Now she consults and writes about commercial insurance. Insurance Coverage for Punitive Damages – The Discussion Continues. Many of these states do allow insurance to cover punitive damages against an employer based on vicarious liability. 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). Co., No. That may or may not be the case. When punitive damages aren't explicitly excluded, they are generally presumed to be covered. Unfortunately, many contractors blissfully assume that if they are held liable for punitive damages, then their liability insurance will cover them. "Wilson Elser Punitive Damages Review (2014)," Page 2. The case, Farmers Texas County Mutual Insurance Company v. Zuniga, 2018 WL 1310157, involved the question of whether or not a form automobile insurance policy covered … The new 2016 UIM settlement procedure law abolishes subrogation if the defendant reasonably cooperates with the UIM carrier. Many errors and omissions and specialty liability policies explicitly cover or exclude punitive damages. Aetna Casualty, 285 N.J. Super. The laws regarding the insurability of punitive damages vary from state to state. Whether punitive damages are covered by insurance depends on two things: state law and policy language. ALA. L. REv. 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. Wilson Elser. 75 (1966). Therefore, when faced with a claim for punitive damages, you need to evaluate the best “potentially applicable law” and jurisdiction to commence a lawsuit to determine whether there is insurance coverage. "A Review of the U.S. Punitive Damages Liability Landscape," Page 3. This is usually accomplished by a straight-forward exclusion or by defining an “occurrence” to exclude damages that are “expected or intended from the standpoint of the insured.” If the conduct that caused the damages was intentional, then any damages … Most (but not all) D&O policies cover punitive damages while many medical malpractice policies exclude them. They are intended to punish the defendant for committing an intentional or egregious act that caused harm to someone. L. REV. of gross negligence.6 In allowing coverage for punitive damages – at least thus far – Texas has conformed to a basic tenet of liability insurance, which is that gross negligence is insurable. Insurance Coverage for Punitive Damages – The Discussion Continues. Accessed Nov. 26, 2019. This discussion is generalized in nature and should not be considered a substitute for professional advice. State laws determine whether and when punitive damages may be awarded. 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. Sometimes they are worded in different ways such as an exclusion for the driver’s recklessness, gross negligence, malicious acts or exemplary damage award. 5. 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. In addition to finding a jurisdiction with favorable law, insurance coverage for punitive damages can depend on whether the damages are “direct” or “vicarious.” In this regard, even in states that prohibit insurance coverage of “direct” punitive damages (i.e., for conduct sanctioned by upper management), they may allow coverage for “vicarious” liability (i.e., liability for the acts of rank and file employees, subcontractors, etc.). Several states have statutes that prohibit the punishment of intentional wrongdoers through punitive damage awards. Insurance Coverage for Punitive Damages, 20 S.C.L. Insurance coverage counsel look at damages issues through a different lens than defense or plaintiff's counsel, and can … 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. As noted previously, many liability policies don't address punitive damages at all. Punitive damages may be excluded separately or in combination with other types of loss like fines and penalties. “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 … Covering claims punish the defendant for committing egregious wrongdoing). This note will first discuss the current status of the issue in jurisdictions other than California. Site Map / Ins. Usually, punitive damages are awarded only if there has been proof of intentional bad acts, and most insurance policies also exclude coverage for damages caused by intentional acts of the insured. They can audit your insurance policies to determine whether they expressly provide coverage for punitive damages. They contend that punitive damages won't serve their intended purpose (to punish the perpetrator) if they are paid by an insurance company. These policies are costly, but they can provide a contractor with coverage for punitive damages that is not subject to the vagaries of the United States court system. Many liability policies purchased by small businesses are silent about punitive damages. 5. This is usually accomplished by a straight-forward exclusion or by defining an “occurrence” to exclude damages that are “expected or intended from the standpoint of the insured.” Of the five remaining jurisdictions, four of them (which until Stephens Martin included Texas) have yet to address the insurability of punitive damages, and one state (Nebraska) prohibits the imposition of punitive damages. First, the “all sums” language is absent from the Farmers policy. 102 WISCONSIN LAW REVIEW insurance (as well as other aspects of liability insurance). What Is Incidental Medical Malpractice Insurance? 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. Other states allow for insurance coverage of punitive damages, so long as the applicable insurance policy does not exclude 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. L.J. What’s Employment Practices Liability Insurance? 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. 2. Most states agree that an insurer does not have to provide insurance coverage for an award of punitive or exemplary damages against an uninsured or underinsured person. For example, in a recent case, one of our contractor clients was faced with a frightening punitive damage claim in a Pennsylvania court arising out of an accident in Pennsylvania, where direct punitive damages are, as a matter of public policy, not covered by 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. Whether liability insurance policies provide coverage for punitive damages depends not only on the language of the policies, but also on public policy considerations as expressed in both state statutes and case law handed down by state courts. Punitive damages are intended as a deterrence. See notes 51-55 & accompanying text infra. Title: Microsoft Word - PUP8130103 While actual awards have been minimal, usually less than $25,000, punitive damages are sought in legal pleadings in virtually every insurance case and in many others. Insurance Bad Faith – Punitive Damages. Employee Resources. This is usually accomplished by a straight-forward exclusion or by defining an “occurrence” to exclude damages that are “expected or intended from the standpoint of the insured.” If the conduct that caused the damages was intentional, then any damages related to that conduct is excluded, including both compensatory and punitive damages. The incentives of insurance companies do not mesh as neatly with Accessed Nov. 26, 2019. The Court of Appeals of Texas, Fourth District, sitting en banc, has denied a motion for en banc reconsideration. 12-4450, 2015 U.S. App. Many states impose one or more of the kinds of restrictions outlined below. 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. 71 (1968). Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers - Alexandria, Virginia Car Accident Lawyer Punitive Damages Can Be Insurable. Wilson Elser. First, you must analyze the applicable policy. Provide insurance coverage on all professional liability and CGL policies for defence costs for punitive damage claims. Some states prohibit insurance of punitive damages on the grounds that spreading the risk of punishment for willful misconduct lessens the deterrent effect. How to Tell Whether Punitive Damages Are Covered by Your Insurance. The court held that the policy language encompassed coverage for punitive damages. "Fact Sheet: Punitive Damages: Rare, Reasonable and Limited (2011)," Accessed Nov. 26, 2019. Three states allow insurance coverage of punitive damages in the uninsured motorist context but have not addressed the issue under other circumstances; and. 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. How-ever, besides the instant case, four decisions since 1962 have excluded punitive damages from automobile insurance coverage. 71, 77-82 (1990) (same); Theodore D. Fischer, Comment, Insurance Coverage and the Punitive Award in the Automobile Acci- 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. 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. Therefore, no punitive or exemplary damages … As a result, the drunk driver pays no punitive damages – the UIM carrier does. N/A N/A Punitive damages are intended as a deterrence. Punitive damages (also called exemplary damages) may be awarded in a tort claim in addition to compensatory damages. In this situation, the employer didn’t commit the bad act so the damages aren’t intended as punishment. In such states, insurance coverage for punitive or exemplary damages would not exist unless that coverage is specifically included in the insurance policy. … Finally, it is possible to purchase a punitive damages “wrap” policy from the off-shore market (i.e., Bermuda). Although the standard commercial general liability (CGL) policy and business auto policy (BAP) contain no punitive damage exclusion, many umbrella and excess liability policies … Labor Shortages – What do You do When You’ve Got the Work, but Nobody to do it. Because of the conflicting law, choice of law issues are important. Marianne Bonner, CPCU, ARM, worked in the insurance industry for 30 years. 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. This is because the innocent policyholder, and not the wrongdoer, pays for the UM coverage. Punitive damages may not be insurable in some states as such coverage may be considered a violation of public policy. 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. It also excludes punitive damages with regard to benefits the employer is obligated to provide under maritime law. Some policies contain multiple sets of exclusions. The answer lies in recognizing the circumstances where the law allows the recovery of punitive damages. For instance, Florida state law generally prohibits insurance coverage for punitive damages for the direct wrongful conduct of an insured. Punitive damages are also designed to discourage others from committing similar types of acts.. Some policies specifically exclude coverage for punitive damages, while others rely on state laws. These damages are sometimes referred to as “ exemplary damages.” Accessed Nov. 26, 2019. Further, unlike the broad language requiring an … 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. 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. insurance coverage for a punitive damage award since such coverage would tend to defeat the purpose of the punitive damage award (i.e. Sometimes they are worded in different ways such as an exclusion for the driver’s recklessness, gross negligence, malicious acts or exemplary damage award. INSURANCE COVERAGE OF PUNITIVE DAMAGES IN MONTANA Scott H. Stanaway I. So, what is a contractor to do? Coverage for Punitive Damages. All other "terms" of this policy apply. 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). Punitive Damages Can Be Insurable Insurability for punitive damage awards is governed by NRS 681A.095 (added in 1995; updated in 2011). May 15th, 2018 By Tara Mireur. bility and Punitive Damages, 40 . Insurability for punitive damage awards is governed by NRS 681A.095 (added in 1995; updated in 2011). Chubb. Policies vary widely so it is important to read the documents carefully. Insurance Coverage for Punitive Damages, 20 S.C.L. Rav. 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. Directly-assessed punitive damages are awarded directly against the wrongdoer. See notes 51-55 & accompanying text infra. 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 … If not, then they can assist you in obtaining a punitive damage endorsement. Obtaining punitive damages coverage when a state declares such damages to be uninsurable can be tricky, but observers say some underwriters are willing to … Therefore, there is no need for courts to act on deterrence grounds to prohibit insurance for punitive damages. Determining whether a contractor has coverage for punitive damages is a two-step process. Some policies cover or exclude punitive damages via their definition of certain terms, particularly damages or loss. 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 … Most states say that UM insurance should not provide an award of punitive damages since the above reasons to award it go unmet. Punitive damages Damages awarded in a civil lawsuit in order to punish wrongdoing of a greater culpability than simple negligence, without regard to compensating the plaintiff’s actual loss. The Court rejected this, however, and conclude that punitive damages, excepting those for any intentional conduct, were within the coverage and the coverage limitation. Most state laws prohibit uninsured motorist insurance (“UM”) from covering punitive damages. Ultimately, our contractor client was able to convince its insurer to settle with the Plaintiff to avoid the risk of having to pay punitive damages. Andrew P. Moses. 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. For public policy reasons, many states (including Minnesota and North Dakota) prohibit insurance coverage for directly assessed punitive damages, based on the notion that allowing coverage would defeat the purpose of punitive damages (i.e., punishment and deterrence). "Punitive or exemplary damages" means damages imposed to punish a wrongdoer and to deter others from similar conduct. 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. 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. Be sure to read all exclusions in the policy. Punitive damages are awarded to penalize the at-fault party in an auto accident and to deter similar blameworthy conduct. Insurance Products for Punitive Damages: There are pros and cons to the insurance products designed to cover punitive liability. Insurance coverage, both liability and uninsured/underinsured motorist coverage, provides coverage for punitive damage awards in a New Mexico auto accidents. insurance coverage for punitive damages from their insurance policies if the insurance company does not intend to provide such coverage. The laws vary widely. In Wolfe v.Allstate Prop. Examples are the ISO general liability, business owners, and business auto policies. Mid-Century Ins. Many insurers of these policies are willing to negotiate coverage for punitive damages – if you ask! Various state statutory codes that limit coverage for punitive damages often distinguish between directly-assessed punitive damages and vicariously-assessed punitive damages. 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. "Wilson Elser Punitive Damages Review (2014)," Page 7. Indeed, many policies expressly agree to cover punitive damages unless the law applicable to the claim makes them uninsurable. Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers. Punitive damages in Canada 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; Insurance Companies Ignore Their Underwriters’ Intent It is clear beyond doubt that the drafters and sellers of standard form commercial general lia-bility insurance policies (formerly comprehensive general liability insurance policies) intended to include punitive damages within the scope of coverage. The Court of Appeals of Texas, Fourth District, sitting en banc, has denied a motion for en banc reconsideration. employing as they try to sell insurance for punitive damages awards even when the law prohibits that kind of coverage. If coverage for "punitive or exemplary damages" exists under this policy by reason of this endorsement and the required underlying coverage, it shall not be for broader coverage then is provided by the underlying insurance. insurance coverage for punitive damage awards. Is Wrongful Death Covered by Liability Policies? First, talk with your insurance broker/agent and your attorney. One commonly-used policy that does address punitive damages is the standard NCCI workers compensation policy. 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. Unfortunately, even if there is nothing within the four corners of the insurance policy excluding coverage for punitive damages, the analysis is not over. Therefore, in any case in which California may not provide the choice of law for the plaintiff's punitive damage claim, counsel … However, a few courts disagree. Speaking of Texas and punitive damages coverage, in Tesco Corp. v. Steadfast Ins. 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. Punitive damages may not be insurable in some states as such coverage may be considered a violation of public policy. To complicate matters, most insurance policies do not include a provision that requires a court to apply the law of any particular state. Discerning Answers to the Conundrum Created by Disputes Involving Conflicting Public Policies, Pragmatic Considerations and Political Actions, 39 V!LL. 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. 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. Auto. Courts in approximately 20 states have either ruled that punitive damages are uninsurable for public policy reasons or have not addressed the issue. 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." 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. 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