State Farm Mutual Automobile Insurance Co. v. Campbell
What Happened: In 1981, Campbell caused an accident in which Todd Ospital was killed and Robert G. Slusher was left permanently disabled, a fact confirmed by both witnesses to the accident and investigators. Notwithstanding the evidence against Campbell, Campbell’s insurance State Farm decided to contest liability and decline the settlement offers from both Slusher and Ospital's estate. Both parties were offering to settle for $25,000 each, or $50,000 total, which was Campbell’s policy limit. State Farm assured the Campbells that "their assets were safe, that they had no liability for the accident, and that State Farm would represent their interests, and that they did not need to procure separate counsel. However, a jury rendered a verdict that Campbell was 100 percent liable for the accident and awarded a judgment of $185,849. State Farm refused to pay the excess amount, nor would it post a supersedeas bond to allow Campbell to appeal the verdict; Campbell obtained his own counsel to appeal the verdict. While the appeal was pending, the Campbells reached a settlement with Slusher and Ospital's estate, whereby those parties agreed not to seek satisfaction of the judgment against the Campbells, and the Campbells would pursue a bad-faith action against State Farm. The attorneys for Slusher and Ospital's estate would represent the Campbells in the bad-faith suit and would make all major decisions regarding it. No settlement would take effect without the approval of Slusher and Ospital's estate, and they would receive 90 percent of any verdict against State Farm.The Utah Supreme Court denied Campbell's appeal concerning the underlying car accident and State Farm then paid the entire amount of the judgment including the excess amount.
Nevertheless, the Campbells filed suit against State Farm alleging bad faith, fraud, and intentional infliction of emotional distress. The Campbells won a $145 million verdict against State Farm for their bad faith actions in not protecting their insureds, Resulting in over $116 million dollars to the Estates of Ospital and Slusher and $29 million to the Campbells.
Question Before the Court: There were two questions before the court; (1) was Campbell liable for the original car accident, and (2) did State Farm act in bad faith by not paying the verdict against the Campbells or settling the case for a reasonable amount?
Court Ruling: Campbell was liable in the underlying accident and State Farm acted in bad faith by not paying the original verdict, not settling the case for a reasonable amount, and not paying for the supersedeas bond; essentially, State Farm violated their duty owed to their insureds the Campbells.