In this episode of On Subrogation: Declaratory Actions, insurance attorney and Rathbone Group partner Jason Sullivan explains declaratory actions: definition, concept, purpose, and why understanding dec judgments is key to protecting your carrier’s right to subrogation recovery.
Declaratory actions, also referred to as dec actions or declaratory (dec) judgments, is when the parties in a subrogation lawsuit ask the court to determine the parties’ rights and responsibilities, most often under a contract.
For automotive insurance disputes, the existing policy is a contract. However, the carrier may request a declaratory judgment to say that there was no coverage for the incident for some reason.
As a subrogation lawyer or claims adjuster, if you get one of these across your desk – figure out exactly what it is. If there are no faults disputed but you and your insured are listed as defendants, it is likely a declaratory action. All parties involved in a declaratory action include:
- Opposing insurance carrier
- Opposing carrier’s insured
- Driver of insured’s vehicle
- Subrogating carrier
- Subrogating carrier’s insured
- Any other parties in the loss that may have claim to damages
In a dec pleading, the opposing carrier will not dispute the parties, the incident, or that all parties have legitimate claims. They will argue that there is some reason they should not be required to pay out those claims under the policy. The most common reasons cited in declaratory actions involve fraud, misrepresentation, or the assertion the vehicle was not covered under the policy. The contention is either –
- the policy was not activated by the incident/party actions, or
- the policy was voided by the incident/party actions.
In concise terms, the relief sought in the opposing carrier’s dec action is not monetary. They are pleading relief from responsibility for paying out damages.
Navigating Declaratory Judgments in a Subrogation Claim
For subrogation professionals, you always want to make sure that it is truly a declaratory action. If a claim for damages is left unanswered, you have exposure for your company and potentially bad faith action if your insured is also left exposed.
If the issue in the declaratory action is whether or not the opposing carrier had a duty to their insured, always look into arguments that there should have been coverage for the damages resulting from the incident. This can be difficult, because you were not the one filling out the policy applications and determining desired parameters.
Study the policy and the details of the incident closely and ask yourself: is the opposing party purposefully misconstruing policy language or trying to make a clear statement ambiguous in order to avoid covering the damages?
A last tip: If the subrogation claim involves a UIM tortfeasor, avoid pursuing the individual for damages. It is much easier to collect subrogation recovery from a carrier than an underinsured motorist.
Looking for More on Subrogation Recovery?
For more on subrogation, listen to our podcasts or visit our YouTube channel for Rathbone Group’s free educational resource for subrogation and insurance professionals, On Subrogation. If you can’t find a subrogation topic you’d like to learn more about, reach out at [email protected] or [email protected] to see your question answered in a future episode.For more information about Rathbone Group’s legal services and our commitment to insurers’ right to subrogation recovery, inquire at [email protected].