Punitive Damages
Key Takeaway
Monetary penalties assessed by a court to punish the defendant for egregious misconduct and deter similar behavior. Whether malpractice insurance covers punitive damages depends on state law -- some states prohibit insuring punitive damages as a matter of public policy, while others allow it.
Definition
Monetary penalties assessed by a court to punish the defendant for egregious misconduct and deter similar behavior. Whether malpractice insurance covers punitive damages depends on state law -- some states prohibit insuring punitive damages as a matter of public policy, while others allow it. Policies should be reviewed to understand coverage in the applicable jurisdiction.
Why This Matters for Law Firms
How claims are handled directly impacts your firm financially and reputationally. Understanding the claims process and related terminology helps law firm leadership make informed decisions when a claim or potential claim arises, and ensures you do not inadvertently jeopardize your coverage by failing to comply with policy requirements.
Example Usage in Context
When a partner receives a demand letter from a former client, the firm's risk manager might reference this: "We need to understand the punitive damages requirements under our policy before taking any action. Let me contact our carrier and broker immediately."
Related terms
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