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 your state may not permit.
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. In the ISMIE policy the definition of damages may include punitive damages:
IV. DEFINITIONS
E. Damages means a monetary judgment (including pre- and post-judgment interest awarded against the Insured), monetary award or monetary settlement negotiated with the Insurer’s written consent. If the Insurer makes an offer to pay the applicable Limit of Liability, it will not pay any prejudgment interest based on the period of time after such offer is made. Notwithstanding anything to the contrary contained herein, Damages also include those amounts the court is permitted to impose on a debt collector as set forth in 15 USC 1692k(a).
Damages shall not include:
1. any restitution, disgorgement, unjust enrichment or illegal profits by an Insured;
2. return or offset of fees or overcharges or amounts which are the subject of fee disputes;
3. punitive or exemplary damages, awards or judgments or any amounts which are a multiple of compensatory damages, awards or judgments, except to the extent insurance for such damages, awards or judgments is insurable under applicable law and is not otherwise excluded by the provisions of this policy. For the purposes of determining whether such damages are insurable:
a. the law of the state of incorporation or principal place of business of the Insured or the Insurer;
b. the state where the negligent act, error or omission took place; or
c. the state where the damages are awarded or imposed, whichever is most favorable to the Insured, shall be deemed applicable law;
4. civil or criminal fines, sanctions or penalties;
5. any amounts for which the Insured is not financially liable or for which there is no legal recourse against the Insured;
6. subject to 3. above, amounts deemed uninsurable under the law pursuant to which this policy shall be construed; or
7. amounts paid to comply with any injunctive order or other non-monetary or declaratory relief or award, including amounts ordered to be paid to comply with specific performance or any agreement to provide such relief.
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