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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.).
However, if the life insurance death benefit is paid in installments instead of a lump sum, the interest portion (if any) is taxable. The principal is tax-free. The insurance proceeds may be included in the taxable estate of the owner. Not to worry, though...the estate tax exclusion is over $5.3 million.