Utah Supreme Court awards $9 million in punitive damages on remand from U.S. Supreme Court. Campbell v. State Farm, 2004 WL 869188 (Utah, Apr. 23, 2004) (Nehring, J.)
By Eric Keepers, Esq.
(5/4/2023)--In State Farm v. Campbell, the insurer refused, against the advice of its investigator, to settle a claim against its insured for the policy limits of $50,000, advised the insureds that their assets were safe, and discouraged them from retaining separate counsel. After a verdict of $185,849 was returned against the insureds, the insurer initially refused to pay the excess amount, and also refused to post a supersedeas bond to enable the insureds to appeal the verdict. The insureds obtained their own counsel for the appeal, and after that appeal was denied, the insurer paid the excess amount.
The insureds then brought a bad faith claim against the insurer in Utah state court, and obtained a verdict of $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25 million, respectively.
The Utah Supreme Court reinstated the $145 million punitive award. The U.S. Supreme Court, however, reversed the Utah Supreme Court's decision and remanded the case for further proceedings, holding that a punitive award should not exceed the compensatory damages by more than a single digit ratio in most cases, and suggesting that an award "at or near the amount of compensatory damages" would be appropriate in that case.
On remand, the Utah Supreme Court held that it had discretion under the U.S. Supreme Court's decision to determine the appropriate punitive award, and was not required to make that award "at or near the amount of compensatory damages."
The court then applied the guideposts of BMW v. Gore, noting that the Supreme Court's decision in Campbell had "leashed" it more tightly to those guideposts. On the issue of reprehensibility, the court held that State Farm's had caused not only economic harm, but also emotional harm to the plaintiffs, because insurance is purchased not only to provides funds in case of loss, but also to provide peace of mind. The also noted that State Farm had shown no remorse for its conduct, and thus was likely to repeat that conduct if not deterred.
On the ratio of compensatory to punitive damages, the court held that the $1 million compensatory award did not include a punitive component, as the Supreme Court surmised, because the trial court's reduction of the jury's initial compensatory award purged that award of any punitive elements. Further, the court held, because State Farm's conduct caused the plaintiffs $1 million in emotional distress, that conduct warranted punitive damages equal to nine times that amount.
On comparable civil and criminal penalties, the court observed that while the Supreme Court had relied on a $10,000 fine for fraud as the most relevant civil sanction, it had endorsed a punitive award of $1 million, which is one hundred times greater than the civil penalty, and had failed to indicate what ratio would be unacceptable.
Finally, the court declined to include attorneys fees and costs in the calculation of compensatory damages, holding that the fair reading of the Supreme Court's opinion foreclosed such consideration.
Many thanks to Eric Keepers, of the Lancaster firm of Roda & Nast, for providing this summary and opinion.
Opinion in Campbell case