Bailey is sued for causing an accident and is found to be liable for $50,000 in compensatory damages,$50,000 in court costs and $250,000 in punitive damages.His policy limits are $300,000 and the most common rules apply regarding an insurer's obligations to pay damages incurred by the insured.How much does the insurer have to pay?

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An insurer is generally obligated to pay compensatory damages owed from the insurer to a third party.In addition,the insured's obligations to pay such expenses as court costs would also be covered.Payment obligations are subject to policy limits.As a general rule,however,the insurer will not have an obligation to pay punitive damages either because of an insurance contract to that affect or because of judicial decisions holding that notions of public policy forbid a policyholder to transfer his punitive damage liability to an insurer.

Bailey Is Sued for Causing an Accident and Is Found