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Declaratory Judgment Actions Can Answer Legal Questions Before Litigation
You hire a contractor to build an in-ground pool in your backyard. The contractor brings an excavator to your house to dig out the area where the pool is going in. As the excavator is taken off the flatbed truck in the driveway, it strikes the garage door and destroys it.
Both you and the contractor call your respective insurance companies, who each send claims adjusters to your house to inspect the damage. It’s clear to both adjusters that the excavator caused the damage, but they say the garage door was flimsy (i.e., it already had a defect) to begin with, and neither company will cover the cost to replace it.
Dissatisfied with the findings, you contact your insurance agent to discuss your homeowner’s policy. The agent points out that there is a poor workmanship clause in your policy which allows the insurance company to “disclaim” or deny coverage which results in no reimbursement for damage done to your property.
You reach out to the contractor to discuss the matter. The contractor says he or she will pay for the replacement garage door if you agree to pay for the labor, since their workers should be paid for their services. However, you want the entire cost covered by the contractor and/or their insurer, since it was their employees who were are responsible for damaging the door. Again, you are met with the “defective door” defense.
Facing the prospect of having to pay to replace a garage door that was damaged by an outside party, you file a lawsuit against the contractor. However, if you can get your insurance company to cover the cost of replacing the garage door, you can drop your lawsuit.
This is where filing a “Declaratory Judgment Action” could be the most expedient way to end a dispute. A declaratory judgment action essentially asks a Court (actually, the Judge assigned to the action) to “declare” what the various parties’ rights are with respect to a legal issue, such as one involving a contract. In our example, such an action would be seeking to have the Judge answer the question as to whether yours, or the contractors, insurance company should cover the loss of the garage door. Often solving these issues eliminates the need for further litigation. After all, if you do have coverage, and you get your money from insurance to pay for a new door, there is no longer a reason to pursue a lawsuit. If there can be no insurance, then at least you know that you are left to face the prospect of suing the contractor for damages.
Declaratory Judgment Actions are not just limited to contract disputes They can also help resolve issues as to what laws apply to any given situation. For example, if you were to get into a car accident with a Connecticut driver during a snowstorm, a declaratory judgment could be used to determine which state’s law is triggered. Which state’s law applies can dramatically affect your ability to recover for your injuries. In this example New York has no-fault coverage for drivers, while Connecticut does not. Therefore, if the judge declares that New York’s law applies, then you may be limited to just receiving insurance reimbursement for any health care costs. In contrast, in Connecticut, you could have the opportunity to pursue a lawsuit, for all pain and suffering, no matter how big or small.
The one thing to note about declaratory judgments is they do not determine the outcome. They merely provide answers to questions relating to disputed contractual or legal issues. Many times, these answers can provide the means to resolving a dispute before more litigation, but not always. An experienced attorney can help a claimant determine what should be clarified by a declaratory judgment and how that affects their overall case.
Mario D. Cometti, Esq. is a Partner at Tully Rinckey PLLC’s Albany office. He focuses his practice on litigation, including family and matrimonial law, civil matters and commercial matters.