Justiciable Controversy in a Declaratory Judgment Action
Privilege Underwriters Reciprocal Exchange v. Peter Grayson: When a bona fide justiciable controversy exists in a declaratory judgment action, the trial court has jurisdiction to adjudicate the coverage questions without first finding the damages issues.
Facts of the Matter
While riding his motorcycle, Peter Grayson was involved in an accident with a vehicle being driven by an uninsured motorist on October 1, 2012. Rather than suing the uninsured motorist, he made a claim with his personal uninsured motorist (“UM”) carrier, which tendered the policy limits of $50,000.00. Grayson then made a claim with Privilege Underwriters Reciprocal Exchange (“PURE”), on a UM policy issued to Robert Knizley, under which Grayson’s sister Mrs. Knizley was a named insured.
Thereafter, on January 17, 2014, PURE filed a declaratory judgment complaint (under Alabama Code § 6-6-220, the Declaratory Judgment Act) against Grayson, seeking a determination that Grayson was not covered under Knizley’s policy, because PURE alleged that Grayson was not a resident of his sister’s household at the time of the accident. Grayson answered and filed a counterclaim for UM benefits, alleging that he had been a resident of his sister’s household at the time of the accident.
For Argument’s Sake
After undertaking significant discovery, PURE filed a motion for summary judgment, which the trial court denied, concluding that there was sufficient disputed material evidence that the matter should be put before a jury. PURE then filed a motion for bifurcated, separate trials for the claims made by PURE and the counterclaims asserted by Grayson. The parties agreed that the coverage issue should be tried first. At trial, the parties conceded that should PURE prevail in the coverage trial, the entire case would be over. A jury trial was held in January 2016, and the jury returned a verdict in PURE’s favor, finding that Grayson was not covered under the Knizley policy.
Grayson filed a motion to vacate the judgment, pursuant to Alabama Rule of Civil Procedure 60(b)(4), which Grayson contended was void for lack of subject matter jurisdiction. Grayson argued that no justiciable controversy existed at the time of the trial because in PURE’s declaratory judgment complaint it essentially had requested an advisory opinion that Grayson was not covered under the policy assuming that he recovered damages on his claims against PURE. At the time of the trial, he had not made a recovery. The trial court granted Grayson’s motion for a new trial, and further instructed that the damages issue would be tried first with the coverage issue to follow, if necessary. PURE appealed to the Supreme Court of Alabama. Privilege Underwriters Reciprocal Exchange v. Peter Grayson [Ms. 1150927]. — So.3d — (Ala. Dec. 16, 2016).
We’ve Got Issues
The issue before the Supreme Court of Alabama in this matter was whether PURE’s declaratory judgment action seeking a determination of whether Grayson was entitled to coverage under the subject policy presented a justiciable controversy so as to invoke the subject-matter jurisdiction of the trial court. The court found that it did. Since the introduction of the Declaratory Judgment Act in 1935, Alabama courts “have routinely entertained declaratory judgment actions filed by insurance companies seeking a determination regarding their rights and obligations under a policy, especially concerning coverage.”
PURE’s declaratory judgment action sought a determination that Grayson was not entitled to coverage under the Knizley policy, because Grayson was not an insured under the policy in that he was not a household resident of his sister, a named insured. The Alabama Supreme Court has previously held, “All that is required for a declaratory judgment action is a bona fide justiciable controversy.”
In the matter at hand, it found that a justiciable controversy existed at the time PURE filed its action insomuch as PURE alleged a justiciable controversy between PURE and Grayson regarding Grayson’s status as an insured. As defined under the policy, if Grayson was not an insured, he would have no coverage and would not be entitled to benefits under the policy. Therefore, because a justiciable controversy existed between the parties, the trial court had jurisdiction to adjudicate the matter, and did not require a finding of the damages issue prior to a determination being made concerning the insurer’s obligations under the policy.
Photo by Eric Schmuttenmaer.