No Liability Coverage for Vicariously Liable Punitive Damages in Florida

The Southern District of Florida issued a ruling favorable to insurers in interpreting whether punitive damages are insurable in Florida–even when awarded for vicariously liable acts.

The case, Ranger Constr. Indus., Inc. v. Allied World Nat’l Assurance Co., No. 17-81226-KAM (S.D. Fla. Dec. 23, 2019), was an insurance coverage dispute arising over an excess policy issued by Allied World to the plaintiff. The policyholder had been hired for a construction project involving building a highway, and various subcontractors were ultimately hired. One such subcontractor’s employee was driving a tractor-trailer during the project when two different vehicles collided with it.

In a subsequent bodily injury claim, the plaintiff asserted that both the particular driver of the tractor-trailer and the policyholder should have punitive damages awarded against them. A jury determined that the tractor-trailer driver was an agent of the policyholder and punitive damages in the amount of $25 million were awarded against both the driver and the policyholder.

The Southern District had to decide whether Florida’s public policy prohibited liability coverage for punitive damages resulting from vicarious liability–which previously had been allowed. In rejecting coverage for all punitive damages, the court examined the history of cases as well as the revised version of Florida Statute Section 768.72. The court noted the revised statute heightened the standard of proof for imposing liability for punitive damages vicariously–essentially requiring that the plaintiff show gross negligence on the part of the vicariously liable agent.

Because the purpose of punitive damages is to deter misconduct and because the statute required that the policyholder must have acted grossly negligent with respect to the accident in order to have punitive damages awarded against it, the court concluded that public policy barred coverage for vicariously awarded punitive damages as well.