Opinion ID: 1718972
Heading Depth: 1
Heading Rank: 5

Heading: Iowa Mutual's Commencement of a Declaratory Judgment Action.

Text: The estate appears to acknowledge in its brief that under ordinary circumstances an insurance company that questions coverage may initiate a declaratory judgment action. [2] According to the estate, however, Iowa Mutual's declaratory judgment action does not fall within this general rule because the employment issue that was determinative of coverage was also an issue that would necessarily be determined in the tort suit. [3] The estate asks us to rule that the commencement of a declaratory judgment action under these circumstances was wrongful and constituted a breach of contract. The majority of courts hold that a declaratory judgment should not be entered if it depends on the resolution of factual disputes that are at issue in the underlying action. 2 Windt § 8.04, at 8. Compare Constitution Assocs. v. N.H. Ins. Co., 930 P.2d 556, 562 (Colo.1996) (stating that declaratory judgment action must concern issues that are independent of and separable from those in the underlying case); Md. Cas. Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24, 30 (1976) (holding that declaratory judgment action was premature due to overlapping issues in that action and in tort suit); U.S. Fid. & Guar. Co. v. Continental Ins. Co., 216 Kan. 5, 531 P.2d 9, 15 (1975) (holding that declaratory judgment action was not appropriate where it sought resolution of a fact question that was also a principal issue in a previously filed tort suit); Roussos v. Allstate Ins. Co., 104 Md.App. 80, 655 A.2d 40, 42 (Ct.Spec.App. 1995) (same), with Reisen v. Aetna Life & Cas. Co., 225 Va. 327, 302 S.E.2d 529, 532 (1983) (holding that an action for declaratory judgment filed prior to resolution of tort case presented justiciable controversy, even though the determinative coverage issue would also be decided in tort case). Under this rule, the insurance company must await the resolution of the tort suit before litigating coverage. See State Farm Fire & Cas. Co. v. Shelton, 176 Ill.App.3d 858, 126 Ill.Dec. 286, 531 N.E.2d 913, 916, 920 (1988) (noting that insurer could present its coverage defense in proceedings following the tort suit). Even if we were to adopt this rule in Iowa, it is of no assistance to the estate. If the timing of Iowa Mutual's declaratory judgment action was wrong, then the remedy was to stay or dismiss the coverage suit. We know of no legal rationale for holding that the premature commencement of a declaratory judgment suit instantly releases the insured from his policy duties, and the estate has cited no cases that so hold. If McCarthy did not want to litigate coverage before his tort liability was determined on the basis that the issues in the coverage case and the tort suit were the same, he should have raised this issue in the coverage action. It is too late to complain of Iowa Mutual's conduct in filing the declaratory judgment action now, in a suit to collect a judgment entered on the tort claim. Therefore, we reject the estate's argument that Iowa Mutual's initiation of a declaratory judgment action to determine issues that were to be resolved in the tort suit constituted a breach of the insurance contract and released the insured from his obligation to comply with the policy conditions.