Direct actions against reinsurers have been on the rise for some time. To bring a direct action, a policyholder must get over the contractual privity hurdle and find some basis to show a direct relationship or third-party beneficiary relationship. Many policyholders try to bring these actions, but they more often than not fail at the motion to dismiss level. Sure, there are circumstances
where the reinsurer is truly the real party in interest and has the direct responsibility and liability to the policyholder. In those cases a direct action makes sense, but those cases are few and far between. Allowing a direct action against a reinsurer where there is no contractual privity or other basis to succeed would disrupt the manner in which risks are spread through the insurance and reinsurance industry. A recent case, highlighted below, shows how the courts address some of these issues.