Car Accidents, Punitive Damages, and Insurance

Can an accident victim recover punitive damages from the at-fault driver’s insurance policy?

Our previous post regarding the recoverability of punitive damages from a first party uninsured motorist insurance policy generated much interest.  For a description of the nature and purpose of punitive damages in Texas, as well as the applicability of them in relation to first party insurance, click the previous link.  This topic has generated so much interest that I’ve been approached several times since that post aired with a related follow up question:  if you can’t recover punitive damages from first party insurance, can you recover them from the at-fault driver’s policy?

First, for newcomers to the discussion, let me clarify the distinction between first party insurance and an at fault driver’s insurance.  First party insurance is insurance maintained by the victim for the victim.  This coverage often takes the form of Personal Injury Protection, Uninsured and Underinsured Motorist coverage, MedPay coverage, and the like.  The at-fault driver’s insurance policy is not first party in relation to the victim; it is third party insurance.

Back to the question, the answer is “it depends.”  The top courts in many other states in the Union have ruled that punitive damages are not recoverable from an at-fault driver’s policy.  The courts reason so because since punitive damages are designed to punish the wrongdoer, to make a risk pool or insurance company pay out punitive damages would not punish the wrongdoer, but would punish other policyholders by increasing insurance companies’ exposure and thus increasing premiums.

Luckily for accident injury victims, the Texas Supreme Court differs.  Under Texas law, the recovery of punitive damages from an at-fault driver’s policy (third party coverage) does not violate public policy.  Texas law looks at the actual terms of the policy to determine whether coverage for punitive damages is allowed on a case by case basis.  In fact, in the absence of any express exclusion of liability for punitive damages contained in the actual policy, coverage for punitive damages assessed against the insured will be enforced.

Disclaimer:  We are licensed Texas attorneys, and base our writings on Texas law.  This information is current and accurate at the time of posting.  We do not update previous posts if/when the laws change.  This blog does not constitute legal advice.