In many states, insurance coverage is not possible for damages that are not the result of a wrongful act. Punitive damages are damages awarded in addition to actual damages because the defendant, as determined by a court or jury, acted with recklessness, malice, or deceit. Such damages are meant to penalize the egregious actions of the defendant and act as a deterrent to others. And there are other penalizing damage assessments. Exemplary damages are simply another name for punitive damages. Multiplied damage awards are authorized by statute for much the same reason; they are double or treble damages that expand liability for actual damages. Because these damage judgments are meant to deter blameworthy conduct, some states often prevent them from being covered by insurance. The argument is that if a party can be insured for its reprehensible conduct, there is no real punishment.
Under the Victor and CNA professional liability program, if a claim results in a punitive, exemplary, or multiplied damage award, the CNA policy will pay the award, up to the policy’s applicable limit of liability, to the fullest extent permitted by law. The new policy is even more beneficial as it expands CNA’s commitment to pay excess damage awards by creating a “most favorable jurisdiction” coverage provision. If punitive and other similar damages are based on the policyholder’s wrongful act in the performance of professional services, the policy will pay the award, up to the policy’s applicable limit of liability as permitted by law in the jurisdiction that most favors coverage for punitive, exemplary, and multiplied damages. With the expansion of coverage, firms won’t have to pay such damages from firm assets or personal funds.
This enhancement increases the possibility of punitive damages coverage by the CNA policy for firms that have projects located in multiple jurisdictions. It also applies to smaller firms that may have projects in one state but, by contract, are subject to the laws of a more favorable jurisdiction. Of course, the jurisdiction has to have a substantial relationship to the policyholder or the claim for its rules to apply to the coverage.
More information on the most favorable jurisdiction coverage is available on the Victor website.