Mississippi state law does not require insurance companies to cover punitive damage awards in their automobile liability policies, the Mississippi Supreme Court has ruled.
In 2002, Shelter Mutual Insurance Co. and Shelter General Insurance Co. sought to amend their Mississippi automobile insurance private passenger policies to exclude liability for punitive damages.
In 2003, Insurance Commissioner George Dale refused to approve the amendments, citing a previous Supreme Court decision â?” and an attorney general’s interpretation â?” that Dale said provided that “an automobile liability policy which provides the insurer will pay all sums which the insured becomes legally obligated includes coverage for punitive damage awards.”
A Hinds County chancellor sided with Dale in 2004 in a lawsuit filed by the insurance companies. The chancellor said state law was written so broadly as to include the payment of punitive damages by the insurer.
On Thursday, the Supreme Court overturned the lower court ruling and sent the case back to Dale.
Justice Jess Dickinson, writing for the court, said the issue was not whether the Legislature could require that automobile insurance policies written in Mississippi to cover awards of punitive damages, but whether it had done so.
Dickinson said the Supreme Court ruled in a 1981 case that the insurer was required to pay punitive damages because its policy included language that the company would pay “all sums which the insured shall become legally obligated to pay.”
Dickinson said the Supreme Court did not rule that the insurance company was required by law to cover punitive damages. He said the court also did not rule that an insurance company is prohibited from excluding coverage for punitive damages.
In a later case, Dickinson said the court found that the extent or limit of liability for punitive damages was governed by the agreement of the parties as reflected by the actual language in the insurance policy.
Dickinson said Mississippi law refers to coverage amounts for bodily injury, death and property damage.
“The Legislature makes no reference to punitive damages in the statute.
“We hold that Mississippi law does not prevent Shelter from excluding coverage for punitive damages by amendatory endorsement to its automobile liability policies. Both the commissioner and the chancellor erred in concluding otherwise,” Dickinson said
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Carriers Auto Legislation Mississippi
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