1. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL 538 U.S. 408 (2003) Case Brief

2. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL PURPOSE: This discusses punitive damages.

3. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL CAUSE OF ACTION: The Campbells sued State Farm, their insurance company, for bad faith, fraud, and intentional infliction of emotional distress.

4. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL FACTS: The Campbell car was attempting to pass on a two-lane highway despite oncoming traffic. The attempted pass resulted in the other driver’s (Ospital) death and left another person (Slusher) permanently disabled. State Farm, the Campbell’s insurer refused Ospital’s and Slusher’s offers to settle for $25,000 each ($50,000 policy limit) and took the case to trial. The jury awarded $185,849 against the Campbells. Initially, State Farm refused to pay, forcing the Campbells to appeal. (continued)

5. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL Although State Farm paid the entire judgment following the appeal, the Campbells sued State Farm for bad faith, fraud, and intentional infliction of emotional distress. At trial, the court allowed the Campbells to introduce evidence of State Farm’s allegedly fraudulent actions over a twenty-year period to prove that State Farm was engaged in a scheme to enhance its finances by refusing to pay claims. Jury verdict: $2.6 million compensatory damages, $145 million punitive damages.

6. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL ISSUE: Whether, under the circumstances, an award of $145 million in punitive damages, where full compensatory damages are $1 million, is excessive and in violation of the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States.

7. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL HOLDING: Yes. The punitive award of $145 million was neither reasonable nor proportionate to the wrong committed, and it was an irrational and arbitrary deprivation of the property of the defendant.

8. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL REASONING: The Court stated that the Campbells were improperly allowed to use much evidence about State Farm that was irrelevant. In an earlier case, the Court stated that a court hearing a case concerning punitive damages should consider the following three factors:

9. Copyright 2007 Thomson Delmar Learning. All Rights Reserved. STATE FARM v. CAMPBELL 1. The degree of reprehensibility of the defendant’s misconduct; 2. the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and 3. the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.