Litigation of Third-Party Coverage Disputes

The threshold question of whether coverage exists can be litigated by seeking a declaratory judgment from the court. Often times it is only necessary to show that a potential for coverage exists in order to win a declaratory judgment. However, an insurance company that defends you against a third party after losing a declaratory judgment may choose to do so under a reservation of rights, meaning if a judgment is eventually entered against you, it may still be necessary to litigate the coverage issue and the insurance company’s liability to you more fully. The attorneys at Geyer Fuxa Tyler have experience litigating liability and damages disputes that arise in both first-party and third-party settings.

The duty to settle and the duty to defend are separate duties that may both apply to a given situation. If an insurance company refuses to pay where liability is clear or where a reasonable demand is made that is within the policy limits, the insurance company can be held liable if it litigates the matter and loses to the third party. Not only can the insurance company be liable up to its policy limits, but when the carrier breached its duty to settle, it can also be liable for the entire judgment, including any excess verdict amount above the policy limits.