October 7, 2026
On September 25, 2026, the Superior Court of New Jersey, Law Division, Hudson County, dismissed a third-party complaint against a professional liability insurer and its program manager. The court held that “New Jersey law does not recognize a direct action against an insurer before an entry of a final judgment against the insured.” The dismissal was without prejudice. London Fischer represented the insurer and program manager. John C. Sullivan, Of Counsel, briefed and argued the motion, and Daniel W. London, Partner, led the firm's team on the matter.
The tactic. The case arose from a construction-defect suit over a large residential project. The owner sued the architect. The architect then filed a third-party complaint against its mechanical, electrical, and plumbing engineering subconsultant, which had dissolved and never appeared. It also sued the subconsultant's professional liability insurer and that insurer's program manager. The architect asked the court to declare, before anyone had been found liable, that the insurer must defend and indemnify the absent engineer. The engineer itself had made no such request.
This move is common in design and construction litigation. When a subconsultant closes its doors, other parties look to its insurance and try to lock in coverage early, inside the case that will decide liability.
The rule. The court relied on Chiacchio v. Chiacchio, 198 N.J. Super. 1, 8 (App. Div. 1984), and on the New Jersey Supreme Court's decision in Crystal Point Condominium Ass'n v. Kinsale Insurance Co., 251 N.J. 437 (2022).
In Crystal Point, a condominium association took default judgments against a structural engineer and an inspection firm over defects in a Jersey City high-rise. When it could not collect, it sued their professional liability insurer. The Supreme Court allowed the claim under New Jersey's Direct Action Statute, N.J.S.A. 17:28-2, but held that the claimant's rights were "purely derivative" of the insured's. That meant the claimant had to proceed under the policy's own terms, including its arbitration clause. Id. at 451, 455. The Court reasoned from the statute's plain text: "injured parties have no rights under the policy until there is an unsatisfied judgment against the assured." Id. at 451.
The application. The architect here had no judgment against the engineer and had not even served the engineer. Under Crystal Point, it had no rights under the policy to enforce. The court dismissed the claim against the insurer and its program manager.
Why it matters. For professional liability carriers, program managers, and the design professionals they insure, the ruling confirms an orderly sequence. Liability gets decided first, and coverage disputes come after. Any later claim against the insurer must take the policy as written. Crystal Point, 251 N.J. at 451. Carriers do not have to litigate coverage for an absent insured, against a party that is not the insured, while the underlying claims are still unresolved.
Takeaways for carriers and program managers.
- Read the policy's “action against the company” clause first. Many architects and engineers forms bar joining the insurer to the suit that decides the insured's liability. That language, together with Crystal Point, can end an early coverage claim on a motion to dismiss.
- Separate the insurer from its program manager. A program manager that administers claims for an insurer acts as the insurer's agent.
- Keep the claim file intact. A dismissal without prejudice leaves room for a later direct action once a judgment exists.
About the authors.
Daniel W. London is a Partner at London Fischer LLP. He concentrates his practice in commercial and construction litigation, insurance coverage, and insurance regulatory work. Before joining the firm, he was an underwriter at Gulf Insurance Group, where he focused on professional liability and employment practices liability insurance. He is a member of the Professional Liability Underwriting Society. He can be reached at (212) 331-9440 or dlondon@londonfischer.com.
John C. Sullivan is Of Counsel at London Fischer LLP. He represents insurers and program managers in coverage disputes and complex litigation in New York and New Jersey. He can be reached at (212) 972-1000 or jsullivan@londonfischer.com.
