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Saturday, October 19, 2019

New SCOTN Case: Court Holds That Plaintiff in Tort Action Not Necessary Party for Purposes of Defendant's Insuror Seeking a Declaratory Judgment on Coverage Issues

The Tennessee Supreme Court recently released its opinion in Tenn. Farmers Mutual Ins. Co. DeBruce, No. E2017-02078-SC-R11-CV (Tenn. Oct. 16, 2019).  The syllabus from the slip opinion reads:
We granted review to determine whether a trial court had authority in a declaratory judgment action to resolve coverage issues between an insurance company and its insured when a claimant, who had sued the insured but did not have a judgment against him, was not a party to the action. Here, the claimant sued the insured for damages arising from an automobile accident. The insured did not cooperate with his insurance company. The insurance company sued its insured, seeking a declaratory judgment that the company did not have to provide liability coverage based on the insured’s lack of cooperation. The trial court awarded the insurance company a default judgment, holding that the company did not have to provide coverage under the policy. Nearly two years later, the claimant moved the trial court to set aside the default judgment and allow her to intervene, asserting that she was a necessary party. The trial court denied the motion. The Court of Appeals ruled that the trial court lacked jurisdiction over the declaratory judgment action because the claimant was a necessary party, and the insurance company had not joined the claimant in the action. We hold that the insurance company and its insured—not the claimant—were necessary parties to the declaratory judgment action. The trial court could decide the coverage dispute between the insurance company and its insured with finality and certainty without the claimant’s participation in the action. The claimant, who had no judgment against the insured and could not bring a direct action against the insurance company to collect any damages caused by the insured, had no interest affected by the dispute between the company and its insured. The trial court had authority to grant declaratory relief because all necessary parties were before the court.
Here is a link to the opinion:

http://www.tncourts.gov/sites/default/files/tennesseefarmersmutualinsuranceco.v.debruce.opn_.pdf

NOTE: This is a must-read opinion for any lawyer who handles auto-crash cases in Tennessee.  It offers the definitive word on who is a necessary party under the circumstances described in this case.  Good stuff.

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