Tenn. Reverses Stand on Punitive Damage Exclusions

August 10, 2004

A Tennessee regulation that disallowed exclusions for punitive damages in most property casualty insurance policy forms has been reversed after 15 years on the books.

The Property Casualty Insurers Association of America (PCI) said the change came in the form of a bulletin recently issued by the Tennessee Department of Commerce and Insurance.

“Since 1988, the Department has disallowed punitive damage exclusions for all policies except those related to pollution liability coverage and uninsured motorist coverage,” Robert Herlong, PCI vice president and regional manager, said.

“Punitive damages can be a major cost driver in many lines of insurance today, so needless to say, we are pleased to see this restriction lifted. Insurers need the freedom to be able to offer products in a market-driven, competitive environment without being forced to include costly coverages that drive up rates.

“This will benefit customers, especially businesses, because they may now have a choice between coverage that includes punitive damages or coverage that excludes them and, as a result, saves the customer money. Other high-risk businesses may find more choices in liability coverage simply because the punitive damage exposure is eliminated from the insurance transaction.”

According the bulletin, the Department will no longer disapprove a policy form filed with the Department because it contains a provision excluding coverage for damages that are punitive, exemplary and/or multiplied or because it contains a provision limiting coverage to compensatory damages.

PCI member companies write more than 39 percent of all the property casualty insurance in the state.

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