Magnum Foods, Inc. v. Continental Casualty Company
36 F.3d 1491 | Court of Appeals for the Tenth Circuit | 1994
What This Case Means for Subcontractors
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.
Key Takeaways
- •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.
- •Review your insurance policies for punitive damage exclusions and understand your state's rules; don't assume broad indemnification clauses will protect you from all liability.
Punitive damages imposed directly on employer for own negligence are not insurable under Oklahoma law.
Frequently Asked Question
Can my insurance cover punitive damages if I'm sued for negligent hiring or retention?
No, not in Oklahoma. Courts prohibit insurance coverage for punitive damages imposed directly on you for your own gross negligence in hiring or retaining workers. This is a public policy rule that overrides insurance contracts. However, your insurer must still handle your claim fairly and in good faith, or you may have a separate claim against them for bad faith.
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