State Farm Mutual Automobile Insurance Co. v. Campbell
125 S. Ct. 1513 (2003)

  • Campbell was probably at fault for a car accident that killed one person and injured another.
  • The victims offered to settle for $50k (the maximum of Campbell’s insurance policy), but his insurance company (State Farm), refused and went to court.
    • Despite the fact that investigators from State Farm felt that Campbell was likely at fault.
  • The Court awarded the victims $186k.
    • State Farm told Campbell they would only pay $50k and suggested the he sell his house to make up the difference.
  • Campbell joined with the victims and sued State Farm for acting in bad faith.
  • The case bounced around a bit, and eventually the Utah Supreme Court awarded Campbell $1M in compensatory damaged and $145M in punitive damages for intentional infliction of emotional distress.
    • There was evidence that State Farm had done this sort of thing numerous times in the past.
  • The US Supreme Court overturned the damage award.
    • The US Supreme Court found that the excessively high punitive damages in this case violate the Due Process Clause of the 14th Amendment.
    • The Court looked to BMW of North America v. Gore (517 U.S. 559 (1996)), which suggested a three-part test in determining whether a damage award violated due process:
      • The degree of reprehensibility of the defendantÕs conduct.
      • The ratio or harm to the compensatory damages awarded.
      • A comparison of the punitive damages award to civil or criminal penalties that could be imposed for comparable misconduct.
    • Based on the facts of this case, the Court found that the punitive damage award was neither reasonable nor proportionate. Therefore it was an “irrational and arbitrary deprivation of property.” Hence a violation of due process.
    • As a future guideline, the Court suggests that “…few awards exceeding a single digit ratio between punitive and compensatory damages will satisfy due process.”