Magnum Foods sued its insurance company (CNA) to recover punitive damages it was ordered to pay in a separate lawsuit. The court ruled that Oklahoma law prohibits insurance coverage for punitive damages when an employer is directly liable for its own gross negligence in hiring or retention. However, the court found that insurers still must act in good faith toward their policyholders, even when denying coverage for uninsurable punitive damages. Magnum won a $750,000 bad faith judgment against CNA for mishandling the claim.
You cannot insure punitive damages in Oklahoma if they result from your own gross negligence in hiring or retaining workers—this is a public policy limit, not a contract issue.
Even when an insurer correctly denies coverage for uninsurable damages, it must still treat you fairly and in good faith during the claims process; bad faith handling can result in separate damages.