Two states let an injured person sue a liability insurer directly, without first getting a judgment against the person who caused the harm: Wisconsin and Louisiana. Four more — New York, New Hampshire, Rhode Island, and Pennsylvania — allow a direct action only after something specific happens, usually an unsatisfied judgment against the insured or the insured’s insolvency. Everywhere else, the traditional rule holds: you sue the person who hurt you, and the insurer pays if and when you win. That is the short list of direct action states, and the distinction between the two groups changes almost everything about how a case is filed.
Wisconsin: The Broadest Direct Action Right
Wisconsin’s statute is the widest in the country. Under Wis. Stat. 632.24, any insurance policy covering liability for negligence makes the insurer directly liable to the injured person, up to the policy limits, whether or not the insured’s liability has been established yet.1Wisconsin State Legislature. Wisconsin Code 632.24 – Direct Action Against Insurer It is not limited to auto crashes. It reaches slip-and-fall claims, product defects, and any other negligence covered by a liability policy.
The trigger is where the injury happened, not where the policy was written. Wisconsin courts have applied the statute to policies issued outside the state as long as the accident or injury occurred within Wisconsin. The purpose, as the courts describe it, is to resolve everyone’s rights in one lawsuit instead of forcing an injured person to sue the insured, win, and then chase the insurer separately.
Louisiana: Direct Action Under Six Conditions
Louisiana is the state most associated with direct action, but its statute is narrower than Wisconsin’s. Under La. R.S. 22:1269, an injured person can bring a direct action against the liability insurer only when at least one of the following applies:2Justia. Louisiana Revised Statutes 22:1269 – Liability Policy; Direct Action Against Insurer
- The insured has filed for bankruptcy or is insolvent.
- Service on the insured has failed, or the insured has not answered or defended within 180 days of service.
- The insured is deceased.
- The claim involves injuries between spouses or between parents and children.
- The insurer is an uninsured motorist carrier.
- The insurer is defending under a reservation of rights or has denied coverage entirely.
As in Wisconsin, the accident or injury must have occurred within the state. A no-action clause in the policy does not block the suit; Louisiana law overrides it for in-state accidents.
Louisiana adds a procedural quirk that catches people off guard. The insurer’s name cannot appear in the case caption. The lawsuit is captioned only against the insured, even though the insurer is a party, and the existence of insurance coverage generally cannot be disclosed to the jury.
States That Allow Direct Action Only After a Trigger
Four states give an injured person a path to the insurer, but only after a specific event. You cannot name the insurer as a defendant from day one the way you can in Wisconsin. You have to earn your way in.
New Hampshire
RSA 264:18 makes an insurer’s liability absolute once a covered loss occurs under a motor vehicle liability policy. After the injured person recovers a final judgment against the insured, the judgment creditor can have the insurance proceeds applied directly to satisfy that judgment.3New Hampshire General Court. New Hampshire Code 264:18 – Required Provisions Post-accident agreements between insurer and insured cannot defeat that obligation. The statute is limited to motor vehicle liability policies.
New York
Under New York Insurance Law section 3420, an injured person can sue the insurer directly after obtaining a judgment against the insured that has gone unsatisfied for 30 days. Notice of the judgment must be served on both the insured (or the insured’s attorney) and the insurer before the direct action is filed.4New York State Senate. New York Insurance Law Section 3420 There is a second path in New York: if an insurer disclaims coverage because the insured did not give timely notice, the injured person can sue the insurer directly, and the only issue in that suit is whether the disclaimer was proper.
Rhode Island
Rhode Island’s statute (R.I. Gen. Laws 27-7-2) permits direct action in narrow circumstances: when the insured cannot be found after service is attempted, when the insured dies before suit or before judgment, or when a nonresident owner or operator involved in a Rhode Island auto accident dies before suit is filed. Outside those situations, the injured party has to get a judgment against the insured first and then bring a separate action against the insurer to collect on it.5Rhode Island General Assembly. Rhode Island General Laws 27-7-2 – Remedies of Injured Party Against Insurer
Pennsylvania
Pennsylvania requires liability policies to include a clause stating that the insured’s insolvency or bankruptcy will not release the insurer from paying covered claims. When execution against the insured is returned unsatisfied because of insolvency, the injured person can then sue the insurer directly for the judgment amount, up to policy limits. In practice, that limits Pennsylvania’s direct action right to situations where the insured cannot pay.
The Insolvency Backdoor Elsewhere
If your state is not on the list above, you are not necessarily locked out of the insurer forever. Many states require liability policies to include a clause stating that the insured’s bankruptcy or insolvency does not release the insurer from its obligations. When the insured cannot pay a judgment, the injured person can typically pursue the insurer directly for the covered amount. Pennsylvania’s statute is one codified version of this rule, and similar provisions exist across the country. This is not a general direct action right — the insured has to be genuinely unable to pay — but it does mean that in most states an injured person eventually reaches the policy if there is one.
The Policy Still Has to Cover the Claim
A direct action statute is a procedural key. It does not create coverage. If the incident falls outside the policy’s coverage, the statute does not help. An auto crash claim needs an auto liability policy in force at the time. A product liability claim needs a commercial general liability policy that covers the product risk.
Exclusions apply the same way they would in any other coverage dispute. Common exclusions for intentional acts, pollution, professional errors, and contractual liability all remain in play. The insurer can raise any coverage defense it would have had against its own insured, and policy limits cap the recovery.
No-Action Clauses Cannot Block a Statutory Direct Action
Most liability policies include a “no-action” clause forbidding anyone from suing the insurer until the insured’s liability has been fixed by judgment or written settlement. In ordinary litigation, that clause keeps the insurer out of court until the case against the insured is resolved.
Direct action statutes override those clauses by operation of law. Louisiana’s statute expressly says the right exists “whether or not such policy contains a provision forbidding such direct action.”2Justia. Louisiana Revised Statutes 22:1269 – Liability Policy; Direct Action Against Insurer Wisconsin’s statute makes the insurer liable to the injured person “irrespective of whether the liability is presently established or is contingent.”1Wisconsin State Legislature. Wisconsin Code 632.24 – Direct Action Against Insurer The statute wins over the contract.
Why Direct Action Changes Federal Court Math
If you are considering federal court based on diversity of citizenship, direct action changes the calculation. Congress addressed the issue in 28 U.S.C. section 1332(c)(1): in a direct action against a liability insurer where the insured is not joined as a defendant, the insurer is treated as a citizen of every state where the insured is a citizen, on top of the insurer’s own state of incorporation and its principal place of business.6Office of the Law Revision Counsel. 28 U.S. Code 1332 – Diversity of Citizenship; Amount in Controversy; Costs
The effect is straightforward. A Louisiana plaintiff cannot create federal diversity jurisdiction by suing an out-of-state insurer alone and leaving out a Louisiana insured. The insurer is treated as a Louisiana citizen for jurisdictional purposes, and the case stays in state court.