defenses to declaratory judgment action texas

Burch involved a declaration that the insurer owed defense, and also owed indemnity for the insureds liability for his wifes torts. The court, in the coverage action, concluded that there was a conflict of interest and a lack of privity, and therefore the insurer was not collaterally estopped from re-litigating the existence of false imprisonment. 855, Sec. Group v. Lou-Con, Inc., 293 F.3d 908 (5th Cir. Ins. See, e.g., State Farm Fire & Cas. App. Rules 12(b) and 12(h) . Amended by Acts 1987, 70th Leg., ch. Oftentimes, the insurer has no duty to indemnify. In this holding, Nevada fell in line with other jurisdictions that also recognize an insurer's right to recoup defense costs where the insurer has specifically reserved such rights, including: California, Connecticut, Massachusetts and Minnesota. endobj 2201. See Great American Ins. Tex. Eric B. Stern is a partner and co-deputy chair of the Data Privacy & Cybersecurity Practice at Kaufman Dolowich & Voluck LLP and concentrates his practice in insurance coverage litigation. Elements of Declaratory Judgment in Texas: Strategies & Ethics in DEC Ins. Texas, Inc., 64 S.W.3d 497 (Tex. stream (a) In this section, "state" includes any political subdivision of that state. 37.0055. 45 (N.D. Tex. App.Corpus Christi 1992, writ denied) (whether boat was being used for business pursuit); International Serv. Sec. App.Austin 1998, no pet. 37.003. . 925 S.W.2d at 714. Under federal law, the Declaratory Judgment Act, itself, does not authorize attorneys fees. Civ. & Liab. App.Fort Worth 1998, no pet.) 2023 Thompson, Coe, Cousins & Irons, LLP. Indemnity is based on the actual facts establishing liability in the underlying suit. Ins. App. 37.002. Co. v. Ochoa, 19 S.W.3d 452 (Tex. tort and environmental coverage. Instead, a party may recover fees only where controlling substantive law permits recovery. PDF IN THE SUPREME COURT OF TEXAS - txcourts.gov The county where the contract was formed may also be a proper venue. Acts 2007, 80th Leg., R.S., Ch. There are several defenses that should be considered in a suit for declaratory relief in both state and federal court. Code37.009 provides that in any proceeding under this Chapter, the court may award costs and reasonable and necessary attorneys fees as they are equitable and just.. Civ. Jan. 25, 2019) is a mandamus case involving an insurer's motion to dismiss a declaratory judgment action by a law firm seeking a declaration of non-liability for malpractice in representing the insurer and advising it did not owe a defense in an underlying suit. Co. v. Patriot Sec., Inc., 926 F.Supp. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. % 1998). 1969); Getty Oil v. Ins. 2201. In this chapter, "person" means an individual, partnership, joint-stock company, unincorporated association or society, or municipal or other corporation of any character. See Fed. SUPPLEMENTAL RELIEF. 1965). In this instance, there may be legitimate concerns that the insurers discovery will inure to the benefit of the liability plaintiff, which is likely not in the interest of either the insured or the insurer. (B) asserts a claim that the party seeking declaratory relief is required to collect sales or use taxes for that state based on conduct of the business that occurs in whole or in part within this state. 1996) (nevertheless refraining from determining coverage for indemnity, on the basis of judicial economy). Insurer's right to assert other policy defenses . 1, eff. 1445(c) and federal abstention principles. It is still likely a court will not allow dual-track litigation of issues that affect liability and coverage. The insured had initially defaulted in the underlying action, and the insurer reserved its right to seek reimbursement if the default judgment was not vacated. In other respects the Uniform Declaratory Judgment Act affords a guide to the scope and function of the Federal act. Sec. See Southern County Mut. Co. v. Louisiana Farm Bureau Fedn, Inc., 996 F.2d 774, 778 (5th Cir. On the other hand, where the insured seeks a declaration that the insurer owes indemnity, before resolution of the underlying case, the opinion may be considered advisory, and declaratory relief may, indeed, be premature. & REM. <> A future interest in a potential judgment has been held insufficient to allow intervention. Sec. 37.006. There was also a declaration that the insurer owed neither defense nor indemnity to the wife. denied) (refusing to allow use of extrinsic evidence to disprove alleged facts). App.San Antonio 1998, pet. 1998) (holding that Texas Declaratory Judgment Act was not controlling, substantive law, and did not justify fee award to defendants). 37.005. Mirror-image counterclaims in declaratory judgment actions See, e.g., State Farm Lloyds v. at 368-69. R. Civ. 37.009. Tex. Federal courts have typically held that declaratory relief is discretionary, and a federal court has broad authority to stay or dismiss an action seeking a declaratory judgment. As such, there should be no collateral estoppel of the insurer, based upon the outcome of the issue in the underlying case. The landowner-appellant appealed a declaratory judgment excluding guests of his commercial lodge from freely using reserved lot areas on some property (essentially gutting the commercial. (b) This chapter is remedial; its purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations; and it is to be liberally construed and administered. Defense - FindLaw Dictionary of Legal Terms Texas law provides innocent owners and holders of a security interest in property with a statutory defense to civil forfeiture of their property or interest in the property. at 452. 1996). ERISA/fiduciary-related claims, commercial general liability (CGL), admiralty and maritime, toxic/mass denied); cf. The abundance of case law allowing extrinsic evidence, however, suggests that the exception will continue. Absent any indemnity obligation and the clear prejudice from late notice, the insurer commenced a declaratory judgment action seeking to recover the defense costs it incurred in defending the . (b) A contract may be construed either before or after there has been a breach. 1998). denied). The award is subject to reversal only if it is arbitrary and unreasonable. R. CIV. The insurer refused to pay the judgment, on the basis that the insureds conduct constituted a willful violation of a penal statute, and was thus excluded by the policy. Co. v. Ward, 107 S.W.3d 820 (Tex. As Texas law remains uncertain regarding reimbursement of defense costs, and as many insureds are not financially capable of repayment, the defense issue may be rendered moot either practically or legally by delay. POWER OF COURTS TO RENDER JUDGMENT; FORM AND EFFECT. E.g., Cluett v. Medical Protective Co., 829 S.W.2d 822, 826 (Tex. See, e.g., Boring & Tunneling Co. v. Salazar, 782 S.W.2d 284, 289-90 (Tex. See Employers Cas. Explanation of the Constitution - from the Congressional Research Service Of N.Y. & N.J., 166 A.D.3d 464 (1st Dep't 2018); Max Specialty Ins. denied). Mut. LEXIS 7982 (Tex. A common way of eliminating this uncertainty is with a declaratory judgment action, also called a declaration. endobj Co. v. Gaskins, 572 S.W.2d 573, 575 (Tex. See Bocquet v. Herring, 972 S.W.2d 19 (Tex. 1170 (1933). Co., 387 S.W.2d 22, 25 (Tex. The Western Heritage case epitomizes the argument for use of extrinsic evidence. declaratory judgment | Wex | US Law | LII / Legal Information Institute The declaratory judgment action allows relief, even where another remedy exists. App.Houston [1st Dist.] River Entertainment was joined because it owned Pepes where the defendant imbibed. Acts 1985, 69th Leg., ch. Protective orders are still relatively simple, and can usually be subject to an agreed motion in federal court. (4) to determine rights or legal relations of an independent executor or independent administrator regarding fiduciary fees and the settling of accounts. In a number of instances, courts have concluded that an insurer is entitled to re-litigate issues. See, e.g., Cook v. Ohio Cas. Group, Inc., 946 F.Supp. See, e.g., Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). APP. 59.02(c). PDF Affirmative and Defensive Pleadings in Insurance Coverage and Bad Faith 2d 601, 621-22 (E.D. The district court dismissed the declaratory action on the defendants motion based on 28 U.S.C. 8 0 obj September 1, 2007. Prac. & REM. Therefore, either diversity or federal question jurisdiction must still exist. hearing as an action for a declaratory judgment and may advance it on the calendar." Federal courts have typically held that declaratory relief is discretionary, and a federal court has broad authority to stay or dismiss an action seeking a declaratory judgment. 167, Sec. denied sub nom. Still, there are often strategic benefits to filing early. Twenty-Fifth Floor - Plaza of the Americas. Co., 95 S.W.3d 702 (Tex. V 8). App.Fort Worth 1978, no writ); Providence Lloyds Ins. denied). Id. 2002, no pet. Declaratory relief is an especially appropriate method for resolving coverage disputes, because of the limited options available for resolution of such disputes. In cases involving duty to indemnify, there may be issues as to whether the indemnity facts were fully litigated in an actual trial, or whether the facts can be re-litigated, construing Gandy and Maldonado. The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate. Co. v. Gjonaj Realty & Mgt. See, e.g., Commercial Metals Co. v. Balfour, Guthrie & Co., Ltd., 577 F.2d 264 (5th Cir. Co. v. Delaney, 386 S.W.2d 648 (Tex. See, e.g., Western Heritage Ins. 2001). 1994). (a) A court of record within its jurisdiction has power to declare rights, status, and other legal relations whether or not further relief is or could be claimed. It is not an abuse of discretion, however, to retain a suit, and to decide issues of indemnity, even before the underlying liability suit has reached judgment. If a proceeding under this chapter involves the determination of an issue of fact, the issue may be tried and determined in the same manner as issues of fact are tried and determined in other civil actions in the court in which the proceeding is pending. Inasmuch as it often involves only an issue of law on undisputed or relatively undisputed facts, it operates frequently as a summary proceeding, justifying docketing the case for early hearing as on a motion, as provided for in California (Code Civ.Proc. A declaration does not prejudice the rights of a person not a party to the proceeding. The Appellate Division, Second Department, held that although the insurer did not owe a duty to defend or indemnify, the insurer was not entitled to recoupment of defense costs reasoning that by allowing an insurance company to recover the costs incurred in defending an underlying action, the Second Department risks eroding the well-established rule that the duty to defend is broader than the duty to indemnify. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia. At issue was a declaratory judgment action over whether medical expenses were owed to an insured worker, under The Workers Compensation Act, where the expenses were incurred after settlement of the employees negligence suit against a third party. 1. The Fifth Circuit overruled prior case law to conform with the Supreme Courts ruling. Co. v. Burch, 442 S.W.2d 331 (Tex. SUBJECT MATTER OF RELIEF. The Statutory Basis for Declaratory Judgment Actions in Texas Lawsuits A developing issue has been the extent to which declaratory relief is available to determine an insurers indemnity obligations, while the underlying suit is pending. Co. v. Block, 744 S.W.2d 940, 943 (Tex. Co. v. Am. One of the factors the courts will review is whether the declaratory action is filed in anticipation of a state court suit. App.Dallas 2001, no pet.) Saint Paul, MN 55102 Co., 61 F.3d 389 (5th Cir. App.Houston [1st Dist.] The Texas Supreme Court concluded that 38.006 allowed recovery of attorneys fees for breach of contract unless attorneys fees are otherwise available. Frontier Pac. 14-0457 (Tex., July 1, 2016), RSL agreed to purchase certain annuity contracts issued by MetLife from three individuals. Texas Supreme Court to Decide Whether a Declaratory Judgment Action is the Proper Way to Assert an Underinsured Motorist Claim January 7, 2021 Bob Allen The Allen Law Group bob.allen@theallenlaw.com Ever since the landmark Texas Supreme Court decision in Brainard v. at 1280 (insurer not precluded from relitigating course and scope of employment). (A) A person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status, or other legal relations there under. & Rem. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139 (Tex. Acts 1985, 69th Leg., ch. 1996). App.Corpus Christi 2003, no writ). 97, 99 (E.D. Costs and fees are not dependent upon the outcome, and can be awarded to either the prevailing or the non-prevailing party. In a declaratory judgment action, neither party is seeking a judgment for money damages. Ins. 1023, 1026 (N.D. Tex. v. Mitchell, 138 F.3d 208, 210 (5th Cir. In a straight complaint allegation case, for instance, there should be extremely limited discovery, beyond verification of the pleadings and the policy. ); Rice v. Alamo Rent-A-Car, Inc., 987 S.W.2d 231 (Tex. Ins. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News. App.Austin 1998, pet. App.Houston [1st Dist.] <> The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate. Id. In Chiriboga v. State Farm Mut. aspects of insurance coverage including directors and officers liability, professional liability, App.Houston [14th Dist.] The policy provided limits of $100,000 per occurrence and $200,000 in the aggregate. ); State Farm Lloyds Ins. DECLARATIONS RELATING TO LIABILITY FOR SALES AND USE TAXES OF ANOTHER STATE. We agree and affirm as well. The amendment substitutes the present statutory reference. Civ. 2010), Sec. Co. v. Ochoa, 19 S.W.3d 452 (Tex. ); but cf. The court may order a speedy hearing of a declaratory-judgment action. Co. v. Gandy, 925 S.W.2d 696 (Tex. Co., 143 F.3d 192 (5th Cir. App.Corpus Christi 1982, no writ), the court declared that the rule was that use of extrinsic evidence was allowed to determine coverage, but not to determine facts that would establish the insurers liability. Rule 57, FED. (prior judgment not res judicata as to amended pleading that alleged new facts, not involving completed operations); St. Paul Ins. Page 2 / 14Defendant-Counterclaimant's First Amended Answer and Counterclaims 5. Under the Declaratory Judgment Act, "any court of the United States, upon the filing of an appropriate pleading, may: . This is an action for declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. endobj 7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending. Co., 975 S.W.2d 329 (Tex. 639a3). 2003) (finding Texas allows only narrow exception); but see Gonzales v. American States Ins. 7 0 obj Courts recognize that when there are conflicting positions on coverage, as when the insurer reserves rights, there is no privity between the insured and the insurer on issues relating to coverage, which are also at issue in the underlying case. Co. of N. 2283. Shoot First, Litigate Later: Declaratory Judgment Actions, Procedural Co., 316 U.S. 491 (1942); Wilton, 515 U.S. 277. Download PDF Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. Sec. This article will discuss some of the recent decisions illustrating the different views that Courts have taken with respect to this issue, as well as the implications for insurance companies that issue duty to defend policies. See Granite State Ins. Westport v. Atchley, Russell, Waldrop & Hlavinka, 267 F. Supp. 45 (N.D. Tex. Defense counsel may, nonetheless, have protected certain information from disclosure, for fear that it was effect coverage, and violate counsels own ethical obligations. Fla. Stat. The firm's new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112. 1997)2; see also State Farm Lloyds v. App. 1993). COURT REFUSAL TO RENDER. (b) In any proceeding that involves the validity of a municipal ordinance or franchise, the municipality must be made a party and is entitled to be heard, and if the statute, ordinance, or franchise is alleged to be unconstitutional, the attorney general of the state must also be served with a copy of the proceeding and is entitled to be heard. 1, eff. Because the insurer would be allowed to re-litigate, after the underlying case is resolved, there is no reason to delay the inevitable. Created is remedy See Utica Lloyds of Tex. Civ. The Historic Hamm Building Jul 20th, 2015 Collections and Foreign Judgments. (2) the decisions of other courts interpreting Section 8, Article I, United States Constitution. 1995) (whether trademark violation occurred during policy period). County Mut. In Natl Union Fire Ins. District courts have articulated several reasons for why mirror-image counterclaims should be dismissed. SHORT TITLE, CONSTRUCTION, INTERPRETATION. 86.011 Et. )1^Hl]TgxY8Ubs,! 9@Dyp*l8sA!N\X PDF Preserving Coverage Defenses LEXIS 8082 (Tex. Sept. 1, 1985. 1965, writ refd n.r.e.) In American Genl Fire & Cas. In considering whether to afford a defense under a policy, insurers must also carefully review the relevant policy language and be aware of the potential limitations on the right to recoupment. 30, 2007, eff. 4 suit would prejudice both Essex and SDT in their defenses against Zuniga's claims because it would (1) create a conflict of interest for Essex,3 and (2) necessarily require the admission of evidence of liability insurance in violation of Texas Rule of Evidence 411.4 Because those policy reasons for the "no direct action" rule apply regardless of whether the plaintiff is seeking Prior to the Grapevine Excavation case, the Fifth Circuit had construed 38.006 to exempt insurers from paying attorneys fees in breach of contract actions. 2201, and further provides for a jury trial. endstream Previously, multiple New York courts at both the trial and Appellate Division levels aligned with Nevada and the other listed states holding that an insurance company may recoup defense costs paid on behalf of an insured when it is ultimately determined that there was no coverage in connection with the underlying action, provided that the insurer reserved its rights to seek such reimbursement. Texas Air Control Bd., 852 S.W.2d at 444. Rule 57. Declaratory Judgment - LII / Legal Information Institute The court recognized that the insurer was defending, but the coverage issue would not be litigated in the underlying case, so declaratory relief was appropriate. App.Texarkana 2003, pet. San Antonio, TX 78216 App.Houston [14th Dist.] A court can dismiss a declaratory action even if it fails to meet the stringent standards for abstention. A defense is an act of protecting one's own interests. The claims involved crop-dusting, which allegedly damaged abutting fields because of herbicide drift. App.Houston 1965, writ refd n.r.e.) See, e.g., Texas Assn of Bus. Cigna Lloyds Ins. Co. v. River Entertainment, 998 F.2d 311, 315 (5th Cir. h.). Moreover, the Second Department noted that the policy at issue did not expressly provide the insurer with a right to recoup defense costs. 1969); see also Allstate Ins. An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. Co. of Texas v. Erskine, 169 S.W.2d 731 (Tex. App. He concentrates his practice on all R. CIV. Co. v. Fraiman, 514 S.W.2d 343, 346 (Tex. Dallas, TX 75201 Ins. (a) In a case of actual controversy within its jurisdiction, except with respect to Federal taxes . <> "gj6P'pn.g_9z# ?V#yof.j,^4{%y^LJ_z|0 eivLnBE.orQevfwe^_d \2P4^Gy-ts}] ;|^QRg-d^yX^OeGE?kP0+]kw/k}m+TssVg4Pv. P. 26; Tex. See McCarthy Bros. Co. v. Continental Lloyds, 7 S.W.3d 725 (Tex. Id. P. 76A; 192.6(b)(5). In the event of a legal controversy, both parties generally want to avoid any legal uncertainty and insecurity that could arise out of a dispute. LEXIS 7088 (Tex. Michael L. Zigelman is co-managing partner of the New York City office of Kaufman Dolowich &
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