The time to check your malpractice coverage is not after the punitive damage award against you. But occasionally we are asked if a particular malpractice insurance policy covers punitive damages. Because a punitive damage awards are normally awarded for egregious acts few malpractice policies do but many do not. As with all Professional Liability Insurance policies, one needs to read the policy itself to determine if there is coverage. One of the more common places to find the punitive damages exclusion is where it is in the Wesco Lawyers Professional Liability Insurance policy in the definition of damages:
E. “Damages” means judgments, awards and settlements if negotiated with the assistance and approval of theCompany. Damages do not include:
4. punitive or exemplary amounts and any multiplied portion of multiplied awards;
But you can also find the exclusion in the insuring agreement or the exclusion section of the policy.
The more difficult task is determining if a policy does cover punitive damages. It is rarely stated that damages include punitive damages. So normally you are left with a thorough reading of the policy to determine if there is not a punitive damages exclusion.
Even after you have done all of this to find if the policy will cover punitive damages, there is one more place to check. That is to determine whether the payment of punitive damages is allowed in your particular state. Even if the policy either states or does not exclude punitive damages, the policy must conform to the laws and rulings for the state you are in. In almost 50% of the states, it is not permitted to insure for punitive damages.
It is pretty straight forward to check. A simple web search will yield a number of sites that will tell you this. The following is one of those sites:
http://www.mcandl.com/puni_chart.html
As punitive damages can be substantial, if you have concerns about this being awarded against you it is important to review the policy in question and then determine if in your state it is even insurable.