In the interim, Zuniga filed a petition seeking to recover punitive damages from
Farmers. Under a turnover order, Zuniga was assigned all of Medina’s rights against
Farmers, which led her to asserting additional claims against the insurer.
The trial court denied Farmers’ claims. In review, the court determined that
“the punitive damages are covered under the automobile policy in question,”
granting Zuniga’s motion. Farmers appealed, arguing that the policy’s plain
language, which states that it would “pay damages for bodily injury,” did not cover
punitive damages. It further said that even if the policy did cover punitive damages,
public policy would bar its policy from covering such damages.
Zuniga argued punitive damages fell into the definition of “damages for bodily
injury.” She noted that in similar cases, other courts concluded that the average
insured would interpret the term ‘damages’ to include punitive damages.
However, the appellate court reversed the trial court’s decision, stating that
Farmers was not responsible for punitive damages.
SCORECARD: Farmers Texas Mutual Insurance Company does not have to pay
for punitive damages in the underlying Zuniga v. Medina case.
TAKEAWAY: In order to avoid lengthy court battles, insurers should clearly
define what is and is not covered under their policies, especially if covered items
could be split into subcategories.
INSURER LIABLE FOR ASBESTOS CLAIMS
During the 1970s mining of vermiculite — a mineral most commonly used in insulation — several workers were injured due to asbestos exposure. It wasn’t until nearly three decades later, however, that the
workers started presenting claims against their employer.
Those injured by the asbestos sued the state of Montana as early as 2002,
alleging that the state knowingly allowed employees to work in vermiculite mines.
In the lawsuit, the workers claimed the state knew as early as 1942 that the exposure
was “in excess of safe limits.”
The suit also mentioned that an
inspection in the 1950s reported a
“considerable toxicity” in the air.
The suit claimed the state failed in
its duty to protect its workers.
While examining the suit, the
state found documentation showing
it held a general liability insurance
policy with Berkshire Hathaway’s
National Indemnity Co. from 1973 to 1975. The policy was written to protect the
state from personal-injury and other claims. The state notified National Indemnity
immediately of the potential liability and said the company should be liable for the
In 2009, Montana reached a $43 million settlement with the miners. National
Indemnity, at first, agreed to cover the settlements, even paying $16 million, but
then later retracted the offer. It believed that the 1975 policy did not cover asbestos-related claims and believed it was not liable for the settlement.
In court, however, the state district judge ruled that National Indemnity
breached its duty by failing to protect the state of Montana against damage claims
made by asbestos victims. Therefore, the insurer could not deny settlement
The judge also looked forward to potential claims. More than 850 additional
claimants not included in the 2009 settlement had sued the state as of 2015. Like
the 2009 ruling, any additional settlements would equally fall under the National
Indemnity policy, the judge ruled.
THEFT NOT FULLY COVERED UNDER POLICY
Employee theft is a leading form of fraud that is often overlooked. Wescott Electric Company found that out the hard way. Over the course of 10 years, from 2003 to 2013, a single employee at
Wescott was able to steal nearly $3 million before getting caught. In the last year of
theft, the employee stole $700,000 worth of copper wire, selling it for scrap.
During the time of the theft, Wescott had four consecutive insurance policies
issued by Cincinnati Insurance Company. When the theft was discovered, Wescott
was under the period of the fourth
insurance policy, which stated that
in order for the policy to take effect,
the loss had to be discovered during
the policy period.
Policy wording became the crux
of the legal debate: Wescott was
insured by Cincinnati under four
policies; could multiple policies
come into play? Cincinnati did not
think so. It paid $100,000 — the limit for a single “occurrence” of employee theft
under the 2013 policy. It said the previous policies did not apply.
Wescott, however, did not accept this as final. The 2010 policy ended on January
31, 2013; then the 2013 policy kicked in. The employee’s theft was discovered in
July 2013. Wescott discovered that $300,000 was stolen between July 2012 and
January the next year — falling under the 2010 policy. From January till July 2013,
under the 2013 policy, the employee stole roughly the same amount.
Wescott said that in the year leading up to the discovery of theft, $700,000 was
stolen. The company believed the theft that occurred under the 2010 policy should
be covered by that policy. When Cincinnati refused, Wescott brought a claim for
breach of contract against the insurer.
Cincinnati filed a motion to dismiss, arguing the theft was only discovered
under the 2013 policy and therefore should only be covered under the 2013 policy.
The court reviewed and sided with Cincinnati. It agreed with Wescott in that
the company was entitled to coverage for a single “occurrence” of employee theft
under the 2013 policy. It also determined that the 2010 policy would not apply,
because the policy had ended.
When Wescott pushed, the court further stated that “coverage … applies to loss
… which is ‘discovered’ by you during the Policy Period — not losses discovered up
to one year after the policy period.”
SCORECARD: Cincinnati Insurance Company is only responsible for employee
theft discovered under the 2013 policy.
TAKEAWAY: When working with a company for multiple policy periods, it is best
to review policy wording with clients so that the parameters of the policy are
INSURER OFF THE HOOK FOR PUNITIVE DAMAGE
Jennifer zuniga was walking on the sidewalk when a vehicle struck her from behind, injuring her. Zuniga sued the driver, Christopher Medina, for negligence and gross negligence. The court found Medina
guilty on both accounts, and Zuniga was awarded $93,250 in damages and
$75,000 in punitive damages.
Medina was insured by Farmers Texas County Mutual Insurance Company and
so sought coverage under the policy. Noting that Medina was a “covered person,”
Farmers agreed to pay damages and gave Zuniga the $93,250 awarded to her.
However, Farmers said it was not responsible for the punitive damages and did not
Farmers filed a petition against Medina and Zuniga for declaratory judgement,
seeking a declaration that punitive damages were not included in the policy. They
moved that the insurer had “no further duty to defend or indemnify Medina; that
Zuniga is not entitled to recover or collect any additional monies from Farmers;
and, that Farmers has no further duty with respect to the Final Judgment” in
Zuniga’s suit against Medina.
SCORECARD: National Indemnity Co. is responsible for the $43 million
settlement stemming from asbestos-related claims dating as far back as 1973.
Additionally, the insurer is responsible for any new settlements stemming from
TAKEAWAY: Past policies still hold firm and insurers may still be held liable,
even 45 years later, if the cause of loss occurred during the policy period.