A provision found within some directors and officers (D&O), professional,
and employment practices liability (EPL) policies stating that with respect to
the insurability of punitive damages, the law of the jurisdiction most
favorable to the insurability of punitive damages will apply, provided the
jurisdiction meets one of the following criteria. It is the jurisdiction where:
(1) the punitive damages were awarded; (2) the act giving rise to the punitive
damages award occurred; (3) the insured is incorporated or maintains its
principal place of business; or (4) the insurer is incorporated or maintains
its principal place of business. When this provision is included within a
policy that affirmatively covers (or does not exclude) punitive damages, it
provides assurance that such damages will be covered by the insurer, despite
the fact that covering punitive damages is contrary to law in certain
jurisdictions (e.g., California). Most favored venue wording merely modifies
the existing level of coverage for punitive damages already provided by a
policy. Such wording does not provide coverage if the policy otherwise excludes
punitive damages. It is also important to recognize that the validity of this
provision has not been tested in court.