In the event of a legal controversy, both parties generally want to avoid any legal uncertainty and insecurity that could arise out of a dispute. A common way of eliminating this uncertainty is with a declaratory judgment action, also called a declaration. This is a court-issued judgment that has the court clarify and affirm any rights, obligations and responsibilities of one or more parties involved in insurance litigation or other civil disputes. They are generally requested when a lawsuit is threatened but before the lawsuit is actually filed, when a conflict might exist between a party’s or parties’ rights under law or under contract and as a way to prevent multiple lawsuits from the same plaintiff.
Declaratory judgments are considered legally binding and any party in a contract can petition the court to have its rights and obligations defined by the court. Declaratory judgments can be issued in both New Jersey and New York state courts or in federal court.
The biggest benefit of a declaratory judgment is that they help prevent lawsuits that are unlikely to be successful. This is of great interest to insurers, as it saves both time and money that would otherwise be spent on costly litigation. A policyholder that obtains an unfavorable declaratory judgment is much less likely to file a lawsuit.
Another major benefit is that the cost of filing a declaratory judgment action is far cheaper in the long run for insurers. For example, cases involving independent medical examination (IME) no-shows, a prime case for the request of a declaratory judgment, will end up not only involving a lawsuit from the insured but also from any medical provider they used in the attempt to obtain unpaid medical claims. This can result in dozens of claims ending up in court, with the defense costs spiraling out of control. Instead of defending many lawsuits, the declaratory judgment action can work to prevent these claims from ever materializing in court.
In addition to saving time and money in court, declaratory judgment can also eliminate the need for hours upon hours to be used in gathering the proofs necessary to defend individual lawsuits. The IME vendor instead can just gather the required documents at one time, for use by Larkin Farrell during the declaratory judgment action.
Another reason for insurers to pursue a declaratory judgment is that it allows the insurance carrier to “set the table” for the litigation. The insurer gets to tell their side of the story first and introduce key aspects of the dispute to their advantage.
The initiating party can also use a declaratory judgment to choose the forum in which the dispute will be heard. Certain jurisdictions can be more favorable than others and multiple jurisdictions can be at play for any one case. A declaratory judgment can make sure the dispute is being heard in the forum with the best potential outcome for the insurance company.
Finally, declaratory judgment actions can eliminate some of the risks in the event of a trial. In IME no-show defenses, if the carrier is unable to produce the correct witnesses at trial, they run the risk of losing the trial despite the potential strength of their claims. A declaratory judgment can keep this from happening.
At Larkin Farrell, we have handled hundreds of cases involving declaratory judgment actions. This process can not only help our clients avoid taking on dozens of costly lawsuits that waste time and money but also make sure our clients have every advantage in the event a dispute goes to trial. The savings alone far outweighs the costs. Let us get started on defending your case today.
