Misuse of the Declaratory Judgment Act: When Declaratory Judgment Actions are Brought in Conjunction with an Action for Breach of Contract

In situations where a plaintiff has asserted a cause of action against an insurance carrier for breach of the insurance contract and declaratory relief, the declaratory action is frequently based upon the same underlying facts and alternatively seeks a declaration that the contract was breached by the insurer. Thus, courts are left to make the same determination in the declaratory judgment action as the determination sought in the breach of contract action – whether or not the carrier breached the contract by denying coverage that was otherwise available.  Under Florida’s declaratory judgment act,

[t]he circuit and county courts have jurisdiction within their respective jurisdictional amounts to declare rights, status, and other equitable or legal relations whether or not further relief is or could be claimed. No action or procedure is open to objection on the ground that a declaratory judgment is demanded. The court’s declaration may be either affirmative or negative in form and effect and such declaration has the force and effect of a final judgment. The court may render declaratory judgments on the existence, or nonexistence:

(1) Of any immunity, power, privilege, or right; or

(2) Of any fact upon which the existence or nonexistence of such immunity, power, privilege, or right does or may depend, whether such immunity, power, privilege, or right now exists or will arise in the future. Any person seeking a declaratory judgment may also demand additional, alternative, coercive, subsequent, or supplemental relief in the same action.

§ 86.011, Fla. Stat. However, “disputed questions of fact alone, [are] not sufficient to make available to litigants the provisions of the Declaratory Judgments Act[.]” Barrett v. Pickard, 85 So. 2d 630, 631 (Fla. 1956).

The declaratory judgment act is not intended to provide a plaintiff with “a catch-all for any type of proceeding at law or in equity.” M & E Land Co. v. Siegel, 177 So. 2d 769, 773 (Fla. 1st DCA 1965). “Despite the apparently very broad scope of the statutes quoted above, we agree with the view expressed by the Supreme Court of Florida in Ready v. Safeway Rock Co., 157 Fla. 27, 24 So.2d 808 (1946), that the statute authorizing declaratory relief should not be ‘so broadly construed as to make it a procedural juggernaut which would ride down and crush out the other valuable, well defined and time-proven equitable and statutory remedies.’” Jacksonville Expressway Auth. v. Duval County, 189 So. 2d 837, 840 (Fla. 1st DCA 1966) (citing Ready v. Safeway Rock Co., 157 Fla. 27, 24 So.2d 808 (1946)). When a declaratory judgment action is brought in conjunction with breach of contract action, a question of coverage that is not separate from the breach of contract action is improperly joined. Thus, in situations where a “complaint alleges in substance: He owes me money and will not pay. My contract says I can go get my property. How can I do it? As stated by Sturgis, J., of this court in Mayes Printing Co. v. Flowers: ‘In a general sense every judgment or decree is declaratory of the rights of litigants.”” M & E Land Co. v. Siegel, supra, (citing Mayes Printing Co. v. Flowers, 154 So.2d 859, 862 (Fla. 1st DCA 1963)). In Swain v. Reliable Ins. Co., Florida’s Third District Court of Appeal stated, “[i]f, as alleged, the insurer was guilty of breach of contract, by failure to defend the action brought against the plaintiff or to pay damage claims asserted for medical expenses, etc., the plaintiff would have an adequate remedy at law for damages.” Swain v. Reliable Ins. Co., 200 So. 2d 862, 863–64 (Fla. 3d DCA 1967).

However, in Britamco Underwriters, Inc. v. Cent. Jersey Investments, Inc., 632 So. 2d 138 (Fla. 4th DCA 1994), Florida’s Fourth District Court of Appeal held that a separate coverage action was appropriate so long as issues of coverage were not dependent on the resolution of fact issues common to the underlying litigation. In considering a breach of contract and coverage action brought by Marr Investments, Inc. in its third-party complaint, Florida’s Second District Court of Appeal held that it was error for the trial judge to determine the coverage question as a matter of law, “as it was premature to determine that issue at [that] time. Coverage should be deferred until liability is decided.” Marr Investments, Inc. v. Greco, 621 So. 2d 447, 449 (Fla. 4th DCA 1993), as amended on reh’g (May 19, 1993)(citing See International Surplus Lines Ins. Co. v. Markham, 580 So.2d 251 (Fla. 2d DCA1991)).

The federal declaratory judgment act, 28 U.S.C.A. §2201, provides federal courts with the authority to declare the rights and other legal relations of interested parties seeking a declaration. Nevertheless, “[a]s a practical matter, however, the elements required under the federal or state declaratory judgment acts are not materially different.” Vill. Square Condo. of Orlando, Inc. v. Nationwide Mut. Fire Ins. Co., 6:09-CV-1711-ORL31DAB, 2009 WL 4899402, at *2 (M.D. Fla. Dec. 11, 2009) (citing Nirvana Condominium Ass’n, Inc., 589 F.Supp.2d at 1335 n. 1 (S.D.Fla.2008)). Unlike the Florida state court authority on this issue, there are numerous federal District Court opinions supporting the position that a plaintiff asserting a breach of contract claim and declaratory judgment claim in the same action cannot state a “bona fide need” for the declaratory judgment when the breach of contract claim has not been resolved. Essentially, federal courts have held that the declaratory judgment claims are inappropriate when they seek an interpretation of whether there is insurance coverage available under a policy before any breach of contract has been determined.  

 “It is well-settled that ‘equitable relief is available only in the absence of an adequate remedy at law.’” SME Racks, Inc. v. Sistemas Mecanicos Para, Electronica, S.A., 243 Fed. Appx. 502, 503–04 (11th Cir. 2007) (citing See Mitsubishi, 14 F.3d at 1518; Deckert v. Independence Shares Corp., 311 U.S. 282, 289, 61 S.Ct. 229, 233, 85 L.Ed. 189 (1940)). The purpose of a declaratory judgment action is to clarify legal relations and to settle controversies prior to a breach of the contract. See, Eisenberg v. Standard Ins. Co., Case No. 09-80199-CIV, 2009 WL 1809994, *3 (S.D. Fla. June 25, 2009). Questions regarding whether a contract was breached are unrelated to the purpose behind a declaratory judgment action, as such claims are nothing more than a petition claiming breach of contract.  Eisenberg, at *3.; see also, Advanced Fluids Solutions, L.L.C. v. National Ass’n for Stock Car Auto Racing, Inc., Case No. 11-CV-16-ORL-22KRS, 2011 WL 3627413 (M.D. Fla. July 26, 2011) (dismissing declaratory judgment count for failure to state a claim where the plaintiff does not cite a specific provision of the contract necessitating relief, but instead is seeking a declaration as to an asserted past breach of the agreement). Accordingly, a declaratory judgment action that is not separate from a breach of contract claim fails to set forth a bona fide dispute or controversy in need of judicial interpretation. Thus, whether in State Court or Federal Court, an insurance carrier should consider a motion to dismiss a claim for declaratory relief where a breach of contract claim would provide an adequate remedy at law.