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Collins & Aikman Corp. v. Hartford Accident & Indemnity Co.11/5/1993
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In American Home Assurance Co. v. Fish, 122 N.H. 711, 715, 451 A.2d 358, 360 (1982), the court found that where losses that include "fines and penalties imposed by law" are excluded from coverage, punitive damages are not covered within the policy. See also Northwestern Nat'l Cas. Co. v. McNulty, 307 F.2d 432, 436 (5th Cir. 1962) (Florida characterization of punitive damages as a "penalty" conforms with the most widely accepted basis for punitive damages in other American jurisdictions).
The interpretation of punitive damages as a fine or penalty is supported by the United State Supreme Court, which has found that a jury may inflict what are called exemplary, punitive, or vindictive damages "'by means of a civil action, and the damages, inflicted by way of penalty or punishment, given to the party injured.'" Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 16, 113 L. Ed. 2d 1, 18, 111 S. Ct. 1032 (1991) (quoting Day v. Woodworth, 54 U.S. (13 How.) 363, 371, 14 L. Ed. 181, 185 (1851)). The United States Supreme Court has also held that punitive damages are not compensation for injury but, rather, are "'private fines levied by civil juries to punish reprehensible conduct and to deter its future occurrence.'" International Broth. of Elec. Workers v. Foust, 442 U.S. 42, 48, 60 L. Ed. 2d 698, 704, 99 S. Ct. 2121 (1979) (quoting Gertz v. Robert Welch, Inc., 418 U.S. 323, 350, 41 L. Ed. 2d 789, 811, 94 S. Ct. 2997 (1974)).
I conclude that giving the terms "penalty" and "fine" their ordinary meanings, they include punitive damages. As such, it is clear that the exclusion of fines and penalties would exclude punitive damages.
The majority errs in determining that the policy should be interpreted under North Carolina law, and even assuming arguendo that the majority was correct in its choice of law, the language of the policy does not cover awards of punitive damages. I vote to reverse the decision of the Court of Appeals.
Chief Justice Exum and Justice Parker join in this Dissenting opinion.
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