Direct Action Against Third Party Insurer

An insurance lawyer in Dallas or Fort Worth who understands insurance law will tell a client that when a car wreck occurs, the person or entity who caused the wreck is the proper party to sue, not the person or entity’s insurance company.

This is illustrated in this 2018, Eastland Court of Appeals opinion styled, Randy Durham v. Hallmark County Mutual Insurance Company.

Durham was injured in a wreck with Bobby Burl Straley and L&L Trucking.  Durham sued Straley and L&L originally, then sued Hallmark, the alleged insurance company of Straley and L&L.

Hallmark filed a motion for summary judgment and a motion to dismiss for lack of jurisdiction, which the trial court granted in Hallmark’s favor.  This appeal followed.

Hallmark argues that Durham cannot sue them directly unless and until Durham first obtains a judgment that reflects liability of Straley or L&L.  As the court pointed out, Texas is not a direct action state; rather, the general rule is that an injured party cannot sue the tortfeasor’s insurer directly until the tortfeasor’s liability has been finally determined by agreement or judgment.  With limited exceptions, not applicable here, this rule applies equally in instances where a plaintiff seeks a declaratory judgment and where a plaintiff seeks money damages.

The “no direct action” rule pertains to standing because there is no justiciable controversy until the liability of the insured has been established.  The need for a determination of liability before bringing a direct action against an insurer, while often referred to as a standing issue, is more appropriately characterized and analyzed as ripeness.

Durham’s declaratory judgment was not ripe until the insured was finally determined to be liable to Straley or L&L.  Furthermore, if Hallmark owed a duty to defend, that particular duty was owed to its insured, not to Durham, a nonparty to
the insurance contract.  In any event, under the “no direct action” rule, a plaintiff in an underlying lawsuit cannot maintain a lawsuit against an alleged tortfeasor’s insurer until that party has been found to be liable for damages that resulted from the activity sued upon.
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