How-ever, besides the instant case, four decisions since 1962 have excluded punitive damages from automobile insurance coverage. Therefore, in any case in which California may not provide the choice of law for the plaintiff's punitive damage claim, counsel … Accessed Nov. 26, 2019. Labor Shortages – What do You do When You’ve Got the Work, but Nobody to do it. Co. of Tex., wherein the El Paso court held that punitive damages were covered by policy language that provides for “payment of all sums which the insured shall become legally obligated to pay as damages because of…bodily injury.” The appellate court found Manriquez inapposite. toward insurance coverage of punitive damages. Discerning Answers to the Conundrum Created by Disputes Involving Conflicting Public Policies, Pragmatic Considerations and Political Actions, 39 V!LL. Oftentimes, the jurisdiction of the underlying lawsuit in which the Plaintiff is seeking punitive damages is not the best jurisdiction to commence the coverage lawsuit. INSURANCE COVERAGE OF PUNITIVE DAMAGES IN MONTANA Scott H. Stanaway I. How can you tell whether a policy covers punitive damages? 1009, 1011-18 (1989) (same); Paul D. Seyferth, The Construction and Admissibility of Insurance Policies That Provide Coverage for Punitive Damage Awards, 7 ALASKA L. REv. Ignorance is bliss. Some policies specifically exclude coverage for punitive damages, while others rely on state laws. See notes 51-55 & accompanying text infra. 12-4450, 2015 U.S. App. When punitive damages aren't explicitly excluded, they are generally presumed to be covered. Is Wrongful Death Covered by Liability Policies? Twenty-three states permit insurance coverage for punitive damages assessed against the party that committed the egregious act. Some of these states bar insurance if the act was intentional. & Casualty Ins. Punitive Damages Can Be Insurable. They contend that punitive damages won't serve their intended purpose (to punish the perpetrator) if they are paid by an insurance company. 5. Punitive damages may not be insurable in some states as such coverage may be considered a violation of public policy. 13-91 (Tex. Sometimes they are worded in different ways such as an exclusion for the driver’s recklessness, gross negligence, malicious acts or exemplary damage award. For example, the Integrated Tech (media liability) policy offered by Philadelphia Insurance covers punitive damages via its definition of the word “damages.” However, the definition of “damages” in Philadelphia’s Allied Healthcare Providers Professional Liability policy excludes punitive damages. Punitive Damages Can Be Insurable Insurability for punitive damage awards is governed by NRS 681A.095 (added in 1995; updated in 2011). Many errors and omissions and specialty liability policies explicitly cover or exclude punitive damages. Provide insurance coverage on all professional liability and CGL policies for defence costs for punitive damage claims. Generally … INTRODUCTION In two recent cases the Montana Supreme Court addressed the question of whether a liability insurance policy may cover pu-nitive damages assessed against an insured.1 Holding in favor of coverage in both cases, the court answered the question on con- tract interpretation and public policy grounds. These courts focus on the phrase “damages because of ‘bodily injury’ or ‘property damage’” that are a part of all liability policies and reason that punitive damages, which are intended to punish and deter, rather than to compensate for injury or damage, do not fit with the scope of the policy. Determining whether a contractor has coverage for punitive damages is a two-step process. damages." 333 South Seventh Street, Suite 2600, Minneapolis, MN 55402, Disclaimer / Aetna Casualty, 285 N.J. Super. If you reside and perform most of your work in a state that prohibits insurance coverage for punitive damages, you can increase your odds of obtaining coverage by obtaining an explicit endorsement providing for coverage and agreeing with your insurance company that coverage disputes will be decided in a favorable jurisdiction and/or be decided by applying a favorable state’s laws. Electronic Data Liability: What Small Businesses Need to Know, What's Not Covered by Auto Liability Coverage, What to Expect from a Wrongful Termination Settlement. Because punitive damages are not designed to compensate a plaintiff, and cannot be considered a "compensatory amount," the court held that the policy "simply did not provide coverage for punitive damages." bility and Punitive Damages, 40 . Alaska courts allow punitive damages to be covered by insurance. If not, then they can assist you in obtaining a punitive damage endorsement. Some policies cover or exclude punitive damages via their definition of certain terms, particularly damages or loss. In between, some states allow punitive dam-ages to be covered only if one or more of the fol-lowing conditions exist: (1) Punitive damages coverage is specifically provided for in the insurance policy; Chubb. insurance coverage for a punitive damage award since such coverage would tend to defeat the purpose of the punitive damage award (i.e. Wilson Elser. Punitive damages in Canada Obtaining punitive damages coverage when a state declares such damages to be uninsurable can be tricky, but observers say some underwriters are willing to … If the policy is ambiguous or silent, then there may or may not be coverage, depending on the applicable law. Alternatively, the court held that the punitive damages would fall within the exclusion barring coverage for civil fines. Insurance Coverage for Punitive Damages, 20 S.C.L. Insurance Products for Punitive Damages: There are pros and cons to the insurance products designed to cover punitive liability. The laws regarding the insurability of punitive damages vary from state to state. Directly-assessed punitive damages are awarded directly against the wrongdoer. The case, Farmers Texas County Mutual Insurance Company v. Shelter Insurance Co. 4 found that if the insured were permitted to collect against the insurer the punitive damages awarded against the insured as part of the insured's bad faith damages in a failure to settle case, the compensatory damages which derived from the insured's own wrongful conduct would undercut the public policy of Colorado against the insurability of punitive damages. Aug. 28, 2014), [ enhanced version available to lexis.com subscribers ], a Texas Appeals Court addressed coverage for $1.5 million in punitive damages awarded in an action for injuries sustained by a worker on a Tesco Corp. drilling rig. "A Review of the U.S. Punitive Damages Liability Landscape," Page 3. Insurance Coverage for Punitive Damages – The Discussion Continues. Finally, it is possible to purchase a punitive damages “wrap” policy from the off-shore market (i.e., Bermuda). 71, 77-82 (1990) (same); Theodore D. Fischer, Comment, Insurance Coverage and the Punitive Award in the Automobile Acci- Marianne Bonner, CPCU, ARM, worked in the insurance industry for 30 years. Several states have statutes that prohibit the punishment of intentional wrongdoers through punitive damage awards. Back to Briefing Papers | Print this Paper. Mid-Century Ins. Div. "Wilson Elser Punitive Damages Review (2014)," Page 2. May 15th, 2018 By Tara Mireur. Center for Justice and Democracy. Courts in approximately 20 states have either ruled that punitive damages are uninsurable for public policy reasons or have not addressed the issue. The unpredictable nature of punitive damage awards is complicated by a lack of uniformity among states as to the determination, treatment and even the insurability of punitive damage awards. Various state statutory codes that limit coverage for punitive damages often distinguish between directly-assessed punitive damages and vicariously-assessed punitive damages. Next, look at the policy definitions section. The main argument against coverage, we noted, is that to allow it would defeat "the purpose of punitive damages, which is to punish and to deter others from acting similarly, and that allowing coverage serves no useful purpose since such damages are a windfall for the plaintiff who, by hypothesis, has been made whole by the award of compensatory damages. In Wolfe v.Allstate Prop. This is not uncommon. Insurance Coverage for Punitive Damages, 20 S.C.L. Some policies contain multiple sets of exclusions. This type of clause is referred to in the insurance industry as a “most favorable jurisdiction” clause. However, a few courts disagree. Two states prohibit insurance coverage of punitive damages in the context of uninsured motorists but have not addressed the issue with respect to other forms of coverage. Punitive damages are also designed to discourage others from committing similar types of acts.. The incentives of insurance companies do not mesh as neatly with Examples are the ISO general liability, business owners, and business auto policies. In the U.S., each state establishes its own guidelines to insuring against punitive damages and the types of acts that are insurable. Some states, however, do allow for it. Lambert, Does Lia-bility Insurance Cover Punitive Damages?, 517 INs. Instead of commencing the coverage dispute in Pennsylvania and applying Pennsylvania law, we commenced a lawsuit in Arizona, where our client’s offices were located, where the truck involved in the accident was licensed, where our client’s insurance contract was formed, and where punitive damages can be covered by insurance. If the company was established in a state that supports punitive damages coverage, then the company can get coverage under its employers' liability insurance policy. The typical reasons stated for the allowance of insurance to pay for punitive damages are that there is little evidence that punitive damages have the effect of deterring the wrongdoing and that the punishment would, if insurance is not allowed, be on the general public as the cost of punitive damages would not be borne by the premium payers but instead by the society at large in the … For instance, Florida state law generally prohibits insurance coverage for punitive damages for the direct wrongful conduct of an insured. That may or may not be the case. What’s Employment Practices Liability Insurance? The main argument against coverage, we noted, is that to allow it would defeat "the purpose of punitive damages, which is to punish and to deter others from acting similarly, and that allowing coverage serves no useful purpose since such damages are a windfall for the plaintiff who, by hypothesis, has been made whole by the award of compensatory damages. Punitive damages (also called exemplary damages) may be awarded in a tort claim in addition to compensatory damages. Accessed Nov. 26, 2019. Auto. … Most (but not all) D&O policies cover punitive damages while many medical malpractice policies exclude them. "Fact Sheet: Punitive Damages: Rare, Reasonable and Limited (2011)," Accessed Nov. 26, 2019. Punitive Damages — damages in excess of those required to compensate the plaintiff for the wrong done, which are imposed in order to punish the defendant because of the particularly wanton or willful nature of his or her wrongdoing. L.J. Accessed Nov. 26, 2019. Whether punitive damages are covered by insurance depends on two things: state law and policy language. May 15th, 2018 By Tara Mireur. If the company was established in a state that supports punitive damages coverage, then the company can get coverage under its employers' liability insurance policy. Insurance Coverage for Punitive Damages – The Discussion Continues. Also called "exemplary damages." © 2013 FWH&T, © 2020 Fabyanske Westra Hart & Thomson. Some states prohibit insurance of punitive damages on the grounds that spreading the risk of punishment for willful misconduct lessens the deterrent effect. “Generally, language in a standard form liability policy providing for coverage for ‘sums’ or ‘all sums’ an insured becomes liable to pay as a result of bodily injury encompasses punitive damages, if … 102 WISCONSIN LAW REVIEW insurance (as well as other aspects of liability insurance). Many of these states do allow insurance to cover punitive damages against an employer based on vicarious liability. Because of the conflicting law, choice of law issues are important. Defining Punitive Damages Our report provides information on the availability and prevalence of punitive damage awards, the insurability of punitive damages in the United States, and the pros and cons of insurance products designed to cover punitive liability. If there is coverage, then the next step is to determine whether coverage is prohibited as a matter of public policy. Andrew P. Moses. Given this exposure, how can a business protect itself? How to Tell Whether Punitive Damages Are Covered by Your Insurance. Some states prohibit insurance of punitive damages on the grounds that spreading the risk of punishment for willful misconduct lessens the deterrent effect. For instance, a policy might state that loss means (among other things) compensatory damages, punitive or exemplary damages, and the multiple portion of any multiplied damage award. Many liability policies purchased by small businesses are silent about punitive damages. The laws vary widely. Some states prohibit insurance coverage for punitive damages levied against the wrongdoer. Insurance Bad Faith – Punitive Damages In certain circumstances, an insurance company may be liable for punitive damages because of its wrongful refusal to defend, failure to provide an adequate defense, breach of its duty to settle, breach of its duty to indemnify, or breach of … Unfortunately, even if there is nothing within the four corners of the insurance policy excluding coverage for punitive damages, the analysis is not over. Northwestern Nat'l Cas. Free Consultation - Call (800) 423-0055 - Gerald A. Schwartz helps victims and their families receive compensation for their injuries in Car Accident and Insurance Claim cases. The innocent injured driver is entitled to recover for all allowable damages under the New Mexico personal injury law. Many insurers of these policies are willing to negotiate coverage for punitive damages – if you ask! Insurability for punitive damage awards is governed by NRS 681A.095 (added in 1995; updated in 2011). In most states, the courts have held that a reference to “damages” is broad enough to include punitive damages, as well as compensatory damages. The Balance Small Business uses cookies to provide you with a great user experience. Many of these states do allow insurance to cover punitive damages against an employer based on vicarious liability. If a suit seeking both compensatory and "punitive or exemplary damages" is brought against an "insured" for an "occurrence" covered by this policy, "we" will provide defense coverage. Insurance coverage for punitive damages is frequently excluded by carriers in Georgia and those states which allow such coverage, whereas other states prohibit insurers from providing such coverage altogether. A Punitive Damages Exclusion is a clause in a liability insurance policy that limits coverage for damages by excluding any award for punitive or exemplary damages that a jury might award. Part Two of the policy, Employers Liability Coverage, excludes punitive or exemplary damages because of bodily injury to an employee employed in violation of the law. For the first time in history, many U.S. insurers today are willing to afford coverage under various types of insurance policies for punitive and exemplary damages under certain circumstances. "A Review of the U.S. Punitive Damages Liability Landscape," Page 4. [4311. coverage,6 the current trend appears to favor an inclusive liability on the part of the insurer. This coverage is typically referenced in the definition of “Loss” with a provision which states that Loss includes punitive or exemplary damages. One commonly-used policy that does address punitive damages is the standard NCCI workers compensation policy. Although the standard commercial general liability (CGL) policy and business auto policy (BAP) contain no punitive damage exclusion, many umbrella and excess liability policies … Some states allow an award of punitive damages on a showing of intent that does not offend California public policy (e.g., recklessness or gross disregard). The first step is to look for an explicit exclusion. L. REV. For example, in Pennsylvania, an insurer is permitted to provide punitive damages coverage to operators of downhill skiing areas, unless such punitive damages are awarded due to … How to Write a Demand Letter When You Have Been Harmed, Pitfalls to Avoid When Buying Business Insurance, The Balance Small Business is part of the, Philadelphia’s Allied Healthcare Providers Professional Liability policy, Fact Sheet: Punitive Damages: Rare, Reasonable and Limited (2011), A Review of the U.S. Punitive Damages Liability Landscape, Wilson Elser Punitive Damages Review (2014). punish the defendant for committing egregious wrongdoing). Policies, Policies, Policies — How Insurers Try to Limit Coverage for Punitive Damages, and Why They Sometimes Fail Insurers rely upon two arguments for denying coverage for punitive damages: (1) Policy language Given this exposure, how can a business protect itself? Co. v. Co. v. Lawrence, 26 P.3d 1074, 1075 (Alaska 2001) (“Because the Lawrences’ liability policies cover them for punitive damages for which they themselves may be liable, we affirm the superior court’s ruling on the punitive damages issue.”). insurance coverage for punitive damages from their insurance policies if the insurance company does not intend to provide such coverage. In certain circumstances, an insurance company may be liable for punitive damages because of its wrongful refusal to defend, failure to provide an adequate defense, breach of its duty to settle, breach of its duty to indemnify, or breach of its general covenant of good faith and fair dealing. Unfortunately, many contractors blissfully assume that if they are held liable for punitive damages, then their liability insurance will cover them. This is because the innocent policyholder, and not the wrongdoer, pays for the UM coverage. A Punitive Damages Exclusion is a clause in a liability insurance policy that limits coverage for damages by excluding any award for punitive or exemplary damages that a jury might award. 75 (1966). Now she consults and writes about commercial insurance. First, you must analyze the applicable policy. insurance coverage for punitive damage awards. It also excludes punitive damages with regard to benefits the employer is obligated to provide under maritime law. The answer lies in recognizing the circumstances where the law allows the recovery of punitive damages. Some states prohibit insurance coverage for punitive damages levied against the wrongdoer. Plaintiffs' counsel, too, may want to be careful about how they characterize damages, if the defendant's insurance is the primary source of any recovery. Title: Microsoft Word - PUP8130103 punitive damages to be insured have narrow exceptions allowing certain risks to be insured for punitive damages. See notes 51-55 & accompanying text infra. The Court of Appeals of Texas, Fourth District, sitting en banc, has denied a motion for en banc reconsideration. Insurance Coverage for Punitive Damages? [4311. coverage,6 the current trend appears to favor an inclusive liability on the part of the insurer. The Court rejected this, however, and conclude that punitive damages, excepting those for any intentional conduct, were within the coverage and the coverage limitation. Care should be taken to pick a jurisdiction and state with favorable law, but also some connection to the contractor, insurance company or place of work, because a court might refuse to enforce the clause if the contractor, insurance company and claim have no connection with the chosen jurisdiction or law. The rationale in such decisions is that the public policy does not prohibit insurance coverage for punitive damage awards against parties who did not engage in the reprehensible conduct because the purpose of punitive damages -- deterrence and punishment of the wrongdoer -- would not be … Therefore, no punitive or exemplary damages … Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers. Punitive damages are awarded to penalize the at-fault party in an auto accident and to deter similar blameworthy conduct. All other "terms" of this policy apply. Insurance coverage for punitive damages is frequently excluded by carriers in Georgia and those states which allow such coverage, whereas other states prohibit insurers from providing such coverage altogether. Employee Resources. 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