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Fines Punitive Damages Exemplary Damages Exclusion

 

                          Fines Punitive Damages Exemplary Damages Exclusion

 

Coverages under a liability policy are ambiguous, but certain clarity can be requested from the Insurer. However exclusions under the policies cannot be changed especially the Fines Punitive Damages Exemplary Damages Exclusion.

Exclusion under the Liability policy states:

It is hereby declared and agreed that this Policy excludes all sums which the Insured shall become legally liable to pay as fines, penalties, punitive or exemplary damages in consequence of an award against the Insured made in any Civil Court.

While defense costs are paid for in a claim one may wonder, why not fines and punitive damages.

Fines and damages are also a financial loss to the client in line with the defense costs. Here it is important to understand the difference.

Ø  Defense costs are paid to defend the claim and properly present the case with all the correct and relevant pleas.

Ø  Fines penalty exemplary damages are awarded by the court for offences committed and for prevention of such offences being committed.

Let us examine the definition in detail:

Ø  A Fine is a penalty that requires the convicted person to pay to the public treasure a sum of money fixed by law after an offense has been committed. The fine may be increased if not paid within the stipulated time.

Ø  Punitive damages are awarded by a jury or a judge, in addition to actual damages, which compensate a petitioner for the losses suffered due to the harm caused by the defendant.

Punitive or exemplary damages do not pay for bodily injuries or property damage. They are awarded over and above payment for those items.

Calculation of punitive damages varies with each case.There is no set formula for arriving at such damages. The amount awarded will depend on the facts relating to the defendant's conduct. The court has the duty to maintain balance and ensure punishment that is not excessive.

Ø  Exemplary damages are paid by the one who has committed an offence .It is awarded without precedent and aims at  preventing others from committing similar offences in the future

An award is given to victims when the conduct of the individual who caused the victim harm is willfully malicious, and grossly reckless.

 Insurance contract is a legal contract and any wrongful act; error must not be willful, with wrong motives & criminal intent. Since the courts award such fines and damages after finding the intent and motives, insurance cover is not available for such actions. This is against public policy, contrary to law and hence not covered.

 

We at Zen Insurance  assist in understanding the insurance cover. Please contact us for assistance.

 Disclaimer:   

Zen Insurance is an IRDAI registered broker which facilitates quick & accurate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products

 

 

 

 

 

 

 

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