Insurer's Declaratory Judgment Action Dismissed under "Priority of Action" Rule

Atlantic Casualty Ins. Co. v. Oregon Mutual Ins. Co. (Feburary 13, 2007)
The Chases' roof leaked because of negligent installation by Starkweather Roofing. The Chases' homeowners' insurer, Oregon Mutual, paid for the repairs. The Chases sued Starkweather and obtained a default judgment. Oregon Mutual filed a garnishment action against Starkweather's insurer, Atlantic Casualty, to recover its subrogation interest in the default judgment. Eight months later, Atlantic Casualty sued for a declaratory judgment that Starkweather violated its insurance contract by failing to give proper notice of the lawsuit.

Oregon Mutual moved for summary judgment dismissal of the declaratory judgment action under the "priority of action" rule, a common law doctrine used to avoid duplicative litigation. The trial court certified the issue to the court of appeals, which remanded for dismissal of the declaratory judgment action. The court reasoned that both the garnishment action and the declaratory judgment action involved the same issue -- whether Atlantic owed coverage to Starkweather under its liability insurance policy.