Accessed Nov. 26, 2019. Alaska courts allow punitive damages to be covered by insurance. 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. State Farm Mut. The incentives of insurance companies do not mesh as neatly with Insurance Bad Faith – 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. 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. State laws determine whether and when punitive damages may be awarded. Marianne Bonner, CPCU, ARM, worked in the insurance industry for 30 years. Further, unlike the broad language requiring an … 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 … Punitive damages are not. Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers. 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. 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. In such states, insurance coverage for punitive or exemplary damages would not exist unless that coverage is specifically included in the insurance policy. punitive damages insurance and that the companies' control over underwriting and contracting places them in a better position than courts to address that objection. Provide insurance coverage on all professional liability and CGL policies for defence costs for punitive damage claims. 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. 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. 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 3. So, what is a contractor to do? This is because the innocent policyholder, and not the wrongdoer, pays for the UM coverage. insurance coverage for a punitive damage award since such coverage would tend to defeat the purpose of the punitive damage award (i.e. © 2013 FWH&T, © 2020 Fabyanske Westra Hart & Thomson. In this situation, the employer didn’t … 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 … They contend that punitive damages won't serve their intended purpose (to punish the perpetrator) if they are paid by an insurance company. 2. 71, 77-82 (1990) (same); Theodore D. Fischer, Comment, Insurance Coverage and the Punitive Award in the Automobile Acci- Some states, however, do allow for it. If there is coverage, then the next step is to determine whether coverage is prohibited as a matter of public policy. Co., No. employing as they try to sell insurance for punitive damages awards even when the law prohibits that kind of coverage. Northwestern Nat'l Cas. Therefore, in any case in which California may not provide the choice of law for the plaintiff's punitive damage claim, counsel … This type of clause is referred to in the insurance industry as a “most favorable jurisdiction” clause. toward insurance coverage of punitive damages. Some states prohibit insurance coverage for punitive damages levied against the wrongdoer. insurance coverage for punitive damages from their insurance policies if the insurance company does not intend to provide such coverage. Some policies contain multiple sets of exclusions. Punitive damages are intended as a deterrence. Punitive Damages Can Be Insurable Insurability for punitive damage awards is governed by NRS 681A.095 (added in 1995; updated in 2011). 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. 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; To complicate matters, most insurance policies do not include a provision that requires a court to apply the law of any particular state. 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). Insurance Products for Punitive Damages: There are pros and cons to the insurance products designed to cover punitive liability. & Casualty Ins. The case, Farmers Texas County Mutual Insurance Company v. Are Punitive Damages Covered by Liability Insurance? Determining whether a contractor has coverage for punitive damages is a two-step process. 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. In this situation, the employer didn’t commit the bad act so the damages aren’t intended as punishment. Co. v. 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. Many liability policies purchased by small businesses are silent about punitive damages. Coverage for Punitive Damages. If not, then they can assist you in obtaining a punitive damage endorsement. 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 coverage is typically referenced in the definition of “Loss” with a provision which states that Loss includes punitive or exemplary damages. Some policies cover or exclude punitive damages via their definition of certain terms, particularly damages or loss. 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. What’s Employment Practices Liability Insurance? 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. Labor Shortages – What do You do When You’ve Got the Work, but Nobody to do it. By using The Balance Small Business, you accept our. Chubb. 13-91 (Tex. 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. May 15th, 2018 By Tara Mireur. First, talk with your insurance broker/agent and your attorney. Generally … The Court of Appeals of Texas, Fourth District, sitting en banc, has denied a motion for en banc reconsideration. 455, 462 (1994). INSURANCE COVERAGE OF PUNITIVE DAMAGES IN MONTANA Scott H. Stanaway I. 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. Ignorance is bliss. Accessed Nov. 26, 2019. Most state laws prohibit uninsured motorist insurance (“UM”) from covering punitive damages. Punitive damages are intended as a deterrence. It also excludes punitive damages with regard to benefits the employer is obligated to provide under maritime law. This is not uncommon. [4311. coverage,6 the current trend appears to favor an inclusive liability on the part of the insurer. Insurance Coverage for Punitive Damages, 20 S.C.L. 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.). N/A N/A If the policy expressly excludes coverage for punitive damages, then the analysis is over; there is no coverage. Back to Briefing Papers | Print this Paper. 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. Next, look at the policy definitions section. 71 (1968). 102 WISCONSIN LAW REVIEW insurance (as well as other aspects of liability insurance). 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). Now she consults and writes about commercial insurance. Other states allow for insurance coverage of punitive damages, so long as the applicable insurance policy does not exclude 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. Insurance coverage counsel look at damages issues through a different lens than defense or plaintiff's counsel, and can … The Supreme Court of Texas recognized the wide variation that exists over the insurability of punitive damages: “The cases defy easy categorization, but it appears that: 19 states generally permit coverage of punitive damages; 8 states would permit coverage of punitive damages for grossly negligent conduct, but not for more serious conduct; 11 states would permit coverage of punitive damages for … None of these policies mentions punitive damages. damages." 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 … "Wilson Elser Punitive Damages Review (2014)," Page 2. Punitive damages are awarded to penalize the at-fault party in an auto accident and to deter similar blameworthy conduct. For instance, Florida state law generally prohibits insurance coverage for punitive damages for the direct wrongful conduct of an insured. Employee Resources. If the policy is ambiguous or silent, then there may or may not be coverage, depending on the applicable law. Co., Civil Action No. 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 May 15th, 2018 By Tara Mireur. Therefore, no punitive or exemplary damages … The answer lies in recognizing the circumstances where the law allows the recovery of punitive damages. Sometimes they are worded in different ways such as an exclusion for the driver’s recklessness, gross negligence, malicious acts or exemplary damage award. How to Tell Whether Punitive Damages Are Covered by Your Insurance. Speaking of Texas and punitive damages coverage, in Tesco Corp. v. Steadfast Ins. Most states say that UM insurance should not provide an award of punitive damages since the above reasons to award it go unmet. Wilson Elser. Although the standard commercial general liability (CGL) policy and business auto policy (BAP) contain no punitive damage exclusion, many umbrella and excess liability policies … 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. Unfortunately, even if there is nothing within the four corners of the insurance policy excluding coverage for punitive damages, the analysis is not over. Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers - Alexandria, Virginia Car Accident Lawyer … Punitive damages may not be insurable in some states as such coverage may be considered a violation of public policy. 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. punish the defendant for committing egregious wrongdoing). L.J. 75 (1966). In most states, the courts have held that a reference to “damages” is broad enough to include punitive damages, as well as compensatory damages. First, the “all sums” language is absent from the Farmers policy. They can audit your insurance policies to determine whether they expressly provide coverage for punitive damages. Directly-assessed punitive damages are awarded directly against the wrongdoer. Andrew P. Moses. Punitive Damages Can Be Insurable. Ct. App. However, a few courts disagree. As noted previously, many liability policies don't address punitive damages at all. 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. 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. insurance coverage for punitive damage awards. 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. 575, 577, 580-89 (App. These damages are sometimes referred to as “ exemplary damages.” In Wolfe v.Allstate Prop. 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. Many states impose one or more of the kinds of restrictions outlined below. 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. L. REV. Center for Justice and Democracy. “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 … 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. Accessed Nov. 26, 2019. The laws vary widely. Also called "exemplary damages." 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. 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. Many insurers of these policies are willing to negotiate coverage for punitive damages – if you ask! Thus, courts in many states have ruled that insurance coverage for a punitive damage award would only defeat the punitive damage award purpose. INSURANCE COVERAGE OF PUNITIVE DAMAGES IN MONTANA Scott H. Stanaway I. 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. 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.”). 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. Some policies specifically exclude coverage for punitive damages, while others rely on state laws. 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 — 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. That may or may not be the case. 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. 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. Given this exposure, how can a business protect itself? This discussion is generalized in nature and should not be considered a substitute for professional advice. 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