Abstract

In October 1989 the Arizona Supreme Court resolved two significant issues that are vitally important to the future of Arizona insurance practice. First, the court announced a new standard for resolving ambiguous insurance policy provisions. Second, the Arizona Supreme Court denied insureds punitive damage coverage under the insured's own uninsured and underinsured motorist coverage (UM and UIM respectively).

The Wilson case raised two issues. First, a contractual issue of whether Wilson's UIM policy provided coverage for punitive damages. This Note first discusses the historical development of Arizona's standard for resolving ambiguous insurance contracts. Then, this Note reviews the holding in State Farm v. Wilson and the new standard applicable to ambiguous insurance contracts. The second issue in Wilson involved the public policy rationale for permitting punitive damage awards. Not constrained by the P.A.T. Homes blind ambiguity rule, the Wilson court engaged in a comprehensive review of the legislative and judicial history behind Arizona's mandatory UM and UIM coverage. The third section of this Note analyzes punitive damage awards against uninsured or underinsured tortfeasors in Arizona and explores the rationale for excluding punitive damages from first party uninsured and underinsured motorist coverage. Finally, this Note analyzes UM and UIM coverage of punitive damages in other jurisdictions, which provide direction and guidance for Arizona in the future.

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