Aug. 2, 2012). 4 0 obj
In addition to the county of the defendants residence or principal office, venue is generally deemed proper in the county where the liability suit is pending, or judgment is entered. Co. of N. App.Corpus Christi 1998), revd on other grounds, 995 S.W.2d 675 (Tex. Co. v. Trejo, 39 F.3d 585 (5th Cir. Declaratory relief is an especially appropriate method for resolving coverage disputes, because of the limited options available for resolution of such disputes. oEN>-BZ=/c]-ZP4U3o>0!f$F = FQfB@DlClYthnA mML.;Emu =uT Co. v. Cowan, 945 S.W.2d 819 (Tex. P., also addresses declaratory judgments, by reference to 28 U.S.C. Civ. In Gonzales v. American States Ins. denied) (disallowing evidence of workers compensation payments to establish employment). These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C. Michael L. Zigelman is co-managing partner of the New York City office of Kaufman Dolowich & Ins. While some older cases find an insurer cannot re-litigate facts, if it has wrongfully refused to defend, recent cases have held that an insurer is not bound, in any circumstance, where the facts allegedly establishing coverage are not fully litigated. Co., 981 S.W.2d 861 (Tex. Co. v. Wade, 827 S.W.2d 448 (Tex. 699 (H.B. Co., 95 S.W.3d 702 (Tex. LEXIS 8082 (Tex. Where suits are filed in two states, one court may abstain in favor of the first-filed suit. 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. In older cases, courts allowed broad introduction of extrinsic evidence in a declaratory judgment context. See, e.g., State Farm Fire & Cas. Prac. 955 S.W.2d at 84 (construing Tex. LEXIS 7550 (Tex. App. Id. A separate issue exists, however, as to the facts and testimony relating to the liability event, and the evidence that has been accumulated or produced in the underlying case. Oct. 20, 1949; Apr. Where the insurer is providing a defense, it is a party to the attorney-client privilege, and can share in communications between the insured and defense counsel, without waiver. 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. Cigna Lloyds Ins. Advisory opinions are prohibited by both the state and federal constitutions. Instead, the purpose of a declaratory judgment action is to determine the parties' responsibilities in relation to a particular dispute. *I`Sl,'dpC2\,AMia*K/[ -M
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z#G?o 0Xj[f e /R&K(KX K$ TBu /5v+nA%. 1973) (court had no authority to order declaration against insurer in response to insureds motion for summary judgment on insurers claims); Indigo Oil, Inc. v. Wiser Oil Co., 1998 TEX. Sec. Youell & Cos v. Getty Oil Co., 510 U.S. 820 (1993); Service Mutual Ins. The Murphys opposed Wells Fargo's motion, arguing, among other things, that Wells Fargo's claims should not be characterized as requesting declaratory relief. 1978). Written instruments, including ordinances and statutes, may be construed before or after breach at the petition of a properly interested party, process being served on the private parties or public officials interested. Mut. %
endobj
App.Corpus Christi 2000, no writ). The federal act allows the court to declare the rights of any interested party.. 1992); cf. 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. All quotes delayed a minimum of 15 minutes. Co. v. Tandy Corp., 986 F.2d 94, 96 (5th Cir. 7 Id. (c) Notwithstanding Section 22.001, Property Code, a person described by Subsection (a) may obtain a determination under this chapter when the sole issue concerning title to real property is the determination of the proper boundary line between adjoining properties. 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. App.Houston [1st Dist.] 1965, writ refd n.r.e.) While the law is less clear, Federal courts, applying Texas law, have reached a similar conclusion. Co. v. Deering Mgmt. 37.010. REVIEW. Tex. When to file is often determined by what is at issue. 1995) (whether trademark violation occurred during policy period). On Dec. 30, 2020, New York's Appellate Division, Second Department, issued a ruling which may have created a split in authority on the question of recoupment of defense costs among New York's appellate level courts. endobj
stream
The Fifth Circuit reviewed abstention under the Burford and Colorado River doctrines, and concluded that neither was applicable. (on petition for mandamus, found claimant was not third party beneficiary and had no right to intervene in declaratory action). The crop-dusting involved only one flight, but several passes during which herbicide was released, and during which wind direction and velocity varied. 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. 10 0 obj
See, e.g., Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). As such, there should be no collateral estoppel of the insurer, based upon the outcome of the issue in the underlying case. App.Fort Worth 1992, writ denied) (insurer not estopped by failing to have declaratory judgment determined before judgment in underlying case). In American, the insurer agreed to defend the insured in an underlying personal injury action but reserved its right to deny coverage to the extent that the insurer was prejudiced due to the insured's late notice of the action. Notes of Advisory Committee on Rules1948 Amendment. 1968); National Sav. PRACTICAL CONSIDERATIONS Federated Mut. 169 (S.D.Tex., 1935); Borchard, Declaratory Judgments (1934), passim. Indemnity is based on the actual facts establishing liability in the underlying suit. Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 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. 1998); see also Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741 (Tex. 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. Control of defense and directing actions of defense counsel in conflict situation (Utica Mut. An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. xX]oF}G?SeW0W44q>EqU{s@N|Bt2&iw'PmH'4QH1_>{'Y7bLH
dB4uX;iYtI7F7*L^F App.Houston [14th Dist.] Co. v. Tandy Corp., 986 F.2d 94, 95 (5th Cir. 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.. 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. 1968) (J. Smith, dissenting). What Is a Declaratory Judgment Action? 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. v. Gaskins, 572 S.W.2d 573, 575 (Tex. See, American Home Assur. 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. Co. v. River Entertainment, 998 F.2d 311, 315 (5th Cir. In St. Paul Ins. Ins. CIV. U.S. Constitution Annotated Toolbox. Co., 628 S.W.2d 184 (Tex. We agree and affirm as well. 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. The insurer, Nautilus, agreed to defend the suit while also reserving its rights to disclaim coverage and obtain reimbursement of defense costs if it was determined that Nautilus did not owe a duty to defend. Plaintiff lacks standing for some or all of . New Orleans, LA 70130 The abundance of case law allowing extrinsic evidence, however, suggests that the exception will continue. Group v. Lou-Con, Inc., 293 F.3d 908 (5th Cir. declaratory judgment action. This is an action for declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. Sec. Co. v. Sassin, 894 F.Supp. Austin, TX 78746 denied sub nom. There is a contract, and a dispute over the parties rights and obligations under the contract. See, e.g., Ruth v. Imperial Ins. (Deering, 1937) 1062a), Michigan (3 Comp.Laws (1929) 13904), and Kentucky (Codes (Carroll, 1932) Civ.Pract. ); Taylor v. State Farm Lloyds, 2003 Tex. 1998, no pet.). Id. (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. 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. 2002); Monticello Ins. App.Texarkana 2003, pet. Co., 2000 Tex. 305 (H.B. Rules 38 and 39 govern a demand for a jury trial. Acts 2007, 80th Leg., R.S., Ch. 37.006, TEX. R. CIV. Insurer's right to assert other policy defenses . App.Beaumont 1972), affd other grounds, 496 S.W.2d 552 (Tex. This Note is jurisdiction neutral. Id. Added by Acts 2007, 80th Leg., R.S., Ch. Acts 1985, 69th Leg., ch. Insurers should also be sure to expressly reserve their right to recoup the costs in their coverage position letters. C.M.W., 53 S.W.3d 877 (Tex. LEXIS 7088 (Tex. Declaratory judgment actions are oftentimes filed in federal court. . defense n. 1 : the act or action of defending see also self-defense. Id. 12 0 obj
In part, of course, the scope of discovery will be determined by the nature of the issue. 1997)2; see also State Farm Lloyds v. 1989, no writ); In re Fontenot, 13 S.W.3d 111 (Tex. 1996). App.Texarkana 1967, no writ) (auto excluded); International Serv. v. Mitchell, 138 F.3d 208, 210 (5th Cir. (b) A contract may be construed either before or after there has been a breach. denied) (failure to satisfy burden is not finding of proof of opposite). Sept. 1, 1985. denied); ANR Prod. The court remanded for consideration of these factors. Therefore, the claimants should not be necessary or indispensable parties, prior to the settlement or judgment. 28 U.S.C. 1991), affd in part, 961 F.2d 213 (5th Cir. Civ. App.Dallas 1992, writ denied); U.S. Fire Ins. Ins. The dispute was over an unscheduled vehicle. (a) In a case of actual controversy within its jurisdiction, except with respect to Federal taxes . It may be appropriate for courts to abstain, in certain circumstances. However, each party must still plead for relief and carry its own burden of proof. 959, Sec. defenses always be pled by motion. See TEX. Co. v. Boll, 392 S.W.2d 158, 161 (Tex. River Entertainment was joined because it owned Pepes where the defendant imbibed. Co. v. Bradleys Elec., Inc., 993 S.W.2d 673 (Tex. The Texas Supreme Court concluded that 38.006 allowed recovery of attorneys fees for breach of contract unless attorneys fees are otherwise available. See, e.g., Dairyland County Mut. 2002, no pet. See, e.g., Standard Fire Ins. Despite the insurers right to review any such documents without waiver of the privilege, and the likelihood that defense counsels concerns would be abrogated by the right to conduct discovery, there is still a question as to what extent defense counsels opinions or observations would be relevant to coverage. Proc. Co. v. Grapevine Excavation, 241 F.3d 396 (5th Cir. 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. Similarly, courts have held that an insurance company has no right to intervene in the liability action against the insured to seek a coverage determination. For instance, when it is clear that a ruling on the merits of plaintiff's claims would . A declaratory judgment is one which simply declares the rights of the parties, or expresser, the opinion of the court on a question of law, without ordering anything to be done. 1995); but cf. 1993). The district court dismissed the declaratory action on the defendants motion based on 28 U.S.C. Rules 38 and 39 govern a demand for a jury trial. Co. v. Vic Mfg. September 1, 2007. denied) (refusing to allow use of extrinsic evidence to disprove alleged facts). Dec. 1, 2007. BORON. See Bailey, 133 F.3d at 369 n.4; Travelers Ins. The insurer denied defense based on the liquor liability exclusion and filed a declaratory judgment action. App.Corpus Christi 2000, no writ). State Farm argued the policy changes were made in Milam County, where the agent was located, and the policy was sold. & Rem. Declaratory Judgment Action Insurer Does Nothing Facts Don't Trigger Duty to Defend Insurer Does Nothing 34 . App.Houston [1st Dist.] Further relief based on a declaratory judgment or decree may be granted whenever necessary or proper. June 15, 2007. App.San Antonio 1998, pet. Ins. Ins. The firm's new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112. The right to award costs and fees is discretionary, not mandatory. The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate. 2d 719, 725 (D. Minn. 2005) (applying Texas law); Forum Ins. Explanation of the Constitution - from the Congressional Research Service The Supreme Court of Texas has ruled that a company did not waive its right to arbitration by bringing a "friendly" declaratory judgment action. App.Amarillo 2019). The demand for relief shall state with precision the declaratory judgment desired, to which may be joined a demand for coercive relief, cumulatively or in the alternative; but when coercive relief only is sought but is deemed ungrantable or inappropriate, the court may sua sponte, if it serves a useful purpose, grant instead a declaration of rights. Sec. 9. 37.008 provides that aforementioned court may refuse to render a declaratory judgements if the judgment become nay terminate and uncertainty or controversy giving rise to the proceeding. See Firemens Ins. Admiral Ins. Insurer's right to file declaratory judgment action 9. denied, 511 U.S. 1032 (1994). Brooks v. Northglen Association, 141 S.W.3d 158, 163-164 (Tex. Suite 1400 DECLARATIONS RELATING TO TRUST OR ESTATE. In state court, an order to seal discovery requires that the parties jump through a number of additional hoops, but protective orders are still available. Id. Co. v. Travis, 68 S.W.3d 72, 77 (Tex. 1, eff. (although judgment reversed on coverage, no indication courts refusal to award fees to either party was abuse of discretion). & REM. Co. v. Fraiman, 514 S.W.2d 343, 346 (Tex. 1, eff. Co. v. Griffin, 955 S.W.2d 81, 82-84 (Tex. The Burches were the plaintiffs, and were also the petitioners for declaratory relief. A court may not . 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. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News. Page 2 / 14Defendant-Counterclaimant's First Amended Answer and Counterclaims 5. See Bernard v. Gulf Ins. Sec. The controversy must necessarily be of a justiciable nature, thus excluding an advisory decree upon a hypothetical state of facts. Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 325, 56 S.Ct. 2 0 obj
The Western Heritage case epitomizes the argument for use of extrinsic evidence. See, e.g., State Farm Fire & Cas. 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. App.Waco 1943, no writ); Superior Ins. App.Dallas 1992, writ denied) (insurer not collaterally estopped from challenging findings); United States Fire Ins. Typically, the first-filed suit has dominant jurisdiction. Sec. 167, Sec. "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. The language of Rule 57 has been amended as part of the general restyling of the Civil Rules to make them more easily understood and to make style and terminology consistent throughout the rules. The district court dismissed the indemnification issue, but granted judgment on defense, based on the extrinsic evidence. P., specifically provides, with regard to joinder of third parties, that This rule shall not be applied, in tort cases, so as to permit the joinder of a liability or indemnity insurance company, unless such company is by statute or contract liable to the person injured or damaged. Most policies include a no action provision that provides that a third partys right of action against the insured does not arise until there is a settlement, to which the insurer has agreed, or a judgment against the insured. Civ. : the evidence and arguments presented supporting the defendant's opposition see also accord, alibi . The Court held that insurers are entitled to recoupment even where the policy at issue does not expressly provide such a right. Co. v. Cooper Mach. The complaint allegation rule can pose a problem with declaratory relief. Hasselbring v. Koepke, 263 Mich. 466, 248 N.W. Sec. Sept. 1, 1985. The Federal Declaratory Judgment Act creates a remedy, not a basis for jurisdiction. He can be reached at mzigelman@kdvlaw.com. The claims involved crop-dusting, which allegedly damaged abutting fields because of herbicide drift. 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. & Rem. 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. In Wade, the insurer argued that it was not challenging the veracity of the facts alleged, but had a defense independent of the pleadings. Where a judgment has been entered in the underlying case, and the insurer has refused indemnity, it may also be that declaratory relief is inappropriate, because a cause of action for breach of contract has ripened. (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. Houston, TX 77056 at 452-53; but see Tri-Coastal Contrs Inc., 981 S.W.2d at 863 (questioning scope of exception). 1991). 1999) (insureds motion to transfer erroneously granted); Southern County Mut. 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. Moreover, Insurers should note that policies that are not duty to defend, or otherwise expressly provide a right of recoupment, may not be subject to the same limitations on the right of recoupment. denied). 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 Travelers Ins. 37.008. Finally, the Court stated that it strongly disagreed with the view that permitting recoupment would erode the duty to defend. tort and environmental coverage. These rules govern the procedure for obtaining a declaratory judgment under 18 U.S.C. See Murray, 437 S.W.2d 264 (Tex. Group, 946 F.Supp. Texas, Inc., 64 S.W.3d 497 (Tex. 37.009. App.Fort Worth 1986, writ refd n.r.e.). 8. Federal courts have broad discretion as to whether to retain jurisdiction or dismiss declaratory judgment actions. A defense is an act of protecting one's own interests. Suite 300 1969); Getty Oil v. Ins. 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. COURT REFUSAL TO RENDER. If the application is deemed sufficient, the court shall, on reasonable notice, require any adverse party whose rights have been adjudicated by the declaratory judgment or decree to show cause why further relief should not be granted forthwith. County Mut. App.Corpus Christi 1975, writ refd n.r.e.) 1023, 1026 (N.D. Tex. Texas Dept of Public Safety v. Moore, 985 S.W.2d 149, 153-54 (Tex. Sec. App.Houston [1st Dist.] 1996) (insurer not estopped from litigating employment issue). Co. v. Taylor, 832 S.W.2d 645 (Tex. 37.006. Co. v. Marathon Ashland Petrol., L.L.C., 87 F. Supp. Co. v. River Entertainment, 998 F.2d 311, 315 (5th Cir. There are exceptions, of course. 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. Co. v. Childress, 650 S.W.2d 770, 775-76 (Tex. App. The existence or nonexistence of any right, duty, power, liability, privilege, disability, or immunity or of any fact upon which such legal relations depend, or of a status, may be declared. denied). An insurer should not be held to have waived its right to litigate coverage by defending under reservation of rights, or by delay in filing a declaratory judgment action. Wade, 827 S.W.2d at 451. 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. 1995), the court held a minor, whose interests were affected, was properly made a party to a declaratory judgment action, and was bound by the judgment where the minors mother answered, as next friend, and a guardian ad litem was appointed. 504-526-4350, 408 St. Peter Street, Suite 510 See Farmers Tex. US Senate panel seeks ethics details from Supreme Court. 1995). Cf. Rule 57. Co., 143 F.3d 192 (5th Cir. DEFINITION. 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. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. (whether policy was void or loss was covered presented justiciable controversy); American States Ins. 14-0457 (Tex., July 1, 2016), RSL agreed to purchase certain annuity contracts issued by MetLife from three individuals. The most significant is that there must be a justiciable controversy between the parties. Co. v. Cooper Machinery Corp., 817 F.Supp. . Indemnity, on the other hand, is based on actual facts and should always be subject to extrinsic evidence. The award is subject to reversal only if it is arbitrary and unreasonable. 2001) (when lease obtained); Guaranty Natl Ins. POWER OF COURTS TO RENDER JUDGMENT; FORM AND EFFECT. 1998, pet. Following the Court's decision in Martin, the Texas Legislature amended the Declaratory Judgment Act to expressly provide that, notwithstanding section 22.001 of the Texas Property Code (the trespass-to-try-title statute), a claimant may sue for declaratory relief "when the sole issue concerning title to real property is the determination . App.Fort Worth 1998, no pet.) Co. of Texas, 1998 Tex. Nor can an insurer join the claimants and address the issues through interpleader. 1997); Heyden Newport Chemical Corp. v. So. In this. <>
1993) (Colorado River factors inapplicable in declaratory judgment action); Granite State Ins. APP. aspects of insurance coverage including directors and officers liability, professional liability, Co. v. Ochoa, 19 S.W.3d 452 (Tex. The Law Dictionary is not a . Genl Agency v. Cooper, 952 S.W.2d 861 (Tex. Sec. The policy provided limits of $100,000 per occurrence and $200,000 in the aggregate. (no right to new trial because of amended petition where suit brought and determined based on prior petition).
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