State Farm Mutual Automobile Insurance v. Campbell

Background

In 1981 a Utah couple, Curtis and Inez Campbell, were involved in a crash that left one driver dead and another permanently disabled. The couple’s insurer refused early settlement offers at the policy limit, defended the insured at trial, and initially refused to cover excess liability. The Campbells sued the insurer for bad faith. At trial the plaintiffs introduced extensive evidence about the insurer’s nationwide claims practices. A jury awarded about $2.6 million in compensatory damages and $145 million in punitive damages; earlier reductions produced a $1 million compensatory figure, and the Utah Supreme Court reinstated the $145 million punitive award.

Reasoning

The Court asked whether the $145 million award violated the Due Process Clause because it was grossly excessive. Applying three guideposts from earlier cases, the Justices examined how blameworthy the insurer’s conduct was, the ratio between punitive and compensatory awards, and comparable civil penalties. The majority found much of the nationwide evidence had little connection to the Campbells’ specific harm, and that a 145-to-1 ratio was presumptively excessive given the substantial compensatory recovery. The Court held that wealth and evidence about out-of-state or dissimilar conduct could not justify such a massive punishment, required careful de novo appellate review, reversed the Utah Supreme Court, and remanded for recalculation consistent with these limits.

Real world impact

The ruling narrows how large punitive awards against businesses may be and tells lower courts to focus punishment on conduct that actually harmed the plaintiff. Insurers and large companies face clearer constraints on runaway punitive awards. States may not impose massive penalties based on conduct that was lawful elsewhere or unrelated to the injured parties, and the case will be sent back to Utah courts for a new calculation.

Dissents or concurrances

Three Justices dissented, arguing the Constitution does not place substantive limits on punitive-damage size and would have left the Utah decision intact.