Non-insurability of punitive damages in Argentina : an Economic Analysis of Law explanation

Abstract

In Argentina, punitive damages have been regulated by the Consumer Protection Law since 2008. The majority of legal scholars believe that insurance for punitive damages is barred by the Argentinean Insurance Law. However, the traditional position of the Economic Analysis of Law is that the state should not prohibit this type of insurance. Therefore, this paper examines whether it is appropriate to implement legislative reform in Argentina to allow punitive damage insurance in direct liability situations. After analyzing the potential applicability of the traditional position of the Economic Analysis of Law in the Argentinean reality, in accordance with the requirements for the admission of punitive damages (in particular, that the defendant acted with malice, recklessness or gross negligence), it follows that it is not socially desirable to enact this legislative reform. This conclusion is based on the findings that the insurance of punitive damages in Argentina would: [1] destroy the function of punitive damages (deterrence and punishment); and [2] weaken the social function of insurance liability.