defenses to declaratory judgment action texas

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 underlying action. Control of defense and directing actions of defense counsel in conflict situation (Utica Mut. 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. The Texas Supreme Court concluded that 38.006 allowed recovery of attorneys fees for breach of contract unless attorneys fees are otherwise available. 1969); Getty Oil v. Ins. 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. Declaratory Judgment. (b) A contract may be construed either before or after there has been a breach. 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. 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. He can be reached at [email protected]. !`g)a00-k@@eU 1992), cert. <> App. Instead, plaintiffs alleged River Entertainment was negligent for allowing the defendant to leave, in his own vehicle, when they should have known his driving ability was impaired. Co. v. Cooper Mach. denied). 1994), the court reviewed abstention doctrine in relation to declaratory judgment actions. 1993). In Chiriboga v. State Farm Mut. (As amended Dec. 29, 1948, eff. Declaratory relief is an especially appropriate method for resolving coverage disputes, because of the limited options available for resolution of such disputes. In Williamson, a jury awarded the claimant damages against the insured for false imprisonment. Suite 1850 37.007. 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. The Fifth Circuit reviewed abstention under the Burford and Colorado River doctrines, and concluded that neither was applicable. 1995). (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. P. 26; Tex. Ins. See, e.g., Stroop v. N. County Mut. Group v. Lou-Con, Inc., 293 F.3d 908 (5th Cir. 688, 699 (1936). Civ. 512-708-8200, 700 North Pearl Street (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. 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. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. See here for a complete list of exchanges and delays. U.S. Constitution Annotated Toolbox. Co. v. Plummer, 13 F.Supp. 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. 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. denied); Ranger Ins. 59.02(c). stream Defendant restates its responses to allegations 1-64 as if fully set forth herein. 12 0 obj River Entertainment was joined because it owned Pepes where the defendant imbibed. 120.53. Under the Declaratory Judgment Act, "any court of the United States, upon the filing of an appropriate pleading, may: . After St. Paul filed its declaratory action in federal court, the claimant filed suit in state court in the same court in which the two prior suits had been filed. stream C.M.W., 53 S.W.3d 877 (Tex. <> Oct. 20, 1949; Apr. The Western Heritage case epitomizes the argument for use of extrinsic evidence. See Tri-Coastal Contractors, Inc. v. Hartford Undwrs Ins. Typically, the first-filed suit has dominant jurisdiction. Page 2 / 14Defendant-Counterclaimant's First Amended Answer and Counterclaims 5. (although judgment reversed on coverage, no indication courts refusal to award fees to either party was abuse of discretion). 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. Answer, Affirmative Defenses, and Counterclaim to the First Amended Complaint for Declaratory Judgment ("Complaint") filed by Hartford Fire Insurance Company ("Hartford"), . See, e.g., State Farm Lloyds v. Co., 767 F.Supp. Co. v. Gandy, 925 S.W.2d 696 (Tex. 606 S.W.3d 774 (Tex. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. Therefore, either diversity or federal question jurisdiction must still exist. Id. As such, there should be no collateral estoppel of the insurer, based upon the outcome of the issue in the underlying case. Attorney Analysis from Westlaw Today, a part of Thomson Reuters. Therefore, the claimants should not be necessary or indispensable parties, prior to the settlement or judgment. 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. 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, e.g., Standard Fire Ins. District courts have articulated several reasons for why mirror-image counterclaims should be dismissed. Civ. ); Rice v. Alamo Rent-A-Car, Inc., 987 S.W.2d 231 (Tex. A declaratory judgment is a binding judgment from a court defining the legal relationship between parties and their rights in a matter before the court. LEXIS 8494 (Tex. See Bocquet v. Herring, 972 S.W.2d 19 (Tex. App.Austin 1998, no pet. E.g., Cluett v. Medical Protective Co., 829 S.W.2d 822, 826 (Tex. Am., 845 S.W.2d 794, 801 (Tex. Co. v. Ochoa, 19 S.W.3d 452 (Tex. 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. Costs and fees are not dependent upon the outcome, and can be awarded to either the prevailing or the non-prevailing party. App.Dallas 1998, pet. App.Dallas 2001, pet. 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. APP. The right to award costs and fees is discretionary, not mandatory. Texas, Inc., 64 S.W.3d 497 (Tex. 959, Sec. (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. R. Civ. See Employers Cas. Prac. Co. v. River Entertainment, 998 F.2d 311, 315 (5th Cir. See McCarthy Bros. Co. v. Continental Lloyds, 7 S.W.3d 725 (Tex. (4) to determine rights or legal relations of an independent executor or independent administrator regarding fiduciary fees and the settling of accounts. In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney's fees as are equitable and just. P., also addresses declaratory judgments, by reference to 28 U.S.C. 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. App.El Paso 1976, writ refd n.r.e.) oEN>-BZ=/c]-ZP4U3o>0!f$F = FQfB@DlClYthnA mML.;Emu =uT Co. v. Boll, 392 S.W.2d 158, 161 (Tex. Sec. App.Fort Worth 1961, writ refd n.r.e.) Plaintiff's Complaint fails to state a cause of action. Insurer's right to file declaratory judgment action 9. The collision was also in Hidalgo County, as was the liability suit. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. 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. 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. Co. v. Deering Mgmt. Group, Inc., 946 F.Supp. See Murray, 437 S.W.2d 264 (Tex. Co., 628 S.W.2d 184 (Tex. (auto liability insurer seeking declaratory relief was not subject to cross-action by injured party, or consolidation of liability and coverage suit); see also Firemans Ins. o FRCP Rule 57. 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. App. Co., 61 F.3d 389 (5th Cir. Declaratoryjudgments are an important tool in litigation. 1023, 1026 (N.D. Tex. Co. v. Rio Grande Heart Specialists of So. Id. 1965). State Farm argued the policy changes were made in Milam County, where the agent was located, and the policy was sold. Co., 387 S.W.2d 22, 25 (Tex. DEFINITION. App.San Antonio 1998, pet. 5 0 obj 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. at 452-53; but see Tri-Coastal Contrs Inc., 981 S.W.2d at 863 (questioning scope of exception). Co. v. Travis, 68 S.W.3d 72, 77 (Tex. 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. 1170 (1933). Co. v. Boll, 392 S.W.2d 158, 161 (Tex. App.Waco 1943, no writ); Superior Ins. What Is a Declaratory Judgment Action? ), Notes of Advisory Committee on Rules1937. (whether driver qualified as an insured); John Deere Ins. Co. v. Trejo, 39 F.3d 585, 590 (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. For The most common exception for extrinsic evidence is when the pleadings simply do not assert facts that would determine coverage. Co., 975 S.W.2d 329, 332 n.1 (Tex. 1998), overruled on other grounds, State Farm Fire & Cas. Sec. Cluett v. Medical Protective Co., 829 S.W.2d 822, 826 (Tex. & Rem. Civ. Rules 38 and 39 govern a demand for a jury trial. 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. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. (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. See here for a complete list of exchanges and delays. 1993) (Colorado River factors inapplicable in declaratory judgment action); Granite State Ins. dYU1oprU.:1FlU;{~_%uIMT6cHE 7o1E-j=E.s nR&%*%")QmLd~s`MF_]jd%DhjP1h 4 z#G?o 0Xj[f e /R&K(KX K$ TBu /5v+nA%. The Federal act is broader in scope. App.Amarillo 1976, writ refd n.r.e. See Owens v. Allstate Ins. Foust v. Ranger Ins. Insurers should also be sure to expressly reserve their right to recoup the costs in their coverage position letters. Group, Inc., 946 F.Supp. Co. v. Block, 744 S.W.2d 940, 943 (Tex. It is axiomatic that the duty to defend is broader than the duty to indemnify. App.Houston [1st Dist.] See, e.g., Ohio Cas. The amendment substitutes the present statutory reference. See United Services Life Ins. 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. App.Texarkana 1967, no writ) (auto excluded); International Serv. 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. Oftentimes, the insurer has no duty to indemnify. Proc. 1999) (insureds motion to transfer erroneously granted); Southern County Mut. An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. costs and declaratory judgment). : the evidence and arguments presented supporting the defendant's opposition see also accord, alibi . Co. v. Gjonaj Realty & Mgt. ^9@VXB-'C(SOZ#jGT"1kfWj7i,9^'EJ Co. of N. The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate. App.Austin 1999, no pet.) CIV. The award is subject to reversal only if it is arbitrary and unreasonable. C.M.W., 53 S.W.3d 877 (Tex. Co., 981 S.W.2d 861 (Tex. Plaintiff lacks standing for some or all of . Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News. When an issue has been litigated in the underlying case, when can it be re-litigated in the coverage dispute? denied). %PDF-1.5 2d 601, 621-22 (E.D. 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 1998, pet. 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. 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. 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. App.Dallas 1998, pet. Const. dismd, 507 U.S. 1026 (1993); cf. 131 (E.D. 1787), Sec. App.Houston [14th Dist.] Co. v. Grapevine Excavation, 241 F.3d 396 (5th Cir. 1, eff. at 1280 (insurer not precluded from relitigating course and scope of employment). Sec. 1991). Cigna Lloyds Ins. As a preliminary consideration, counsel for the insurer should be careful and selective in what is requested. Co. v. Sassin, 894 F.Supp. Ins. <>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 12 0 R/Group<>/Tabs/S/StructParents 1>> A person interested as or through an executor or administrator, including an independent executor or administrator, a trustee, guardian, other fiduciary, creditor, devisee, legatee, heir, next of kin, or cestui que trust in the administration of a trust or of the estate of a decedent, an infant, mentally incapacitated person, or insolvent may have a declaration of rights or legal relations in respect to the trust or estate: (1) to ascertain any class of creditors, devisees, legatees, heirs, next of kin, or others; (2) to direct the executors, administrators, or trustees to do or abstain from doing any particular act in their fiduciary capacity; (3) to determine any question arising in the administration of the trust or estate, including questions of construction of wills and other writings; or. Frontier Pac. Civ. Prac. P. 76A; 192.6(b)(5). Ins. Disclaimer. Amended by Acts 1987, 70th Leg., ch. 1996) (nevertheless refraining from determining coverage for indemnity, on the basis of judicial economy). Federal courts have broad discretion as to whether to retain jurisdiction or dismiss declaratory judgment actions. LEXIS 8082 (Tex. Nautilus also simultaneously commenced a declaratory judgment action in federal court seeking a declaration that it did not owe a duty to defend because the underlying action did not allege "personal and advertising injury.". See, e.g., Ruth v. Imperial Ins. Seq. Civ. (a) When declaratory relief is sought, all persons who have or claim any interest that would be affected by the declaration must be made parties. Federated Mut. Still, there are often strategic benefits to filing early. Corp. v. Vacuum Tanks, Inc., 975 F.2d 1130, 1133 (5th Cir. Co. v. Griffin, 955 S.W.2d 81, 82-84 (Tex. endobj Texas is not a direct action state, and a claimant typically has no claim against an insurer until a judgment is obtained. 1968). San Antonio, TX 78216 1995) (whether trademark violation occurred during policy period). A future interest in a potential judgment has been held insufficient to allow intervention. relation to an action brought by a party with no apparent justiciable interest. While for years there was a question in the Federal courts as to whether 38.001, Tex. June 15, 2007. Co. v. Tilley, 484 S.W.2d 802, 806 (Tex. 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. RESERVATION OF RIGHTS CHECKLIST - PAGE 2 . Sept. 1, 1999. 1995). v. Mitchell, 138 F.3d 208, 210 (5th Cir. 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. denied), the court held it was permissible, and not purely advisory, to determine the number of occurrences involved in the underlying litigation. 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. <> See, e.g., Commercial Metals Co. v. Balfour, Guthrie & Co., Ltd., 577 F.2d 264 (5th Cir. Co. v. Louisiana Farm Bureau Fedn, Inc., 996 F.2d 774, 778 (5th Cir. 9. Under state or federal law, declaratory relief is only appropriate when there is an actual case or controversy. The court may order a speedy hearing of a declaratory judgment action. endobj App.Amarillo 1997, no pet.). 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. v. Am. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. See Firemens Ins. 1998) (holding that Texas Declaratory Judgment Act was not controlling, substantive law, and did not justify fee award to defendants). The Supreme Court of Texas has ruled that a company did not waive its right to arbitration by bringing a "friendly" declaratory judgment action. A federal anti-injunction also exists. Co. v. Burch, 442 S.W.2d 331 (Tex. 6#7a |mp}v"VY2I In a straight complaint allegation case, for instance, there should be extremely limited discovery, beyond verification of the pleadings and the policy. 1364 (N.D. Tex. V 8). Id. A common way of eliminating this uncertainty is with a declaratory judgment action, also called a declaration. The firm's new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112. The federal act allows the court to declare the rights of any interested party.. In determining amount in controversy, the court may consider policy limits and defense costs, and is not necessarily limited by the damages pleaded in the underlying suit. Co., 975 S.W.2d 329 (Tex. App.Corpus Christi 1975, writ refd n.r.e.) PRAC. The application must be by petition to a court having jurisdiction to grant the relief. 39 F.3d at 591. 3 0 obj 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. Typically, an anti-suit injunction is appropriate in limited instances: 1) to address a threat to the courts jurisdiction; 2) to prevent the evasion of important public policy; 3) to prevent a multiplicity of suits; or 4) to protect a party from vexatious or harassing litigation. The county where the contract was formed may also be a proper venue. The petition in the underlying suit was amended, however, and all references to alcohol were deleted. (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. Co. v. Cooper Machinery Corp., 817 F.Supp. Explanation of the Constitution - from the Congressional Research Service 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 . )1^Hl]TgxY8Ubs,! 9@Dyp*l8sA!N\X Facts and Procedural History. Sept. 1, 1985. 1 0 obj The court remanded for consideration of these factors. See Feria v. CU Lloyds of Texas, 2001 Tex. 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. Cty. <> 86.011 Et. Co. v. Delaney, 386 S.W.2d 648 (Tex. There are exceptions, of course. (driver excluded); see also Tri-Coastal Contrs, Inc. v. Hartford Undwrs Ins. A declaration does not prejudice the rights of a person not a party to the proceeding. 45 (N.D. Tex. 37.0055. 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. endstream App.Fort Worth 1973, writ refd n.r.e.). In Natl Union Fire Ins. 37.009.

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