Declaratory Judgment — Powerful Litigation Tool for Plaintiffs

New York Civil Practice Law & Rules, Article 30 Sec. 3001 provides litigants with an extraordinary tool to save time and money. A declaratory judgment offers policyholders and insurance companies a quick way to resolve their respective rights and obligations under an insurance policy even before liability under the policy is decided. Originating in the early 1900s, the federal judiciary adopted the procedure in 1934, although without creating an independent ground for federal jurisdiction. This legislation came at the behest of the Commissioners on Uniform State Laws, which first urged adoption of the Uniform Declaratory Judgments Act in 1922.

In Lang v. Hanover Insurance Co, in 2004, the New York Court of Appeals denied an injured party the right to a declaratory action against a tortfeasor’s (i.e., a person who committed a tort) insurance company. In this circumstance, the insurance carrier had denied coverage for the plaintiff’s injury when the tortfeasor filed a timely notice of claim. The tortfeasor later filed for bankruptcy, and the injured plaintiff sought to ensure himself coverage from the defendant’s carrier. The Court of Appeals refused to allow the plaintiff a right to a declaratory judgment against another policyholder’s insurance company. The Court insisted that the plaintiff first get a judgment against the tortfeasor, which would then be submitted to the insurance carrier for payment.

The New York legislature compromised this harsh rule, when in January 2009, it amended CPLR §3001 and §3420 of the Insurance Law. The new amendment will allow a personal injury plaintiff to “confirm that there is a fund to pay the judgment before, not after, slogging through the underlying litigation,” by initiating a declaratory judgment action against the insurance company that disclaims coverage even if the plaintiff is not the policyholder.