Currently, punitive damages are unambiguously uninsurable in 11 states. If the defendant acted with intent to harm, there is no punitive damages cap. Punitive damages are not available in every state. CONST. As mentioned above, punitive damages should only be awarded if a defendant has acted egregiously. Corporate counsel are often tasked with negotiating An insurer in Washington could not eliminate its coverage obligation based on its insureds recovery from a third party. In California, the civil fine for fraud is at least five times greater, as Insurance Code 1871.4 sets the penalty for insurance-related fraud at fifty thousand dollars ($50,000) or double the value of the fraud, whichever is greater. For a company like Markel, where all claims adjusters report into the same claims division, underwriters and clients can be assured that the adjusters will work collaboratively to resolve these types of claims on behalf of our insureds, whether through settlement or trial. 3905A, Physical Pain, Mental Suffering, This is the case with many consumer protection statutes. Lastly, wrap policies require that the insured provide notice of a claim for punitive damages to the issuing, offshore insurance carrier, in accordance with the notice requirements listed in the wrap policy. Option 2: Most favored nations wording in a CGL policy
This article provides an overview of some of the basic concepts of punitive damages and attempts to demystify some common assumptions. In the United States, punitive damages are payments awarded by a judge or jury to punish bad actors engaging in reckless, willful, malicious or wanton conduct, and to deter similar wrongful conduct in the future. WebCalifornia Supreme Court Clarifies Attorneys Fees And Punitive Damages In An Insurance Bad Faith Action Because of the unique nature of an insurance contract, 6 VA. CODE ANN. Alaska, Georgia, Illinois, Indiana, Iowa, Missouri, Oregon, and Utah all currently have split-recovery statutes in place. Once these three conditions are met, the offshore wrap policy will indemnify an insured for the punitive damage portion of a jury or arbitration award. Ohio The cap is two times the compensatory damages. Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. Limit the Use of My Sensitive Personal Information. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. & Planning Assn, Inc., 89 Cal. In states called split-recovery, allocation, or apportionment states, some or the entire punitive damages award goes to the state, not the plaintiff. In essence, a most favored nations (MFN) clause stipulates that the law applicable to the insurability of punitive damages under the policy will be the law which, out of a choice of several enumerated options, allows for coverage of punitive damages. In some states, a plaintiff must prove that the defendant tortfeasor engaged in intentional conduct. Insurers in puni-wrap situations do not argue among themselves as to how to classify the damages and from which policy they will be paid, because the controlling policy and puni-wrap policy are both issued by subsidiaries of the same insurance company. Punitive damages are not available in every state. In such a case, the plaintiff could point to the manufacturers knowledge as proof of gross negligence or recklessness that might justify an award of punitive damages. Similarly in 2019, a Maryland jury awarded $229.6 million in purely compensatory damages to a plaintiff in a medical malpractice case.8 The speculation concerning this case was that the plaintiff did not meet the high legal standard for awarding punitive damages (there must be intentional conduct in Maryland). But an examination of cases decided under the statute (e.g., addressing the specific evidentiary showing needed to support an award) often reveals that the remedy is compensatory in nature. However, if there is a claim in which the controlling policy is only partially eroded by compensatory damages and the remainder of the shared limit is eroded by the puni-wrap policy, money will remain on the controlling policy limit for the next claim that comes in the door. 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). 3905, Items of. Bould, 437 So. Nevada The cap is $300k, if the compensatory damages are less than $100k. In order to obtain a punitive damage wrap quote, a domestically issued quote is sent by a Bermudian broker to the insurers offshore affiliate, which will issue a punitive wrap policy for the limits listed in the domestic quote, in exchange for a premium. As such, if a domestically issued policy excludes a particular risk, then the punitive damage policy will not provide punitive damage coverage for the excluded risk. Tennessee The cap is $500k or two times the compensatory damages, whichever is greater. There is, however, one exception to this rule, for punitive damages for wrongful death, where state laws permit that only punitive damages can be awarded in wrongful death claims. Among the verdicts in Figure 2, there are several very large punitive damage awards that were rendered against smaller commercial defendants, including a $50 million punitive damages award against a low-income housing building owner and a $100 million punitive damage award against a Georgia scrap metal recycling company. It is not a mere failure to exercise reasonable care. But the policy is grounded in the legal showing of "fraud, oppression or malice" required under California law for a punitive award. As noted above, an insured buys a puni-wrap policy in conjunction with a US CGL policy (referred to in the puni-wrap as the controlling policy). For example, an underwriter at Markel in the US will issue the controlling CGL policy and an underwriter at Markel in Bermuda will issue the accompanying puni-wrap policy. Idaho The cap is $250k or three times the compensatory damages, whichever is greater. For example, in California juries are instructed to consider the reprehensible nature of the defendants conduct and the amount of punitive damages that would have The simplest way to buy insurance for punitive damages is to request a clause or endorsement in the CGL policy that affirmatively states that punitive damages are covered by the policy.18 Such a clause may incur additional premium, but including it will ensure that the policy is unambiguous in its intent to cover punitive damages. ;tw
hEkm2TWU4y;; xA>-OzMs>~]sQpht2t7kr#w{iN Willis Towers Watson possesses the expertise, knowledge and the global capabilities necessary for securing punitive damages coverage on casualty programs for insureds across industries, casualty program sizes and insurance structures. In 2018, for example, a jury in Harris County, Texas, rendered a plaintiffs verdict in a trucking case for $89,050,000 in compensatory damages and $0 in punitive damages.7 Though the jury did not formally award punitive damages, the pain and suffering figure clearly reflected the jurys anger and their desire to punish the defendant. The US Supreme Court suggested that most awards should be a single-digit ratio and that a ratio of 4-to-1 is close to the line of constitutional impropriety.10 However, the Court did not develop a bright-line rule, with the result that the state courts have their own jurisprudence that takes into consideration all of the factors set out by the Supreme Court. Settlements do not typically specify whether the monies paid are for punitive or compensatory damages, with the result of the default assumption is that they are compensatory. VII 5 By most approximations, at least 95% of civil cases settle, rather than go to trial.3 The second reason for low frequency of punitive damages is that out of the very few cases that do go to trial and result in plaintiffs verdicts, a small percentage of them involve punitive damages. The insurers argued that Walmart overpaid the settlement to avoid this outcome and force its insurers to pay for the entire sum. First, the reality is that only a very small percentage of personal injury cases in the US go to trial in the first place. New Jersey The cap is $350k or five times the compensatory damages, whichever is greater. For example, Illinois law allows for punitive damages in cases where the defendant engages in conduct with evil motive or with a reckless and outrageous indifference to a highly unreasonable risk of harm and with a conscious indifference to the rights and safety of others.1 Conversely, Florida law states that a defendant may be held liable for punitive damages if the defendant was guilty of intentional misconduct or gross negligence.2 In many states, claimants must meet a higher burden of proof to succeed on a punitive damage claim, offering clear and convincing evidence that a defendants conduct justifies such an award. It is a policy that only covers punitive damages. If the defendant is a small business or individual, the cap is 10% of defendants net worth up to $350k. 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Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. Limit the Use of My Sensitive Personal Information. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. & Planning Assn, Inc., 89 Cal. In states called split-recovery, allocation, or apportionment states, some or the entire punitive damages award goes to the state, not the plaintiff. In essence, a most favored nations (MFN) clause stipulates that the law applicable to the insurability of punitive damages under the policy will be the law which, out of a choice of several enumerated options, allows for coverage of punitive damages. In some states, a plaintiff must prove that the defendant tortfeasor engaged in intentional conduct. Insurers in puni-wrap situations do not argue among themselves as to how to classify the damages and from which policy they will be paid, because the controlling policy and puni-wrap policy are both issued by subsidiaries of the same insurance company. 
Punitive damages are not available in every state. In such a case, the plaintiff could point to the manufacturers knowledge as proof of gross negligence or recklessness that might justify an award of punitive damages. Similarly in 2019, a Maryland jury awarded $229.6 million in purely compensatory damages to a plaintiff in a medical malpractice case.8 The speculation concerning this case was that the plaintiff did not meet the high legal standard for awarding punitive damages (there must be intentional conduct in Maryland). But an examination of cases decided under the statute (e.g., addressing the specific evidentiary showing needed to support an award) often reveals that the remedy is compensatory in nature. However, if there is a claim in which the controlling policy is only partially eroded by compensatory damages and the remainder of the shared limit is eroded by the puni-wrap policy, money will remain on the controlling policy limit for the next claim that comes in the door. 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). 3905, Items of. Bould, 437 So. Nevada The cap is $300k, if the compensatory damages are less than $100k. In order to obtain a punitive damage wrap quote, a domestically issued quote is sent by a Bermudian broker to the insurers offshore affiliate, which will issue a punitive wrap policy for the limits listed in the domestic quote, in exchange for a premium. As such, if a domestically issued policy excludes a particular risk, then the punitive damage policy will not provide punitive damage coverage for the excluded risk. Tennessee The cap is $500k or two times the compensatory damages, whichever is greater. There is, however, one exception to this rule, for punitive damages for wrongful death, where state laws permit that only punitive damages can be awarded in wrongful death claims. Among the verdicts in Figure 2, there are several very large punitive damage awards that were rendered against smaller commercial defendants, including a $50 million punitive damages award against a low-income housing building owner and a $100 million punitive damage award against a Georgia scrap metal recycling company. It is not a mere failure to exercise reasonable care. But the policy is grounded in the legal showing of "fraud, oppression or malice" required under California law for a punitive award. As noted above, an insured buys a puni-wrap policy in conjunction with a US CGL policy (referred to in the puni-wrap as the controlling policy). For example, an underwriter at Markel in the US will issue the controlling CGL policy and an underwriter at Markel in Bermuda will issue the accompanying puni-wrap policy. Idaho The cap is $250k or three times the compensatory damages, whichever is greater. For example, in California juries are instructed to consider the reprehensible nature of the defendants conduct and the amount of punitive damages that would have The simplest way to buy insurance for punitive damages is to request a clause or endorsement in the CGL policy that affirmatively states that punitive damages are covered by the policy.18 Such a clause may incur additional premium, but including it will ensure that the policy is unambiguous in its intent to cover punitive damages.