Panel weighs whether uninsured/underinsured motorist policies must cover punitive awards

A Senate Judiciary subcommittee heard competing arguments about amendments to S.244 that would allow insurers to exclude punitive damages from mandatory uninsured/underinsured motorist (UIM) coverage.

The issue first drew attention when Brandon Gotchell, an attorney testifying for what he described as a policy change to align coverage with the punitive purpose, said the amendment would let an insurer decline to pay punitive awards in UIM claims unless a consumer purchased a specific endorsement. "Why should my own insurance pay for the punishable conduct of someone else?" Gotchell asked, arguing punitive damages are meant to punish the wrongdoer.

Gotchell used a hypothetical: if a driver with minimum limits (for example, $25,000) causes a wreck and a jury awards punitive damages, he said UIM carriers which step into the at-fault driver's shoes should not be required to cover that punitive portion. "If you purchase it, you should receive that benefit," he added, but he said the Legislature should not require punitive coverage as a baseline.

Opponents warned the amendment would effectively nullify jury awards in many cases and shift costs to injured people. One testifier argued that when consumers buy UIM, the premium already reflects the risk that insurers might have to pay larger awards; removing the requirement could leave victims without expected recovery. Several senators asked whether the marketplace would continue to offer punitive endorsements and whether any premium savings would be passed to consumers.

Senators also discussed alternative approaches, including requiring insurers to offer both forms (one policy that includes punitive coverage and one that does not), or increasing mandatory liability minimums so fewer injured people must rely on UIM. Witnesses urged the committee to get input from insurance companies and actuaries before making structural changes.

The subcommittee did not vote. Members said they want insurer testimony and cost estimates before deciding whether to recommend the change to the full Senate.