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Declaratory judgment actions may prevent needless lawsuits

When facing potential lawsuits in New York courts, one may hear unfamiliar terms and phrases. While it is helpful to have an attorney who can guide one through these circumstances, having a general understanding of such terminology may allow one to participate more fully in the process. One term that may be used when mounting an insurance defense is “declaratory judgment actions.”

The benefit of the declaratory judgment is that it often prevents lawsuits from proceeding when there is little likelihood of success. In such a case, a judge is merely asked to determine whether the plaintiff’s rights have been denied. No monetary awards or damages are decided. The court simply clarifies the obligations and rights of each party, giving the plaintiff an opportunity to decide whether it is worth it to proceed with a lawsuit.

In insurance law, a declaratory judgment action happens frequently when a policyholder threatens to file a lawsuit, claiming the insurance company wrongfully denied benefits. If a judge reviews the policy and determines that the insurer is not obligated to cover the policyholder’s claim, the policyholder is less likely to pursue the legal action and face the real possibility of a dismissal. The declaratory judgment is binding in the same way a final judgment would be binding.

Insurance companies who learn that  policyholders are planning lawsuits to recover losses may pursue declaratory judgment actions to determine whether the insureds’ policies obligate the companies to pay. Such actions are complex and require skillful handling. Seeking the advice of a New York attorney who has experience with insurance defense will improve the chances of reaching a quick resolution.

Source: investopedia.com, “Declaratory Judgment Definition“, Accessed on Jan. 22, 2018

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