The Role Of Declaratory Judgments In Florida Insurance Litigation
Insurance companies will often seek declaratory judgments to determine their obligations under a particular policy. For example, if someone is injured on another person’s property, the company that insures the property owner may seek a declaratory judgment that it has no duty to defend or indemnify that owner should they be sued.
Keep in mind, while most personal injury claims fall under state law, declaratory judgments are subject to federal jurisdiction. Under the Declaratory Judgments Act, a congressional statute, federal judges “may declare the rights and other legal relations of any interested party seeking such a declaration.” The word “may” is important. A federal court is not always required to make a determination. The judge may decide that it is best to dismiss a declaratory judgment action to avoid interfering with an ongoing state court proceeding.
Federal Court Orders Reconsideration of Insurer’s Request
The U.S. 11th Circuit Court of Appeals recently clarified the standards that federal judges must use when deciding whether or not to exercise their jurisdiction over a declaratory judgment proceeding. This particular case, James River Insurance Company v. Rich Bon Corp., originated with a shooting at a Miami nightclub. A fight broke out at the club, which quickly escalated into a shootout. An employee of the nightclub was killed in the gunfire and a nightclub patron was shot and seriously injured.
The nightclub had a general liability policy that covered bodily injury and property damage. This coverage excluded any workers’ compensation liability or injuries to employees. There was also a cap of $25,000 per person or $50,000 per incident for any claims arising from an “assault or battery” on the premises.
The injured guest sued the nightclub in Florida state court, alleging negligent security. The nightclub also anticipated a similar lawsuit from the deceased employee’s estate. The insurance company decided to file a declaratory judgment action in federal court, seeking clarification of its coverage obligations.
While the federal action was pending, the insurer ended up settling the state lawsuit with the injured patron for the $50,000 policy limit. The estate of the deceased employee then filed its own state lawsuit. The insurer argued in federal court that the nightclub’s insurance for this incident was already “exhausted,” and in any event, the estate could not recover any coverage under the employee exclusion.
The federal court declined to exercise jurisdiction and dismissed the declaratory judgment action. On appeal, the 11th Circuit said that was an abuse of discretion. The appellate court said that looking at the “totality of the circumstances,” the insurer had a viable claim that a declaratory judgment was warranted based on its exhaustion-of-coverage argument. The 11th Circuit therefore ordered the trial court to reconsider its position accordingly.
Speak with a Tampa, Florida, Insurance Lawyer Today
Insurance disputes can often lead to a number of complicated legal questions. An experienced Tampa insurance litigation attorney can help you in finding some answers. Contact HD Law Partners today to schedule a consultation with a member of our team.