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
State Farm told Campbell
they would only pay $50k and suggested the he sell his house to make up
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
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
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 defendantŐs 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
As a future guideline, the
Court suggests that "...few awards exceeding a single digit ratio
between punitive and compensatory damages will satisfy due process."