Which term describes a contract in which a claimant can sue the insurer directly or jointly with the insured?

• A. Binder
• B. Direct-action statute
• C. Incontestable clause
• D. Contract of indemnity

Answer: (B)

Direct-action statutes authorize an injured party to sue the insurer directly for damages caused by the insured, and in some cases to join the insured in the suit as well. This gives the claimant a path to recover from the insurer even if pursuing the insured alone would be difficult. The concept fits because the policy is an agreement to indemnify the insured, yet the law allows the claimant to reach the insurer directly. This is different from a binder (a temporary coverage contract), an incontestable clause (which relates to policy validity after issuance), or a contract of indemnity (the insurer’s promise to indemnify the insured, not a procedural right for third-party suits).