Opinion ID: 2608727
Heading Depth: 2
Heading Rank: 1

Heading: scope of insurance coverage

Text: There is no Oklahoma case law on whether the language of an insurance policy providing for payment of  all sums which the insured might become legally obligated to pay is sufficiently broad to include punitive damages. The insurer contends the policy does not include punitive damages recovered against the insured because its terms do not expressly provide for payment of that class of damages. Instead, the provision covers damages because of injury which the insurer claims is confined to payment for actual damages. Insurer also argues that since both parties stood vis-a-vis each other in an equal bargaining position, the insurance agreement is not to be viewed as an adhesion contract. The insured, if it so desired, could have procured additional coverage for punitive damages and have its premium adjusted accordingly. The insured, on the contrary, urges that a proper construction of the policy, as a matter of law, provides it with coverage for punitive damages, because such award is one of the sums which the insured became legally obligated to pay as damages arising from false arrest. A survey of pronouncements from other jurisdictions, which have addressed this specific issue, indicates a split of authority with the majority holding the terms of the policy embrace liability for punitive damage. [5] In Harrell v. Travelers Indemnity Co ., [6] an Oregon decision, the policy obligated the insurer to pay for the insured all sums which the insured shall become legally obligated to pay as damages. It contained neither an express exclusion nor a like inclusion of punitive damages. The state law favored the insured where the contract was ambiguous. [7] In Norfolk & Western Railway Co. v. Hartford Accident and Indemnity Co., [8] the court similarly reasoned that where the provisions cover all sums which the insured shall become legally obligated to pay, the policy unambiguously includes all sums. Punitive damages, which became liquidated by judgment, were considered a sum included in the policy. In short, absent a specific exclusion of punitive damages, the court in both cited cases resolved the issue in favor of the insured. The majority rule is in accord with the reasoning followed by this court in interpreting insurance policies. These contracts are to be liberally construed in favor of the object to be accomplished. [9] Where the contract is susceptible of two meanings, the words of inclusion are liberally construed in favor of the insured and words of exclusion are strictly construed against the insurer. [10] The policy provisions in the case at bar make no distinction between actual and punitive damages. Punitive damages are not specifically excluded. Under the plain language of the policy the company promises to pay on behalf of the insured all sums which the insured shall be legally obligated to pay as damages because of injury arising from false arrest. The law is clear in Oklahoma that insurance policies are to be construed most liberally to favor recovery. We hold that if the language of this policy may be deemed in law to be patently ambiguous, doubts about its meaning must be resolved in favor of the insured. Hence the policy provision  for all sums which the insured might become legally obligated to pay  is sufficiently broad to include liability for punitive damages.