When can a tort plaintiff directly pursue the defendant's insurance carrier?
Tort plaintiffs sometimes sue individuals, small businesses, or other entities whose ability to pay a judgment may be in question. One common example is a construction accident: A worker is injured and plans to sue the owner of the premises where it happened, along with others. In some situations, defendants have resources to pay a settlement or judgment on their own, but often they don*t. Obviously, this depends on the amount of recovery and a host of other factors.
A defendant may also have an insurance policy. But what if there are potential questions about coverage for the injury or claim? This puts the plaintiff in a difficult position, i.e., pursuing a defendant who may not ever be able to pay a judgment (or settle the case).
Direct Action Statutes Generally
As a matter of contract law, the plaintiff in this situation is not a party to the insurance contract and therefore has no right to pursue the defendant*s insurer (*standing*). That is why some states have enacted *direct action* statutes that allow a plaintiff to pursue the defendant*s insurer directly.
Direct action statutes do not abrogate the common law contract standing rule altogether. They typically provide a narrow path for plaintiffs, and a series of hoops that the plaintiff must jump through before pursuing the defendant*s insurer.
The rationale for direct action statutes, according to a very early (1942) Louisiana ruling is that *an insurance policy against liability is not issued primarily for the protection of the insured but for the protection of the public.* Davies v. Consolidated Underwriters, 6 So.2d 351 (La. 1942).
Direct Actions in Connecticut
Connecticut has a fairly typical direct action statute: it gives judgment creditors with an unsatisfied judgment against the defendant standing to sue the insurer. Conn. Gen. Stat. Sec. 38a-321. New York has a similar statute. NY CPLR Sec. 3420(b)(2).
As mentioned, these statutes establish standing for certain plaintiffs that otherwise would not have it. Because of this, courts in New York and Connecticut have generally held that a plaintiff not jumping through the hoops set forth in the statute have no standing to sue. In other words, the statutes set for the exclusive means of obtaining standing.
Anyone individual or business involved with a tort or other claim implicating insurance coverage issues should be aware of how direct action issues may affect their claim. Ultimately, they can affect the strategy and recovery for the plaintiff.
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