defenses to declaratory judgment action texas

In older cases, courts allowed broad introduction of extrinsic evidence in a declaratory judgment context. 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. v. Texas Air Control Bd., 852 S.W.2d 440, 446 (Tex. Andrew A. Lipkowitz is an associate at Kaufman Dolowich & Voluck LLP and primarily focuses his practice in insurance coverage litigation and monitoring. Tex. PARTIES. P. 76A; 192.6(b)(5). Ins. 3.08(a), eff. App.Dallas 1998, no pet.). Dept. Cluett v. Medical Protective Co., 829 S.W.2d 822, 826 (Tex. Tex. See State Farm Mut. CIV. Civ. <> 855, Sec. It is axiomatic that the duty to defend is broader than the duty to indemnify. PDF Texas Supreme Court to Decide Whether a Declaratory Judgment Action is Youell & Cos v. Getty Oil Co., 510 U.S. 820 (1993); Service Mutual Ins. LEXIS 8082 (Tex. Co. v. Boll, 392 S.W.2d 158, 161 (Tex. In a straight complaint allegation case, for instance, there should be extremely limited discovery, beyond verification of the pleadings and the policy. LEXIS 1736 (Tex. There is a contract, and a dispute over the parties rights and obligations under the contract. denied sub nom. costs and declaratory judgment). 1998) (holding that Texas Declaratory Judgment Act was not controlling, substantive law, and did not justify fee award to defendants). Co. v. Griffin, 955 S.W.2d 81, 82-84 (Tex. Co. v. Am. Co., 502 S.W.2d 232 (Tex. Co., 316 U.S. 491 (1942); Wilton, 515 U.S. 277. endobj Control of defense and directing actions of defense counsel in conflict situation (Utica Mut. The court then noted the special concerns applicable in declaratory actions. In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney's fees as are equitable and just. Co. v. Tandy Corp., 986 F.2d 94, 96 (5th Cir. App.Austin 1998, pet. The issue becomes more murky when allegations triggering coverage are alleged, but are in conflict with the actual facts. Co. v. Blevins, 741 S.W.2d 604, 606 (Tex. Facts and Procedural History. 97 (E.D. Frontier Pac. App.Dallas 1992, writ denied) (insurer not collaterally estopped from challenging findings); United States Fire Ins. After the federal court ruled in favor of Nautilus, holding that it did not owe a duty to defend, Nautilus filed a motion for recoupment of its defense costs. 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. (As amended Dec. 29, 1948, eff. App.Houston [1st Dist.] Elements of Declaratory Judgment in Texas: Strategies & Ethics in DEC <> 1997)2; see also State Farm Lloyds v. 1993), cert. 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. App.Houston [1st Dist.] Co. v. Louisiana Farm Bureau Fedn, Inc., 996 F.2d 774, 778 (5th Cir. Cty. 1998), overruled on other grounds, State Farm Fire & Cas. (b) A contract may be construed either before or after there has been a breach. Co. v. Fraiman, 514 S.W.2d 343, 346 (Tex. 131 (E.D. Co., 975 S.W.2d 329, 332 n.1 (Tex. & Liab. App.San Antonio 1998, pet. Oct. 20, 1949; Apr. DECLARATORY JUDGMENT ACTIONS - ryderlaw.com He can be reached at mzigelman@kdvlaw.com. In re Houston Specialty Insurance Co., 569 S.W.3d 138 (Tex. 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. R. Civ. If the discovery is limited, or poorly conducted, or does not address the coverage issues, however, the insurer may seek additional testimony and evidence. 45 (N.D. Tex. & REM. Co. v. Hood, 895 F.Supp. denied). Co. v. Tilley, 484 S.W.2d 802, 806 (Tex. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. 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. Rule 57, FED. Filing 34 ANSWER to COMPLAINT for declaratory judgment, affirmative defenses and COUNTERCLAIM filed by Clemens Franek against Jay Franco & Sons, Inc. (jmp, ). See, e.g., Texas Assn of Bus. The declaratory judgment action allows relief, even where another remedy exists. 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. 59.02(c). 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. Co., 981 S.W.2d 861 (Tex. The abundance of case law allowing extrinsic evidence, however, suggests that the exception will continue. 512-708-8200, 700 North Pearl Street declaratory-judgments | U.S. Constitution Annotated | US Law | LII 1996); Williamson v. State Farm Lloyds, 76 S.W.3d 64 (Tex. 2d 719 (S.D. . 925 S.W.2d at 714. 1995, no writ); Employers Cas. 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. Sec. 10, eff. 1998). Federated Mut. Mirror-image counterclaims in declaratory judgment actions In Williamson, a jury awarded the claimant damages against the insured for false imprisonment. APP. 1993). See, e.g., State Farm Lloyds v. When there is uncertainty as to the legal obligations or rights associated with a potential future course of action, declaratoryrelief offers an immediate means to resolve this uncertainty. art. App.Houston [14th Dist.] 86.011 Et. It is still likely a court will not allow dual-track litigation of issues that affect liability and coverage. Co. v. Murray, 437 S.W.2d 264, 265-66 (Tex. Opinions expressed are those of the author. 9 0 obj Aug. 2, 2012). Co. v. Rio Grande Heart Specialists of So. First Cause of Action: Declaratory Judgment under . 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. Ins. In a declaratory judgment action, neither party is seeking a judgment for money damages. Still, there are often strategic benefits to filing early. In Nautilus, the insureds were sued in California state court by a former business partner asserting numerous claims, including interference with prospective economic advantage. Answer, Affirmative Defenses, and Counterclaim to the First Amended Complaint for Declaratory Judgment ("Complaint") filed by Hartford Fire Insurance Company ("Hartford"), . The award is subject to reversal only if it is arbitrary and unreasonable. 1996). Rule 57. Declaratory Judgment - LII / Legal Information Institute Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. He concentrates his practice on all In Foust v. Ranger Ins. 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. Acts 2007, 80th Leg., R.S., Ch. endobj These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C. The most common exception for extrinsic evidence is when the pleadings simply do not assert facts that would determine coverage. 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. Co. v. Gjonaj Realty & Mgt. Sec. We agree and affirm as well. endobj endstream Acts 1985, 69th Leg., ch. See Brillhart v. Excess Ins. 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. A declaration does not prejudice the rights of a person not a party to the proceeding. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. Sec. 2d 601, 621-22 (E.D. Const. denied) (disallowing evidence of workers compensation payments to establish employment). 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. The district court dismissed the declaratory action on the defendants motion based on 28 U.S.C. The collision was also in Hidalgo County, as was the liability suit. While the law is less clear, Federal courts, applying Texas law, have reached a similar conclusion. App.Austin 2003, no pet. 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. 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. In addition, Rule 57 provides that the court may order a speedy hearing as an action for a declaratory judgment and may advance it on the calendar.. Notes of Advisory Committee on Rules1948 Amendment. PRACTICAL CONSIDERATIONS 1994). Ins. 713-403-8210, 601 Poydras 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. 1997), the Supreme Court reaffirmed the complaint allegation rule, with dicta suggesting that the exception for extrinsic evidence would be narrowed. Co. v. Block, 744 S.W.2d 940, 943 (Tex. ); Rice v. Alamo Rent-A-Car, Inc., 987 S.W.2d 231 (Tex. (driver excluded); see also Tri-Coastal Contrs, Inc. v. Hartford Undwrs Ins. endobj An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. R. CIV. Id. Under federal law, the Declaratory Judgment Act, itself, does not authorize attorneys fees. 2003) (finding Texas allows only narrow exception); but see Gonzales v. American States Ins. Download PDF Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. 37.008 provides that the court may refuse to render a declaratory judgment if the judgment would not terminate the uncertainty or controversy giving rise to the proceeding. 2 and the commencement of foreclosure proceedings, into agreeing to convey her interest in the property to Mark in their divorce.1 Kyle sued Fidelity, its officers, and a related entity (collectively, Fidelity),2 as well as Mark,3 seeking forfeiture of principal and interest paid on the loan under Texas Constitution Article XVI, section 50(a)(6)(Q)(xi), a declaratory judgment that the deed of . 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. Fla. Stat. You Can't Always Get What You Want (if what you want is a declaratory Ins. App.Houston 1998, pet. As such, there should be no collateral estoppel of the insurer, based upon the outcome of the issue in the underlying case. County Mut. Co. v. WSG Investors, LLC, 09-cv-05237, 2012 WL 3150577 (E.D.N.Y. <> 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). Sec. 1993) (whether accident arose from liquor liability); Acceptance Ins. Improper use of declaratory judgments under the Texas UDJA - LinkedIn Civ. Guar. RESERVATION OF RIGHTS CHECKLIST - PAGE 2 . 1998, pet. Declaratory Judgment These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C. Declaratory judgment actions in the United States are defined by a statutory framework first developed by the National Conference of Commissioners on Uniform State Laws in 1922 and designed to expand the role and authority of courts in settling disputes. . See United Services Life Ins. While abstention doctrine is more frequently an issue in federal court, state courts can also abstain. Ohio Cas. Co., 996 S.W.2d 207 (Tex. 2201, and further provides for a jury trial. Ins. In St. Paul Ins. 2201. 2 The courts decision has been described as carving out an exception, rather than overruling prior law. This is an action for declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. denied); Ranger Ins. Therefore, either diversity or federal question jurisdiction must still exist. Nevertheless, some courts have concluded that declaratory relief is inappropriate where another cause of action is fully mature and provides an appropriate remedy at law. The Federal act is broader in scope. Co. v. Patriot Sec., Inc., 926 F.Supp. Id. App.Austin, Oct. 2, 2003, no pet. Texas, Inc., 64 S.W.3d 497 (Tex. denied, 511 U.S. 1032 (1994). Disclaimer. 1994), the court reviewed abstention doctrine in relation to declaratory judgment actions. 504-526-4350, 408 St. Peter Street, Suite 510 37.002. The federal act allows the court to declare the rights of any interested party.. The right to award costs and fees is discretionary, not mandatory. denied); ANR Prod. In RSL Funding, LLC v. Pippins, No. Ins. Pursuant to 37.003, a declaration may be either affirmative or negative in form and effect. San Antonio, TX 78216 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. C.M.W., 53 S.W.3d 877 (Tex. 8 0 obj When Can You File a Declaratory Judgment Action' - Insurance Journal PDF Declaratory Judgment Actions: When are they Appropriate? <> Sept. 1, 1985. 6 0 obj App.San Antonio 1998, pet. 2001) (when lease obtained); Guaranty Natl Ins. insured that the insurer's defense of the action against the insured . Corp., 817 F.Supp. CSAT Versus Denton - Original Answer and Counterclaim - TML Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139 (Tex. Co. v. Ochoa, 19 S.W.3d 452 (Tex. Because the insurer would be allowed to re-litigate, after the underlying case is resolved, there is no reason to delay the inevitable. Civ. Co. v. County of Nye0, Nev., 26 . at 1280 (insurer not precluded from relitigating course and scope of employment). Sec. !`g)a00-k@@eU For instance, when it is clear that a ruling on the merits of plaintiff's claims would . Id. See Farmers Tex. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. The petitioner must have a practical interest in the declaration sought and all parties having an interest therein or adversely affected must be made parties or be cited. Oftentimes, the insurer has no duty to indemnify. Rules 38 and 39 govern a demand for a jury trial. The Fifth Circuit overruled prior case law to conform with the Supreme Courts ruling. 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. All quotes delayed a minimum of 15 minutes. 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. Co., 981 S.W.2d 861 (Tex. Co. v. Burch, 442 S.W.2d 331 (Tex. Genl Agency v. Cooper, 952 S.W.2d 861 (Tex. 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 . endobj Co. v. Gandy, 925 S.W.2d 696 (Tex. PDF IN THE SUPREME COURT OF TEXAS - txcourts.gov The court may order a speedy hearing of a declaratory judgment action. denied); State Farm Lloyds v. denied). 37.0055. App.Corpus Christi 1982, no writ) (could not consider facts of ownership that conflicted with petition); Calderon v. Mid-Century Indem. These changes are intended to be stylistic only. In addition, in many instances, a protective order will allow broad discovery, without fear of disclosure to the plaintiff. aspects of insurance coverage including directors and officers liability, professional liability, 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. 7 Id. Created is remedy (not justiciable controversy); Foust v. Ranger Ins. 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. stream App.Fort Worth 2000, no pet.). The Historic Hamm Building A number of issues arise in regard to discovery in a declaratory judgment action. App.Austin 1998, no pet. App.Corpus Christi 2000, no writ). title to the propertyan essential element of an action to quiet titleand, in the court of appeals' view, the pleadings alleged "the wrong cause of action," the court concluded that the Brumleys' pleadings did not support the judgment.9 6 603 S.W.3d 449, 451 (Tex. Sec. 1995); but cf. App.Houston [14th Dist.] See TEX. Co., 192 A.D. 3d 28 (2d Dep't 2020) the Second Department expressly "declined to follow" the prevailing New York authority. 2201. 1968); National Sav. Federal: Declare Assess Act, 28 U.S.C. 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. In other respects the Uniform Declaratory Judgment Act affords a guide to the scope and function of the Federal act. 1969); see also Allstate Ins. PDF UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS - Manatt . 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. 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. 2023 Thompson, Coe, Cousins & Irons, LLP. Co. v. Carmichael, 1998 Tex. 37.009. Costs and fees are not dependent upon the outcome, and can be awarded to either the prevailing or the non-prevailing party. He can be reached at alipkowitz@kdvlaw.com. Twenty-Fifth Floor - Plaza of the Americas Because the pleadings did not address a fact essential to determining coverage, the court allowed extrinsic evidence. Prac. Civ. 30, 2007, eff. Citing the Travelers case, the court recited the relevant factors the court must consider in determining whether to dismiss a declaratory judgment action: 1) whether there is a pending state action in which all of the matters in controversy may be fully litigated; 2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant; 3) whether the plaintiff engaged in forum shopping in bringing the suit; 4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exist; 5) whether the federal court is a convenient forum for the parties and witnesses; 6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy; and.
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