Insurance Policies And Punitive Damages

Coverage for punitive damages are not always covered in an insurance policy.  This issue came up in the 2018, case styled, Richard Brett Frederking v. The Cincinnati Insurance Company, Inc.  The case is from the U.S. District Court, Western District of Texas, San Antonio Division.

This is a summary judgment case if favor of Cincinnati.  The Court held that the insurance policy at issued does not afford coverage for the punitive damages award attributed to the negligence of Carlos Sanchez.

Frederking was injured when his vehicle was struck by an intoxicated driver, Carlos Sanchez.  A trial was held in State Court and the jury found Sanchez was grossly negligent and awarded Frederking $207,550.00 in punitive damages plus interest.  The issue is whether the policy held by Sanchez’s employer covers this punitive damages award.

Cincinnati is only required to indemnify an insured for an “accident” or “occurrence.”  Sanchez’s conduct of driving while intoxicated, found to be grossly negligent in the underlying lawsuit, resulted in a car collision with Frederking wherein Frederking was injured.  Frederking argues that Sanchez’s decision to drink and drive may have been deliberate, but the harm he caused was dependent on further negligence and was thus caused by an accident.

This Court had to decide whether the policy as written provides coverage for punitive damages awarded in the underlying lawsuit.

This Court initially concluded, and on Motion for Reconsideration, still concludes that Sanchez’s collision with Frederking were the natural and expected result of a driver operating a vehicle while intoxicated.  An accident is generally considered to be a fortuitous, unexpected, and unintended event.  A deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly.

In this case, the jury concluded that Sanchez acted with gross negligence, which required the jury to find that Sanchez had “actual, subjective awareness of the risk involved, but nevertheless proceeds with conscious indifference to the rights, safety, or welfare of others” which is what is required under Texas Civil Practices & Remedies Code, Section 41.001(11).  The Court concedes that other cases with differing facts have reached an opposite result, the Court remains convinced that Sanchez’s grossly negligent conduct required actual, subjective awareness of the risks involved, and is not an “accident” under the terms of the policy.  The Court further remains convinced that Sanchez’s conduct cannot be held to be an “accident” under the policy because Plaintiff fails to show that the result “would have been different” had the deliberate act—the act of driving while intoxicated—been performed correctly.