Also known as: direct actions against a liability insurer · direct action against liability insurers · direct action · direct action statute
Written by attorneys · grounded in primary & secondary sources — see below
An action in which an injured party sues a liability insurer directly without joining the insured as a defendant. Federal law treats the insurer as a citizen of every state of which the insured is a citizen in addition to the insurer's own states of incorporation and principal place of business.
Maria, a Texas citizen, sues Shield Insurance alone after slipping at a Texas store. The store is a Texas citizen. Shield is incorporated in New York with its principal place of business in California. Because Maria sued the insurer directly without joining the store, Shield is deemed a citizen of Texas as well as New York and California. Complete diversity fails and the federal court lacks subject-matter jurisdiction.
A Florida plaintiff injured by a Florida insured sues the insurer directly in federal court. The insurer is incorporated in Delaware with its principal place of business in Illinois. Because the insured is a Florida citizen, the insurer is also deemed a Florida citizen. Complete diversity is destroyed even though the insurer's own citizenship would otherwise permit jurisdiction.
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An Illinois resident sues a Michigan insurer directly for injuries caused by an Illinois insured. The policy was issued in Michigan. The insurer is deemed an Illinois citizen because the insured is an Illinois citizen. The federal court dismisses for lack of diversity jurisdiction under the direct-action statute.
A California plaintiff sues a Nevada insurer directly after an accident involving a California insured. The insurer is incorporated in Nevada and has its principal place of business in Arizona. The statute deems the insurer a California citizen as well, eliminating complete diversity and barring federal jurisdiction.
A New York plaintiff brings a direct action against a Connecticut insurer for harm caused by a New York insured. The complaint names only the insurer. The insurer is treated as a New York citizen, destroying diversity regardless of the insurer's own citizenship and forcing the case into state court.
A New York plaintiff sues a New Jersey insurer directly after a New Jersey camp counselor causes injury in New York. The court applies New Jersey law to the insurer's liability because the policy was issued there. The direct action proceeds under the chosen state's substantive rules.
The statute deems the insurer a citizen of every state of which the insured is a citizen in addition to the insurer's own incorporation and principal-place states. Complete diversity is destroyed when the plaintiff and the insured share citizenship.
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When an injured party sues the liability insurer directly, the statute supplies the citizenship rule that applies even though the insured is omitted. The plaintiff need not join the insured, and the insurer's deemed citizenship controls the diversity analysis.
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No. The statute expressly contemplates suits against the insurer alone and supplies the citizenship rule that applies in that setting. Failure to join the insured does not defeat the action on joinder grounds.
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A plaintiff may sue the liability insurer directly without joining the insured. The insurer is then deemed a citizen of every state of the insured, which frequently destroys complete diversity and keeps the case out of federal court.
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…IV Here a former President asserts his immunity from civil damages claims of two kinds. He stands named as a defendant in a direct action under the Constitution and in two statutory actions under federal laws of general applicability. In neither case has Congress taken express legislative action to subject the President to…