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An insurance defense attorney has many tools at their disposal to address legal issues. One such tool is a declaratory judgment action, which can be utilized to define legal controversies before a matter becomes an entire lawsuit. Declaratory judgment actions allow parties to a potential action to determine their rights and responsibilities before a lawsuit is filed. This creates a helpful landscape of legal issues before any costly and time-consuming litigation commences.

What is a Declaratory Judgment Action?

A declaratory judgment action is a judgment issued by a court to conflicting parties in a legal controversy. Parties often seek declaratory judgments before a lawsuit, but uncommonly they can be filed after parties have begun litigation. The purpose of the declaratory judgment action is for the court to establish the legal rights and obligations of the parties. Declaratory judgment actions are most common in insurance litigation and contract disputes where the parties cannot agree on questions about their rights and duties under an existing agreement.

Differences Between Declaratory Judgment in State and Federal Courts

The primary difference between Florida federal court and state court declaratory actions is the jurisdiction of the legal proceeding. The party bringing the claim must choose whether to file in Florida state or federal court. The remaining differences are of procedure, depending on the jurisdiction.

Federal Declaratory Judgment Actions

Under 28 U.S.C. § 2201, U.S. federal courts have jurisdiction to address cases of actual controversy and declare “the rights and other relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” This statute is what created Rule 57 in the Federal Rules of Civil Procedure, which allows parties to seek declaratory judgment on actual controversies.

Florida Declaratory Judgment Actions

Florida’s version of the declaratory judgment rule is similar to the rule governing such actions filed in federal court. Under Section § 86.011, Fla. Stat. (2023), a court that has jurisdiction over a matter can declare “rights, status, and other equitable or legal relations” regarding a matter. Courts may render a declaratory judgment of any immunity, power, privilege, or right; or of any fact to determine whether an immunity, power, privilege, or right exists or may exist in the future.

Outlining a Declaratory Judgment Action

Although all declaratory judgment actions must address an actual controversy, the existence of a controversy is not enough to bring the action. Under Florida law, to bring a declaratory judgment action, the plaintiff must show the following: 

1. A bona fide dispute between the parties.
2. The complainant raises a question that the court can answer regarding immunity, power, privilege, or right.
3. The complainant doubts the question of immunity, power, privilege, or right being brought before the court.
4. The complainant can articulate a need for the declaratory judgment action.
5. The declaratory judgment sought is not merely a solicitation for legal advice or sheer curiosity amongst the parties involved.

Parties bringing a declaratory judgment action must acknowledge that the court may rule against their interests. This prohibits parties moving to dismiss the action unless the moving party can show the complainant failed to articulate an actual controversy. Insurers considering declaratory judgment must be able to meet the test above and risk a finding against their position when considering declaratory judgment actions as an option.

Using Declaratory Judgment Actions

Declaratory judgment actions can be a valuable tool for insurance companies to utilize, especially at the early stages of a claim dispute. Below are the benefits of seeking declaratory judgments before engaging in litigation.

Eliminating the Need for more complex litigation

Seeking declaratory relief allows an insurance company to prevent costly litigation before filing a lawsuit. Because declaratory judgment requires a judge to review the facts of a dispute before an action is filed, the judge will establish the rights and responsibilities of the parties involved in the dispute. This allows both parties to outline their arguments within one action instead of throughout litigation. This eliminates the need for costly motion practice, prolonged discovery of critical documents and other evidence, and deposition of relevant parties.

Picking a forum before a dispute arises

Filing a declaratory judgment action allows insurers to pick their forum before an action commences. In some cases, the location of the filing can matter as much as what is being filed. It is only sometimes filed in the court with jurisdiction over a particular case, but in many instances, multiple courts have jurisdiction.

For example, a legal dispute involving a Texas motorist, with a Florida-based insurance provider, who was hit by a semi-truck while driving in Nevada can be brought in multiple jurisdictions, such as: 

• Texas: the domicile state of the motorist.
• Nevada: the location of the accident.
• Florida: the principal place of business for the insurance company.
• Delaware: the state where the insurance company is incorporated.
• Multiple states: the principal place of business and state of incorporation of the trucking company. 

Thus, if an insurance company decides to file a declaratory judgment action in Florida, where it has its principal place of business and where its primary legal counsel is located, it can commence the legal action in a location favorable to its role in the dispute.