Insurance Declaratory Judgment Actions and the Federal Abstention Doctrine: Strategies and Limitations

Declaratory judgment actions are one of the most common procedural steps that policyholders and insurers can take to obtain a definitive ruling regarding their rights and duties under the policy prior to extensive litigation on the coverage issue or underlying claim. They are an effective tool for resolving certain coverage issues, particularly the insurer’s duty to defend.

Parties, often insurers, will file a declaratory judgment action in federal court on the premise federal jurisdiction will be more favorable than state court. Leery of this tactic, federal judges closely scrutinize coverage dispute claims brought in federal court under the federal Declaratory Judgment Act.

Federal abstention doctrines, designed to avoid parallel litigation in state and federal courts, may result in the federal court dismissing the action. Two different doctrines generally apply to insurance coverage litigation, depending on whether the relief sought is injunctive vs. coercive. Therefore, the party seeking relief in federal court must frame their pleadings in light of the applicable abstention doctrine to maintain federal jurisdiction over the action.

Listen as our authoritative panel of insurance practitioners discusses strategies in bringing or opposing declaratory judgment actions and the applicability of federal abstention doctrines for actions brought in federal court.

1. Declaratory judgment actions: issues and strategies
   1. Defining what is a “claim” for purposes of a declaratory judgment action
   2. Standing to file a declaratory judgment action
   3. Defining an actual controversy for purposes of declaratory judgment action
   4. Timing and statute of limitations
   5. Necessary parties to the action
   6. Choice of law
   7. Recovery of attorney fees
2. Filing in federal court and the abstention doctrine
   1. Federal Declaratory Judgment Act
   2. Abstention and the Brillhart/Wilton doctrine
   3. Abstention and the Colorado River doctrine
   4. Deciding which abstention doctrine applies

The panel will address these and other key questions:

• What issues or factors must counsel consider in determination the timing of the filing of a declaratory judgment action?
• Who are the necessary parties to a declaratory judgment action?
• How does the relief sought, declaratory vs. coercive, inform which abstention doctrine applies if relief is sought in federal court?
• How have federal courts decided abstention issues in cases involving both declaratory and coercive relief?