Rhode Island Federal Court Holds That Direct Action by Third Party Claimant Against Excess Insurer Is Barred Where Insured’s Bankruptcy Prevents Exhaustion of Self-Insured Retention

The federal district court of Rhode Island recently held that a third-party claimant cannot bring a direct action against an excess insurer under Rhode Island’s direct action statute even if the insured is bankrupt and cannot satisfy its self-insured retention.  Click here for a copy of the decision.

This was the first significant decision interpreting Rhode Island’s direct action statute, which permits a third-party lawsuit directly against an insurer if the insured files for bankruptcy.  In the case, the Insurance Company of the State of Pennsylvania was awarded summary judgment when the court held that its excess policy insuring Monaco Coach Corporation would never be triggered because Monaco’s bankruptcy prevents the insured from exhausting its self-insured retention.  The Court also found that the terms of Rhode Island’s direct action statute do not trump the language of the insurance policy to create coverage where none would otherwise exist.

Edwards Angell Palmer & Dodge attorney Stephen Prignano represented the Insurance Company of the State of Pennsylvania in this litigation.