Punitive Damages Award Upheld Against State Farm

A Missouri appeals court Tuesday upheld an $8 million punitive damages judgment imposed against State Farm Insurance. The case involved a lawsuit filed by two insureds who held an auto insurance policy with State Farm. The insureds accused State Farm of malicious prosecution and breach of contract.

As is common, the insurer was able to frustrate resolution of the claim for years. The case began over 10 years ago when the insureds reported the theft of a Toyota 4Runner, which was later found abandoned and burned in Miami County, Kan. State Farm declined to pay the $10,000 claim and, working through an industry investigative service, referred the case to Johnson County prosecutors, who charged Hampton and Vail with insurance fraud. This technique of getting the authorities to bring fraud charges is commonly used by insurers as a technique to intimidate insureds into abandoning even legitimate claims made against their policies.

After a jury acquitted the insureds of any wrongdoing in 2001, they filed the civil action against State Farm. In September 2005, the civil jury awarded them each $400,000. Later that year, a judge adjusted those amounts to $250,000 because of a statutory cap, and he also assessed the punitive awards.

State Farm appealed. The Court of Appeals for the Western District of Missouri upheld the judge’s actions. A State Farm spokeswoman said the company was disappointed by Tuesday’s ruling and thought the large punitive award was contrary to the evidence and represented an unconstitutionally unfair judgment.

http://www.kansascity.com/business/story/436574.html