Attorney Fees are almost universally excluded from the definition of damages in attorney malpractice policies. Punitive damages may or may not be excluded from malpractice coverage, but still may not be permitted by your state.
Your insurer may pay defense costs and the award for damages in a covered malpractice claim. Fees and sanction awards are another matter. Fees or sanction awards often exceed the value of the underlying claim. Awarded punitive damages could dwarf the underlying case.
The time to check for coverage is not after the punitive damage award. So how can you determine whether a particular malpractice insurance policy covers punitive damages? Punitive damage awards are normally awarded for egregious acts some malpractice policies provide coverage other policies exclude the coverage. Just because it is excluded does not mean you will find it in the ‘exclusion section’. The more common place to find the punitive damages ‘exclusion’ is in the damages definition. The Everest Policy defines damages as Loss. In the Everest policy it is the definition of Loss:
SECTION XX – DEFINITIONS
Q. Loss means those amounts any Insured becomes legally obligated to pay as a result of a Claim, including but not limited to damages (including punitive, exemplary and multiple damages), judgments, settlements, Claim Expenses and any award of pre-judgment and post-judgment interest with respects to covered damages, judgments or settlements. Solely with respect to coverage under SECTION II, Loss shall include Expenses.
The insurability of punitive, exemplary or multiple damages shall be determined under the internal laws of any jurisdiction most favorable to the Insureds, including the jurisdiction in which the Named Insured, the Insurer, this Policy or such Claim is located.
Loss does not include:
1. the multiplied portion of multiplied awards;
2. fines, penalties, taxes or sanctions imposed by law, other than as referenced above;
3. any amount for which an Insured is absolved from payment by reason of any covenant, agreement, court order, or bankruptcy of any Insured;
4. the return, reduction, restitution, withdrawal, forgiveness, waiver or offset of any legal fees, costs, expenses or receivables, paid to, incurred, charged or chargeable by, an Insured;
5. the cost of correcting, re-performing or completing, any Professional Services by an Insured;
6. the cost of complying with any injunctive or other non-monetary relief;
7. amounts which are uninsurable by law.
Click here for Punitive/Compensatory Damages Allowed by State
CLICK HERE TO OBTAIN AN ATTORNEY MALPRACTICE QUOTE
This blog is an excerpt from the policy. The complete policy along with applicable endorsements could impact the information provided above.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080