The Oregon Supreme Court today significantly reduced a punitive damage award against an insurance company on a claim of bad faith failure to settle. In Goddard v. Farmers Insurance Co., a jury found that an automobile insurer had in bad faith refused to settle a wrongful death claim within policy limits, and entered an award to the insured of more than $20 million in punitive damages. That punitive damages amount was 16 times greater than plaintiff's compensatory damages.
On review the Supreme Court held that, where the defendant's wrongful act resulted in economic injury but not personal injury, the ratio of punitive damages to compensatory damages should generally not exceed four to one in order to avoid violating the Due Process Clause of the US Constitution. The court ordered a new trial limited to the amount of punitive damages, unless defendant accepts the reduced award of four times compensatory damages.
Find our earlier coverage of the law of punitive damages here, here, and here.
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