If I buy R&W insurance, can I still sue the seller directly instead of claiming on the policy?

It depends on how the purchase agreement and the insurance policy are structured together, since this is a negotiated feature rather than an automatic rule. Many representations and warranties insurance placements are designed so the insurer effectively stands in the seller's shoes for most breaches, with the buyer's recourse against the seller significantly reduced or eliminated for the representations covered by the policy, in exchange for the seller agreeing to a lower cap, a smaller holdback, or a cleaner exit from post-closing exposure.

Most of these arrangements still preserve some direct seller recourse for specific carve-outs, most commonly fraud, and sometimes for a limited "retention" layer that sits below the insurance coverage and functions similarly to a deductible. Whether a buyer retains any broader right to sue the seller directly, alongside or instead of claiming on the policy, depends entirely on what the purchase agreement itself says about the interaction between the two, so this needs to be worked out and clearly drafted as part of placing the coverage, not assumed afterward.