In a case where the insurer's unreasonable refusal to settle leads to an extra damages award, what type of damages is this likely to be?

In a case where the insurer's unreasonable refusal to settle leads to an extra damages award, what type of damages is this likely to be?

• A. Compensatory damages
• B. Nominal damages
• C. Consequential damages
• D. Punitive damages

Answer: (D)

Punitive damages are meant to punish and deter particularly egregious conduct. When an insurer unreasonably refuses to settle within policy limits and that bad-faith behavior leads to a larger damages award at trial, the court may impose punitive damages to punish the insurer and discourage similar conduct in the future. This differs from compensatory damages, which cover actual losses, and from nominal or consequential damages, which don’t capture the purpose of punishing egregious conduct.

Punitive damages are meant to punish and deter particularly egregious conduct. When an insurer unreasonably refuses to settle within policy limits and that bad-faith behavior leads to a larger damages award at trial, the court may impose punitive damages to punish the insurer and discourage similar conduct in the future. This differs from compensatory damages, which cover actual losses, and from nominal or consequential damages, which don’t capture the purpose of punishing egregious conduct.