The bad-faith case that has ricocheted through the courts for 20 years may finally be nearing resolution. The Utah State Supreme Court has awarded Inez Campbell more than $9 million in her long-standing dispute against State Farm.
After previously reviewing the case, the United States Supreme Court remanded it to the state court, finding that the original punitive damage award of $145 million was excessive and violated the due process clause of the Fourteenth Amendment.
The case has brought unequaled clarity to the constitutional limits surrounding punitive damages, according to the National Association of Mutual Insurance Companies. "The U.S. Supreme Court had attempted to place limits on punitive damages for years, but their decisions did not appear to capture the attention of some lower courts," NAMIC staff wrote in response to the Utah verdict. "In Campbell, the court seemed to finally say enough."
Although the award was greatly reduced to $9,018,780.75, it was significantly higher than State Farm's target figure of just more than $1million. "Even the Supreme Court's observation that this case 'likely would justify a punitive damage award at or near the amount of compensatory damages' does not cause us to retreat from our view that we have been granted discretion to determine the amount of punitive damages," Justice Nehring wrote in his opinion.
In addition to suggesting limits for punitive damage awards, the U.S. Supreme Court sought to restrict the scope of evidence that may be presented to jurors. The court chided Utah's jurists for the fact that the $145 million punitive damage award was prompted by State Farm's nationwide policies, rather than for its conduct toward the Campbells.
"The Supreme Court found impermissible our reliance on State Farm's conduct outside Utah in measuring the reprehensibility of the company's conduct," wrote Nehring. "The Supreme Court's rejection of our consideration of State Farm's conduct in other states was grounded in the recognition that much of the out-of-state conduct was lawful where it occurred."
The Utah Supreme Court stood firm on the rights of individual states to interpret punitive damages awards. Had the U.S. Supreme Court not agreed, the justices would have ruled on a fixed punitive damage figure, Nehring argued. In Utah, punitive damages are analyzed under a seven-factor test, commonly known as the Crookston standards. The factors are the relative wealth of the defendant, the nature of the alleged misconduct, the facts and circumstances surrounding such conduct, the effect on the lives of the plaintiffs and others, the probability of future recurrence of the misconduct, the relationship of the parties, and the amount of actual damages awarded.
In the original case, Curtis Campbell, who has since died, was found responsible for a 1981 automobile accident that disabled Robert Slusher and killed Todd Ospital. At the time, Campbell was insured by State Farm up to $25,000, according to court records. State Farm chose not to settle the case.
When Campbell was found responsible and a judgment entered against him for $135,000, State Farm refused to pay the amount, suggesting that the Campbells put their house up for sale to pay off the judgment. Although State Farm eventually paid the judgment, the Campbells sued for bad faith. At trial, the Campbells were permitted to introduce evidence that State Farm had a comprehensive nationwide policy of handling certain claims in a like manner.
The jury awarded Curtis and Inez Campbell $2,086.75 in special damages, $2.6 million in compensatory damages, and $145 million in punitive damages. The trial judge remitted the amounts to $1 million in compensatory damages and $25 million in punitive damages. On appeal, the Utah Supreme Court reinstated the original jury verdict of $145 million in punitive damages, citing two decades of "egregious and malicious behavior" in State Farm's claim-handling practices.
"While some have speculated that this might finally be the end of Campbell, the Utah Supreme Court's decision raises questions that might merit further review," NAMIC staff warned. "The Campbell litigation may not yet be over."
State Farm has not commented on whether it will ask for further review of the case.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.