Utah Supreme Court Issues New Punitive Damages Decision in Campbell v. State Farm

On April 23, the Utah Supreme Court issued its opinion in Campbell v. State Farm, after remand from the United States Supreme Court.

As you know, the U.S. Supreme Court held that a $145 million punitive damage award previously affirmed by the Utah Supreme Court was constitutionally excessive. The high court stated that State Farm's conduct likely would justify a punitive damage roughly equal to the amount of compensatory damages ($1 million), but the court remanded to the Utah Supreme Court to determine the appropriate amount of punitive damages to award.

On remand, the Utah Supreme court reduced the award to just over $9 million, exactly nine times the amount of compensatory damages. In so doing, the court characterized insurance bad faith as highly reprehensible conduct. The court reasoned that the damages caused by insurance bad faith extend beyond mere "economic" harm:

"If we were to hold the view that insurance has no purpose beyond providing economic compensation for loss, there would be little reason to dwell on this first reprehensibility factor. So interpreted, not only would the harm caused by State Farm be purely economic in nature, but the economic harm sustained by the Campbells would be minimal. State Farm ultimately paid the entire judgment which was awarded against the Campbells, including amounts in excess of the policy limits. However, we do not believe that the Campbells' injuries were limited to their economic loss."

The court went on to explain that insurance bad faith is comparable to a physical assault in terms of reprehensibility:

"As the facts of this case make clear, misconduct which occurs in the insurance sector of the economic realm is likely to cause injury more closely akin to physical assault or trauma than to mere economic loss."

The court even suggested that a carrier's vigorous defense of a claim on its merits may be grounds for an award of punitive damages to deter future misconduct:

"State Farm's obdurate insistence that its treatment of the Campbells was proper clearly calls out for vigorous deterrence."

The Utah Supreme Court's analysis seems inconsistent with both the letter and the spirit of the U.S. Supreme Court's opinion. Nevertheless, we anticipate that plaintiffs will rely on these broad sweeping statements in future insurance bad faith cases.

For a copy of the Utah Supreme Court opinion, click here.

For more information, contact Curt Cutting at ccutting@horvitzlevy.com.

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