Declaratory Judgment Actions Not Viable for Addressing Past Wrongs

By Don R. Sampen, published, Chicago Daily Law Bulletin, June 16, 2026

The 1st District Appellate Court recently dismissed an insurer’s declaratory judgment action seeking a determination that it did not breach any duties to its insured, on the grounds that the declaratory judgment statute is not intended to declare non-liability for a party’s past conduct.

The case is United Equitable Insurance Co. v. Steward, 2026 IL App (1st) 250978. The insurer, United Equitable Insurance Co. (UEIC), was represented by Shelist LLC of Chicago. Stoller & Garstki of Chicago represented the insured’s assignee, Tsujiorka Walker.

In 2015, Lakesha Steward’s vehicle struck Walker while he was riding his motorcycle and he suffered serious injuries. In 2016 Walker contacted Steward’s insurer, UEIC, regarding payment for his injuries.

In response, the insurance company filed its first declaratory action seeking rescission based on misrepresentations in Steward’s policy application. The court held against the insurer, finding that it had a duty to defend Steward.

In 2017, Walker sued Steward in a case in which UEIC provided Steward a defense. A verdict was returned in favor of Walker for over $800,000. But that judgment was reversed on appeal due to an evidentiary error.

Following the jury trial, the insurer in 2022 filed the instant declaratory judgment action seeking a determination “as to the policy limits in this case, and that the Court declare the limit to be $25,000, that UEIC breached no duties, and that any excess is not the responsibility of UEIC.”

Subsequently Steward filed for bankruptcy. As part of the bankruptcy proceedings, however, the bankruptcy court authorized the bankruptcy trustee to assign to Walker all of Steward’s interest in any claims against the insurance company relating to the accident.

Eventually, in 2023, Walker moved to dismiss the second declaratory judgment action on the grounds, among others, that UEIC was seeking to limit its liability in a potential bad-faith action. The insurer then tendered its $25,000 policy limit to Walker but the tender was not accepted. It also sought to stay the case pending resolution of the bankruptcy, which was allowed.

Following the bankruptcy proceeding, Walker in 2024, as assignee, sued UEIC in a separate action alleging that its defense of Steward in the underlying case was in bad faith.

Walker claimed that he had offered to settle his claim against Steward for the policy limit as early as 2016, that UEIC rejected the offer, sought to rescind the policy, made no attempt to settle and did not file an appeal bond for the appeal that resulted in a reversal.

Walker also filed a second motion to dismiss in the declaratory judgment action, raising similar arguments as in his prior motion. The trial court granted the motion and UEIC took this appeal.

Analysis

In an opinion by Justice Jesse G. Reyes, the 1st District affirmed. Regarding UEIC’s argument over the policy limit of $25,000, Reyes observed that there was no controversy regarding that limit, which had been resolved in the earlier litigation.

He did, however, take issue with the insurance company’s position that Walker’s claim that it breached its duty to settle was part of a coverage dispute. Reyes found that Walker never alleged that UEIC owed excess insurance coverage under the policy.

Rather, Walker’s claim of bad faith in the separate lawsuit sought to hold the insurance company liable for its own actions in providing Steward a defense. That claim was independent of any question concerning the scope of coverage owed to Steward as raised in UEIC’s action.

Reyes further wrote that the insurer misunderstood the purpose of the declaratory judgment statute. That statute allows the parties in a dispute to learn the consequences of their actions before acting. It was not intended, according to Reyes, to declare non-liability for a party’s past conduct. In sum, its purpose is to give guidance for future conduct, not to provide relief related to past conduct.

Thus, Walker’s claim of bad faith was more properly considered in the bad-faith action he filed, rather than as part of a declaratory judgment action filed by the insurance company.

As a result, the 1st District affirmed the trial court’s dismissal of UEIC’s complaint in the declaratory judgment action.

Key Point

According to the 1st District, a declaratory judgment action under Illinois law may be used only to provide guidance to the parties for future conduct and may not provide relief for past conduct.