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. Insurance Bad Faith – Punitive Damages. 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. L.J. It states an insurer may insure against legal liability for exemplary or punitive damages that do not arise from a wrongful act of the insured committed with the intent to cause injury to another. 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. 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. When punitive damages aren't explicitly excluded, they are generally presumed to be covered. insurance coverage for punitive damages from their insurance policies if the insurance company does not intend to provide such coverage. Wilson Elser. 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.”). 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. The new 2016 UIM settlement procedure law abolishes subrogation if the defendant reasonably cooperates with the UIM carrier. Generally … punish the defendant for committing egregious wrongdoing). Accessed Nov. 26, 2019. 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. 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. 12-4450, 2015 U.S. App. Covering claims 75 (1966). INSURANCE COVERAGE OF PUNITIVE DAMAGES IN MONTANA Scott H. Stanaway I. Accessed Nov. 26, 2019. 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. "Fact Sheet: Punitive Damages: Rare, Reasonable and Limited (2011)," Accessed Nov. 26, 2019. Most states say that UM insurance should not provide an award of punitive damages since the above reasons to award it go unmet. State laws determine whether and when punitive damages may be awarded. Ignorance is bliss. In such states, insurance coverage for punitive or exemplary damages would not exist unless that coverage is specifically included in the insurance policy. Insurance Coverage for Punitive Damages – The Discussion Continues. 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. The court held that the policy language encompassed coverage for punitive damages. 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 … 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. Three states allow insurance coverage of punitive damages in the uninsured motorist context but have not addressed the issue under other circumstances; and. Ct. App. Div. 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. 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 … 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. Many of these states do allow insurance to cover punitive damages against an employer based on vicarious liability. Policies vary widely so it is important to read the documents carefully. "A Review of the U.S. Punitive Damages Liability Landscape," Page 3. bility and Punitive Damages, 40 . 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. The case, Farmers Texas County Mutual Insurance Company v. Most (but not all) D&O policies cover punitive damages while many medical malpractice policies exclude them. Therefore, in any case in which California may not provide the choice of law for the plaintiff's punitive damage claim, counsel … 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 … & Casualty Ins. insurance coverage for punitive damage awards. Because of the conflicting law, choice of law issues are important. Insurance Coverage for Punitive Damages – The Discussion Continues. INSURANCE COVERAGE OF PUNITIVE DAMAGES IN MONTANA Scott H. Stanaway I. The incentives of insurance companies do not mesh as neatly with Insurability for punitive damage awards is governed by NRS 681A.095 (added in 1995; updated in 2011). The first step is to look for an explicit exclusion. First, the “all sums” language is absent from the Farmers policy. All other "terms" of this policy apply. Further, unlike the broad language requiring an … [4311. coverage,6 the current trend appears to favor an inclusive liability on the part of the insurer. 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. Insurance Coverage for Punitive Damages? 71, 77-82 (1990) (same); Theodore D. Fischer, Comment, Insurance Coverage and the Punitive Award in the Automobile Acci- How to Tell Whether Punitive Damages Are Covered by Your Insurance. See notes 51-55 & accompanying text infra. 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). Some policies specifically exclude coverage for punitive damages, while others rely on state laws. 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. It states an insurer may insure against legal liability for exemplary or punitive damages that do not arise from a wrongful act of the insured committed with the intent to cause injury to another. Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers. The answer lies in recognizing the circumstances where the law allows the recovery of punitive damages. Speaking of Texas and punitive damages coverage, in Tesco Corp. v. Steadfast Ins. Courts in approximately 20 states have either ruled that punitive damages are uninsurable for public policy reasons or have not addressed the issue. May 15th, 2018 By Tara Mireur. 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). May 15th, 2018 By Tara Mireur. Coverage for Punitive Damages. 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. 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. 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. 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. See notes 51-55 & accompanying text infra. Other states allow for insurance coverage of punitive damages, so long as the applicable insurance policy does not exclude coverage. 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 … Therefore, no punitive or exemplary damages … ALA. L. REv. Punitive damages are not. Most state laws prohibit uninsured motorist insurance (“UM”) from covering punitive damages. Whether punitive damages are covered under liability policies has long plagued the Texas insurance coverage lawyer and his or her clients, and two recent decisions suggest that the outcome, at least from a public policy standpoint, may remain a question without a definitive answer. insurance coverage for a punitive damage award since such coverage would tend to defeat the purpose of the punitive damage award (i.e. To complicate matters, most insurance policies do not include a provision that requires a court to apply the law of any particular state. Aetna Casualty, 285 N.J. Super. Northwestern Nat'l Cas. 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. Co., No. They are intended to punish the defendant for committing an intentional or egregious act that caused harm to someone. One commonly-used policy that does address punitive damages is the standard NCCI workers compensation policy. 5. Thus, courts in many states have ruled that insurance coverage for a punitive damage award would only defeat the punitive damage award purpose. Punitive damages may be excluded separately or in combination with other types of loss like fines and penalties. 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. What’s Employment Practices Liability Insurance? This … Various state statutory codes that limit coverage for punitive damages often distinguish between directly-assessed punitive damages and vicariously-assessed punitive damages. Punitive damages (also called exemplary damages) may be awarded in a tort claim in addition to compensatory damages. Chubb. N/A N/A Punitive damages are awarded to penalize the at-fault party in an auto accident and to deter similar blameworthy conduct. 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. Examples are the ISO general liability, business owners, and business auto policies. 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. 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. Many insurance policies exclude punitive damages, or are ambiguous about whether they are covered. Although the standard commercial general liability (CGL) policy and business auto policy (BAP) contain no punitive damage exclusion, many umbrella and excess liability policies … Therefore, there is no need for courts to act on deterrence grounds to prohibit insurance for punitive damages. Given this exposure, how can a business protect itself? 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 4. Be sure to review all of your policies, including your pollution, professional and umbrella policies. In the U.S., each state establishes its own guidelines to insuring against punitive damages and the types of acts that are insurable. 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.. Given this exposure, how can a business protect itself? Some states prohibit insurance of punitive damages on the grounds that spreading the risk of punishment for willful misconduct lessens the deterrent effect. Indeed, many policies expressly agree to cover punitive damages unless the law applicable to the claim makes them uninsurable. 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. Sometimes they are worded in different ways such as an exclusion for the driver’s recklessness, gross negligence, malicious acts or exemplary damage award. Obtaining punitive damages coverage when a state declares such damages to be uninsurable can be tricky, but observers say some underwriters are willing to … In Wolfe v.Allstate Prop. If there is coverage, then the next step is to determine whether coverage is prohibited as a matter of public policy. They contend that punitive damages won't serve their intended purpose (to punish the perpetrator) if they are paid by an insurance company. 455, 462 (1994). Punitive damages in Canada 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. Co., Civil Action No. Insurance coverage counsel look at damages issues through a different lens than defense or plaintiff's counsel, and can … It also excludes punitive damages with regard to benefits the employer is obligated to provide under maritime law. 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. Alternatively, the court held that the punitive damages would fall within the exclusion barring coverage for civil fines. © 2013 FWH&T, © 2020 Fabyanske Westra Hart & Thomson. 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. First, talk with your insurance broker/agent and your attorney. Auto. A jury, judge, or appellate court (if a case is appealed) decides whether a plaintiff receives punitive damages, and if so, and the amount paid. Unfortunately, many contractors blissfully assume that if they are held liable for punitive damages, then their liability insurance will cover them. 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. This type of clause is referred to in the insurance industry as a “most favorable jurisdiction” clause. For instance, Florida state law generally prohibits insurance coverage for punitive damages for the direct wrongful conduct of an insured. Now she consults and writes about commercial insurance. "Wilson Elser Punitive Damages Review (2014)," Page 2. 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. Many liability policies purchased by small businesses are silent about punitive damages. Whether punitive damages are covered by insurance depends on two things: state law and policy language. LEXIS 9876, (3d Cir. This is because the innocent policyholder, and not the wrongdoer, pays for the UM coverage. 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. "Punitive or exemplary damages" means damages imposed to punish a wrongdoer and to deter others from similar conduct. Accessed Nov. 26, 2019. Punitive damages are intended as a deterrence. “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 … … punitive damages to be insured have narrow exceptions allowing certain risks to be insured for punitive damages. employing as they try to sell insurance for punitive damages awards even when the law prohibits that kind of coverage. If the policy expressly excludes coverage for punitive damages, then the analysis is over; there is no coverage. So, what is a contractor to do? 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. 2. 71 (1968). 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 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. Back to Briefing Papers | Print this Paper. Rav. 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