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Insuring for Punitive Damages Doesn't Violate Public Policy

By John Council
September 09, 2003

In an opinion that could be one of Texas' most important insurance coverage rulings in years and spark even more debate about damage awards, the 2nd Court of Appeals ruled that insuring for punitive damages does not violate public policy.

The Fort Worth court's 2-1 opinion in Westchester Fire Insurance Co. v. Admiral Insurance Co. involves a complicated dispute between two insurance companies over which one should cover the excess costs of a settlement in a nursing home neglect case, Cagle, et al. v. PeopleCare. In Cagle, the nursing home agreed to settle the case, paying about $2 million in actual and $2 million in punitive damages.

Westchester, an excess insurer for PeopleCare, appealed to the 2nd Court of Appeals challenging the trial court's partial summary judgment ruling that limits the amount of money Westchester can recover from Admiral, the nursing home's primary insurer. The court agreed with Westchester, reversing the trial court's decision.

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