Bubba had “another one of them envelopes” sitting down at the Post Office. The lady wouldn’t let him peek at this one either. He figured it was the “declaration of war suit.” After the EUO, the other lawyer made the comment this might end up as a “dec action.” I had explained to Bubba that insurance companies often file declaratory judgment actions when there is an issue as to coverage. It allows a judge to decide the question. Our law firm has filed many of them to resolve all sorts of disputes and it’s an appropriate method for an insurer to ask the court to make a decision in a fair and impartial way.
One disadvantage to bringing a declaratory judgment action is the potential risk the insured will view it as a hostile act. Bubba thought suing the policyholder sounded more like “fightin’ words” and called it a “declaration of war.” Knowing our firm regularly files dec actions for insurance companies didn’t really make Bubba feel any happier. He was ready to “scrap it up!”
Logically, what else can an insurance company do that would be fair? If the company doesn’t believe there is coverage, asking a judge to decide the question is reasonable. A dec action brings the issue to the court for resolution as opposed to simply saying, “No, we won’t pay you.” Franky, it can be a “good faith” practice to ask the court to settle disagreements over coverage. But, it sometimes results in the insured filing a counterclaim for “bad faith.” You always need to consider the unintended consequences of suing your own customer.