm argues that intervention under Rule 24(a) was appropriate pursuant to three court of appeals' cases: Anderson; Stufflebeam v. Canadian Indem. Co., 157 Ariz. 6, 754 P.2d 335 (App.1988); and McGough. H.B.H. and the Does respond that our supreme court implicitedly overruled McGough and precluded intervention in United Services Auto. Assoc. v. Morris, 154 Ariz. 113, 741 P.2d 246 (1987). They also argue that the reasoning in Stufflebeam and Anderson does not allow intervention. Because the determination whether intervention was appropriate depends almost entirely on an understanding of these cases, we discuss each one.
The earliest case is McGough, in which the insured was the pilot of a plane involved in a crash which resulted in the death of a
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