Also known as: direct action statute · direct-action statute · direct-action statutes · direct action
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A statute permitting an injured party to sue a liability insurer directly without first obtaining a judgment against the insured. The statute overrides typical no-action clauses in insurance policies. In federal diversity cases the statute also imputes the insured's citizenship to the insurer when the insured is not joined as a defendant.
A statute permitting an injured party to sue a liability insurer directly without first obtaining a judgment against the insured. The statute overrides typical no-action clauses in insurance policies. In federal diversity cases the statute also imputes the insured's citizenship to the insurer when the insured is not joined as a defendant.
Select any source to read its text and confirm it supports the definition.
A statutory provision authorizing a member of an LLC or a partner in a limited partnership to sue another member, manager, partner, or the entity itself to enforce personal rights or protect individual interests. The plaintiff must plead and prove an actual or threatened injury that is not solely derivative of harm to the entity.
Select any source to read its text and confirm it supports the definition.
A statutory provision authorizing a member of an LLC or a partner in a limited partnership to sue another member, manager, partner, or the entity itself to enforce personal rights or protect individual interests. The plaintiff must plead and prove an actual or threatened injury that is not solely derivative of harm to the entity.
Each sense below has its own examples, sources, and questions.
Destiny Davis, a Texas citizen, sued Dixon Foods' liability insurer in federal court after a slip-and-fall at a Texas store. The insurer was incorporated and had its principal place of business in New York. Because Davis sued the insurer alone without joining the store, the court treated the insurer as a Texas citizen under the direct-action rule and dismissed the case for lack of complete diversity.
Diane Dawson, injured in a maritime accident, sued the vessel owner's liability insurer directly under a state direct-action statute after the owner invoked limitation of liability. The suit proceeded against the insurer alone because the statute nullified the policy's no-action clause.
Doris Duffy sued an insurer directly under a state statute after a coverage dispute. The insurer moved for sanctions when Duffy's counsel filed frivolous pleadings that ignored controlling precedent on the direct-action rule's effect on diversity jurisdiction.
The statute deems the insurer a citizen of every state where the insured is a citizen in addition to the insurer's own states of incorporation and principal place of business. Complete diversity is therefore destroyed if the plaintiff and the insured share citizenship.
Supporting sources
Yes. These statutes nullify no-action clauses and allow the injured party to proceed directly against the liability insurer in a minority of jurisdictions.
Supporting sources
Dwight Dorsey, a non-managing member of an LLC, sued the managing member after the manager revoked Dorsey's promised employee discount and complimentary stays while preserving similar benefits for other members through side agreements. Dorsey alleged a distinct personal injury arising from selective treatment rather than a uniform loss to the LLC.
Daniel Diaz, a limited partner, filed a direct action against the general partner and the partnership seeking an accounting of partnership affairs after discovering undisclosed self-dealing that reduced his individual distributions. The complaint asserted rights arising independently of the partnership relationship.
Deanna Davenport sued her fellow LLC members for mismanagement that allegedly depressed the value of her membership interest. The court dismissed the direct action because the complaint failed to allege any threatened injury separate from the harm suffered by the LLC itself.
The member must plead and prove an actual or threatened injury that is not solely the result of an injury to the LLC itself. A claim that merely duplicates harm to the entity fails this requirement.
Supporting sources
…beyond what he would face if the suit were in his home State. The real impact on the named defendant is the same as it is in a direct action against the insurer, which would be constitutionally permissible. Watson v. Employers Liability Assurance Corp. , 348 U. S. 66 (1954); Minichiello v. Rosenberg , 410 F. 2d 106, 109-110…