Exemplary Damages In Auto Policies

August 4, 2011

A 1989 case decided by the Court of Appeals, El Paso, would be of interest to those in Grand Prairie, Fort Worth, Arlington, Mansfield, Crowley, Grapevine, Duncanville, Lake Worth, and other places in Texas who have a claim for exemplary damages.
The style of the case is, Emigdia C. Manriquez, Individually and on Behalf of all Statutory Wrongful Death Beneficiaries of Jorge Ramon Manriquez, Deceased v. Mid-Century Insurance Company of Texas. Here is some background.
Manriquez and her group, are the widow and surviving parents of a pedestrian killed when struck by an unlicensed minor, Gregory Daniel Alkofer. A lawsuit resulted from this event.
Mid-Century the insurance company for Alkofer, intervened in the lawsuit and successfully moved for a declaratory judgment limiting its liability to $50,000.
The relevant parts of the insurance policy provide:
PART A -- LIABILITY COVERAGE
Insuring Agreement
We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident.
....
Limit of Liability
If separate limits of liability for bodily injury and property damage liability are shown in the Declarations for this coverage the limit of liability for "each person" for bodily injury liability is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one auto accident. Subject to this limit for "each person," the limit of liability shown in the Declarations for "each accident" for bodily injury liability is our maximum limit of liability for all damages for bodily injury resulting from any one auto accident. The limit of liability shown in the Declarations for "each accident" for property damage liability is our maximum limit of liability for all damages to all property resulting from any one auto accident.
If the limit of liability shown in the Declarations for this coverage is for combined bodily injury and property damage liability, it is our maximum limit of liability for all damages resulting from any one auto accident.
This is the most we will pay regardless of the number of:
(1) Covered persons;
(2) Claims made;
(3) Vehicles or premiums shown in the Declarations; or
(4) Vehicles involved in the auto accident.
In this case the policy provided for separate limits of $50,000 for each person / $100,000 for each accident.
Attorneys for Manriquez contend any $50,000 limitation would not include an award for exemplary damages. In support of this position, they cited other Texas cases that essentially said, where insuring agreements provide for the payment of ... all sums which the insured shall become legally obligated to pay as damages because of ... bodily injury will include payment for punitive damages for gross negligence. These cases emphasize the words "all sums" as being the important inclusive language. In determining whether these words include coverage for punitive damages, most courts have used the following rationale: (1) the average insured, in the absence of an express policy exclusion from liability from punitive damages, would assume that the term "damages" would include punitive damages, since they would become by judgment a "sum" that the insured would be legally obligated to pay: (2) because the insurer drafted the policy and could have made clear its intention to exclude coverage for punitive damages, the rules of construction require it to bear the burden of ambiguity; and (3) punitive damages are covered because they always "arise" out of the underlying action for injury.
In this case, there is an absence of the words "all sums." The insurance agreement expressly excludes coverage for any person who intentionally causes bodily injury. Nonetheless, an average insured would assume the term damages would include all damages except those intentionally caused. The insurer drafted the policy and could have made it clear that no punitive damages would be covered. Punitive damages arise out of or are due to the legal responsibility created because of the auto accident.
Manriquez sued for exemplary damages because of heedless and reckless conduct on the part of the insured. Gross negligence, to be the ground for exemplary damages, should be that entire want of care which would raise the belief that the act or omission complained of was the result of a conscious indifference to the right or welfare of the person or persons to be affected by it.
The court stated that the term "accident" as used in the insurance policy was construed to include negligent acts of the insured causing damage which is undesigned and unexpected. It could be argued that one who acts with conscious indifference and causes an accident, dos so with some expectation. "We reject this, however, and conclude that punitive damages, excepting those for any intentional conduct, were within the coverage and the coverage limitation.
In cases where exemplary damages or punitive damages are being sought it is vital that an experienced Insurance Law Attorney be consulted. This attorney would know the proper way of drafting a lawsuit to maximize a recovery for his client without jeopardizing coverage.