Exemplary Damages And Auto Insurance Policies

Insureds living in Haslet, Saginaw, Newark, Cedar Hill, Grand Prairie, Arlington, Hutchins, Dallas, Fort Worth, Benbrook, and other places in Texas rarely know what their insurance policies say. And even if they knew what the policy said they would not really understand. Of course, that is why an experienced Insurance Law Attorney should be consulted.
What about “exemplary damages”? Will your auto insurance pay a claim for exemplary damages? Here is a 1997, that provides some guidance.
The case is styled, Lolitha J. Milligan v. State Farm Mutual Automobile Insurance Company. The case was decided by the Court of Appeals, 14th District, Houston.
The facts in this case are not in dispute. On August 20, 1992, Milligan was injured in an accident caused by an uninsured drunk driver. The parties agree that the driver’s conduct constituted gross negligence. At the time of the accident, Milligan was insured by State Farm undr a policy providing uninsured motorist coverage. The policy provides in relevant part as follows:
We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person, or property damage caused by an accident.
Milligan and State Farm settled her claim for actual damages under the uninsured motorist coverage in her auto policy, but State Farm denied coverage of her claim for exemplary damages. They brought this case before the court for a determination of whether or not the policy paid for exemplary damages.
The court here, discusses the purpose of uninsured motorist coverage and the relevant portions of the insurance code where the requirments of this coverage are stated. Here is a cite taken from the case in its discussion. From a Fort Worth Court of Appeals case, “we reject the arguement that awarding exemplary damages under an uninsured motorist provision contravenes public policy by allowing an innocent party to be punished for the wrongdoing of a third party tortfeasor.”
Writing about other courts decisions, this court stated, “Those courts finding exemplary damages are not recoverable under the uninsured motorist provisions focus on the policy reasons for imposing exemplary damages. First, the courts note the statutory definition of exemplary damages as ‘any damages awarded as an example to others, as a penalty, or by way of punishment.’ Exemplary damages are assessed both to punish the wrongdoer and to serve as a deterrent to future wrongdoers. Neither deterrence of wrongful conduct or punishment of the wrongdoer is achieved by imposing exemplary damages against an insurance carrier in this situation. Therefore, the courts … determined that coverage provisions requiring an insurer to pay damages that a plaintiff was legally entitled to recover from an uninsured motorist because of bodily injury does not include an award of exemplary damages.”
This court next got into a discussion of the wording in the policy and the language used to describe the coverage provided.
Ultimately the court ruled, stating, “The insuring agrements for uninsured motorist coverage in these cases are identical to the language in the policy here. In view of the Texas Supreme Court’s clear guidelines concerning the imposition of exemplary damages and the policy reasons therefore, we no longer accept the position taken in … We instead agree with our sister court’s decision in … and hold that the uninsured motorist clause in the auto policy in this case does not cover exemplary damages as a matter of law.”
Bottom line is that most of the time the courts will not make insurance companies pay for exemplary damages under the uninsured motorist portion of an auto policy. But it must be kept in mind that it is worthwhile to get an attorney to review the pollcy and facts of each particular situation before giving up.