Can Two Wrongs Make a Right to Seek Indemnification of Punitive Damages From a Liability Insurance Carrier?

In some situations, an insured person may act in a really reckless or careless way, like driving drunk and causing a car accident. When this happens, their insurance company might not have to pay for any extra punishment costs, because they think it’s not fair for insurance to cover for that. However, if the insurance company does something wrong while handling the case, they might still have to pay for those extra costs. So, even though the insurance company might not have to pay for the bad things the insured person did, they still have to be really careful when they handle the case in court. When an insurance company is defending a claim for someone, they have a duty to act in the best interest of the insured person. This includes advising them on settlement options, considering fair settlement offers, and trying to settle if it would be the smart thing to do. Even if the insured person did something wrong, the insurance company still has to fulfill their duty to defend them. If the insurance company doesn’t do this, they could face legal consequences. Some courts say that if an insurance company acts in bad faith and causes the insured person to be punished with extra damages, the insured person can’t ask the insurance company to pay for those extra damages in a separate lawsuit. But some other courts say that the insurance company can be made to pay for those extra damages if it acted in bad faith. There is no clear agreement among the courts on this issue. A federal court case called Ging v. American Liberty Ins. Co. dealt with a situation where a driver caused a deadly accident and his insurance company didn’t accept an offer to settle the claim. The court said the insurance company had to act in good faith when defending the entire claim, even though it didn’t have to cover punitive damages. This decision was based on the idea that the insurance company took on the responsibility to defend the claim, so it had to act in good faith. The court didn’t explain why it made this decision or talk about any public policy issues involved. Punitive damages are meant to punish a defendant for really bad behavior and deter them from doing it again. Some courts don’t think insurance companies should have to pay for punitive damages because it would let the wrongdoer off the hook. Others think it’s okay for insurance companies to pay for punitive damages.

Insurance companies usually don’t cover punitive damages in their contracts. They say they can’t be held responsible for something they didn’t agree to cover. Some judges believe that when an insurance company acts in bad faith, the person they insure should be able to sue for damages beyond just what the contract says. They argue that if the person isn’t allowed to sue for punitive damages, they won’t be fully compensated for what they lost because of the insurance company’s bad behavior.
On the other hand, some courts worry that if the insurance company has to pay punitive damages, they’ll just raise their prices, passing the cost on to everyone who has their insurance. But people who support allowing punitive damages say that even if the insurance company has to pay extra in a lawsuit, they still might have to raise their prices to cover the costs of a regular lawsuit without punitive damages. In some court cases, there is a debate about whether or not an insurance company should have to pay punitive damages to their customer if they acted in bad faith. Some people think that if the insurance company knows they may have to pay punitive damages, they will be more likely to settle a claim instead of going to trial. Others argue that the insurance company shouldn’t always have to settle just to avoid future legal trouble. Some courts also compare the behavior of the customer and the insurance company to decide if punitive damages should be paid. Some say that the customer’s behavior is worse, while others think the insurance company’s actions should be considered too. Under Florida law, if an insurance company can be held responsible for not acting in good faith, they may have to address specific issues when deciding whether to settle a claim or handle the defense. It may seem conflicting that the insurance company has to defend the claim but isn’t initially responsible for paying punitive damages. This might create conflicts and questions about whether the insurance company is acting in the best interest of the insured. If an insurance company might have to pay extra money as punishment (punitive damages), the lawyer advising them should remember that they have certain duties to the person they have insured. These include telling the insured about chances to settle the case, warning them about any problems with the lawsuit, and helping them understand what might happen in court. The lawyer also has to negotiate settlements in a fair way that takes into account the insured person’s interests. This last duty is the hardest to do because there isn’t clear guidance on how to do it. The insurance company has to carefully consider and document their decision about how much money to offer and explain why they didn’t offer the full amount of the insurance policy. This might not stop the insured person from suing the insurance company, but it can help the insurance company defend themselves in court. Basically, even if the law says an insurance company can’t be sued for refusing to pay punitive damages, they still have to be careful not to put their own interests ahead of their customer’s. In a case in New York, the court said that if an insurance company refuses to settle a case and forces their customer to make a deal to avoid punitive damages, the insurance company might still be in trouble for not doing the right thing. So, insurance companies have to always think about what’s best for their customers. In Florida, if an insured person acts really bad, their insurance company might have to pay for any extra “punishment” money the insured has to pay. This makes it tough for the insurance company, and they have to act fair to avoid having to pay extra money. Insurance policies generally do not cover the cost of intentional acts that result in punitive damages. In Florida, it is against public policy for liability insurance to cover punitive damages for wrongful conduct. The insurer must defend a case even if only part of it is covered by the policy, and this includes cases involving both compensatory and punitive damages. Some states do allow insurance coverage for punitive damages based on gross, reckless, or wanton conduct, but Florida does not. There have been cases in other states where insurers were denied recovery for punitive damages, with the reasoning being that it is not the insurer’s duty to cover these damages. James H. Daniel is a lawyer at a law firm in Jacksonville, and he specializes in personal injury and insurance cases. He also works on appeals for the firm.

Source: https://www.floridabar.org/the-florida-bar-journal/can-two-wrongs-make-a-right-to-seek-indemnification-of-punitive-damages-from-a-liability-insurance-carrier/