Knoebber

On the merits, this case concerns an intra-family dispute over the proceeds of a $50,000 life insurance policy. When Janet Knoebber failed to plead in response to the complaint or the cross-claim, the district court entered a default judgment against the deceased’s wife in favor of his mother. The district court denied the wife’s motion to vacate the default judgment. We hold, in accord with the long-standing principle that default judgments are disfavored, that the district court abused its discretion in failing to set aside the default and reach the merits. In the course of doing so, we clarify the meaning of the “culpability” *694 prong of the well-established standard governing the setting aside of default judgments.

I. Background

Thomas Knoebber died of lung cancer on August 16, 1997, at the age of 40, leaving his wife, Janet, and a two-year-old son. Thomas’ death left Janet distraught. She sought psychiatric treatment, and under her psychiatrist’s care was taking powerful antidepressants.

In July 1998, Janet completed the sale of her home in Livermore, California, and moved to Tampa, Florida, with her son and her eight-year-old daughter from a previous marriage to begin…