Insurers should check their exclusions relating to claims for penalties if they do not want to pay civil penalties. This is especially important in this age of major fines by regulators.
A Louisiana court has obliged an insurer to cover $3.5 million in civil penalties imposed on an energy company for violations of the USA Clean Air Act. The policy excluded criminal fines and penalties, as well as punitive, exemplary or injunctive relief.
The court held that the exclusion did not exclude the Clear Air Act penalties because they are civil penalties not criminal penalties.