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. In the American Alternative policy it is the definition of damages:
III. DEFINITIONS
The following terms shall have the same meaning set forth below, whether expressed in the singular or plural, and whether capitalized or not, whenever these terms are highlighted in Bold in this Policy.
I. DAMAGES means a monetary judgment, arbitration award or settlement; provided, however that Damages does not mean or include:
1. Any amounts for which the Insured is not legally liable;
2. Civil or criminal fines, penalties, sanctions or forfeitures, and the multiplied portion of any multiplied damage award, regardless of against whom they are awarded or assessed, including any economic harm that results from the foregoing, except for sanctions, fines, penalties or multiplied damages awarded against an Insured resulting from a violation of the Fair Debt Collection Practices Act or the Fair Credit Reporting Act, which are not to exceed the lesser of $500,000 or the Limits of Liability shown in the Declarations, per Policy Period. The coverage provided by this paragraph shall be part of, and not in addition to the Limit of Liability identified in the Declarations;
DEBT COLLECTOR means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts for a third party, or who regularly collects or attempts to collect, directly or indirectly, debts due another.
3. Punitive or exemplary damages;
4. Injunctive, declaratory or other equitable relief, or any costs or fees associated with or resulting from such relief; or
5. Any amounts deemed uninsurable by applicable 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.
Contact Me Today
Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as
L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
(616) 940-1101 Ext. 7080