In an insurance coverage lawsuit seeking declaratory relief, an insurer sued the third-party claimant.  The insurer was seeking a declaration that there was no coverage, which naturally would impact the third-party claimant. The insured did not respond to the lawsuit and the insurer moved for a default judgment which was objected to by the third-party claimant. The trial court granted a final judgment in favor of the insurer, which prompted an appeal from the third-party claimant because the final judgment impacts its rights to coverage if it obtains a judgment against the insured.

The appellate court reversed but please take a look at this Court’s discussion on the issue of an insurer adding a third-party claimant to a coverage lawsuit when then the third-party cannot pursue a direct claim against the insurer until it obtains a settlement or judgment against the insured. It presents an interesting argument and counter-point for a third-party claimant that is added to the coverage lawsuit which has implications if it obtains a judgment against the insured:

This case involves an apparent anomaly in Florida law. It is well-established that third-party claimants injured by an insured’s negligence have a right as third-party beneficiaries to payment from the insured’s insurance proceeds. It is equally well-established that the third-party claimants’ rights in this regard do not accrue unless and until they obtain a verdict or settlement against the insured. A quick review of this law is helpful at this point.

Section 627.4136, Florida Statutes, requires that persons not a party to a liability insurance contract obtain a settlement or judgment against the insured as a condition precedent “to the accrual” of a cause of action against the liability insurer. See § 627.4136(1), Fla. Stat. Indeed, section 627.4136(2) expressly provides that until this condition precedent is met, “[n]o person who is not an insured under the terms of a liability insurance policy shall have any interest in such policy, either as a third-party beneficiary or otherwise[.]” § 627.4136(2), Fla. Stat. (emphasis added).

Because the third-party claimants’ cause of action has not “accrued” and indeed, they do not “have any interest in such policy, either as a third-party beneficiary or otherwise,” third-party claimants cannot sue the insurer or name the insurer in a lawsuit against the insured. Cf. Williams v. Am. Optical Corp., 985 So. 2d 23, 27 (Fla. 4th DCA 2008) (“Florida law is well established that the right to sue on an inchoate cause of action — one that has not yet accrued — is not a vested right because no one has a vested right in the common law, which the Legislature may substantively change prospectively.”); id. at 30 (“The right to pursue a cause of action is generally considered to have become vested when the cause of action has accrued.”).

So here is the anomaly: It is also a well-established and continuing practice in Florida for insurers, when suing insureds in an action for declaratory judgments of no coverage, to name as defendants potential third-party claimants, even when the third-party claimants have not yet obtained a verdict or settlement and therefore they do not “have any interest in such policy, either as a third-party beneficiary or otherwise.” In these circumstances, the third-party claimants’ interests are not sufficiently choate to sue insurers but are presumably sufficiently choate to be sued by insurers and bound by such declarations. See generally Tomlinson v. State Farm Fire & Cas. Co., 579 So. 2d 211, 212 (Fla. 2d DCA 1991) (concluding without discussing the nature of the third-party claimants’ inchoate interest, “[s]ince section 627.7262 applies to declaratory judgment actions against insurers and not to actions by insurers like this action, we conclude that the coverage issue was properly addressed by the trial court”).

Neither party asks this Court to review the appropriateness of this well-established, albeit apparently anomalous practice. And indeed, it may well have some practical benefits in bringing all relevant interests together in one lawsuit, which might facilitate early settlements. Thus, we do not reach the appropriateness of this practice or the issue of whether such third-party claimants can seek to be dismissed from such suits unless and until they have a verdict or settlement which would give them an interest in the policy.

Under the circumstances presented here, where the insurer named the third-party claimants as defendants in an action for a declaration of no coverage, the trial court erred in its blanket determination that the third-party claimants lacked any standing to contest a declaration that will preclude them from claiming a right as third-party beneficiaries to payment from the proceeds of a policy if and when they obtain a verdict or settlement. We fail to see how a party can be a defendant in a declaratory judgment action and be bound by the judgment but have no standing to defend or appeal.

Lopez v. U-Haul Co. of Florida, 51 Fla.L.Weekly D679d (Fla. 3d DCA 2026

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.