State Farm Mutual Automobile Insurance Co. v. Campbell

In 1981, Campbell (plaintiff) was driving with his wife in Utah and attempted to pass six vans traveling ahead of them on a two-lane highway. Todd Ospital was driving a small car approaching them from the opposite direction. To avoid a head-on collision with Campbell, Ospital swerved into the shoulder. However, he lost control of his car and collided with a vehicle driven by Robert Slusher. Ospital was killed, and Slusher was rendered permanently disabled. The Campbells were not injured. In a later wrongful-death and tort action, Campbell insisted he was not at fault. Even after investigations pointed to the fact that Campbell’s recklessness caused the crash, his insurance company, State Farm Mutual Automobile Insurance Co. (State Farm) (defendant), decided to contest liability and declined offers by Slusher and Ospital’s estate to settle the claims for the policy limit of $50,000. Additionally, State Farm ignored the advice of its own investigators and took the case to trial, assuring the Campbells that their assets were safe, they were not liable, and State Farm would represent their interests. Instead, a jury found that Campbell was 100 percent at fault, and a judgment was returned for $185,849. At first, State Farm refused to cover the excess liability of $135,849 over the Campbells’ policy limit of $50,000. However, the Campbells sought independent counsel to appeal the judgment against them and bring a bad-faith action against State Farm. The Campbells agreed to be represented by Slusher and Ospital’s lawyers and to pay 90 percent of any verdict received to Slusher and Ospital’s estate. In 1989, the Utah Supreme Court denied Campbell’s appeal in the wrongful-death and tort actions. State Farm then paid the entire judgment, including the amounts in excess of the policy limits. However, the Campbells still filed a complaint against State Farm alleging bad faith, fraud, and intentional infliction of emotional distress. The jury awarded the Campbells $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25 million, respectively. Both parties appealed, and the Utah Supreme Court reinstated the $145 million punitive-damages award. The United States Supreme Court granted certiorari.