By: Peyton Pope
Punitive damages are awarded in addition to compensatory damages when a defendant is found to be grossly negligent. Miss. Code Ann. § 11-1-65 governs the award of such damages. Under this provision, “punitive damages may not be awarded unless the claimant proves by clear and convincing evidence that the defendant against whom punitive damages are sought acted with action malice, gross negligence which evidences a willful, wanton, or reckless disregard for the safety of other, or committed actual fraud.” Miss. Code. Ann. § 11-1-65. Essentially, punitive damage awards are reserved for serious claims where the defendant acted in a shocking manner.
Traditionally, punitive damages are viewed as a punishment awarded at the court’s discretion to deter future misconduct. But, in situations where the defendant is covered by an insurance policy that does not expressly exclude coverage for punitive damages, who is responsible for paying the punitive award?
In Frith, the Mississippi Supreme Court ruled that an automobile liability policy which provides the insurer will pay “all sums which the insured becomes legally obligated” includes coverage for punitive damage awards. Anthony v. Frith, 394 So. 2d 867 (Miss. 1981). Because of this interpretation, the Mississippi Attorney General’s office issued an opinion explicitly stating that Mississippi law does not provide for the exclusion of punitive damages from insurance policies for automobile liability claims. See A.G. Op. #01-0660.
However, in a later case, the Mississippi Supreme Court ruled that the Attorney General opinion, while correctly interpreted, was being incorrectly applied by the lower courts. Shelter Mut. Ins. Co. v. Dale, 914 So. 2d 698 (Miss. 2005). Instead, the Mississippi Supreme Court clarified that Mississippi law does not prevent, instead of providing for, the exclusion of punitive damages. Old Sec. Cas. Ins. Co. v. Clemmer affirmed Frith by finding the extent or limit of liability for punitive damages is governed by the agreement of the parties as reflected by the actual language of the policy. 455 so.2d 781, 783 (Miss. 1984).
Punitive damages are a reality of practice, and Insurance providers can avoid such liability if they expressly exclude coverage in the language of their policy. If the policy language does not exclude coverage, it may be wise to account for the possibility of a punitive damage award in the premium.
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Anthony v. Frith, 394 So. 2d 867 (Miss. 1981): https://www.westlaw.com/Document/I3108ec600eb811d9bde8ee3d49ead4ec/View/FullText.html?transitionType=Default&contextData=(sc.Default)&VR=3.0&RS=cblt1.0
Shelter Mut. Ins. Co. v. Dale, 914 So. 2d 698 (Miss. 2005): https://www.westlaw.com/Document/Ib32c9f49468d11da974abd26ac2a6030/View/FullText.html?transitionType=Default&contextData=(sc.Default)&VR=3.0&RS=cblt1.0