defenses to declaratory judgment action texas

Cty. PDF United States Court of Appeals for The Ninth Circuit 37.011. Co., 316 U.S. 491 (1942); Wilton, 515 U.S. 277. Rules 38 and 39 govern a demand for a jury trial. Sec. <> )1^Hl]TgxY8Ubs,! 9@Dyp*l8sA!N\X Jurisdictions continue to be split over insurer's right to recoup Answer, Affirmative Defenses, and Counterclaim to the First Amended Complaint for Declaratory Judgment ("Complaint") filed by Hartford Fire Insurance Company ("Hartford"), . (whether driver qualified as an insured); John Deere Ins. Co. v. Deering Mgmt. Co. v. The courts appear to be split, with federal courts being somewhat more lenient in allowing the use of extrinsic evidence in this circumstance. 2 0 obj Insurer's right to file declaratory judgment action 9. Redwood also moves to dismiss Holmes's affirmative defense of failure of conditions precedent, arguing that the defense does not refer to any specific or particular unmet condition. (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. *I`Sl,'dpC2\,AMia*K/[ -M @ICPgIw5 Y k]x?4 :D R*NuNK^CXdmS0I,-B 1997); Trinity Universal Ins. Genl Agency v. Cooper, 952 S.W.2d 861 (Tex. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139 (Tex. Ins. Co., 542 S.W.2d 429 (Tex. The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate. This article contains general legal information but does not constitute professional legal advice for your particular situation. App. 1997); Heyden Newport Chemical Corp. v. So. In this. 855, Sec. U.S. Constitution Annotated Toolbox. The answer may depend upon whether the insurer has defended or simply denied coverage, and the extent to which the issue is actually material to, and fully litigated in, the underlying dispute. Ohio Cas. Co. v. River Entertainment, 998 F.2d 311, 315 (5th Cir. District courts have articulated several reasons for why mirror-image counterclaims should be dismissed. The declaratory judgment action allows relief, even where another remedy exists. DECLARATORY JUDGMENT ACTIONS - ryderlaw.com Acts 2007, 80th Leg., R.S., Ch. 10 0 obj 2201. 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. <> PDF Preparing for Non-Compete Litigation - Epstein Becker & Green Id. 37.006. (c) This chapter shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it and to harmonize, as far as possible, with federal laws and regulations on the subject of declaratory judgments and decrees. 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 Westport v. Atchley, Russell, Waldrop & Hlavinka, 267 F. Supp. PRAC. 1968). See Great American Ins. Suite 400 A declaratory judgment must be based on an actual controversy, and cannot be merely advisory. Declaratory relief is an especially appropriate method for resolving coverage disputes, because of the limited options available for resolution of such disputes. 5 0 obj 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. A declaratory judgment is appropriate when it will terminate the controversy giving rise to the proceeding. Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. The Murphys opposed Wells Fargo's motion, arguing, among other things, that Wells Fargo's claims should not be characterized as requesting declaratory relief. See Bailey, 133 F.3d at 369 n.4; Travelers Ins. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. Co., 975 S.W.2d 329, 332 n.1 (Tex. When Can You File a Declaratory Judgment Action' - Insurance Journal Moreover, the Second Department noted that the policy at issue did not expressly provide the insurer with a right to recoup defense costs. 1996). The industry leader for online information for tax, accounting and finance professionals. Tex. Civ. LEXIS 7982 (Tex. CIVIL PRACTICE AND REMEDIES CODE CHAPTER 37. DECLARATORY JUDGMENTS - Texas Saint Paul, MN 55102 PDF UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS - Manatt App.Corpus Christi 1997, no pet.) Dallas, TX 75201 Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. This Note is jurisdiction neutral. P. 26; Tex. App.Austin 1999, no pet.) LEXIS 7088 (Tex. R. CIV. Control of defense and directing actions of defense counsel in conflict situation (Utica Mut. App.Texarkana 2003, pet. Since the duty to defend is based solely on the live pleadings, a declaratory judgment is arguably based only on the pleading in effect, and is not determinative as to any subsequent amended or supplemental pleading. An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. The amendment substitutes the present statutory reference. Wade, 827 S.W.2d at 451. App.Dallas 1998, pet. It is axiomatic that the duty to defend is broader than the duty to indemnify. However, each party must still plead for relief and carry its own burden of proof. PDF Affirmative and Defensive Pleadings in Insurance Coverage and Bad Faith 8 0 obj at 368-69. Code Crim. 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. See, e.g., Standard Fire Ins. oEN>-BZ=/c]-ZP4U3o>0!f$F = FQfB@DlClYthnA mML.;Emu =uT 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. 2001) (when lease obtained); Guaranty Natl Ins. See Firemens Ins. 1993) (Colorado River factors inapplicable in declaratory judgment action); Granite State Ins. 1998, no pet.). 37.006, TEX. Therefore, the claimants should not be necessary or indispensable parties, prior to the settlement or judgment. (whether policy was void or loss was covered presented justiciable controversy); American States Ins. Youell & Cos v. Getty Oil Co., 510 U.S. 820 (1993); Service Mutual Ins. 214-871-8200, One Riverway 1998). Co., 387 S.W.2d 22, 25 (Tex. While federal abstention doctrine is equally applicable to declaratory judgments action, courts are particularly vigilant in exercising their discretion to protect comity and prevent forum shopping. June 29, 2021 - A standard feature of CGL policies is the duty to defend, which obligates insurance companies to defend an insured even if there is ultimately no duty to indemnify. 1996) (nevertheless refraining from determining coverage for indemnity, on the basis of judicial economy). xko9.ou _:=;0b+w)m3]WTy:>yYWOv]vs|?V~>zw"{}v~eM/XVY&R~Eou6Wv/ *]nT:^\-G:[A? 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. Indemnity, on the other hand, is based on actual facts and should always be subject to extrinsic evidence. ^9@VXB-'C(SOZ#jGT"1kfWj7i,9^'EJ 1170 (1933). 37.002 provides that the chapter is remedial: Its purpose is to settle and to afford relief from uncertainty and in security with respect to rights, status, and other legal relations; and it is to be legally construed and administered. The Act does not create or enlarge jurisdiction. Voluck LLP and chair of its general liability coverage practice group. 1965, writ refd n.r.e.) endobj First Cause of Action: Declaratory Judgment under . Mirror-image counterclaims in declaratory judgment actions PRACTICAL CONSIDERATIONS The abundance of case law allowing extrinsic evidence, however, suggests that the exception will continue. In Gonzales v. American States Ins. Insurers should be sure to work with competent counsel to be aware of all of their rights under applicable policies and the relevant controlling law and proceed accordingly. Issues also arise, when the underlying case is still proceeding, as to the extent to which the insurer can discover information which could also be relevant, and potentially damaging, in the underlying liability suit. There are exceptions, however, (1) when conduct estops a party from asserting prior active jurisdiction; (2) where parties are lacking; or (3) where there is lack of intent to prosecute. Further, while it is unlikely that an insurer wishes to proceed, without protective order, to establish evidence that demonstrates the insureds liability as the insurer has not yet prevailed on its coverage defenses it is also unclear under what standard the insured should be able to protect otherwise discoverable information, simply because it is damaging. Created is remedy . denied) (judgment of negligence in underlying case did not establish that negligent acts caused bodily injury, and did not preclude insurer from establishing intentional conduct); Deering Mgmt. Insurers that issue policies containing a duty to defend, such as CGL policies, should familiarize themselves with the rules governing recoupment in the applicable jurisdiction. Ins. (prior judgment not res judicata as to amended pleading that alleged new facts, not involving completed operations); St. Paul Ins. On the other hand, the existence of another remedy, or unresolved issues, does not preclude declaratory relief. App.Corpus Christi 1975, writ refd n.r.e.) (a) In this section, "state" includes any political subdivision of that state. He can be reached at [email protected]. Recent cases discussing the enforceability of policy buy-backs suggest there may be other exceptions in which a statutory insurance requirement renders a claimant an intended beneficiary. 2201, and further provides for a jury trial. Where extrinsic evidence is offered, however, the scope of discovery should be broader. DECLARATORY JUDGMENT ACTIONS, DISCOVERY & TRIAL - New York State Bar Co. v. Patriot Sec., Inc., 926 F.Supp. Co. v. Tilley, 484 S.W.2d 802, 806 (Tex. BORON. In holding that Nautilus was entitled to recoupment of defense costs, the Court reasoned that the right to recoupment was not governed by the insurance policy at issue, but rather the right is afforded to the insurer under the theory of common law unjust enrichment. 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. There is a contract, and a dispute over the parties rights and obligations under the contract. App.Houston [1st Dist.] Co., 192 A.D. 3d 28 (2d Dep't 2020) the Second Department expressly "declined to follow" the prevailing New York authority. 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. xX]oF}G?SeW0W44q>EqU{s@N|Bt2&iw'PmH'4QH1_>{'Y7bLH dB4uX;iYtI7F7*L^F 639a3). Co., 767 F.Supp. Michael L. Zigelman is co-managing partner of the New York City office of Kaufman Dolowich & Declaratory Judgment These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C. App.Corpus Christi 1992, writ denied) (whether boat was being used for business pursuit); International Serv. Co., 418 S.W.2d 712, 715-16 (Tex. App.Waco 1943, no writ); Superior Ins. at 332. ), Notes of Advisory Committee on Rules1937. aspects of insurance coverage including directors and officers liability, professional liability, 2 a : the theory or ground that forms the basis for a defendant's opposition to an allegation in a complaint or to a charge in a charging instrument (as an indictment) ;also. In Gandy, the court broadened the scope of re-litigation, noting that in no event, however, is a judgment for plaintiff against defendant rendered without a fully adversarial trial, binding on defendants insurer . 699 (H.B. 1993); McLaren v. Imperial Cas. Id. The following state regulations pages link to this page. (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 a 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 thereunder. The Second Department's decision creates a distinction amongst the First and Second Departments, possibly making the issue ripe for review by New York's Court of Appeals. 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. The court in Griffin relied upon a change in the Texas Constitution, expanding the scope of district court jurisdiction and eliminating the minimum amount in controversy. In common law, a defendant may use defenses to prevent or limit liability.A defense can either allege a failure to state a claim, or affirm the existence of a claim and present additional reasons that prevent the plaintiff or prosecutor from prevailing on a cause of action, a demand for relief, or otherwise obtaining the result requested. App.Beaumont 1999, pet. App.Houston 1965, writ refd n.r.e.) App.Houston [1st Dist.] See Brillhart v. Excess Ins. endobj 37.007. The Court also held that its decision is in line with what has "historically been the majority approach." Civ. Const. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. 1995, no writ); Employers Cas. Cigna Lloyds Ins. endobj 1993); Trinity Univ. It argues that the other claims and defenses in the case subsume the issues on which Holmes asks for a declaratory judgment. Sec. . Co. v. Burch, 442 S.W.2d 331 (Tex. ERISA/fiduciary-related claims, commercial general liability (CGL), admiralty and maritime, toxic/mass The petition in the underlying suit was amended, however, and all references to alcohol were deleted. The Supreme Court of Texas has ruled that a company did not waive its right to arbitration by bringing a "friendly" declaratory judgment action. Co. v. Vandewater, 907 S.W.2d 491 (Tex. Under most liability policies, the claimants are not third-party beneficiaries and have no direct rights, and no cause of action, against the insurer until there has been a settlement, to which the insurer agrees, or a judgment against the insured. These changes are intended to be stylistic only. See, e.g., Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). Texas Air Control Bd., 852 S.W.2d at 444. 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 [email protected] Ever since the landmark Texas Supreme Court decision in Brainard v. at 68. Co. v. Griffin, 955 S.W.2d 81, 82-84 (Tex. The Burches were the plaintiffs, and were also the petitioners for declaratory relief. 959, Sec. App.Austin 1998, no pet. <> Plaintiff's Complaint fails to state a cause of action. The Federal Declaratory Judgment Act creates a remedy, not a basis for jurisdiction. There are exceptions, of course. denied) (refusing to allow use of extrinsic evidence to disprove alleged facts). Acts 1985, 69th Leg., ch. In a number of instances, courts have concluded that an insurer is entitled to re-litigate issues. Sec. In fact, the Court held that the policy "did not apply" in the context of Nautilus' claim for reimbursement of defense costs, as it had already been determined that there was no duty to defend. App.Texarkana 1994, no writ) (possibility that liability triggering indemnity would be incurred was a feature hypothetical event, and court had no power to pass upon hypothetical or contingent situation); Fort Worth Lloyds v. Garza, 527 S.W.2d 195 (Tex. Twenty-Fifth Floor - Plaza of the Americas 12 0 obj In duty to defend cases, the issue of whether extrinsic evidence is even relevant would likely arise. defense n. 1 : the act or action of defending see also self-defense. See Murray, 437 S.W.2d 264 (Tex. Declaratory Judgment. App.Corpus Christi 2000, no writ). Civ. 1994). There are a number of instances in which extrinsic evidence may be at issue: Extrinsic evidence may be used to show that the person sued does not qualify as an insured, or that the vehicle or equipment in issue is not insured. The issue becomes more murky when allegations triggering coverage are alleged, but are in conflict with the actual facts. Co. v. Marathon Ashland Petrol., L.L.C., 87 F. Supp. 830-252-5100. Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment. In Nautilus, the insureds were sued in California state court by a former business partner asserting numerous claims, including interference with prospective economic advantage. A trial court has discretion to enter declaratory judgment if it will serve a useful purpose or will terminate the controversy between the parties. Id. In addition, in many instances, a protective order will allow broad discovery, without fear of disclosure to the plaintiff. 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. Declaratory judgment actions are oftentimes filed in federal court. In other respects the Uniform Declaratory Judgment Act affords a guide to the scope and function of the Federal act. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News. See, e.g., Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). PDF IN THE SUPREME COURT OF TEXAS - txcourts.gov June 15, 2007. App.Dallas 1998, no pet.). Ins. All orders, judgments, and decrees under this chapter may be reviewed as other orders, judgments, and decrees. 7 Id. See, e.g., Western Heritage Ins. !`g)a00-k@@eU 7 0 obj A justiciable controversy may nonetheless exist where no other cause of action is available or has ripened. 2002, no pet. RESERVATION OF RIGHTS CHECKLIST - PAGE 2 . The insured was located in Hidalgo County, the car was purchased in Hidalgo County, and the salesman contacted the agent by phone, from Hidalgo County, to add the car to the policy. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Houston, TX 77056 Therefore, either diversity or federal question jurisdiction must still exist. Sec. Co. v. Childress, 650 S.W.2d 770, 775-76 (Tex. Burch involved a declaration that the insurer owed defense, and also owed indemnity for the insureds liability for his wifes torts. Instead, a party may recover fees only where controlling substantive law permits recovery. App.Austin, Oct. 2, 2003, no pet. Code, applied to breaches of an insurance agreement, this question was resolved by the Texas Supreme Court, on a certified question from the Fifth Circuit, in Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d 1 (Tex. 1996). Still, there are often strategic benefits to filing early. This is an action for declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. Tex. ANSWER to COMPLAINT for declaratory judgment, affirmative defenses and COUNTERCLAIM filed by Clemens Franek against Jay Franco & Sons, Inc. (jmp, ). A declaration does not prejudice the rights of a person not a party to the proceeding. 512-708-8200, 700 North Pearl Street % denied). Of N.Y. & N.J., 166 A.D.3d 464 (1st Dep't 2018); Max Specialty Ins. Suite 1850 Co. v. Cooper Machinery Corp., 817 F.Supp. JURY TRIAL. While the law is less clear, Federal courts, applying Texas law, have reached a similar conclusion. relation to an action brought by a party with no apparent justiciable interest. 955 S.W.2d at 84 (construing Tex. Federal courts are especially reluctant to exercise jurisdiction if there is a parallel state court proceeding even if subsequently filed that includes all necessary parties and will resolve the issues. Co. v. Delaney, 386 S.W.2d 648 (Tex. See London Mut. But, because courts have recognized that, where a coverage issue exists, there is no privity between the insured and the insurer, there is an argument that an insurer should be allowed to litigate facts in a declaratory judgment, regardless of whether the facts are also being litigated in the underlying suit. New Orleans, LA 70130 Indemnity is based on the actual facts establishing liability in the underlying suit. Rule 57. Declaratory Judgment - LII / Legal Information Institute 97, 99 (E.D. Co. v. Am. The court, however, concluded this was not a county in which a substantial part of the facts giving rise to the coverage dispute arose. 10, eff. Cf. Sec. Sec. Facts and Procedural History. the enforceability of a non-compete, considerations before initiating legal action, cease and desist letters, declaratory judgments, seeking damages, requesting injunctive relief, and potential remedies available under the Defend Trade Secrets Act (DTSA). Co. v. Cowan, 945 S.W.2d 819 (Tex. ); but cf. endobj PDF Preserving Coverage Defenses COSTS. The controversy is ripe, because the insurer is called upon to defend, and because the existence of coverage may impact the outcome of the suit. v. Wallace, 288 U.S. 249 (1933); Gully, Tax Collector v. Interstate Natural Gas Co., 82 F.(2d) 145 (C.C.A.5th, 1936); Ohio Casualty Ins. Co., 61 F.3d 389 (5th Cir. CODE provides, in subpart (a), that: When declaratory relief is sought, all persons who have or claim any interest that would be affected by the declaration must be made parties. On the other hand, in some instances, principally those in which only indemnity is at issue, or where stay or abstention is likely, there may be no benefit to early filing. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. See, e.g., Dairyland County Mut. 1, eff. 1997), the Supreme Court reaffirmed the complaint allegation rule, with dicta suggesting that the exception for extrinsic evidence would be narrowed. See Bocquet v. Herring, 972 S.W.2d 19 (Tex. Bonham State Bank v. Beadle, 907 S.W.2d 465 (Tex. Id. Andrew A. Lipkowitz is an associate at Kaufman Dolowich & Voluck LLP and primarily focuses his practice in insurance coverage litigation and monitoring. 869, 93 A.L.R. The Court held that insurers are entitled to recoupment even where the policy at issue does not expressly provide such a right. 504-526-4350, 408 St. Peter Street, Suite 510 1993), cert. App.Houston [1st Dist.] E.g., Wilton v. Seven Falls Co., 515 U.S. 277 (1995); American States Ins. Insights in Action: Corporate law departments find their outside firms innovation lagging, but there may be little incentive to change, Messaging platform & personal device use is a firm-wide compliance problem, What a law firm Client Development Manager says about client listening programs, Law firm leaders express the benefit of strategy, culture & adaptability to weather these uncertain times, U.S. officials lead urgent rescue talks for First Republic, DeSantis' showdown with Disney carries political risk. See, e.g., Commercial Metals Co. v. Balfour, Guthrie & Co., Ltd., 577 F.2d 264 (5th Cir. See Farmers Tex. R. Civ. Courts have struggled with the issue of what can be resolved in the declaratory judgment action, when the issue determining coverage may also be material in the underlying case. PDF In the United States District Court for The Northern District of Texas Jurisdictional authority is split on the question of whether an insurance company can recoup defense costs paid on behalf of an insured when it is subsequently determined that there was no duty to defend. summary judgment on all of the Murphys' claims and its own claim for declaratory relief, requesting attorney's fees for both prosecuting and defending a declaratory judgment action. See Tri-Coastal Contractors, Inc. v. Hartford Undwrs Ins. that AHCA Comply with Fla. Stat. Co. v. Watson, 876 S.W.2d 145, 149 (Tex. Co. v. Boll, 392 S.W.2d 158, 161 (Tex. <>>> art. 37.005. Co., 981 S.W.2d 889 (Tex. Co. v. Gjonaj Realty & Mgt. 1992); cf. While abstention doctrine is more frequently an issue in federal court, state courts can also abstain. 959, Sec. App.Fort Worth 1986, writ refd n.r.e.). R. Civ. By Karl Bayer. Am., 845 S.W.2d 794, 801 (Tex. Twenty-Fifth Floor - Plaza of the Americas. App.Austin 2003, no pet. Declaratory Judgment Action Insurer Does Nothing Facts Don't Trigger Duty to Defend Insurer Does Nothing 34 . 2283. PRAC. C.M.W., 53 S.W.3d 877 (Tex.