## Facts

- Curtis Campbell, insured by State Farm under a $50,000 automobile liability policy, caused a highway collision that killed Todd Ospital and permanently injured Robert Slusher.
- Investigators and witnesses largely attributed fault to Campbell, but State Farm denied liability and declined to settle within policy limits.
- State Farm assured the Campbells they faced no personal liability and discouraged them from retaining separate counsel.
- A Utah jury found Campbell 100% at fault and awarded $185,849, exceeding the policy limits; State Farm refused to pay the excess amount or pursue an appeal, though it later paid the full judgment after affirmance.
- The Campbells sued State Farm for bad faith, fraud, and intentional infliction of emotional distress based on its claims handling and refusal to settle.
- In a bifurcated trial, the jury found State Farm’s refusal to settle unreasonable and, after a damages phase that included extensive evidence about State Farm’s alleged nationwide claims practices unrelated to the Campbells’ claim, awarded $2.6 million compensatory damages and $145 million punitive damages.
- The trial court reduced the award to $1 million compensatory and $25 million punitive, but the Utah Supreme Court reinstated the $145 million punitive award.

## Issues

1. Whether a $145 million punitive damages award, alongside $1 million in compensatory damages, is grossly excessive under the Due Process Clause of the Fourteenth Amendment.
2. Whether a state court may justify punitive damages by relying on a defendant’s out-of-state conduct and dissimilar transactions unrelated to the plaintiff’s injury.

## Decision

- The Supreme Court reversed the Utah Supreme Court and remanded.
- The Court held the $145 million punitive damages award was grossly excessive and violated due process.
- The Court ruled that punitive damages cannot be used to punish a defendant for lawful out-of-state conduct or for dissimilar conduct unrelated to the plaintiff’s harm.
- Applying the BMW of North America, Inc. v. Gore guideposts, the Court concluded the reinstated punitive award was constitutionally unsupportable, particularly given the limited reprehensibility toward the Campbells and the extreme ratio.

## Legal Principles

- The Due Process Clause forbids grossly excessive or arbitrary punitive damages and requires meaningful judicial review of punitive awards.
- Courts assess punitive damages using three guideposts: (1) reprehensibility, (2) ratio between punitive and actual or potential harm, and (3) comparison to authorized civil or criminal penalties in similar cases.
- Reprehensibility is the most important factor; economic harm without physical injury to the plaintiff typically supports lower punitive awards than conduct causing physical harm.
- A state may not punish a defendant for conduct occurring outside its jurisdiction, especially if that conduct was lawful where it occurred.
- Dissimilar acts independent from the conduct establishing liability may not serve as a basis for punitive damages.
- While no bright-line ratio applies, punitive awards exceeding a single-digit multiplier of compensatory damages will rarely satisfy due process; when compensatory damages are substantial, a punitive award near compensatory damages may approach the constitutional limit.

## Conclusion

The Court held that due process limits punitive damages and requires application of the Gore guideposts; Utah’s reliance on nationwide, unrelated conduct and its reinstatement of a 145:1 punitive-to-compensatory award produced an unconstitutional punishment, requiring reversal and recalculation within constitutional bounds.


State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003)