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What is the purpose of declaratory judgment actions?

On Behalf of | Sep 29, 2016 | Insurance Defense

At times, an insurer and its insured are at odds with each other. Declaratory judgment actions filed here in New York and elsewhere can head off any potential controversies between the party by outlining each of their rights and responsibilities under an insurance policy as they move forward. Important matters of law are outlined and decided in order to remove any extraneous issues that could hinder negotiations and any future legal actions involving the parties.

Some of the issues that are settled in a declaratory judgment include whether the insurance company is obligated to defend an action, whether coverage is available for a particular claim and which insurance company will be considered the primary insurer if more than one policy could be used for the same claim. Before seeking such a judgment, however, it is important to determine whether the issues involved would be subject to trial. This determination is often easily definable when a policyholder is being sued and turns to the insurance company to defend the claim.

The need for a declaratory judgment is often less obvious before an insured individual makes a claim. Being proactive about establishing the right to coverage often makes sense, but doing so could make the process more of a challenge. A New York court will need to be provided evidence that there is a reasonable potential for conflicts that could be more easily resolved from the outset between the insurer and the insured.

Filing declaratory judgment actions without first understanding the potential legal issues and the process of obtaining one could be costly. Due to the legal requirements that must be met in order to receive a declaratory judgment, it would be beneficial to enlist the aid of an attorney. The situation can be reviewed, the existing and potential legal issues can be identified, and the best course of action can be determined.

Source: apps.americanbar.org, “Insurance 101: Considerations for Declaratory Judgment Actions”, Shanda K. Pearson, Accessed on Sept. 29, 2016