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Declaratory judgments often used to settle insurance disputes

On Behalf of | Aug 17, 2021 | Insurance Law |

In these difficult times, many commercial and residential property owners are filing claims with their insurers to recover damages under their policies to cover property damage repairs and other costs. However, in many cases, the insurer and insured disagree on how to interpret the terms of the insurance contract itself, resulting in a dispute involving policy coverage.

The insurer may interpret the policy language in a way that limits the amount of coverage given to the policyholder, or denies coverage altogether, while the policyholder may interpret the language to mean that their damages are covered. In such cases, it may be best to have the court resolve these legal disagreements through a declaratory judgment.

What is the purpose of a declaratory judgment?

Generally, an insurer, with the help of an insurance law attorney, may file a petition for declaratory judgment to make a determination relating to a specific matter in controversy, such as the coverage provided by an insurance policy. The declaratory judgment is often used to illuminate the insurance company’s rights and obligations to the policyholder.

If the court determines the insurer is not liable for the policyholder’s loss, the insurer can avoid the sometimes lengthy and expensive litigation process. Generally, if a declaratory judgment is entered in favor of the insurance company, the policyholder is unlikely to go forward with their claim against the insurer, as they know it will be unsuccessful.

Declaratory judgments can be useful tools for insurance companies to deny or limit the coverage offered to a policyholder, and therefore avoid costly insurance litigation in Las Vegas.


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