CBA 2011 ANNUAL M EETING
J UNE 23, 2011
C ONNECTICUT C ONVENTION C ENTER
DECLARATORY J UDGMENTS
No representation or warranty is made as to the accuracy of these materials. Readers should check primary sources where appropriate and
use the traditional legal research techniques to make sure that the information has not been affected or changed by recent developments.
LAWYERS' PRINCIPLES OF PROFESSIONALISM
As a lawyer I must strive to make our system of justice work fairly and
efficiently. In order to carry out that responsibility, not only will I comply
with the letter and spirit of the disciplinary standards applicable to all
lawyers, but I will also conduct myself in accordance with the following
Principles of Professionalism when dealing with my client, opposing
parties, their counsel, the courts and the general public.
Civility and courtesy are the hallmarks of professionalism and should not
be equated with weakness;
I will endeavor to be courteous and civil, both in oral and in written
communications;
I will not knowingly make statements of fact or of law that are untrue;
I will agree to reasonable requests for extensions of time or for waiver of
procedural formalities when the legitimate interests of my client will not be
adversely affected;
willingness to initiate or engage in settlement discussions is consistent with
zealous and effective representation;
Where consistent with my client's interests, I will communicate with
opposing counsel in an effort to avoid litigation and to resolve litigation
that has actually commenced;
I will withdraw voluntarily claims or defense when it becomes apparent
that they do not have merit or are superfluous;
I will not file frivolous motions;
I will make every effort to agree with other counsel, as early as possible, on
a voluntary exchange of information and on a plan for discovery;
I will attempt to resolve, by agreement, my objections to matters contained
in my opponent's pleadings and discovery requests;
I will refrain from causing unreasonable delays;
In civil matters, I will stipulate to facts as to which there is no genuine
dispute;
I will endeavor to consult with opposing counsel before scheduling
depositions and meetings and before re-scheduling hearings, and I will
cooperate with opposing counsel when scheduling changes are requested;
I will at all times be candid with the court and its personnel;
When scheduled hearings or depositions have to be canceled, I will notify
opposing counsel, and, if appropriate, the court (or other tribunal) as early
as possible;
Before dates for hearings or trials are set or if that is not feasible,
immediately after such dates have been set, I will attempt to verify the
availability of key participants and witnesses so that I can promptly notify
the court (or other tribunal) and opposing counsel of any likely problem in
that regard;
I will refrain from utilizing litigation or any other course of conduct to
harass the opposing party;
I will refrain from engaging in excessive and abusive discovery, and I will
comply with all reasonable discovery requests;
In depositions and other proceedings, and in negotiations, I will conduct
myself with dignity, avoid making groundless objections and refrain from
engaging in acts of rudeness or disrespect;
I will not serve motions and pleadings on the other party, or counsel, at
such a time or in such a manner as will unfairly limit the other party's
opportunity to respond;
In business transactions I will not quarrel over matters of form or style,
but will concentrate on matters of substance and content;
I will be a vigorous and zealous advocate on behalf of my client, while
recognizing, as an officer of the court, that excessive zeal my be detrimental
to my client's interests as well as to the proper functioning of our system of
justice;
While I must consider my client's decision concerning the objectives of the
representation, I nevertheless will counsel my client that a
I will endeavor to be punctual in attending court hearings, conferences,
meetings and depositions;
I will remember that, in addition to commitment to my client's cause, my
responsibilities as a lawyer include a devotion to the public good;
I will endeavor to keep myself current in the areas in which I practice and
when necessary, will associate with, or refer my client to, counsel
knowledgeable in another field of practice;
I will be mindful of the fact that, as a member of a self regulating
profession, it is incumbent on me to report violations by fellow lawyers as
required by the Rules of Professional Conduct;
I will be mindful of the need to protect the image of the legal profession in
the eyes of the public and will be so guided when considering methods and
content of advertising;
I will be mindful that the law is a learned profession and that among its
desirable goals are devotion to public service, improvement of
administration of justice, and the contribution of uncompensated time and
civic influence on behalf of those persons who cannot afford adequate legal
assistance;
I will endeavor to ensure that all persons, regardless of race, age, gender,
disability, national origin, religion, sexual orientation, color, or creed
receive fair and equal treatment under the law, and will always conduct
myself in such a way as to promote equality and justice for all.
It is understood that nothing in these Principles shall be deemed to
supersede, supplement or in any way amend the Rules of Professional
Conduct, alter existing standards of conduct against which lawyer conduct
might be judged or become a basis for the imposition of civil liability of any
kind. ♦
Adopted by the Connecticut Bar Association’s House of Delegates on June 6, 1994
Peter Kochenburger is the Acting Director of the Insurance Law Center and Associate
Clinical Professor of Law at the University of Connecticut School of Law, where he
directs the Insurance Law LL.M. program and teaches courses in insurance and consumer
law. Professor Kochenburger has developed and taught the first online courses at the
School of Law, including courses in Liability Insurance and Comparative Insurance
Regulation, involving students and faculty from China, Italy and the United States. He is
a funded Consumer Representative at the National Association of Insurance
Commissioners and also consults with policyholders, government agencies, nonprofit
organizations and insurers on insurance and consumer issues. He has served as an expert
witness in many insurance-related lawsuits. Professor Kochenburger graduated cum
laude from Harvard Law School (1986) and holds his B.A. cum laude in history from
Yale University (1982).
Charles T. Lee
Anderson Kill & Olick, P.C.
1055 Washington Boulevard
Stamford, CT 06901
203-388-7970
Email: [email protected]
Charles T. Lee is managing shareholder of Anderson Kill & Olick’s Stamford office. His
practice concentrates in commercial litigation and insurance recovery exclusively on
behalf of corporate policyholders. He has litigated matters involving professional
liability, environmental, D&O, credit risk, errors and omissions, builders’ risk, and other
types of coverage matters, as well as class actions, governmental regulation,
telecommunications, franchise, and petroleum marketing. Mr. Lee recently presented a
Crisis Management seminar at the American Bar Association’s Petroleum Conference
in New Orleans, LA, and serves as the current Chairman of the Insurance Law Section
of the Connecticut Bar Association.
NYDOCS1-969188.1
FRANCIS J. BRADY
Francis J. Brady is a partner with Murtha Cullina LLP where he practices in the
business litigation area. For more than 35 years, Mr. Brady has represented corporate
clients in complex securities, antitrust and insurance coverage disputes. As to
insurance, he has represented only policyholders in a wide range of insurance matters
including environmental, directors and officers and professional liability claims. He has
successfully argued a number of appeals before the Connecticut Supreme Court in the
insurance area. A representative case in that regard is R.T. Vanderbilt Company v.
Continental Casualty Company, 273 Conn. 448 (2005), in which the Court held that
insurance carriers must provide corporate policyholders with a defense to certain
administrative proceedings (e.g., “PRP” letters issued by the Environmental Protection
Agency).
Among other professional and civic activities, Mr. Brady has been President of
the Connecticut Bar Association, President of the Hartford County Bar Association, CoChair of the Connecticut Bar Association’s Federal Practice Section, Chair of the Civil
Justice Advisory Group for the District of Connecticut and Mayor of the Town of
Windsor. He has been selected for inclusion in “The Best Lawyers of America” in the
areas of commercial litigation and insurance law and has received the highest ranking
for commercial litigation in Chambers USA. Mr. Brady is admitted to practice in
Connecticut, the United States District Court for the District of Connecticut, the United
States Court of Appeals for the Second Circuit and the United States Supreme Court.
He is a graduate of Worcester Polytechnic Institute (B.A.), George Washington
University (J.D.), and Harvard Law School (LL.M.).
2366559v1
Michael T. McCormack
Hinckley, Allen & Snyder LLP
20 Church Street
Hartford, CT 06103
860-331-2670
Email: [email protected]
Michael McCormack is a partner in the Litigation Group of Hinckley, Allen & Snyder in
Hartford where he practices in the area of complex commercial litigation and insurance
coverage and recovery for corporate and individual policy holders. In his practice, Mike
represents clients in insurance recovery coverage claims under various types of insurance
policies, including general liability, property, business interruption, directors and officers
liability, health and disability, and errors and omissions policies. Mike also counsels
clients on the adequacy of their insurance and risk management programs and assist
clients with the negotiation of insurance policies and insurance coverage to protect their
business and insurance needs.
Hill, Andriola
& Associates, LLC
Attorneys at Law
Regen O’Malley
Regen O’Malley is an attorney with Hill, Andriola & Associates, LLC, in
Glastonbury, Connecticut. Prior to joining that firm earlier this year,
Regen practiced insurance coverage and appellate law for over eight years
at Halloran & Sage LLP in Hartford, Connecticut. Regen concentrates her
practice on the defense of insurers and agents against both contractual and
extra-contractual claims. She also regularly counsels insurers regarding
complex coverage issues and represents insurers in defending and
prosecuting declaratory judgment actions in coverage disputes. In
addition, Regen has successfully handled numerous appeals both in the
Connecticut Appellate and Connecticut Supreme Court as well as in the
United States Second Circuit Court of Appeals.
Regen is a member of the Connecticut and Hartford County Bar
Associations. She serves as Secretary of the CBA Insurance Law Section
and is a member of the Bench Bar Committee of the HCBA. Regen is also
an emeritus member of the Oliver Ellsworth Inn of Court and has been
selected as a New England Super Lawyers, Rising Star in Insurance
Coverage for 2009, 2010 & 2011. She serves on the Board of Directors of
the New Britain YWCA.
[email protected]
Phone (860) 657-1012
.
Fax (860) 657-9264
628-2 Hebron Avenue, Suite 100, Glastonbury, CT 06033
STUART D. ROSEN
Stuart Rosen is a partner with Bingham McCutchen LLP, practicing in the firm’s Securities and
Financial Institutions Litigation Group. For over 25 years Stuart has represented corporate and
institutional clients in complex commercial litigation in a wide range of matters, including
contract disputes, business torts, insurance and reinsurance, and real estate. He has extensive
experience litigating matters in federal and state courts and in arbitrations, and has
participated in alternate dispute resolution programs, including mediations. He has also
successfully argued a number of appeals to the Connecticut Supreme and Appellate Courts.
A member of Bingham’s Insurance Group, Stuart represents leading insurers in litigation and
coverage matters involving mass torts, environmental pollution, silica and asbestos,
construction defects, property damage, and D & O and E & O coverage. He has also handled
disputes arising out of group life and health coverage, brokerage disputes, and reinsurance
litigation involving environmental, asbestos and professional liability claims.
Stuart was selected for inclusion in The Best Lawyers in America in the area of commercial
litigation for 2010 and 2011. He is admitted to practice in Connecticut, the U.S. Court of
Appeals for the Second and Third Circuits, and the U.S. District Court for the District of
Connecticut and the Southern District of New York.
CBA ANNUAL MEETING PRESENTATION
June 23, 2011
Declaratory Judgments: “How to Make Your DJ Rock”
Moderators:
Peter Kochenburger, Acting Director of the Insurance Law Center, Director of
Graduate Programs, and Associate Clinical Professor of Law, University of Connecticut
School of Law
Charles T. Lee, Anderson Kill & Olick, P.C., Stamford, Chairman of the Insurance Law Section of the
Connecticut Bar Association
Speakers:
Francis J. Brady, Murtha Cullina LLP, Hartford
Michael T. McCormack, Hinckley Allen & Snyder LLP, Hartford
Regen O’Malley, Hill Andriola & Associates LLC, Glastonbury
Stuart D. Rosen, Bingham McCutchen LLP, Hartford
I. Brief Overview Of Governing Law
A.
State:
1.
Connecticut General Statutes §52-29 provides the Connecticut
Superior Court with authority to issue declaratory judgments. The
courts have the right to “declare rights and other legal relations”
upon request. A declaration by the court is a final judgment.
Conn. Gen. Stat. §52-29(a).
2.
Connecticut Practice Book Rules governing Declaratory Judgment
Actions:
a.
Conn. Practice Book §17-54 governs the scope of
declaratory judgments. The court will render declaratory
judgments as to the existence or nonexistence of any (1)
right, power, privilege or immunity; or (2) fact upon which the
existence or nonexistence of such right, power, privilege or
immunity does or may depend, whether such right, power,
privilege or immunity now exists or will arise in the future.
The courts have the authority to enter a declaratory
judgment on a factual issue, although the declaration on the
factual issue does not resolve the dispute between the
parties. ACMAT Corp. v. Greater New York Mut. Ins. Co.,
88 Conn. App. 471 (2005) (holding that trial court did not err
by declaring the existence of an insurance policy issued by
defendant).
1
b.
Conditions under which the Superior Court may issue a
declaratory judgment.
1. Party seeking a declaratory judgment must have a
legal or equitable interest by reason of danger of loss or
of uncertainty as to the party's rights or other jural
relations. Conn. Practice Book §17-54(1).
2. There must be an actual bona fide and substantial
question or issue in dispute or substantial uncertainty of
legal relations.
3. If there is another form of proceeding that can provide
the party seeking a declaratory judgment immediate
redress, the court is of the opinion that such party should
be allowed to proceed with the claim for declaratory
judgment despite the existence of such alternate
procedure.
B.
Federal courts have authority to issue declaratory judgments in cases for
which they have original jurisdiction. 28 U.S.C. §2201. Rule 57 of the
Federal Rules of Civil Procedure governs declaratory judgment
proceedings in federal court.
C.
Considerations on venue
1.
Parties to a declaratory judgment action should consider
whether to litigate the action in state or federal court. If the
action is to be litigated in state court the parties may litigate
the matter in the complex litigation docket. In declaratory
judgment actions involving questions of law, motions to
dismiss for forum non conveniens are not favored absent
sufficient factors to override a plaintiff’s choice of forum.
Reed v. Commercial Union Ins. Co., 60 Conn. App. 200,
203-204 (2000).
II. The Pleadings
A.
The complaint must allege facts demonstrating a legal or equitable interest
and that there is an actual bona fide and substantial question in dispute or
substantial uncertainty of legal relations.
B.
The prayer for relief must state the precise declaratory judgment sought.
Conn. Practice Book §17-56(a)(2).
C.
A declaratory judgment action must include all persons who have an
interest in the subject matter of the requested declaratory judgment that is
“direct, immediate and adverse to the interest of one or more of the
plaintiffs or defendants in the action.” Conn. Practice Book §17-56(b). In
2
the alternative, such persons must be notified of the declaratory judgment
action. Id. The complaint or counterclaim must include a certification
appended to the pleading which states that all persons required to be
joined were joined or were reasonably notified and, if notified, the
certification must list: (1) such person’s name, if known; (2) the nature of
such person’s interest; and (3) the manner of notice to such person.
Conn. Practice Book §17-56(b).
D.
Failure to join all parties necessary for a declaratory judgment action or to
notify all interested parties does not defeat a declaratory judgment action.
The exclusive remedy for failure to join, or notify, all parties with an
interest in a declaratory judgment action is a motion to strike. Conn.
Practice Book §17-56(c). However, a declaratory judgment is only
binding on those persons who are parties to the action and the court shall
only enter a declaratory judgment which affects only the parties to the
action. Conn. Practice Book §17-56(d). A party who is joined in a
declaratory judgment action and who has an opportunity to litigate the
subject matter of the declaratory judgment action is bound by the court’s
declaration. Liberty Mut. Ins. Co. v. Lone Star Indus., 290 Conn. 767
(2009).
E.
Causes of action for other relief may be joined in complaints seeking
declaratory judgments. Conn. Practice Book §17-56(a)(4).
F.
A claim for declaratory judgment may be asserted in a counterclaim.
Conn. Practice Book §17-56(a)(5).
G.
A declaratory judgment action may not be asserted under General
Statutes §52-102a. Sullivan v. Guzman, 2006 Conn. Super. LEXIS 3276
(Oct. 26, 2006).
H.
A declaratory judgment action is a special statutory proceeding, and
absent factual issues raised in the declaratory judgment complaint, the
action is not triable to a jury. Town of Wallingford v. Reliance Ins. Co.,
2000 Conn. Super. LEXIS 134 (Conn. Super. Jan. 12, 2000)(granting
motion to strike insurer’s jury claim because construction of insurance
contract is a question of law and there were no factual issues alleged in
the complaint). When, however, a declaratory judgment action is filed to
resolve certain factual issues, a jury trial is permitted. Conn. Practice
Book §17-56(a)(6); First Am. Title Ins. Co. v. 273 Water St., LLC, 2011
Conn. Super. LEXIS 703 (Conn. Super. Mar. 25, 2011).
III. The Claim Must Be Justiciable
A.
What is “justiciability”?
1. “A declaratory judgment action is not . . . a procedural panacea for
use on all occasions, but, rather, is limited to solving justiciable
controversies.” Milford Power Co., LLC v. Alstom Power, Inc., 263
Conn. 616, 624 (2003).
3
2. As justiciability implicates subject matter jurisdiction it must be
resolved as a threshold matter. Milford Power, 263 Conn. at 623.
3. “Justiciabilty requires: (1) that there be an actual controversy
between or among the parties to the dispute . . . (2) that the
interests of the parties be adverse . . . (3) that the matter in
controversy be capable of being adjudicated by a judicial power . . .
and (4) that the determination of the controversy will result in
practical relief to the complainant.” Shenkman-Tyler v. Cent. Mut.
Ins. Co., 126 Conn. App. 733, 739 (2011).
4. Ripeness, standing and mootness all fall under the umbrella of
justiciability. Milford Power, 263 Conn. at 623.
5. “[F]or a declaratory judgment coverage action involving an excess
policy to be ripe, it must be practically or reasonably likely that the
insured’s potential liability will reach into the excess coverage;
absolute proof that the policies will be triggered is not required. . . .
Moreover, the ‘worst case or highest estimate of damages . . . may
be used to ascertain whether or not a claim is justiciable against a
particular excess insurer’s policy. . . .” Liberty Mut. Ins. Co. v. Lone
Star Indus., 290 Conn. 814-15 (remanding case to trial court for
determination as to whether there was a “ripe controversy” where
excess policy’s attachment point was $20 million and the record
was insufficient for Supreme Court to determine whether silicosis
claims were reasonably likely to trigger the excess coverage).
IV. Proper Parties To A Declaratory Judgment Action
A.
Who may bring a Declaratory Judgment Action?
1.
Under Connecticut Practice Book §17-54, the party seeking a
declaratory judgment must “have an interest, legal or equitable, by
reason of danger of loss or of uncertainty as to the party’s rights or
other jural relations”
2.
Under “justiciability” doctrine, the complainant must also be capable
of obtaining some practical relief as the result of the declaratory
judgment action. Shenkman-Tyler v. Cent. Mut. Ins. Co., 126
Conn. App. 733, 739 (2011) (holding that a plaintiff who had
assigned his rights under insurance policy lacked standing to bring
claim against insurer for policy proceeds, as he had no interest in
the policy and a determination of the controversy would result in no
practical relief to him).
3.
An insurer who is required to defend and indemnify its insured has
standing to bring a claim against another insurer which may share
that obligation. See Travelers Prop. Cas. Co. of Am. v. Cont’l Cas.
Co., 2008 Conn. Super. LEXIS 3278 (Conn. Super. Dec. 29, 2008)
(Peck, J.).
4
B.
4.
Whether an injured third-party has a right to bring a declaratory
judgment action against the alleged tortfeasor’s insurer appears to
depend upon the circumstances. Typically, such claims are not
considered ripe for adjudication if the underlying action against the
insured has not been adjudicated because such claims are
contingent upon the third-party prevailing in the underlying action.
See Hamilton v. U.S. Servs. Auto. Ass’n, 115 Conn. App. 774
(2009) (affirming trial court’s holding that conservator of estate of
injured third-party lacked standing to bring declaratory judgment
action against insurer which had denied coverage for claim);
Century Indem. Co. v. Northeast Utilities, X03CV 980495496S,
1999 Conn. Super. LEXIS 1494 (Conn. Super. May 24, 1999)
(Aurigemma, J.) (holding that until plaintiff insurer was found liable
to NU to pay for more than its proportionate share of NU’s loss for
environmental claims, plaintiff insurer had nothing more than a
hypothetical interest in the policies issued by the other insurers);
see also Carford v. Empire Fire & Marine Ins. Co., 94 Conn. App.
41 (2006) (An injured third-party lacks standing to pursue claims of
breach of contract and extra-contractual claims prior to entry of
judgment and assignment under Section 38a-321 and absent privity
of contract).
5.
However, at least one superior court has held that where an injured
third-party would be required to seek uninsured motorist coverage
absent insurance coverage for the alleged tortfeasor, the injured
third-party has a direct and immediate interest that is justiciable.
See Wynn v. Commercial Union Ins. Co., 1994 Conn. Super. LEXIS
1493 (Conn. Super. June 13, 1994) (Lewis, J.); see also Colonial
Penn Ins. Co. v. Patriot General Ins. Co., 1996Conn. Super. LEXIS
117, (Conn. Super. Jan. 19, 1996) (Licari, J.) (uninsured motorist
carrier has standing to bring suit against alleged tortfeasor’s
insurer).
Who are necessary parties?
1. Necessary parties should include any person or entity you want to
be bound by the court’s decision. See Conn. Practice Book §1756(d) (“Except as otherwise provided by law, no declaration shall
be binding against any persons not joined as parties. . . .”)
2. “It is generally held that an injured person having a claim against an
insured tortfeasor has a legal interest in a coverage dispute with the
insurer and must be either notified or joined as a party in a
declaratory judgment action to decide the coverage question. . . .
‘Persons who have been injured in an automobile accident are
certainly proper parties to a suit by the liability insurer to determine
the coverage of its policy, and the better rule would seem to be that
they are both proper and necessary parties to the maintenance of
5
the suit.’” Conn. Ins. Guar. Ass’n v. Raymark Corp., 215 Conn.
224, 228-29 (1990).
3. A default judgment entered in a declaratory judgment coverage
action brought by an insurer against its insured is not binding
against an injured party who was not made a party to, and was not
permitted to intervene in, the coverage action. See Willard v.
Travelers Ins. Co., 247 Conn. 331 (1998) (holding that collateral
estoppel did not bar Section 38a-321 action by injured party against
insurer because he was not a party to Travelers declaratory
judgment action, he had no opportunity to litigate it, and the action
was not “actually litigated” as it was decided by default judgment
after claimant failed to appear).
4. As in many areas of insurance law, these issues are typically
governed by state law with important distinctions. Connecticut’s
preference to include underlying claimants as defendants in
declaratory judgment actions involving insurance coverage is not
necessarily shared in other states, where it may not be advisable to
name injured parties. Also, in cases with media attention, care
should be taken to make clear that the inclusion of injured parties
(victims) as defendants in an insurance coverage lawsuit is not
intended as an attack on them or their credibility.
V. Considerations In Providing Notice To Or Naming Interested Parties As
Defendants
A.
A plaintiff in a declaratory judgment action must name as defendants or
provide reasonable notice to all interested persons. See. Conn. Practice
Book §17-56(b).
B.
If providing notice via certificate, the certificate must list the names of such
persons, if known, the nature of their interest and the manner of notice.
See. Conn. Practice Book §17-56(b).
i.
C.
Failing to provide proper notice is a jurisdictional defect, but that
defect may be cured through proper notice. See Conn. Ins. Guar.
Ass’n v. Raymark Corp., 215 Conn. 224 (1990) (reversing judgment
but remanding case so that notice defect may be cured).
Connecticut Practice Book §17-56(d) permits notice only, but the failure to
name an interested party as a defendant may mean that the holding will
not be binding against that party. See Willard v. Travelers Ins. Co., 247
Conn. 331 (1998).
VI. What Coverage Issues May Be Resolved in a DJ?
6
A.
VII.
Declaratory judgment actions are appropriate to resolve a variety of
issues, including::
1.
The existence of an insurance policy under which an insured may
be obligated to defend or indemnify an insured. ACMAT Corp. v.
Greater N.Y. Mut. Ins. Co., 86 Conn.App. 471 (2005).
2.
Factual issues pertaining to coverage, such as whether a person is
an employee of the named insured. Nationwide Mut. Ins. v. Allen,
83 Conn. App. 526 (2004)(holding that trial court had authority to
determine whether claimant was employee of named insured
notwithstanding pending worker’s compensation proceeding
involving same issue).
3.
An insurer’s duty to defend an insured in a third party liability action.
Holy Trinity Church of God in Christ v. Aetna Cas. & Sur. Co., 214
Conn. 216 (1990). An insured may bring a declaratory judgment
action to determine an excess insurer’s duty to drop down and
defend the insured if it is declared that the primary insurer does not
have a duty to defend the insured. Conn.Gen. Life Ins. Co. v.
Zurich Am. Life Ins. Co., 2003 Conn. Super. LEXIS 910 (Conn.
Super. March 28, 2003).
4.
An insurer’s duty to indemnify an insured against third-party liability
claims. An insured may bring a declaratory judgment action to
determine the duty of excess carriers to indemnify the insured
before exhaustion of underlying insurance in pending actions when
it is reasonable to anticipate that the underlying claims will trigger
the excess coverage. Conn. Gen. Life Ins. Co. v. Zurich Am. Life
Ins. Co., 2003 Conn. Super. LEXIS 910 (Conn. Super. March 28,
2003).
When, If Ever, Is A Stay Of A DJ Action Appropriate Pending Resolution
Of Underlying Litigation?
A.
Motions to stay declaratory judgment actions pending resolution of an
underlying action or other proceeding which may affect an insurer’s duty to
indemnify are proper when such a stay will serve judicial economy. See
Conn. Gen. Life Ins. Co. v. Zurich Am. Life Ins. Co., 2003 Conn. Super.
LEXIS 910 (Conn. Super. March 28, 2003).
B.
A stay of a declaratory judgment action filed in federal court is appropriate
when a subsequent declaratory judgment action filed in state court
involving the same issues of state law which have not been resolved by
the state appellate courts has been filed. Konover Constr. Corp. v. Royal
Indem. Co., 399 F. Supp. 2d 130, 132 (D. Conn. 2005).
7
C.
A motion to stay a declaratory judgment action pending resolution of an
underlying action in which the insurer is not a party and is not adequately
represented may not be appropriate. Westport Ins. Corp. v. Sheri Paige &
Assocs., 2004 U.S. Dist. LEXIS 9470 (D. Conn. 2004). A court presiding
over a declaratory judgment action does not have the authority to stay an
underlying personal injury action pending in another judicial district.
Danbury Ins. Co. v. Bochicchio, 2007 Conn. Super. LEXIS 537 (Conn.
Super. Feb. 20, 2007).
D.
A stay of a declaratory judgment action may be appropriate when the
insured’s obligation to respond to discovery in the declaratory judgment
action and defend the declaratory judgment action will burden the insured
and perhaps disadvantage the insured in an underlying action in which the
insurer is defending under a reservation of rights. City of Danbury v. State
Interlocal Risk Mgmt., 2001 Conn. Super. LEXIS 2673 (Conn. Super.
Sept. 14, 2001)(granting motion to stay insurer’s counterclaims for
declaratory judgment action after insurer agreed to defend insured under
reservation of rights in complex underlying action).
E.
Conversely, there is little precedent in Connecticut for courts to stay
underlying actions to allow an insurance coverage action to proceed first,
as a means to clarify the insurer’s and policyholder’s rights and
responsibilities. This position is not universal, for example in Wisconsin
insurance disputes are typically resolved in advance of the underlying
case.
VIII.
Good Faith Duties – Insurer To insured & Counsel To Client
A.
Connecticut recognizes that a duty of good faith and fair dealing is implicit
in contractual relationships, including insurance. Macomber v. Travelers
Property and Casualty Corporation, 261 Conn. 620, 638 (2002). However,
as in virtually every other state, an insurer’s good faith duties to its
policyholder constitutes its own branch of contract and tort law, with
detailed and sometimes enhanced obligations that otherwise may not exist
in other contracts. An insurer’s common law duty of good faith and fair
dealing is also complementary to statutory requirements, such as those
set out in the Connecticut Unfair Insurance Practices Act, Conn. Gen.
Stat. § 38a-31. While the Connecticut Supreme Court has not determined
whether an insurer has a fiduciary duty to its policyholder, Macomber, 261
Conn. 639-642, the relevance of this determination may be minimal in
many instances, given the range of obligations and damages already
existing for insurers.
B.
Insurers are often defending policyholders in liability claims while at the
same time attempting to assert, or at least preserve, coverage arguments.
For example, an insurer may defend a policyholder under a reservation of
8
rights while engaged in a declaratory judgment action in a separate suit.
As noted in Section VII, courts typically will not stay the underlying suit
until insurance obligations are determined, which leaves the insurer with
the conflicting roles of defending its policyholder (with all the obligations
discussed above), while at the same time pursuing its own interests in the
coverage action. Despite the frequency of these situations, there is
minimal case law in the US addressing the issues typically presented.
Even a cursory discussion could occupy several panels, and several
issues are simply noted below.
1. Insurers should internally separate the claims personnel who are
managing the underlying claim on behalf of the insured, from
employees controlling the coverage action. Failing to do so can
easily lead to the conclusion that the insurer was protecting its own
interests at the expense of its policyholder. Many insurers have
separate legal departments established to manage coverage and
bad faith litigation involving the company.
2. In situations where the underlying litigation is well advanced of the
coverage action, the insurer will usually be faced with a settlement
offer, mediation, or trial, which will require balancing its duties to its
policyholder (including the duty to settle) while still asserting its
coverage defenses. If the policyholder is able to independently
reimburse the insurer should the insurer settle with the claimant
and then succeed in the coverage action, this may not be a difficult
issue. However, in the majority of cases (especially those involving
personal lines and small business policyholders), the insured may
have no practical ability to reimburse its insurer who settles on its
behalf, and then successfully demonstrates there is no coverage.
When, if ever, can an insurer demand, or even request, that a
policyholder financially contribute to a settlement in an underlying
case as recognition of the insurer’s chances of prevailing on
coverage? Perhaps never in a personal lines case, but concerns
for over-reaching behavior by an insurer lessen with sophisticated
policyholders adequately represented by coverage counsel.
C.
In contrast to the issues discussed in B, there is a well developed body of
law, ABA professional standards, and commentary nationally on the duties
of insurer-retained defense counsel, especially in situations where there is
a real or possible conflict of interest between an insurer and its
policyholder. In brief, and easier to state than to always recognize,
defense counsel must focus on her obligations to the policyholder and not
divulge information to the insurer detrimental to the policyholder’s
insurance coverage.
9
IX.
Discovery and Attorney-Client Privilege Issues in Declaratory Judgment
Actions
A.
Because Connecticut is not a tripartite state, the defense attorney in the
underlying action has an undivided duty to the policyholder. Nevertheless,
carriers have historically attempted to gain access to the communications
between the underlying defense counsel and the policyholder through one
of at least three theories: (1) the cooperation clause in most policies; (2)
the “common interest” doctrine which reasons that the carrier and the
policyholder have a common interest in defeating the underlying plaintiff;
and (3) the “at-issue” doctrine which maintains that, because the
policyholder has put defense expenses and other related matters “at
issue” in the coverage litigation, the attorney-client privilege has been
waived. In those circumstances where the carrier has denied coverage,
the Connecticut Supreme Court has rejected each of these arguments and
has barred the carrier from access to the attorney-client communications
between underlying defense counsel and the policyholder. Metropolitan
Life v. Aetna, 249 Conn. 36 (1999). In doing so, the Court quoted from the
United States Supreme Court. “The effect [of weakening the protection]
on the legal profession would be demoralizing. And the interests of the
clients and the cause of justice would be poorly served.” Hickman v.
Taylor, 329 U.S. 495, 511 (1947).
B.
The question remains as to whether a carrier who provides a defense to a
policyholder under a reservation of rights would have access to the
attorney-client communications in the underlying case under the
cooperation clause or other relevant theories. An insurer’s defense of its
insured under a reservation of rights raises discovery and privilege issues
as the insurer becomes adverse to its insured. Although an insurer may
be paying for the insured’s defense, the insured still has the right to expect
his communications with his defense counsel are subject to attorney-client
privilege. It would be improper and would violate attorney-client privilege
for an insurer to attempt to use privileged information it obtained in
defending its insured against its insured in a coverage action. See
Chenkus v. Dickson, 1990 Conn. Super. LEXIS 1222 (Conn. Super. Sept.
7, 1990) (Berdon, J.).
C.
Privileged communications between an insurer and its attorneys are also
properly withheld unless an insurer places the materials “at issue” or
plaintiffs allege civil fraud or bad faith against insurer. See Hutchinson v.
Farm Family Cas. Ins. Co., 273 Conn. 33, 38-43 (2005).
10
X.
Collateral Estoppel
B.
Because the duty to defend is broader than the duty to indemnify, a priorentered judgment declaring that a defendant insurer has no duty to defend
its insured against an underlying action collaterally estops the underlying
plaintiff from claiming the insurer has a duty to indemnify after judgment in
the underlying action brought pursuant to Conn. Gen. Stat. §38a-321;;
DaCruz v. State Farm Fire & Cas. Co., 268 Conn. 675 (2004).
C.
Collateral estoppel may serve to bar claims by an injured third-party who
later seeks to assert a claim against the tortfeasor’s insurer under the
direct action statute (Conn. Gen. Stat. §38a-321) if the insured tortfeasor
was a defendant in a fully litigated declaratory judgment coverage action,
as that party then stands in the shoes of the insured.
D.
However, the application of collateral estoppel based on a prior-decided
declaratory judgment action appears to be limited under Section 33 of the
Restatement (Second) of Judgments, which provides: “[a] valid and final
judgment in an action brought to declare rights or other legal relations of
the parties is conclusive in a subsequent action between them as to the
matters declared, and, in accordance with the rules of issue preclusion, as
to any issues actually litigated by them and determined in the action.”
Lighthouse Landings, Inc. v. Conn. Light & Power Co., 300 Conn. 325
(2011) (citing 1 Restatement (Second) of Judgments § 33 in holding that
judgment in a declaratory judgment had no preclusive effect on claims
alleged in subsequent civil action, but that adjudication of special defenses
and counterclaims in that action did have preclusive effect because they
were based on the same allegations).
XI.
Attorney’s Fees
A.
Consistent with the “American rule,” which requires the parties to litigation
to pay their own attorney fees and expenses, attorney’s fees are not
recoverable to the victor in a declaratory judgment action. See ACMAT
Corp. v. Greater N.Y. Mut. Ins. Co., 282 Conn. 576 (2007) (reversing
decision of trial court to award attorney’s fees to company which
successfully prosecuted declaratory judgment against insurer establishing
the existence of a certain insurance policy). However, a policyholder may
recoup attorney’s fees in a successful coverage action if the insurer acted
in bad faith. ACMAT, 282 Conn. at 592. Attorney’s fees may also be
recoverable in successful CUPTA/CUIPA actions. In contrast, some
states, by common law or statute, authorize policyholders to recover
attorney’s fees when successful in a coverage action, regardless of
whether the insurer acted in bad faith. ACMAT contains an extensive
discussion of how other states resolve this issue, though this review is not
current and state law in this area can change quickly.
11
Notes
Notes
Notes
Notes
Notes
Notes