State Farm Mutual Automobile Insurance Co. v. Campbell case brief

State Farm Mutual Automobile Insurance Co. v. Campbell case brief summary
538 U.S. 408 (2003)

SYNOPSIS:
Respondent insureds sued petitioner insurer, alleging that the insurer's refusal to settle meritorious claims against the insureds constituted bad faith, fraud, and intentional infliction of emotional distress. Upon the grant of a writ of certiorari, the insurer appealed the judgment of the Supreme Court of Utah which upheld the jury's award of $ 145 million as punitive damages upon an award of $ 1 million as compensatory damages.

OVERVIEW:
-The insureds contended that the substantial punitive damages award was justified in view of the insurer's national scheme to meet corporate fiscal goals by capping claim payments and engaging in fraudulent practices.
-The insurer argued that the ratio of punitive damages to compensatory damages clearly indicated that the punitive damages award was excessive and unrelated to the actual harm suffered by the insureds.

HOLDING:
The United States Supreme Court held that the punitive damages award was neither reasonable nor proportionate to the wrong committed, and it was thus an irrational, arbitrary, and unconstitutional deprivation of the property of the insurer.

ANALYSIS:
-While the insurer's nationwide policies were clearly deficient, evidence of dissimilar and out-of-state misconduct of the insurer, and out-of-state conduct which was lawful where it occurred, was an improper basis for punishing the insurer for the limited harm to the insureds.
-Further, neither the wealth of the insurer nor the fact that its nationwide misconduct went largely unpunished justified punitive damages which were grossly disproportionate to the compensatory damages awarded for the actual harm to the insureds.

OUTCOME: The judgment upholding the jury's award of punitive damages was reversed, and the case was remanded for further proceedings.



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