In Nautilus, the insureds were sued in California state court by a former business partner asserting numerous claims, including interference with prospective economic advantage. 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. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. (b) A contract may be construed either before or after there has been a breach. 45 (N.D. Tex. Sec. App.Waco 1943, no writ); Superior Ins. County Mut. 1996) (nevertheless refraining from determining coverage for indemnity, on the basis of judicial economy). 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. 1998); see also Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741 (Tex. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. POWER OF COURTS TO RENDER JUDGMENT; FORM AND EFFECT. DECLARATORY JUDGMENT Definition & Legal Meaning - The Law Dictionary Auto Ins. PDF Texas Supreme Court to Decide Whether a Declaratory Judgment Action is See Farmers Tex. Sec. (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. State Farm argued the policy changes were made in Milam County, where the agent was located, and the policy was sold. App.Dallas 2001, pet. 2000). Ins. In older cases, courts allowed broad introduction of extrinsic evidence in a declaratory judgment context. Texas, Inc., 64 S.W.3d 497 (Tex. Co. of N. 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. Suite 300 We agree and affirm as well. App.Houston [14th Dist.] Created is remedy A declaratory judgment must be based on an actual controversy, and cannot be merely advisory. 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. PDF IN THE SUPREME COURT OF TEXAS - txcourts.gov See, e.g., Boring & Tunneling Co. v. Salazar, 782 S.W.2d 284, 289-90 (Tex. See, e.g., Dairyland County Mut. 1, eff. A future interest in a potential judgment has been held insufficient to allow intervention. The fact that a declaratory judgment may be granted whether or not further relief is or could be prayed indicates that declaratory relief is alternative or cumulative and not exclusive or extraordinary. Acts 1985, 69th Leg., ch. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 2010), Sec. In a straight complaint allegation case, for instance, there should be extremely limited discovery, beyond verification of the pleadings and the policy. Circuit Court of Appeals certified the question of whether an insurer is entitled to recoupment of defense costs based on a reservation of its rights to seek recoupment to the Nevada Supreme Court. App.Corpus Christi 1975, writ refd n.r.e.) Co. v. Sassin, 894 F.Supp. App.Dallas 2000, pet. BORON. I Co. v. Block, 744 S.W.2d 940, 943 (Tex. Where suits are filed in two states, one court may abstain in favor of the first-filed suit. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. 12 0 obj POWER OF COURTS TO RENDER JUDGMENT; FORM AND EFFECT. But the fact that another remedy would be equally effective affords no ground for declining declaratory relief. See TEX. . denied sub nom. Rule 57. Declaratory Judgment - LII / Legal Information Institute LEXIS 1736 (Tex. Although the trial court vacated the default judgment, on appeal, the Second Department reversed the lower court's order and reinstated the judgment against the insureds. 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. & Rem. See London Mut. Tex. The most significant is that there must be a justiciable controversy between the parties. Dept. 37.011. 97 (E.D. 2283. Co. v. Ochoa, 19 S.W.3d 452 (Tex. However, each party must still plead for relief and carry its own burden of proof. Tex. See, e.g., Standard Fire Ins. (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. 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.. P., also addresses declaratory judgments, by reference to 28 U.S.C. Rule 57 also notes that "the existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate." Co., 981 S.W.2d 861 (Tex. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. 2023 Thompson, Coe, Cousins & Irons, LLP. By Karl Bayer. Sec. Co. v. Travis, 68 S.W.3d 72, 77 (Tex. 1993) (Colorado River factors inapplicable in declaratory judgment action); Granite State Ins. See State Farm Fire & Cas. Co. v. Kelliher, 343 S.W.2d 278 (Tex. Genl Ins. Ins. The petition in the underlying suit was amended, however, and all references to alcohol were deleted. App.Austin 1998, no pet. 1998). 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. App.San Antonio 2019). Ins. Declaratory judgment actions are oftentimes filed in federal court. Id. 2201. V 8). <> The county where the contract was formed may also be a proper venue. 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. v. Mitchell, 138 F.3d 208, 210 (5th Cir. Sept. 1, 1999. It may be appropriate for courts to abstain, in certain circumstances. September 1, 2007. denied). Bonham State Bank v. Beadle, 907 S.W.2d 465 (Tex. Understanding Declaratory Judgment Actions | Larkin Farrell 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. District courts have articulated several reasons for why mirror-image counterclaims should be dismissed. App.Austin 1987, no writ); Safeway Mng. See, e.g., Cook v. Ohio Cas. 1998) (holding that Texas Declaratory Judgment Act was not controlling, substantive law, and did not justify fee award to defendants). There was also a declaration that the insurer owed neither defense nor indemnity to the wife. See Travelers Ins. 1965, writ refd n.r.e.) Seq. ); but cf. 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. The underlying liability suit arose from an accident in which one defendant, while intoxicated, hit the plaintiffs vehicle, killing their daughter. ); State Farm Lloyds Ins. 1996). See, e.g., Ohio Cas. PRAC. Mut. (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. Rule 57. See Bituminous Cas. 461 (1937); Nashville, Chattanooga & St. Louis Ry. See Scottsdale Ins. Because the insurer would be allowed to re-litigate, after the underlying case is resolved, there is no reason to delay the inevitable. 1997); Heyden Newport Chemical Corp. v. So. It is still likely a court will not allow dual-track litigation of issues that affect liability and coverage. Co. v. Fraiman, 514 S.W.2d 343, 346 (Tex. 10, eff. denied); State Farm Lloyds v. In re Houston Specialty Insurance Co., 569 S.W.3d 138 (Tex. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. 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. See, e.g., City of Galveston v. Giles, 902 S.W.2d 167 (Tex. On March 11, 2021, the Nevada Supreme Court, in a 4-3 decision, held in Nautilus Insurance Company v. Access Medical, LLC, 2021 WL 936076 (Nev. 2021) that an insurance company is entitled to reimbursement of defense costs where a determination is ultimately made that the insurer did not owe a duty to defend, and the insurer expressly reserved its right to seek recoupment. App.San Antonio 1998, pet. Corp. v. Vacuum Tanks, Inc., 975 F.2d 1130, 1133 (5th Cir. Shoot First, Litigate Later: Declaratory Judgment Actions, Procedural Acts 2007, 80th Leg., R.S., Ch. Because the pleadings did not address a fact essential to determining coverage, the court allowed extrinsic evidence. Despite the complaint allegation rule, Texas courts have always recognized that there are circumstances in which the court must look to extrinsic evidence to determine whether a duty to defend exists. Plaintiff lacks standing for some or all of . The court noted that the Griffin exception did not apply, but that a justiciable controversy existed, as the judgment clarified the rights of the parties under the contract; especially because the policy includes a provision under which Ranger could be relieved of its duty to defend by tendering its limits. Hasselbring v. Koepke, 263 Mich. 466, 248 N.W. Sec. Under the Declaratory Judgment Act, "any court of the United States, upon the filing of an appropriate pleading, may: . 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. PDF Preserving Coverage Defenses Co., 95 S.W.3d 702 (Tex. Sec. endobj 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. Co., 542 S.W.2d 429 (Tex. 2201, to determine an actual controversy between the . denied). App.Fort Worth 2000, no pet.). 37.006. A court may not, however, refuse to exercise jurisdiction on the basis of a whim or personal disinclination. See, e.g., St. Paul Ins. In St. Paul Ins. declaratory judgment | Wex | US Law | LII / Legal Information Institute App.Austin 1998, pet. Sec. (whether policy was void or loss was covered presented justiciable controversy); American States Ins. Co. v. County of Nye0, Nev., 26 . Co. v. Deering Mgmt. App.Beaumont 1972), affd other grounds, 496 S.W.2d 552 (Tex. (B) A contract may be construed either before or after there has been a breach. Explainer: How did the battle between Ron DeSantis and Disney escalate? App.Austin 1999, pet. Moreover, the Second Department noted that the policy at issue did not expressly provide the insurer with a right to recoup defense costs. 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. 1787), Sec. 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. 1, eff. denied). PDF I. CAN YOU FILE BASIS FOR DECLARATORY RELIEF - Thompson, Coe, Cousins 2d 601, 621-22 (E.D. . CODE 37.001-.011. 2 0 obj C.M.W., 53 S.W.3d 877 (Tex. 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. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. There are several defenses that should be considered in a suit for declaratory relief in both state and federal court. Co. v. Bradleys Elec., Inc., 993 S.W.2d 673 (Tex. The district court dismissed the declaratory action on the defendants motion based on 28 U.S.C. Judges have always been suspect of declaratory judgment actions and, more particularly, the "mirror image" case where the alleged wrongdoer takes on the role of the plaintiff. App.Fort Worth 1998, no pet.) Co. v. Hood, 895 F.Supp. See, e.g., Ruth v. Imperial Ins. Cluett v. Medical Protective Co., 829 S.W.2d 822, 826 (Tex. Defendant restates its responses to allegations 1-64 as if fully set forth herein. . 925 S.W.2d at 714. When there is uncertainty as to the legal obligations or rights between two parties, a declaratory judgment offers an immediate means to resolve this uncertainty. A federal court cannot, however, stay a pending suit for declaratory relief to allow the parties to re-file suit in state court, as the state court will have no jurisdiction. 7 Id. (4) to determine rights or legal relations of an independent executor or independent administrator regarding fiduciary fees and the settling of accounts. (c) A business described by Subsection (b)(1) is entitled to declaratory relief on the issue of whether the requirement of another state that the business collect and remit sales or use taxes to that state constitutes an undue burden on interstate commerce under Section 8, Article I, United States Constitution. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. The issue becomes more murky when allegations triggering coverage are alleged, but are in conflict with the actual facts. Defense counsel may, nonetheless, have protected certain information from disclosure, for fear that it was effect coverage, and violate counsels own ethical obligations. Finally, the Court stated that it strongly disagreed with the view that permitting recoupment would erode the duty to defend. A federal anti-injunction also exists. In RSL Funding, LLC v. Pippins, No. Co., 975 S.W.2d 329 (Tex. Co., 975 S.W.2d 329, 332 n.1 (Tex. The application must be by petition to a court having jurisdiction to grant the relief. The federal act allows the court to declare the rights of any interested party.. These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C. Even before the Texas Supreme Courts opinion in Griffin, federal courts recognized that indemnity presented an actual controversy and was justiciable, prior to judgment in the underlying liability suit. Group v. Lou-Con, Inc., 293 F.3d 908 (5th Cir. 1993); Trinity Univ. 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. 6 0 obj When an issue has been litigated in the underlying case, when can it be re-litigated in the coverage dispute? 9. 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). endstream App.Amarillo 2019). Disclaimer. Co. v. Burch, 442 S.W.2d 331 (Tex. App.Corpus Christi 2000, no writ). A defense is an act of protecting one's own interests. 2004). 1995). (a) In this section, "state" includes any political subdivision of that state. The Statutory Basis for Declaratory Judgment Actions in Texas Lawsuits 1968); National Sav. 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. Wade, 827 S.W.2d at 451. Improper use of declaratory judgments under the Texas UDJA - LinkedIn It argues that the other claims and defenses in the case subsume the issues on which Holmes asks for a declaratory judgment. Co. v. Cooper Mach. The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate.

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