A counter-claim is a demand for relief made by a defendant in a civil case against a plaintiff. A personal injury or similar tort case begins when an injured person, the plaintiff, sues another person, the defendant, demanding damages because the defendant’s behavior was either intentional or negligent. A counter-claim is a way for the defendant to say, “hey, you owe me as well.”
Some states, such as California, refer to counter-claims as “cross-complaints,” but they should not be confused with cross-claims. To make matters even more confusing, a defendant who files a counter-claim is known as both the “defendant” (in the original case) and the “counter-claim plaintiff” (in the counter-claim), while the plaintiff becomes both the “plaintiff” (in the original case) and the “counter-claim defendant” (in the counter-claim).
For instance, suppose that the plaintiff in a case is injured in a car accident. Her auto insurance is supposed to cover her medical bills if she’s injured in a car crash, but in this case, her insurer refuses to pay. The plaintiff sues her insurance company, seeking the insurance coverage that her premiums were supposed to pay for. Suppose, however, that the defendant insurer believes that the plaintiff deliberately lied on her insurance application, and that if she had told the truth, the insurer would never have given her a policy. The insurer may decide to file a counter-claim against the injured driver, claiming that she committed fraud and owes them damages.
In the original insurance claim, the injured driver is the plaintiff and the insurance company is the defendant. In the fraud claim, the injured driver is the counter-claim defendant and the insurance company is the counter-claim plaintiff. However, both claims can be addressed by the same judge or jury in the same trial.
Counter-claims are a type of claim joinder, which allows parties to a particular case to bring up all the legal issues that are related to the same chain of events that created the original dispute. Since dealing with all the issues that come from the same case saves time, money, and effort for everyone involved (including the court), most courts permit or even encourage the use of counter-claims and other kinds of claim joinders whenever possible.
This was not always the case, however. Once upon a time, a defendant who had a counter-claim against a plaintiff could only bring up the claim as an affirmative defense. If the jury decided the defendant’s counter-claim was worth more than the plaintiff’s claim, the defendant got a “recoupment,” or the difference in money damages between his claim and the plaintiff’s. If his claim was worth less than the plaintiff’s, however, he got a “set-off,” or the amount he had to pay the plaintiff reduced by the amount his claim was worth. The math in these cases was similar to the calculations used for comparative negligence today, but the results often left defendants with a less fair result. Counter-claims were established to ensure that the plaintiff’s claim and the defendant’s claim are on an equal footing in court.
Today, counter-claims may be allowed even if their nature or subject matter is completely unrelated to the original claim. They may also be filed even after the defendant has filed his answer to the original complaint. As a rule, however, counter-claims that are related to the same event or transaction as the original claim are considered “compulsory,” while counter-claims that are not related are considered “permissive.” If a defendant has a counter-claim against a plaintiff that is related to the same events that created the plaintiff’s original claim, he must file the counter-claim as part of the plaintiff’s original case, or he may be barred from suing the plaintiff over it later. The reason for this rule is to increase efficiency by making parties resolve all their disputes related to the same facts in the same case. Otherwise, parties might find themselves having to prove the same set of facts over and over in multiple trials, costing a great deal of extra time and money, instead of merely proving the facts once and dealing with all the disputes that arise from those facts in a single trial or hearing.