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Explaining Why Insurance for Punitive Damages is Against Public Policy  

https://zalma.com/blog

in Most States   Insurers generally argue that they cannot indemnify or insure for  punitive damage awards. Insurance carriers typically rely, in  California, on \\u201cpublic policy\\u201d and point to California Insurance Code  Section 533. Section 533 states:  An insurer is not liable for a loss caused by the willful act of the  insured; but he is not exonerated by the negligence of the insured, or  of the insured\\u2019s agents or others.  Insurance carriers frequently cite Peterson v. Superior Court, 31 Cal.3d  147 (1982), in support of their argument. The Peterson court addressed  the question of whether \\u201cimposition of punitive damages negates an  insured\\u2019s coverage for compensatory damages as well as punitive  damages.\\u201d It stated that \\u201cindemnification of the punitive damages is  disallowed for public policy reasons.\\u201d  Many courts have recognized that the California Insurance Code Section  533\\u2019s bar against coverage does not apply when an insured\\u2019s liability is  based on the acts of its agents, employees or representatives, at least  absent evidence that the insured (or, in the case of a corporation, its  board of directors) authorized or ratified the intentionally wrongful  conduct.  For example, in Arenson v. National Automobile & Casualty Insurance  Co., 45 Cal.2d 81 (1955), the insured\\u2019s son, a minor, started a fire  that damaged school property, and the school district obtained a  judgment against the plaintiff for the amount of the damage. The carrier  refused to defend the suit or to pay the amount of the judgment,  claiming that the injury was caused intentionally by an insured and  therefore fell within an intentional acts exclusion or alternatively,  Section 533. The court held: \\u201cSection 533 ... has no application to a  situation where [the insured] is not personally at fault.\\u201d It apparently  ignored the fact that a minor child living with his parents is also an  insured.  \\xa9 2021 \\u2013 Barry Zalma  Barry Zalma, Esq., CFE, now limits his practice to service as an  insurance consultant specializing in insurance coverage, insurance  claims handling, insurance bad faith and insurance fraud almost equally  for insurers and policyholders. He also serves as an arbitrator or  mediator for insurance related disputes. He practiced law in California  for more than 44 years as an insurance coverage and claims handling  lawyer and more than 52 years in the insurance business. He is available  at http://www.zalma.com and zalma@zalma.com.  Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE  Legend Award.  Over the last 53 years Barry Zalma has dedicated his life to insurance,  insurance claims and the need to defeat insurance fraud. He has created  the following library of books and other materials to make it possible  for insurers and their claims staff to become insurance claims  professionals.  Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library \\u2013 https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4