There are many methods to pursue your rights against an insurance company after a car accident or truck accident. A commonly known method is to go to a trial where the case is brought before a panel of jurors or a judge who makes major decisions about a case. Another method to win a lawsuit that is less well known is seeking relief through Declaratory Action.

 

What is Declaratory Relief?

While it is not always the best option, in some cases, it is possible to seek declaratory relief to cut back on the demands of a full trial. Under federal law, the Declaratory Judgment Act allows declaratory relief when this law applies to a particular case. Declaratory relief is given when the court makes a decision about the case before it gets to the point of trial, including the rights and obligations of each party. But, the court cannot order any specific steps as a result, such as how much money should be awarded as compensation. Usually, a party to a lawsuit seeks declaratory relief when they are not sure of his or her rights, or is unsure about the result of a case. By seeking declaratory relief, the party to a lawsuit can find out how the judge will rule, or decide his case without actually having to move forward with the full trial. This can save a party to a lawsuit the time, money and stress of a full trial.

 

Usually, if there was a full trial, the court would require the responsible party to pay the compensation owed, or order the party in the wrong to stop the bad acts that brought about the lawsuit. If the person who brought the legal action did so in mistake, the court will make a decision that reflects this as party of the declaratory relief given. Unlike a traditional trial, an action for declaratory relief lets an injured claimant bring up their issues before a judge and ask for an official response about how the judge will rule. The idea behind declaratory relief is that it will promote a resolution of the case and stop the case from continuing with the litigation and lawsuit.

 

What is an example of Declaratory Relief?

An insurance policy is a contract. In exchange for paying premiums, the insurance company agrees to provide coverage. But actually getting the insurance company to pay is less simple. In insurance lawsuits, there is usually a dispute about the meaning of specific terms and words in the insurance policy.

 

In a Michigan lawsuit, Vanguard Ins. Co. v. Racine, there was a dispute about the meaning of the words “resident” or “regularly residing” for the insured person. In this case, a divorced couple had a son was spending time with his father when the son was killed by a riding lawnmower. The boy’s mother sued the father, and the father got the insurance company to defend him under his homeowner’s insurance policy. The court decided that the insurance company would have to provide coverage through declaratory action, which then gave the insurance company the option to appeal or pay. In other words, the court made a decision without taking the case all the way through the litigation process.

 

Beyond the obvious, it is important to note how declaratory relief and actions can affect terms within the insurance policy. For example, some insurance policies have a “no action clause.” This clause is used to stop the insured person from suing the insurance company until after a judge or jury figures out the damages in a case. One reason this kind of clause exists is to prevent the insured person and the injured claimant or plaintiff, the person who starts and brings forward the lawsuit, from working together or colluding to try to get an insurance settlement from the insurance company.

 

Without going through the entire trial process, an injured claimant cannot recover or seek financial compensation unless the judge or jury agrees and the claimant wins the lawsuit.

 

There are exceptions, which is where the declaratory relief comes into play. A person who seeks declaratory relief under the insurance policy does not have to give notice of his or her intent to seek declaratory relief, because it would deprive the claimant of all the benefits available under the law if the law allowed insurance companies to use terms like the no action clause to prevent all declaratory relief methods.

 

Can the insurance company file a lawsuit and seek Declaratory Relief?

Yes, the insurance company can also file a lawsuit under a declaratory relief action against the person who they provided insurance to, and the insured person who is covered by the insurance policy.

 

This method could benefit the insurance company if it suspects the policyholder made material representations on the application, or committed fraud. Put simply, if the person who applied for insurance coverage lied about something important in the insurance policy, the insurance company can file an action for declaratory relief and rescind, or take back, the insurance policy as a defensive measure against the misrepresentation or fraud.

 

Although it is not as common, it is possible for the insurance company to seek declaratory relief as long as it does not cross the line and be done in bad faith.

 

Generally, bad faith is when an insurance company wrongfully denies a claim. The obligation to act in good faith is implied in every insurance policy under the law. This means that even if an insurance company’s policy does not expressly state, or write-out in plain language, that its employees must act in good faith and give each claim proper consideration, it is still required.

 

When bad faith is particularly offensive, punitive damages may be awarded which means courts and juries are willing to award more money to a claimant who made a valid claim that was improperly considered by an insurance company. Punitive damages are usually added on top of the usual damages in a case. Usually, damages take the form of money awards to an injured claimant after a car accident for medical treatment, property damage to the car, etc. Punitive damages, on the other hand, are added on top of these damages for particularly bad misconduct, especially harmful behavior or to teach a lesson.

 

In addition to risking the massive amount of damages that can be sought as compensation if the court finds that the insurance company sought declaratory relief in bad faith, there are other risks for the insurance company to consider before seeking declaratory relief:

 

• The court may decide against the insurance company. If the insurance policy is vague or ambiguous, the court will have to decide in favor of the insured.
• The insured person may come back and counter with the claimant’s own legal complaint for bad faith
• In some cases that go before a jury, the jurors, typically made up of people from various backgrounds, may decide against the insurance company when they realize the insurance company is the one who started the declaratory relief action.

 

As with most final court judgments and decisions, either party can file an appeal of his or her case as long as it is done on time.

 

In Ridley v. Guarantee Nat’l Ins. Co., the insurance company was forced to pay for a claimant’s injuries before reaching a final settlement. In this case, a passenger was hurt in a car accident. Both the driver who was with passenger and the other vehicle’s driver already decided that the insurance company’s driver was mostly at-fault for causing the accident. But passenger could not afford to pay for the medical treatment needed after the accident. Lawsuits take time, which the passenger did not have. The passenger’s lawyer said that the insurance company should pay for the treatment even before the case was decided. The passenger filed an action for declaratory relief. The judge of the court that first heard and handled the lawsuit decided against the injured passenger, but the passenger was able to appeal after the action for declaratory relief did not go in the passenger’s favor. Appealed to the state’s supreme court, the supreme court decided that the passenger did in fact have a right to relief that was reasonably clear even though settlement had not been finalized yet.

 

In order to understand your rights and any deadlines that may apply in your case, seek the advice and guidance of a personal injury attorney. No case is exactly the same, and understanding how to navigate the laws, policies and best methods for your unique case takes experience and good judgment from a personal injury attorney.

 

Contact an experienced personal injury lawyer

 

Without experience in the insurance industry or legal experience, understanding which factors or evidence can help or hurt your case can be difficult to understand.

 

Are you trying to secure your financial recovery with the help of experienced attorneys? If so, we can help.

 

The Pusch & Nguyen Law Firm has helped countless Texans handle their insurance disputes. Our experienced trial lawyers have gone up against some of the biggest names in the insurance industry while successfully bringing home payouts for clients. Our successful reputation speaks for itself, and with offices in both Houston and San Antonio, we are well equipped to assist Texans who are in dire need of our services. Register online for a free case evaluation or call us today at 713-524-8139 (Houston) or 210-702-3000 to schedule an appointment with a member of our team.