Northwest Airlines wins ruling over McCarran accident

By Cy Ryan (contact)

Thursday, Oct. 29, 2009 | 5:29 p.m.

CARSON CITY -- A federal appeals court has ruled that Northwest Airlines has the right to continue its pursuit to recover $10.6 million for damage to one of its plane that rolled down an embankment at McCarran International Airport in February 2002.

The 9th U.S. Circuit Court of Appeals overturned the decision of Federal Judge Philip Pro that held Westchester Fire Insurance Company was shielded from continuing its claim.

Northwest Airlines contracted with Phil Mendez, who operated an aircraft maintenance business at the airport. An employee of Mendez was in the cockpit when the plane went down the embankment.

Mendez was insured by a policy issued by Westchester. But he never followed the provision that he must promptly notify the company of an accident or claim. Northwest, after more than a year’s delay, filed suit in Minnesota against Mendez and notified Westchester, which was the first time the insurance company knew about the accident.

Northwest obtained a default judgment against Mendez in Minnesota state court for $10.6 million in January 2005. Ten months later, an attorney for Mendez demanded Westchester provide a defense. The company had canceled the policy before that.

Westchester then filed suit in federal court in Las Vegas saying it had no duty to defend Mendez or pay for the damages to the airplane because Mendez violated the terms of the insurance policy.

Northwest Airlines intervened in the Westchester suit. The insurance company couldn't find Mendez to serve him with papers to appear for a deposition.

Judge Pro granted a default judgment against Mendez for failure to respond to the Westchester suit. The default judgment was also entered against Northwest Airlines, preventing it from pursuing its claim against the insurance company.

The appeals court, in a decision written by Circuit Judge Richard Clifton, said “A default entered against an insured policyholder, Mendez, should not prevent an injured third party, in this instance Northwest, from proceeding on its own behalf.”

Clifton said Judge Pro “should not have entered a default judgment in the action against all defendants based on Mendez’s failure to appear for a deposition.”

The appeals court said it is not making any decision whether Westchester has to pay the claim of Northwest. That will be up to the federal court in Las Vegas.

Mendez maintains the Federal Aviation Agency has absolved him of any liability but he has not produced the documents.