Oklahoma courts limit declaratory judgments to actual insurance disputes

A growing trend in insurance litigation finds plaintiffs using Oklahoma’s Declaratory Judgment Act, 12 O.S. § 1651 et seq., (the “Act”) to gain early access to insurance coverage issues, despite not being a party to that contract. For example, a plaintiff injured in a trucking accident may file a declaratory judgment action against the trucking company’s insurer, arguing the driver has coverage under the company’s auto policy for the accident; or an injured slip-and-fall plaintiff seeks a declaration that the accident is covered under the businesses commercial general liability policy. Plaintiffs have also sought declarations as to the additional insured status of a general contractor at a construction site, policy limits and priority of coverage. The strategic objective is to establish the existence of a “deep pocket” or to circumvent a judgment proof tortfeasor and force the insurer to early settlement discussions.

The Act, however, was never intended to serve as a vehicle for advisory opinions or hypothetical disputes. The Act was designed to allow courts to determine the rights, obligations and status of parties to an actual controversy, such as a contract of insurance. Strangers to the contract generally do not have standing to enforce that contract. Oklahoma courts generally have a disfavor for issuing advisory opinions and have consistently found that standing to sue an actual dispute among parties must exist. Declaratory judgments are meant to address actual controversies, not speculative coverage opinions for contingent claims.

An injured claimant is generally not a party to commercial auto or general liability policies and ordinarily possesses no contractual rights until obtaining an actual judgment. The Oklahoma Supreme Court has stated that an actual controversy under the Declaratory Judgments Act requires a plaintiff with standing to assert a concrete, legally protected interest rather than a hypothetical or contingent one. The leading Oklahoma decision is Knight v. Miller, 2008 OK 81, where the Oklahoma Supreme Court affirmed dismissal of the declaration action, concluding that no justiciable controversy existed because the plaintiff’s interest in the insurance policy remained contingent and speculative.

Despite Knight, plaintiffs continue to experiment with various offensive declaratory judgment theories to gain early access to insurance coverage issues rather than waiting for an insurer to deny coverage or file its own declaratory judgment action seeking to force the issue. As these disputes become more common, Oklahoma courts will likely be called upon to further define the limits of declaratory relief when sought by third-party tort claimants. The resulting decisions may further define the differences between coverage litigation and tort litigation for years to come.