Insurance Policies And Punitive Damages

Insured’s in Grand Prairie, Arlington, Fort Worth, Burleson, Crowley, Benbrook, Hurst, Euless, Bedford, North Richland Hills, and other places in Tarrant County and Texas rarely understand what is covered in their auto insurance policy and what is not.
Here is a case decided in 1989, discussing exemplary damages. The case was decided by the El Paso Court of Appeals and is styled, 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 are some facts of the case.
Manriquez and the others are the widow and surviving parents of a pedestrian killed when struck by an automobile driven by an unlicensed minor, Gregory Alkofer. Gregory was sued for negligent driving and gross negligence.
Mid-Century intervened in the lawsuit and moved for a declaratory judgment limiting its liability to $50,000.
Pertinent parts of the policy in question provided:
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 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 accident. The limit of liability shown in the Declarations for “each accident” for property damage liability is our maximum limit of liability for all to all property resulting from any one accident.
If the limit of liability shown on 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 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.
The policy provided separate limits of liability for bodily injury and property damage liability in the following amounts: bodily injury — $50,000 for each person / $100,000 for each accident.
Attorneys for Manriquez first contended that any $50,000 limitation would not include an award for exemplary damages. They cited many other court decisions holding that 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 of punitive damages for gross negligence. These cases emphasize the words “all sums” as being the important inclusive considerations. In determining whether these words include coverage for punitive damages, a majority of courts have used the following rational: (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 making its decision that exemplary damages are covered by the auto policy the court stated; “Appellant pleaded for exemplary damages because of heedless and reckless conduct on the part of the insured. Gross negligence, to be the ground of 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 conscious indifference to the right or welfare of the person or persons to be affected by it. The term “accident” as used in an 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, does so with some expectation. We reject this, however, and conclude that punitive damages, excepting those for intentional conduct, were within the coverage and the coverage limitation.
When an insurance policy covers exemplary damages and when it does not, can be confusing and will vary with the facts of a case and the wording of the insurance policy. For these reasons, it is important to seek the advice of an experienced Insurance Law Attorney when faced with the potential of exemplary damages being part of a claim.