Default Judgment contrary to law; what can the state do about it?

Question

This appeared upon the board. Note that the statement of law here is actually not correct so it doesn't precede as stated. However the legal question is interesting anyway. Suppose the following:

My insurance company requires that in order to purchase liability insurance I must also purchase uninsured motorist insurance.

They claim they must do this according to state law.

I file lawsuit in small claims court to recover the premium of the unwanted policy.

The insurance company does some quick math and realizes they stand to lose more by defending the case then not, so they fail to show up. This is the easy part.

The hard part: the trial judge doesn't know the law. I generated this hypothesis because the law wasn't well known. [In fact there's no such law, but let us presume there is.]

Thus I win the case in default judgment.

My insurance company doesn't care; they just refund the money and cancel the part of the policy I didn't want. They can't cancel the rest of the policy because it's a default judgment. (Of course there's likely to be a problem with renewal but we don't need to talk about that.) However, the insurance commissioner gets notified.

So the question:

I got the ruling I want. The insurance company doesn't care and has no interest in appealing the case.

The insurance commissioner doesn't like the ruling because it's contrary to law. What can the state do about it?

The only useful hit I get on multiple attempts of internet searches is United States v. Savala, which is completely wrong jurisdiction but seems to be stating a well-known rule.

Answer 1

The insurance commissioner doesn't like the ruling because it's contrary to law. What can the state do about it?

The state has no strong reason to do anything about it.

A default judgment in a small claims court ruling sets no precedent. Only appellate court rulings create binding precedents.

It doesn't even have "collateral estoppel" effect that makes the ruling binding on the insurance company in another lawsuit against the insurance company regarding the same issue, because it wasn't litigated on the merits.

The insurance commissioner could issue a regulation or policy statement expressly disagreeing with the result reached as a matter of default judgment, but probably wouldn't unless the small claims court judgment became widely known and was causing other people to misinterpret the law.

Answer 2

It’s a question of standing

A person has standing to interfere in a case if a) the judgement has a material affect on them or b) the law explicitly grants standing.

The insurance commissioner is not affected by the judgement - a small claims court is not a court of recorded so it’s decisions do not set precedent - so a) does not apply. So, one would have to turn to the statute that created/regulates the insurance commissioner. It may give them standing to appeal the judgement against the insurer, but if it doesn’t, it’s all over red rover.