What it does
CA 05 40 is an optional endorsement that excludes punitive damages from Covered Autos Liability coverage. ISO introduced it in its 2026 multistate forms revision (CA-2026-OFR26), approved for policies effective on or after September 1, 2027 in states that have adopted the revision. A companion form, CA 05 41, applies the same idea to the general liability coverages of the Auto Dealers Coverage Form.
Why it matters
Whether punitive damages can be insured is a question of state law. Where the exclusion is attached, a punitive award against the insured is not paid by the auto policy and remains the insured's own responsibility.
Selling notes
- Check whether the insurer attaches it routinely or only to certain classes, and whether umbrella or excess policies also exclude punitive damages.
- For heavy truck and passenger carrier fleets, explain the uninsured punitive exposure clearly.
- Read the endorsement's definition of punitive damages (including exemplary or multiplied damages).
