Insurer's conduct warranted punishment but not to the tune of $145 million
A man in this Utah case was involved in an auto accident that disabled one person and killed another. The man's auto liability insurance limit was $25,000. His insurer chose not to settle the case, which proceeded to a trial that resulted in a $135,000 judgment against the man. The insurer refused to pay the judgment and instead suggested that the man and his wife cover it by selling their house.

Although the insurer eventually paid the judgment, the insureds sued for bad faith. At trial, the insureds were permitted to introduce evidence that the carrier had a comprehensive nationwide policy of handling certain claims in a manner similar to what they had experienced. The jury awarded the insureds $2,086.75 in special damages, $2.6 million in compensatory damages, and $145 million in punitive damages. The trial judge reduced the compensatory damage award to $1 million and the punitive damages award to $25 million. On appeal, however, a state appeals court reinstated the original jury verdict for $145 million in punitive damages.

The insurer appealed this decision to the U.S. Supreme Court, which held that the punitive damages award was excessive and violated the due process clause of the U.S. Constitution's Fourteenth Amendment. It reversed and remanded the case to the state appeals court for the determination of an appropriate award.