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 Axis (AIG) policy it is the definition of damages:
Definitions
Damages means a monetary judgment or settlement. Damages does not include:
a. fines or statutory penalties, sanctions whether imposed by law or otherwise, or any amount awarded or assessed against you in any claim;
b. the return of or restitution of legal fees, costs and expenses;
c. punitive or exemplary damages, or the multiplied portion of multiplied damages;
d. amounts for which you are not financially liable or which are without legal recourse to you;
e. the cost of re-performing or completing any professional legal services, or the cost of compliance with an injunction or any other non-monetary relief; or
f. any amounts which may be deemed uninsurable under 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.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080