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’. In the Freedom Specialty policy the exclusions are found in the definition of Loss:
IV. DEFINITIONS
Q. Loss means damages, judgments, settlements, client notification and consultant costs, and defense costs which you are legally obligated to pay; provided, however, that loss does not include fines, penalties, sanctions, taxes, or exemplary damages, the multiple portion of multiplied damages, reimbursement, disgorgement, reduction, set-off, or return of fees, costs, or expenses, any amount for which you are not financially liable or for which is without legal recourse to you, or matters which may be deemed uninsurable under the law pursuant to which this policy is construed.
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