YOU ASK:

Are exemplary damages insurable and can you tell me the insurability of punitive damages by state?

WE ANSWER:

Yes and no, depending on where you are.

It turns out that the different states in the U.S. have divergent views on the insurability of punitive damages.

The purpose of punitive or exemplary damage awards is to punish the defendant for outrageous misconduct and by "making an example" out of the tortfeasor to discourage other people from committing torts. Thus, courts in many states have ruled that insurance coverage for a punitive damage award would only defeat the punitive damage award purpose.

However, other courts approve insurance coverage for punitive damages, claiming that the deterrent effect of punitive damages has nothing to do with the insurance coverage itself and that the policy of insured, which covers all awarded damages, should be honored.

The table below shows the insurability of punitive damages by state.


Punitive damages
Directly assessed Vicariously assessed
Alabama Insurable Insurable
Alaska Insurable Insurable
Arizona Insurable Insurable
Arkansas Insurance only for punitive damages that are not awarded for intentional torts Insurable
California Not Insurable Insurable
Colorado Not Insurable Undecided
Connecticut Not Insurable Insurable
Delaware Insurable Insurable
District Of Columbia Undecided Undecided
Florida Not Insurable Insurable
Georgia Insurable Insurable
Hawaii Insurable Insurable
Idaho Insurable Insurable
Illinois Not Insurable Insurable
Indiana Not Insurable Insurable
Iowa Insurable Insurable
Kansas Not Insurable Insurable
Kentucky Insurance only for punitive damages that are not awarded for intentional torts Insurable
Louisiana Insurance only for punitive damages that are not awarded for intentional torts Insurable
Maine Not Insurable Undecided
Maryland Insurable Insurable
Massachusetts Not Insurable Undecided
Michigan Insurable Insurable
Minnesota Not Insurable Insurable
Mississippi Insurable Insurable
Missouri Insurable Insurable
Montana Insurance only for punitive damages that are not awarded for intentional torts Insurable
Nebraska - -
Nevada Insurance only for punitive damages that are not awarded for intentional torts Insurable
New Hampshire Insurable Insurable
New Jersey Not Insurable Insurable
New Mexico Insurable Insurable
New York Not Insurable Not Insurable
North Carolina Insurable Insurable
North Dakota Insurance only for punitive damages that are not awarded for intentional torts Insurable
Ohio Insurable Insurable
Oklahoma Not Insurable Insurable
Oregon Insurance only for punitive damages that are not awarded for intentional torts Insurable
Pennsylvania Not Insurable Insurable
Rhode Island Not Insurable Undecided
South Carolina Insurable Insurable
South Dakota Undecided Undecided
Tennessee Insurance only for punitive damages that are not awarded for intentional torts Insurable
Texas Undecided Insurable
Utah Not Insurable Not Insurable
Vermont Insurable Insurable
Virginia Insurance only for punitive damages that are not awarded for intentional torts -
Washington Insurable Insurable
West Virginia Insurable Insurable
Wisconsin Insurable Insurable
Wyoming Insurable Insurable

Caps on Exemplary Damages

There has been a heated debate about whether exemplary damages have had the intended effect of providing a fair sanction to defendants. Exemplary damage critics claim that some punitive damages are unnecessarily excessive and unfair.

In response to the debate, some states, such as Alabama, Alaska, Colorado, Connecticut, Florida, Georgia, Indiana, Kansas, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Texas and Virginia, have adopted legislation imposing caps on exemplary damages.

For instance, the state of New Jersey allows courts to impose exemplary damages of up to five times the compensatory damages or $350,000, with the exception of serious perpetrations, such as sex abuse, DUI cases, discrimination etc. In Florida, exemplary damages cannot be in excess of $500,000, and in Texas, they cannot exceed $750,000.

Other states, such as Louisiana, Michigan, Massachusetts, Washington, Connecticut, New Hampshire, and Nebraska have introduced stricter pieces of legislation prohibiting exemplary damages altogether, by common law or statute.

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