Insurance Law Lesson 41: Declaratory Judgment

Insurance disputes frequently play out in declaratory judgment lawsuits, frequently called “DJs.”

In a declaratory judgment action, the plaintiff asks the court to declare the rights and/or obligations of the parties. There does not necessarily have to be a “damages” portion. A DJ seeks a determination of rights and, generally, an order as to future compliance with the judicially determined obligations.

In the insurance context, DJs lawsuits are filed by both insureds and insurers.

In jurisdictions like Illinois, where an insurer can be penalized for failing to do so, insurers frequently file these suits against their policyholders, asking the court to rule that they have limited or no obligations of coverage to the insured in connection with a particular claim.

In jurisdictions without such penalties, DJs are more frequently filed by the policyholders, and they are coupled with breach of contract claims (because it would be the insured’s position that the insurer is breaching the obligations that the policyholder is asking the court to declare).

The next lesson will discuss issues of DJs that are litigated by a liability suit against the insured is still pending.

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