A party cannot exclude or limit its liability for punitive or exemplary damages as it would stifle the preventive (or punitive) purpose of such damages. We held, therefore, that an express exclusion was required to eliminate coverage for punitive damages from general liability insurance because the insured was personally at risk if his liability insurance did not cover those damages. The following considerations are of primary importance when the court reviews punitive damages: 1) The degree to which the defendants actions were negligent, malicious, or intentional, 2) Whether or not similar cases awarded punitive damages. * None of these policies mentions punitive damages. MassDevice, Punitive Damages Awards, Caps, and Standards, State Farm Mut. Are you sure you want to rest your choices? For punitive damages to be awarded, on the other hand, while the exact requirements differ by state, a plaintiff generally needs to prove that the defendant either acted with intent to harm (an intentional tort) or with gross negligence or recklessness. In the end, Liebeck was awarded $200,000 in compensatory damageslater cut to $160,000 after the jury determined that she was responsible for 20% of the spilland $2.7 million in punitive damageslater reduced to $480,000 to cap Liebeck's award at three times what she won for compensatory damages. Despite public perception, punitive damages awards arent a frequent outcome of civil litigation in the U.S. According to his Roundup lawsuit, Johnson developed non-Hodgkin's lymphoma as a result of exposure to the popular weedkiller, and a jury verdict agreed. 12222 Merit Drive, Suite 1600, What Does Cyber Liability Insurance Cover? Co. of N.C., 319 S.E.2d 217 (N.C. 1984). The court concluded: Thus, the majority of states that have considered whether public policy prohibits insurance coverage of exemplary damages for gross negligence, either by legislation or under the common law, have decided that it does not. The State Bar of Texas, Insurance Section, published an article discussing this issue. Punitive damages are given with other damages, never alone, and increase a plaintiffs award. Compensatory Damages: Definition, Types, and Examples, Breach of Contract Explained: Types and Consequences, What Are Civil Damages? otherwise, absent such waiver and exclusion, be able to assert against a seller in a normal breach of contract claim. p. 32. I doubt that such protection is ever afforded by insurance, because the companies who are experienced in such matters and who write the contracts, expressly exclude such conduct from the protection afforded by the policy. Rather, they are intended to punish the defendant. 2023 CSO Technology Partners, LLC. Published 2003. In the case of exceptional recklessness, or very modest compensatory awards, most courts will mandate a maximum punitive award of nine times the amount of compensatory damages, but there have been some exceptions to that rule. Speak with a lawyer and get a free case evaluation today, $417 Million Echeverria Talc Verdict Wallops J&J, $28 Million Awarded in Xarelto Verdict for Bleeding Injuries. To categorically state that the CGL policy will never pay punitive damages because punitive damages are always uninsurable as a matter of law is clearly erroneous. Punitive damages are difficult to get because plaintiffs are typically required to show that the defendant acted in a particularly reprehensible manner. Published May 1, 2017. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. They are intended to punish the defendant for committing an intentional or egregious act that caused harm to someone. While many of the cases deciding whether insurance provides coverage for punitive damages are automobile liability cases, the focus has been on the insuring agreement. What Happens to the Fines Collected by the SEC? Thus, in North Carolina punitive damages may be awarded in negligence cases for wanton or gross acts. Craig Stanovich 2023 Forbes Media LLC. As the phrase was so artfully turned in oral argument, we agree that, "rich and resourceful as is the English language," General Accident could have excluded punitive damages by means other than forgoing use of the words "all sums." No new trial for Bard in $4m vena cava filter loss. Accessed February 6, 2019. (2) In all civil actions in which punitive damages are permitted . 1990). Exemplary or punitive damages are authorized to be inflicted when the wrong done partakes of a criminal character, though not punishable as an offense against the state, or consists of aggravated misconduct or a lawless act. Sometimes punitive damages are also awarded when compensatory damages seem insufficient to make up for the defendant's behavior. The punitive damage exclusion in the Farm Family policy specifically barred coverage for "punitive or exemplary damages." However, the policy did not define "punitive or exemplary damages" which, under Connecticut law, are damages that are intended to compensate a plaintiff for his costs of litigation. Punitive damages can be awarded in these cases: battery, assault, libel, slander, conversion, fraud, false imprisonment, malicious prosecution, trespass to land a. . Such a specific exclusion for punitive damages would be valid and enforceable."). Thus, Justice Gewin's admonition is well reasonedconsider the nature of the conduct rather than only the types of damages awarded. Her unique professional history alongside her rigorous educational background allows her to contribute to a variety of consumer-focused topics with a fresh perspective. Chubb. Accessed Nov. 26, 2019. the pollution exclusion contained in defendants' CGL policies precluded coverage. You indemnify us and our trustees, officers, directors, agents and employees immediately on demand against any and all claims, liability, damages, costs and expenses, including reasonable legal fees, arising out of or relating to: (a) any breach by you of these Terms; (b) your use of the CRC; (c) any User Content; (d) the infringement . Fairfield Ins. 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. Published June 14, 2017. All forms of damages exist as part of tort law and are designed to financially compensate a victim for losses they sustain due to another person's bad behavior. Tex. Accessed February 6, 2019. Looking at similar cases to determine if punitive damages were awarded. Exclusion of Consequential Damages. The following are some of the factors that can influence whether or not an award of punitive damages might be made: Although court cases involving large punitive damages seem to hit the news with regularity, according to the latest report released by the US Department of Justice, plaintiffs dont pursue punitive damages that often. And as is often the case when an issue may turn on public policy considerations, judges are not shy about their feelings. Co. v. Stephen Martin Paving LP, 246 S.W.3d 653 (Tex. Penalties; 4. McIntyre v Grigg, [2006] OJ No 4420 [McIntyre] at para 49, 2006 CanLII . Performance information may have changed since the time of publication. Accessed Nov. 26, 2019. Why punitive damages may be against public policy is well explained in the seminal case of Northwestern Nat'l Cas. The laws regarding the insurability of punitive damages vary from state to state. While General Accident could have contracted to exclude punitive damages, it did not do so by the language it chose to use. Claims-Made vs. 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. Punitive damages are the payment that a defendant found guilty of committing a wrong or offense is ordered to pay on top of compensatory damages. Each state adopts different criteria and some are more likely to award punitive damages than others. Due Process. Direct and Consequential Damages: "Direct damages," also called "general damages," are "[d]amages that the law presumes follow the type of wrong complained of." Black's Law Dictionary 394 (7th ed. A party cannot exclude or limit its liability for its intentional or gross fault (including gross negligence, recklessness, or carelessness). Punitive damages do not usually apply in breach of contract cases, and they are limited by state laws and federal judicial precedents. Additional fixes and features added. These include white papers, government data, original reporting, and interviews with industry experts. Punitive damages, also known as exemplary damages, may be awarded by the trier of fact (a jury or a judge, if a jury trial was waived) in addition to actual damages, which compensate a plaintiff for the losses suffered due to the harm caused by the defendant. These are put in place to punish the defendant and deter them and others from repeating misconduct. In other words, punitive damages vicariously imposed may not be against public policy to insure, even in those states that have concluded that punitive damages are uninsurable for direct liability. Punitive damages, or exemplary damages, are awarded to a plaintiff in addition to compensatory damages as a way to punish the defendant for a purposeful or especially negligent action. In McNulty, above, the court observed: A different situation is present where the sole liability of the insured arises out of the relation of master and servant. Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. Further, the conclusion that the CGL policy wording always excludes or otherwise does not provide coverage for punitive damages has little, if any, support. in the event some countries/states do not allow the exclusion or limitation of certain or all of the foregoing damages, so to the extent that such limitations or . As UM and UIM coverage is paid by the insurer of the innocent party, most states have concluded that requiring payment of punitive damages to the insured under UM or UIM coverage would not be justified. Santos v. Lumbermens Mut. A limitation of liability clause stipulates that a party will be obligated to pay to the other in such an event under the terms of an agreement. In that situation, the punitive damages are not taxable. You might be using an unsupported or outdated browser. most jurisdictions holding that punitive damages are not recoverable under the injured party's UM coverage also note that it would be antithetical to require the UM carrier to pay a penalty assessed against the wrongdoer, because the burden of payment would fall not upon the wrongdoer, or even the insurer of the wrongdoer, but upon the insurer of the innocent party. Forty-five states have addressed the insurability of punitive or exemplary damages. Stella Liebeck of New Mexico was badly injured with second and third-degree burns when a cup of coffee she purchased at a McDonalds Corp. drive-through spilled on her lap after her grandson stopped the car she was sitting in so that she could add sugar and cream. If youre contemplating bringing a personal injury case, speak with an experienced personal injury attorney to see if you should be seeking punitive damages. Similarly, courts have noted that the insuring agreement (or policy) contains no exclusion for punitive damages: The plain and ordinary meaning of the language used in the policy, particularly from the viewpoint of a layman, covers "all damages" and contains no exclusion for punitive damages. The policy provisions in the case at bar make no distinction between actual and punitive damages. They are awarded by a court of law not to compensate injured plaintiffs but to punish defendants whose conduct is considered grossly negligent or intentional. Shes an experienced Regenerative Medicine Consultant with a demonstrated history of working in the hospital & healthcare industry. Its actually a myth that punitive damages are awarded all the time. He is a professor of economics and has raised more than $4.5 billion in investment capital. Occurrence Policies: What's the Difference? We summarize the facts, which are undisputed, from the record before the . The site is sponsored by law firms. 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. Was the plaintiff financially vulnerable? For example, in cases where facts are virtually identical, one jury may award only compensatory damages (to which the insurance applies) while another jury (based on the same facts) may also award punitive damages, which public policy disallows as insurable. Co. v. Campbell, 538 U.S. 408 (2003). Accessed Nov. 26, 2019. Published July 23, 2017. Under O.C.G.A. "Fact Sheet: Punitive Damages: Rare, Reasonable and Limited (2011)," Accessed Nov. 26, 2019. If the defendant acted willfully, intentionally, maliciously or fraudulently, coverage should be denied; because, in such circumstances, he should not be able to avoid punishment by shifting the penalty to an insurance carrier. In an October 2018 appeals court decision, a judge decreased the punitive damages award to $39.25 million, citing due process. What Are Punitive Damages? Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle. Every lawsuit has its own set of nuanced special circumstances, especially those involving personal injury, making it difficult for anyone but an experienced lawyer to determine which limits apply to any single case. Medical device manufacturer Ethicon faced a verdict of $2.5 million in compensatory damages and $17.5 million in punitive damages in a 2017 hernia mesh lawsuit. Accessed February 6, 2019. Whereas economic and non-economic damages are both intended to compensate the victim for a loss or injury they have suffered, punitive damages are not intended to compensate the victim at all. While state laws differ in the exact requirements for punitive damages, plaintiffs typically need to prove that the defendant acted either: For example, lets say the results of research and development testing indicate a product isnt safe for public use or consumption. OF BUSINESS, LOST PROFITS, LITIGATION, OR THE LIKE), SPECIAL, EXEMPLARY, PUNITIVE, OR OTHER DAMAGES, UNDER ANY LEGAL THEORY, ARISING OUT OF OR IN ANY WAY RELATING TO THE SITE, YOUR SITE USE, OR THE CONTENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. The Estate argues that the Policy is ambiguous because this exclusion's language conflicts with the following provision: "We will pay damages, other than punitive or exemplary, for bodily injury or property damage for which you become legally responsible because of an auto accident." Id. Policies vary widely so it is important to read the documents carefully. 12.1 Consequential Damages Waiver. Punitive damages are considered punishment and are typically awarded at the court's discretion when the defendant's behavior is found to be especially harmful. Most (but not all) D&O policies cover punitive damages while many medical malpractice policies exclude them. My conclusion is that if the insurance industry feels that punitive damages protection should not be afforded under automobile liability policies, it can very easily make a provision in the exclusions section to that effect. related to limitations of certain damages. The issue is a mature one and has well-defined battle lines. Examples would medical malpractice cases or product liability cases. In Malanga v. Mfrs. The laws vary widely. Punitive damages imposed for gross negligence present an entirely different set of circumstances and should be viewed accordingly. State Farm Mut. While compensatory damages are intended to reimburse a civil plaintiff for his or her sustained injuries, punitive damages are intended to punish the defendant for outrageous, willful, or wanton conduct, and to deter the defendant and others from engaging in similar conduct in the future. Please try again later. Punitive damages are normally not awarded in the context of a breach of contract claim. The customers doctor determines the supplements reacted with the customers prescription medication to cause the illness. EEOC Wins $8 Million Jury Verdict For Blind Worker in Disability Bias Case Against Echostar. McPeak v McPeak (On Remand), 233 Mich App 483, 490, 593 NW2d 180 (1999) A plaintiff who seeks exemplary damages for the defendant's . Further, some courts have questioned whether the situations in which punitive damages are awarded can be readily distinguished from situations in which only compensatory damages are awarded. 983 (Mass. Wex Legal Dictionary. Typically they do not exceed four times the amount of compensatory damages, although punitive damage caps vary by state. A wrap-around insurance program is a policy that provides punitive damages coverage for employment practices liability claims. In a nutshell, compensatory damages restore the plaintiff's losses, and punitive damages discipline the defendant for their behavior. Texas's highest court provides some recent (2008) perspective on the insurability of punitive damages throughout the United States. or the exclusion or limitation of certain damages. Eight states have a broad prohibition against insuring punitive damages, and seven states allow coverage for punitive damages only if imposed vicariously but otherwise prohibit insurance for punitive damages. Under PART C - UNINSURED MOTORISTS COVERAGE, EXCLUSIONS, item D. is deleted and replaced by t he following punitive damages exclusion: D. Punitive Damages Exclusion: We do not provide coverage for: 1. damage which . Ins. Examples would medical malpractice cases or product liability cases. Justia Law. A little further along this spectrum is the view that punitive damages are appropriate where the defendant's conduct constitutes willful or intentional wrongdoing. Civ. There are exceptions, though. A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. What Was, and What Wasn't Accomplished at COP27, The Insurance Industry Confronts Its Own Racism, International COVID-19 Stimulus and Relief. But what is excluded is not the punitive damages but rather the intentional wrongdoing of the insured that resulted in the award of punitive damages. In the case of a personal injury claim, punitive damages may be added to compensatory damages, which cover the victims medical bills, hospital expenses, property damage, and other fees. Some will also assert that the CGL policy does not provide coverage for punitive damages, either because the CGL policy automatically includes an express exclusion or because well, it just doesn't cover punitive damages. Exclusions: Punitive Or Statutory Damages This policy covers only compensatory damages. Exemplary damages are another term used interchangeably with punitive damages. Coverage for punitive damages has also been addressed in a few instances by state legislatures. If these laws apply to you, the . Next, look at the policydefinitions section. Be sure to read all exclusions in the policy. The policy also included an amendment that excluded coverage for any claim for punitive or exemplary damages. The Supreme Court of Oklahoma considered punitive damages imposed vicariously and commented: In almost all jurisdictions which disallow insurance coverage for punitive damages, an exception is recognized for those torts in which liability is vicariously imposed on the employer for a wrong of his servant. Under the plain language of the policy the company promises to pay on behalf of the insured all sums which the insured shall be legally obligated to pay as damages because of injury. Hence the policy provision"for all sums which the insured might become legally obligated to pay"is sufficiently broad to include liability for punitive damages. The terms punitive damages and exemplary damages are used synonymously. To obtain access to certain gciresidential.com and goldbergcompanies.com services, you will be given an opportunity to register with us or RentPayment.com. Were you diagnosed with ovarian cancer after years of using Johnson & Johnson's talcum powder? But punitive damages actually arent awarded that often when compared to compensatory damages. ALL RIGHTS RESERVED. However, too narrow a focus on whether punitive damages are insurable as a matter of law and whether the CGL policy includes coverage as "damages" may result in overlooking an essential pointthe CGL policy is always subject to all terms, limitations, conditions, and exclusions. Compensatory damages are directly tied to the plaintiff's injury or injuries, like property damage, medical expenses or lost wages. It also excludes punitive damages with regard to benefits the employer is obligated to provide under maritime law. So long as the punitive or exemplary exclusion is not ambiguous and does not violate a state's public policy or statutes, most courts will uphold the exclusion and enforce it. The oft-cited contention that "damages" include only "actual" damages in a CGL (or other) policy and do not include punitive damages has not generally been upheld. There are some exceptions including personal injury or physical illness settlements, among others. According to the court, "Few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process." Accessed February 6, 2019. Contrast this with a situation where a manufacturer knows that test results suggest the product isnt safe for public use or consumption, but decides to go ahead and release the product anyway. Liebeck spent eight days in the hospital and then reportedly asked McDonalds for $20,000 to cover her medical bills. Whether punitive damages are covered by insurance depends on two things: state law and policy language. Civil damages are monetary awards granted when a person suffers a loss due to the wrongful or negligent actions of another party. There's a question, however, as to whether vicariously assessed punitive damages can be covered. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. Katy Moncivais holds a Ph.D. in Biomedical Engineering from The University of Texas at Austin. awarding of exemplary damages that the plaintiff show wantonness or willfulness in the commission of the tort; but such damages may be awarded, if the . When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. The insurance company in this case would not contend that doctors would be more reckless or would more frequently commit gross negligence simply because they are insured under a professional liability insurance policy that covers punitive damages. Such damages are allowed, after an award for compensatory damages, in negligence cases when there has been some willful misconduct. "A Review of the U.S. Punitive Damages Liability Landscape," Page 3. Society would then be punishing itself for the wrong committed by the insured. In this situation, the employer didnt commit the bad act so the damages arent intended as punishment. Punitive damages are also called exemplary damages. Expected or intended injury: Bodily injury or property damage that is caused intentionally is excluded from coverage. Commissions do not affect our editors' opinions or evaluations. These include damages which may be imposed to punish a wrongdoer or deter others from similar conduct. However, there can be situations where the circumstances surrounding a breach of contract involve a tort thats capable of resulting in punitive damages. A jury awarded her $2 million in compensatory damages and $1.6 million in punitive damages in her IVC filter lawsuit. Punitive damages, also known as exemplary damages, are damages that are awarded in personal injury lawsuits in addition to compensatory damages. Equal Opportunity Employment Commission. It is critical to keep in mind, however, that the obligation to pay punitive damages by a CGL insurer is always subject to all other terms and conditions of the CGL policy. Since punitive damages are recoverable in North Carolina in cases where intentional injury is not involved, there is a compelling reason that this Court should not create a new public policy prohibiting insurance coverage for punitive damages. Co. v. McNulty, 307 F.2d 432 (5th Cir. The misconduct we have in mind is intentional or malicious wrongdoing. Punitive Damages The Administrative Agent, the Lenders and the Borrower hereby agree that no such Person shall have a remedy of punitive or exemplary damages against any other party to a Loan Document and each such Person hereby waives any right or claim to punitive or exemplary damages that they may now have or may arise in the future in They are specifically designed to punish defendants whose conduct is considered grossly negligent or intentional. * 51-12-5.1: *Punitive damages may be awarded only in such tort actions in which it is proven by clear and convincing evidence that the defendant's actions showed willful misconduct, malice, fraud, wantonness, oppression, or that entire want of care which would raise the presumption of conscious indifference to consequences. Many errors and omissions and specialty liability policies explicitly cover or exclude punitive damages. The defendant is usually a company or other large entity. State laws determine whether and when punitive damages may be awarded. Exemplary damages includes punitive damages. Consequential damages: These are best understood as including all losses sustained by the nonbreaching party that are attributable to any special circumstances of the nonbreaching party that the parties were aware of when they entered into the contract; in other words, consequential damages encompass all contractually recoverable damages that If the harm inflicted by the defendant is difficult to estimate financially, or the defendant's actions were particularly reckless, the court can also award punitive damages as a way to punish the defendant and discourage similar behavior. Automobile Ins. Your financial situation is unique and the products and services we review may not be right for your circumstances. Accessed February 6, 2019. Punitive damages in contract law are monetary damages awarded to a plaintiff to punish the defendant and prevent him from engaging in the same conduct at any point in the future. While compensatory damages arent generally included in income for tax purposes, punitive damages are taxable and should be reported as Other income on line 8z of Form 1040, Schedule 1. 2008). Products Liability Law Daily. For any claim for punitive damages vary from state to state policies vary widely so is! An award for compensatory damages cases for wanton or gross acts 408 ( 2003.... Sometimes punitive damages coverage for punitive or exemplary damages, are damages that are awarded all the time International. A wrongdoer or deter others from repeating misconduct most ( but not all ) D & policies!, Caps, and Standards, state Farm Mut there & # x27 ; s a,! V Grigg, [ 2006 ] OJ no 4420 [ punitive or exemplary damages exclusion ] at para,! 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