A jury award that would have forced State Farm Insurance Cos. to pay a Utah man $145 million in punitive damages has been overturned by the U.S. Supreme Court.
Insurance trade groups said the 6-3 decision was a win not only for the exclusive agent company State Farm but for the industry as a whole.
The court ruled that that the award was excessive given that the mental anguish damages were only $1 million. The man, Curtis Campbell, sued State Farm in 1989 when the insurer refused to pay $50,000 to settle an accident claim in which one victim was disabled and another killed.
Though State Farm won the first round in court, Campbell sued a second time and won on the grounds that the company failed to settle in good faith. The case became a test of industry practices in settlement cases extending into other states and trade groups argued that, if allowed, would effectively allow juries to set national regulatory policy.
The Downers Grove, Ill.-based Alliance of American Insurers and several other insurance trade associations filed a friend of the court brief last August asking the Court to overturn the earlier verdict in the case of State Farm v. Campbell.
“Our brief argued that the Utah jury ruling in State Farm v. Campbell was in error because it sought to impose a single state’s laws on others, thereby illegally usurping the authority of state insurance regulation,” said Joyce Kraeger, an Alliance attorney involved in filing the amicus brief. “This would have transformed the role of a jury from that of being a fact finder in a particular dispute into a national regulator of insurance.”
The industry brief also had contended that, under the McCarran-Ferguson Act, the regulation of insurance is committed to the states with each state regulating conduct within its own borders. The brief emphasized that a state may not extend its insurance regulatory power outside its boundaries.
In addition to the Alliance, other insurer trade groups involved in the brief were the American Insurance Association, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies. Together, the four major trade associations represent approximately 90 percent of the property/casualty insurance companies nationwide.
Topics Legislation Market
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