A term that, when used in reinsurance agreements, refers to damages awarded by a court against an insurer in addition to compensatory damages.
Punitive damages are intended to punish the insurer for willful and wanton misconduct and to serve as a deterrent.
When the award is against an insurer, it is usually related to the insurer’s conduct in the handling of a claim.
See Extra Contractual Obligations and Losses in Excess of Policy Limits.