St. Mary's Law Journal


There is a nationwide debate on whether punitive damages should be insurable. Insuring punitive damages causes courts concern regarding whether a wrongdoer escapes punishment by having the insurer pay for damages attributable to the wrongdoer’s egregious conduct. The United States Court of Appeals for the Fifth Circuit noted Texas’ public policy does not justify interference with private insurance contracts. The Court determined Texas allows liability insurance contracts to cover punitive damages and declared the inquiry ended. But, in the years since this determination, many Texas appellate courts have contracted the Fifth Circuit’s holding. The shifting discussion among Texas appellate courts is largely attributable to tort reform. Tort reform created a policy behind punitive damages of limiting damages to represent punishment. Even though the shift has occurred in assessing punitive damages, there is no consensus on whether punitive damage indemnification can be contracted for in an insurance policy. If the Texas Supreme Court looks to the definition of punitive damages to find a policy, they likely will only find confusion. The current definition came to life as a creature of tort reform. The present debate needs new rhetoric and viewpoints because public policy demands insurance be provided for cases involving punitive damages. Consumers of liability expect insurability, and wrongdoers still face the sting of a punitive damage awards which cannot be fully healed by indemnification. The ability of punitive damages to define the standards of care under a clear and convincing standard ensures such damages will be assessed only in appropriate cases. Punitive damages are rough tools. Insurance can take the edge off an often-unpredictable remedy. The insurance industry already provides exclusions for truly reprehensible conduct, so courts should defer to the market to uphold public policy. Allowing insurance for gross negligence permits punitive damages to work for the public.


St. Mary's University School of Law