Does Uninsured Motorist Insurance Cover Punitive Damages?

Most state laws prohibit uninsured motorist insurance (“UM”) from covering punitive damages. Some states, however, do allow for it. Punitive damages are awarded to penalize the at-fault party in an auto accident and to deter similar blameworthy conduct. These damages are sometimes referred to as “exemplary damages.”

Underinsured motorist coverage (UIM) is different than UM insurance. It pays a policyholder for any damages that he/she suffers in an accident where the at-fault party has insurance, but just not enough to cover all of the holder’s injuries. As with an uninsured motorist claim, most states disallow UIM coverage to pay a punitive damage award.

Note that California law says that a UM policy or a UIM policy cannot pay a policyholder for punitive damages. The law also states that drivers are not required to have these types of coverage.

The law, though, does state that a driver has to maintain “15/30/5” liability insurance. 15/30/5 means that if the insured is responsible for causing an accident (for example, in a rear-end collision) his/her insurance company will pay up to:

• $15,000 for bodily injury or death per person,
• $30,000 for total bodily injury or death per accident (to all people in the other vehicle combined), and
• $5,000 for property damage to the other vehicle.

Note that per California law, a driver is obligated to notify his/her insurer promptly after an accident, regardless of who was at fault.

State law also requires people to file a form SR-1 California accident report with the California DMV within 10 days if:

1. they are involved in an accident, and
2. the accident caused injury to anyone or exceeded $1,000 in vehicle damage.

Our California personal injury attorneys will highlight the following in this article:

• 1. What is uninsured motorist coverage?
• 2. Does UM provide for the recovery of punitive damages?
• 3. What about underinsured motorists’ coverage?
• 4. What is the law in California?

1. What is uninsured motorist coverage?

UM coverage is a type of auto insurance coverage. It pays a policyholder when another driver causes a car accident but has no insurance to cover the injured party’s:

• medical bills,
• lost wages, and/or
• pain and suffering.

Most states require an auto insurance policy to include uninsured motorist coverage in case a non-insured driver hits the policyholder.

In the case of an auto accident, UM coverage pays for any bodily injury or personal injury to:

• the policyholder,
• covered family members, or
• maybe even any passengers in the car driven by the policyholder.

Note that uninsured motorist property damage insurance (UMPD) is a separate motorist policy from a UM policy. A UMPD policy pays the policyholder for any damage that an uninsured motor vehicle causes to his/her vehicle. Depending on the state, the policy may also pay for any personal property damage sustained in an accident.

Example: Jill lives in North Carolina, a state that requires an auto policy to include UM liability insurance. Her own insurance company that provides the policy is State Farm.

Jill gets injured in a hit-and-run accident. Police, though, find the at-fault driver two days after the accident took place.

It turns out that the driver had no automobile insurance to pay for Jill’s medical expenses. Here, Jill can look to her own insurance carrier, State Farm, to pay for her medical costs. Her UM liability policy pays since the uninsured driver had no liability coverage in place.

2. Does UM provide for the recovery of punitive damages?

The majority of states in the United States say that uninsured motorist insurance does not cover punitive damages.¹

Punitive damage awards are sometimes given to an injured party to:

• punish the wrongdoer that caused an accident, or
• deter others from causing similar injuries.

Most states say that UM insurance should not provide an award of punitive damages since the above reasons to award it go unmet. This is because the innocent policyholder, and not the wrongdoer, pays for the UM coverage.²

In the states that do allow UM coverage to pay punitive damages, the reasoning is that the practice is not against public policy. The states say that punitive damages have little effect in deterring blameworthy conduct. They also say that society at large would incur the costs due to increases in the costs of liability insurance policies.³

Note that punitive damages are different than compensatory damages. “Compensatory damages” compensate a plaintiff for losses in a personal injury case.

Compensatory damages for an accident or injury fall into two basic categories:

• “Economic” (pecuniary) damages, such as medical bills, property damage and lost wages, and
• “Non-economic” damages, such as pain and suffering.

3. What about underinsured motorists’ coverage?

Underinsured motorist coverage helps pay for a motorist’s damages when he/she gets injured by a driver who has insurance, but not enough to cover all of the injured party’s damages.

UIM coverage can pay for:

• medical expenses,
• lost wages, and
• pain and suffering.

Example: Nicole lives in Florida, a state that does not require drivers to have either UM/UIM coverage. She separately purchased, though, a UIM policy with her Fla. insurer.

Nicole gets injured in a T-bone accident caused entirely by John. She suffers extensive back injuries that result in $50,000 in medical expenses.

John does have insurance, but his policy only has the state’s minimum liability limits of $10,000 per person for bodily injury. This obviously cannot pay for all of Nicole’s expenses.

Luckily, however, Nicole’s UIM coverage can be used to pay for the additional $40,000 not covered by John’s policy.

As with UM insurance, most states do not allow a UIM policy to pay a policyholder for punitive damages. The reasoning is the same as with the reasoning regarding UM coverage. Allowing a punitive damage award would not injure or punish the wrongdoer since the policy is paid by the innocent party.⁴

4. What is the law in California?

California law says that both a UM and UIM policy cannot award a policyholder with a punitive damage award.⁵

Note that drivers in California are not required to carry UM or UIM coverage. However, an insurance company has to offer this coverage to its insureds. If a person decides against the policies, he/she must sign a waiver. The waiver simply states that the insured was offered the coverage, but he/she decided against it.

California law requires drivers to maintain so-called “15/30/5” liability insurance.

15/30/5 means that if the insured is at fault for an accident, his/her insurance company will pay up to:

• $15,000 for bodily injury or death per person,
• $30,000 for total bodily injury or death per accident (to all people in the other vehicle combined), and
• $5,000 for property damage to the other vehicle.

Automobile insurance is available in California in higher amounts than 15/30/5. Many companies, for instance, offer up to $100,000 per person and $300,000 for total bodily injury per accident.

Note that under most California auto policies, a driver is obligated to notify his/her insurer promptly after an accident, regardless of whose fault it is. (An exception is if no one was injured and there was only minor property damage to the insured’s car).

California law also requires people to file a form SR-1 California accident report with the California Department of Motor Vehicles within 10 days if they are involved in an accident in which anyone is injured or the vehicle damage exceeds $1,000.⁶

Failure to notify the DMV as required by California law may result in the suspension of the person’s driver’s license.⁷

For additional help…

For additional guidance or to discuss your case with a personal injury attorney, we invite you to contact us at the law firm of the Shouse Law Group.

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