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In that case, you'd report the medical expenses related to the incident as miscellaneous (other) income. Punitive damages are taxable except in certain wrongful death cases, as are awards for employment discrimination and injury to reputation (libel, slander, defamation, etc.).
Fortunately, you can avoid taxable income if the employer meets the conditions stated in IRS Publication 525. When a life insurance company pays death benefits in excess of the stated amount, as you receive these extra dollars, they are taxed as income. Excess benefits typically result from interest earned on your premiums paid during the life of the policy.