Drunk-Driver Crash Victims Win: Insurers Must Cover Attorney Fees Awarded With Punitive Damages

Published May 28, 2010 · Ohio Supreme Court

When a drunk driver hurts someone, the jury can do more than add up the medical bills. If the driver's conduct showed malice, Ohio law allows punitive damages to punish it, and when punitive damages are awarded the jury can also order the driver to pay the victim's attorney fees. The catch has always been collecting. Ohio law forbids insurance coverage for punitive damages, and drunk drivers who flee crash scenes are not usually people with assets.

On May 4, 2010, the Supreme Court of Ohio removed part of that obstacle. In Neal-Pettit v. Lahman, 125 Ohio St.3d 327, 2010-Ohio-1829, the Court held that attorney fees awarded as a consequence of a punitive-damages verdict are not themselves punitive damages, and an auto insurer whose policy does not clearly exclude them must pay. For victims of impaired and reckless drivers, that is real money from a source that can actually write the check.

The crash and the verdict

The facts in the opinion are brief but telling. On March 27, 2003, Linda Lahman struck Kimberly Neal-Pettit's car. Lahman was intoxicated and was fleeing the scene of an earlier collision. Neal-Pettit sued for her injuries and for punitive damages.

A jury found for Neal-Pettit and awarded $113,800 in compensatory damages, $75,000 in punitive damages, and, based on a finding that Lahman had acted with malice, attorney fees that the trial court set at $46,825, plus about $10,000 in expenses.

Lahman was insured by Allstate. Allstate paid the compensatory damages, interest, and expenses. It refused to pay the punitive damages, which was correct under Ohio law, and it also refused to pay the attorney fees. Neal-Pettit sued Allstate directly for the fee award. The trial court ruled for her, the Eighth District affirmed, and Allstate took the case to the Supreme Court.

What the Court held

The Court ruled 4 to 2 for the victim. Its syllabus begins with the key sentence: "Attorney fees are distinct from punitive damages." Justice Lanzinger's majority opinion worked through three questions.

Does the policy cover attorney fees? Allstate's policy promised to pay "damages which an insured person is legally obligated to pay because of" bodily injury. The Court held that a fee award, although triggered by the punitive verdict, also stems from the underlying bodily injury, and that where policy language can reasonably be read either way, the reading that favors coverage wins.

Does the punitive-damages exclusion apply? Allstate's policy excluded "punitive or exemplary damages, fines or penalties." The Court held that attorney fees are conceptually different from punitive damages, that the exclusion never mentions fees, and that an insurer who wants to exclude something must say so clearly. Allstate wrote the policy and could have added the words.

Does public policy forbid coverage? Ohio law, including R.C. 3937.182(B), prohibits auto policies from covering punitive damages, on the theory that a wrongdoer should not be able to insure against punishment. The Court held that the statute mentions only punitive and exemplary damages, not attorney fees, and declined to add words the legislature left out. The opinion also made the practical point that the holding does not reward bad conduct, because "these punitive damages remain uninsurable" and the driver still owes them personally.

Two justices dissented, arguing that the fee award is so tightly bound to the punitive award that it should be treated as punitive too. The majority disagreed, and the law is now settled.

Why this matters to crash victims

It changes the economics of a malice case. Attorney fees in a contested drunk-driving injury case can run tens of thousands of dollars, as they did here. Before Neal-Pettit, a victim who won a fee award often could not collect it, because the only person obligated to pay was a driver with no money. Now the driver's auto insurer is on the hook, unless its policy specifically excludes fees.

It gives insurers a reason to settle fairly. An insurer defending a drunk-driving claim now knows that if the case goes to trial and the jury finds malice, the insurer may owe the victim's attorney fees on top of compensatory damages. That exposure encourages realistic settlement offers earlier.

It reinforces that drunk driving can be malice. The jury in this case found malice, and the Court noted that the finding was presumably based on Lahman driving drunk and fleeing a prior collision. Not every impaired-driving crash supports punitive damages, but conduct that shows a conscious disregard for other people's safety can, and the victim's lawyer should plead and prove it from the start.

What to expect from the insurer after this decision

Expect two responses. First, insurers will begin rewriting policy exclusions to add attorney fees expressly. The Court all but invited them to. Policies issued or renewed over the next few years may close this door, which is why the language of the specific policy in your case matters.

Second, adjusters will continue to treat punitive claims as leverage they can ignore, since the punitive award itself still cannot be insured. That is a mistake on their part. A verdict for compensatory damages, attorney fees, and interest, all payable by the insurer, can exceed the policy limits the adjuster thought were the ceiling, and the driver remains personally liable for the punitive award.

What this means for you

If you were hit by a drunk, drugged, or fleeing driver, your claim is not an ordinary negligence case and it should not be handled like one. The facts that support punitive damages, such as the blood-alcohol result, the criminal charges, the driver's prior record, and any attempt to leave the scene, need to be documented and preserved early. Police reports, breath-test records, and court files from the criminal case are available if someone asks for them.

We handle car crash cases involving impaired drivers throughout the Dayton area. In some cases the responsibility extends beyond the driver: earlier this year we wrote about the Supreme Court's decision allowing claims against police officers who recklessly released a drunk driver, and a bar that overserves a visibly intoxicated patron may be liable as well. And because impaired drivers so often carry little or no insurance, your own uninsured and underinsured motorist coverage should be reviewed from the first day.