One of the defendants was inappropriately named in a declaratory judgment action where the underlying negligence action had been settled within policy limits and no excess judgment had been entered against her.

GEICO appealed from the district court’s order granting the defendant’s motion for summary judgment in a declaratory judgment action stemming from a 2008 motor vehicle accident. At the time of the accident, the defendant, Sara Farag, was insured under an auto policy issued by GEICO to her parents, Hussein and Monica Farag. After the accident, the injured individual in the other vehicle, Gould, sued the Farags for negligence. Gould’s claim against Monica Farag was later settled for the $100,000 policy limits, and Monica was dismissed from the underlying case. A final judgment was later entered in favor of Gould and against Hussein and Sara Farag for approximately $300,000. GEICO subsequently filed a declaratory judgment action against all three Farags, seeking a declaration from the court that it had not handled the underlying claims in bad faith. The district court granted Monica Farag’s motion for summary judgment on the basis that she should not have been included as a defendant in the declaratory judgment action. On appeal, the court considered that no excess judgment had been entered against Monica and that the underlying claim had been settled within policy limits. Thus, the potential for Monica to bring a claim against GEICO for failing to act in good faith was so conjectural, hypothetical or contingent that the district court did not err in determining that she should not have been joined in the lawsuit.

_{Case Law Alerts, 2^nd Quarter, April 2015}

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