When is a ‘direct action’ not a ‘direct action’? The short answer, as set forth in Curet v. United National Insurance Company1—in which the authors represent the plaintiff—is that a “direct action” is not a “direct action” when the term is construed within the context of 28 U.S.C. §1332(c)(1) (“Diversity of citizenship; amount in controversy; costs”)—the federal statute that, inter alia, defines the citizenship of a corporation for the purposes of determining the diversity of citizenship sufficient to impose original jurisdiction in the federal district courts. Clearly, this answer requires explanation.

‘Direct Action’ Statute

New York Insurance Law §3420(a)(2) requires every liability insurance policy or contract to contain a provision that “in case judgment against the insured or the insured’s personal representative in an action brought to recover damages for injury sustained or loss or damage occasioned during the life of the policy or contract shall remain unsatisfied at the expiration of thirty days from the serving of notice of entry of judgment upon the attorney for the insured, or upon the insured, and upon the insurer, then an action may, except during a stay or limited stay of execution against the insured on such judgment, be maintained against the insurer under the terms of the policy or contract for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy or contract.”

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