PCI Urges Overturn of Decision Mandating Coverage for Punitive Damages in Mississippi

The Property Casualty Insurers Association of America (PCI) is urging the Mississippi Supreme Court to reverse a lower court decision that mandates insurance companies provide coverage for punitive damages in automobile insurance policies.

In the case of Shelter Insurance Cos. v. George Dale, the Department of Insurance prohibited Shelter Insurance Cos. from excluding coverage for punitive damages in the liability portion of automobile policies based on an opinion issued by the state attorney general. The department’s action was challenged and the Chancery Court of Hinds County ruled against Shelter.

“This is an important case because the Supreme Court’s decision will not only affect Mississippi law and insurers in this state, but will have an effect on how the issue of insuring punitive damages is discussed around the country,” said Robert Hurns, legislative database manager and counsel for PCI. “The attorney general’s opinion and the lower court ruling are out of the mainstream and contrary to Mississippi case law. If the ruling is not reversed, Mississippi will be the only state mandating coverage of punitive damage awards against liable drivers.”

Around the country 30 other states provide insurers with the option to cover or exclude punitive damages, while 15 states, including the District of Columbia, have ruled that punitive damages can not be covered by insurance.

“The issue of coverage for punitive damages should be based on the specific terms of the insurance policy. By allowing insurance companies the choice to offer or exclude punitive damage coverage, consumers are also provided the options regarding coverage and how much they want to pay for insurance. The insurance policy is a contract and the two parties involved should be free to make these decisions. By making punitive damage coverage mandatory, the Chancery Court has infringed on the insurer and the consumer’s freedom to establish the terms of a contract,” said Hurns.