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Lawsuits against insurance companies, finance companies, etc., for negligence, fraud, breach of contract, etc., can include a variety of claims, and therefore can produce a variety of types of awards/settlements.
Because these are nonphysical injuries, under IRC § 104(a)(2), only compensation for out-of-pocket amounts for medical costs incurred to treat any emotional distress claims would be excludable from income if not previously deducted (IRC §§ 111 and 213). All punitive damages received pursuant to these types of claims are taxable.Your tax preparer would want to look to the reason for the lawsuit and then if you paid any medical costs due to mental distress. Only the medical could be excluded unless you used that amount already as a deduction on your Schedule A.
It is unfortunate but lawsuits and awards are sometimes taxable.