Insurance Decision May Help Plaintiffs

A man was killed and another permanently disabled in an auto accident in Utah in 1981.

Investigators concluded that Curtis Campbell caused the accident by unsafely passing other vehicles, but his insurer, State Farm, contested liability and refused to settle the ensuing claims for the $50,000 policy limit.

Adjusters even ignored their own investigators’ advice, and the case proceeded to trial. A jury found Campbell 100 percent at fault and returned a verdict for $185,849.

A first, State Farm refused to cover the excess liability despite having told its insures that " their assets were safe, that [ State Farm] would represent their interests, and that they did not need to procure separate counsel."

In the meantime, employees of State Farm apparently altered company records so that tits insured would appear less culpable.

The insurer then did an about-face and told that Campbells to "put for sale signs on your property to get things moving."

State Farm refused to post a supersedeas bond to allow Campbell to appeal, forcing

him to hire his own lawyer to pursue an appeal. In the ensuing litigation, he reached an agreement with the parties who were injured an killed in the accident where by their lawyers would pursue a bad-faith action against State Farm.

Initially, the trial court granted the defendant’s summary judgment, but the decision was reversed on appeal. On remand, the trial court denied State Farm’s motion to exclude evident of dissimilar out-of-state conduct.

In a bifurcated trial, the jury found unreasonable State Farm’s decision not to settle because there was a substantial likelihood of an excess verdict. In the second phase of trial, evidence regarding compensatory and punitive damages was introduced pertaining to the defendant’s business practices in numerous states.

The crux of the case was that State Farm’s conduct was not only intentional and egregious, it was part of a "national scheme" devised by top executives " to meet corporate fiscal goals by capping payout on claims company wide."

The jury returned a verdict for $26 million in compensatory damages and $145 million in punitive damages.

The trial court reduced the amounts to $1 million and $25 million respectively. The Utah Supreme, however, found the insurers’ conduct reprehensible and reinstated the $145 million punitive damage verdict.

On appeal, the U.S. Supreme Court held, inter alia, that a $145 million punitive damage award violated the due process clause of the 14th Amendment in light of a $1 million compensatory award. State Farm Mutual Automobile Insurance Company v. Campbell, 123 S. Ct. 1513( decided April 7, 2003).

Although, the plaintiffs trial bar, in general, greeted the decision with horror and disgust, I, for one, see some benefit from the decision that at least equals the negative.

At the risk of raising the ire of my colleagues, I find it a relief that the highest court of the land has finally laid out some parameters on an issue that has been sensitive to some and amorphous to many.

In doing so, the Court has taken off the table one of the centerpieces of the tort reform movement ( although it is certain that ill-conceived purposes will cause the reform lobby to seek further restrictions and argue that the Campbell result did not go far enough).