WHO WE SERVE
PEOPLE
OUR SERVICES
CULTURE OF POSSIBILITY
LOCATIONS
NEWS
CAREERS
SEARCH
November 7, 2010
Joining the Tort Victim as a Party to a Declaratory Judgment Action

To join or not to join? This is a question frequently asked by insurance coverage attorneys when deciding whether to join a tort victim in a declaratory judgment action. An insurer who files a declaratory judgment undoubtedly wants assurance that the declaration will be binding against all involved parties, including the tort victim. But what are the pitfalls, if any, for failing to name the tort victim as a party? Is providing notice to the tort victim enough? Since the answer to this question is unclear, these issues are worthy of special consideration.

A declaratory judgment action is authorized by Conn. Gen. Stat. §52-29, which provides that “the Superior Court in any action or proceeding may declare rights and other legal relations on request for such a declaration, whether or not further relief is or could be claimed. The declaration shall have the force of a final judgment.” Practice Book §17-56 provides, in pertinent part as follows:

(b)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 shall be made parties to the action or shall be given reasonable notice thereof.…

* * *

(d) Except as otherwise provided by law, no declaration shall be binding against any persons not joined as parties. If it appears to the court that the rights of nonparties will be prejudiced by its declaration, it shall order entry of judgment in such form as to affect only the parties to the action.

Conn. Prac. Book §17-56 (2010).

In Connecticut Ins. Guarantee Assoc. v. Raymark Corp., 215 Conn. 224 (1990), the Connecticut Supreme Court recognized 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.” Id. at 228-229 (citations omitted). Here, the Raymark court suggests that a plaintiff filing a declaratory judgment action has two choices – either name the injured person in the action or notify the injured person of its pendency. The court went on to comment that “[p]ersons 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 the suit.” Id. at 229 (quoting 20 J. Appleman, Insurance Law and Practice § 11371.) In light of this holding, we can safely conclude that the “better rule” in Connecticut is to join the tort victim as a party in the declaratory judgment action. But what happens if the tort victim is not joined, but is only given notice of the action?

The Raymark court, despite expressing its preference that the tort victim be named as a party, indicates that providing notice to the tort victim is still adequate. In this regard, Practice Book §17-56(d) muddies the waters. It provides that “no declaration shall be binding against any persons not joined as parties.” Unlike §17-56(c), subsection (d) does not contain a provision regarding “notice of interested persons.” This leads to the question regarding whether an injured party, if given only reasonable notice, would be bound by the court’s declaration if not joined as a party.

“Simply notifying an interested person of the pendency of the action does not ensure that the person will be bound by the resulting judgment. In fact, the rules of practice, as amended in 2000, specifically provide that ‘[e]xcept as otherwise provided by law, no declaration shall be binding against any persons not joined as parties. If it appears to the court that the rights of nonparties will be prejudiced by its declaration, it shall order entry of judgment in such form as to affect only the parties to the action.'” Batte-Holmgren v. Comm’r of Pub. Health, 281 Conn. 277, 288 (2007) (citing Conn. Prac. Book § 17-56 (d)). The court then went on to point out that “the notice requirement ensures that interested persons are aware of the requested declaratory relief and are able to move to intervene to protect their interests, should they choose to do so.” Id.

Additionally, courts, when directly confronted with the issue of whether the injured person is a proper party to a declaratory judgment action determining coverage between an insurer and the insured tortfeasor, have permitted such participation. See Colony Ins. Co. v. Oracle Lounge, Inc., 2008 Conn. Super. LEXIS 1012 (Superior Court, J. D. of New Haven at New Haven, May 1, 2008) (Bellis, J.) (estate of patron permitted to intervene in declaratory judgment action between nightclub and its insurer); Wynn v. Commercial Union Ins.Co., 1994 Conn. Super. LEXIS 1493 (Superior Court, J.D. of Stamford/Norwalk at Stamford, June 13, 1994) (Lewis, J.) (declaratory judgment action brought by injured third party against tortfeasor’s insurers; denying motion to strike of insurer, and rejecting argument that injured party had no standing to bring the declaratory judgment action); Philadelphia Indem. Ins. Co. v. Atlantic Risk Mgmt., 2006 Conn. Super. LEXIS 2824 (Superior Court, J.D. of New Haven, September 20, 2006) (Robinson, J.) (declaratory judgment action brought by insurer against its insured, granting motion to intervene filed by injured party/insurer, which had paid over 4 million dollars to satisfy judgment resulting from the defendant’s alleged mishandling of claims).

Based upon these cases, it is clear that a tort victim has a legal interest in the outcome of the coverage action and must be joined as a party or be given notice of the lawsuit. Nonetheless, the better practice is to join the tort victim as a party because a declaration may not be binding on an interested person who is not joined as a party. No insurer wants to be in the position where it is forced to re-litigate a coverage issue in a direct action by the tort victim because it failed to name the tort victim in the declaratory judgment action. Thus, we must now examine the potential impact of not naming the tort victim as a party.

The Connecticut Supreme Court has held that only parties to a declaratory judgment action may be bound by its declaration. See Batte-Holmgren v. Comm’r of Pub. Health, 281 Conn. 277, 288 (2007). It would, therefore, seem that an insurer’s failure to join the tort victim as a party would result in the insurer having to re-litigate the coverage action if later challenged by the tort victim. However, this may not be the case.

A tort victim cannot institute a direct action against a tortfeasor’s insurer without first obtaining a judgment against its insured. See, e.g., Hamilton v. United Serv. Auto. Assoc., 115 Conn. App. 774 (2009). Accordingly, the only way a tort victim may assert a direct action against the tortfeasor’s insurer is via the so-called “direct action statute,” Conn. Gen. Stat. §38a-321. This statute provides in relevant part as follows:

Each insurance company which issues a policy to any person . . . insuring against loss or damage on account of bodily injury . . . for which loss . . . such person . . . is legally responsible, shall, whenever a loss occurs under such policy, become absolutely liable, and the payment of such loss shall not depend upon the satisfaction by the assured of a final judgment against him for loss . . . by such casualty. . . . Upon the recovery of a final judgment against any person . . . including administrators . . . for loss or damage on account of bodily injury . . . if the defendant in such action was insured against such loss . . . at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment.

Conn. Gen. Stat. § 38a-321 (2010).

Under the direct action statute, the tort victim is “subrogated to the rights of the defendant” against the insurer, and may pursue the insurer to satisfy the judgment. Because the tort victim is subrogated to the rights of the insured, it has no greater right against the insurer than “the defendant in such action could have enforced.” This is an important point. Let’s assume that by the time the tort victim obtained a judgment against the insured and filed a direct action under Conn. Gen. Stat. § 38a-321, the insurer had already obtained a declaration of no coverage via a declaratory judgment action. Let’s further assume that the tort victim was not a party to the declaratory judgment action. Based upon the principles of subrogation, the tort victim could not re-litigate the coverage issue in the direct action. Assuming a court had previously determined that there was no coverage afforded to the insured under the policy, the tort victim would also have no rights under the policy, as it steps into the shoes of the insured. Simply stated, the tort victim cannot have any greater rights than those held by the insured.

In conclusion, it may not matter that the tort victim was not joined as a party in the declaratory judgment action. If the only plausible way for a tort victim to pursue coverage is to assert the rights of the insured, and a declaration of no coverage has already been obtained against the insured, it is irrelevant that the tort victim may not have participated in the coverage action. In most cases, however, it is simple enough, and therefore, advisable to join the tort victim as a party. This eliminates any debate and a potential direct action by the tort victim in the future. In those situations where a court may not be able to exercise personal jurisdiction over the tort victim, it would appear that reasonable notice of the pendency of the coverage action is appropriate.

Appellate Consultation & Evaluation