Court Orders Insurer to Pay Punitive Damages

In the case “Tormos Raul Alfredo c/ Montagna Jose Luis y otro/a s/Daños y Perj.Resp. profesional (Excluido Estado),” the plaintiff had sued jointly a physician and a healthcare center, seeking compensation for damages resulting from a medical intervention in an alleged malpractice case.

According to the case record, during the evidentiary stage, it was proven that the plaintiff had undergone surgery and that, during the postoperative period, a fragment of surgical drain was inadvertently retained in the patient’s body. This led to a second surgery and delayed the oncological treatment the patient needed to undergo.

The first instance court considered that the mere existence of the foreign object constituted a case of medical fault, since it demonstrated negligence or carelessness in the procedure. On that basis, the judge held the physician liable for negligence and the institution vicariously liable for breaching its duty of safety and ordered they paid expenses, permanent disability, psychological harm, and non-monetary damages. The judge extended the effects of the ruling to the insurer, within the limits of the coverage, pursuant to article 118 of the Argentine Insurance Law.

The Court of Appeals on Civil and Commercial Matters in the City of Junin partially reversed this decision. On one hand, it released the physician who had performed the surgery from liability, holding that the harmful act had been carried out by another professional during postoperative care. This other person had not been sued. At the same time, it upheld the liability of the healthcare institution for the defective functioning of its postoperative urology service and modified the scope of the damages award.

This ruling is relevant because punitive damages were extended to the insurer. It is well known that, under Argentine law, punitive damages are generally excluded from insurance coverage (and medical civil liability insurance is no exception). This is because, as expressly provided in insurance regulations, “the indemnity owed by the insurer does not include penalties imposed by judicial or administrative authority” (article 12 of the Insurance Law 17418).

However, the Court of Appeals ordered both the institution and the insurer to pay punitive damages, set at the sum equivalent to five basic household baskets type 3 (determined by the Argentine Institute of Statistics and Census). To reach this decision, the Court interpreted that article 112 of the Insurance Law prohibits coverage of fines imposed directly on the insured but not fines imposed on the insured due to acts of third parties for whom the insured is legally liable. Therefore, according to its reasoning, punitive damages are included within the contracted coverage, to keep the insured’s assets unharmed.

In the Court’s own words: “Considering that the purpose of this legislative exclusion from coverage is to discourage the insured from engaging in conducts punished through fines. Therefore, for fines not to be covered by the insurer, they must sanction the insured’s own acts or omissions, but not those of third parties for whom the insured must be legally responsible.”

Finally, citing the “Barrios” precedent, the Court ordered updating the coverage limit using the same mechanism applied to indemnities, although without interest, noting that otherwise the insurance function would be undermined in the face of inflation.

This decision sets a precedent that the Argentinian insurance industry must pay attention to, as it introduces a novel interpretation regarding coverage of punitive damages.