Opinion ID: 2625838
Heading Depth: 4
Heading Rank: 2

Heading: The Nature of State Farm's Misconduct

Text: ¶ 27 This factor specifically analyzes the nature of the defendant's conduct in terms of its maliciousness, reprehensibility, and wrongfulness. It mirrors the reprehensibility factor described by the United States Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). There, the Supreme Court stated that the defendant's misconduct is [p]erhaps the most important indicium of the reasonableness of a punitive damages award. Id. at 575, 576, 116 S.Ct. 1589. Repeated trickery and deceit targeted at people who are financially vulnerable is especially reprehensible and worthy of greater sanctions. Id. Moreover, deliberate false statements, acts of affirmative misconduct, or concealment of evidence of improper motive also warrant larger awards. Id. at 579, 116 S.Ct. 1589. ¶ 28 With these standards clearly in mind, the trial court made nearly twenty-eight pages of extensive findings concerning State Farm's reprehensible conduct. We summarize here three examples from those findings of State Farm's most egregious and malicious behavior. ¶ 29 First, State Farm repeatedly and deliberately deceived and cheated its customers via the PP & R scheme. See Court's Findings, Conclusions and Order Regarding Punitive Damages and Evidentiary Rulings, Campbell, at 17-27. For over two decades, State Farm set monthly payment caps and individually rewarded those insurance adjusters who paid less than the market value for claims. Id. at 18-19. Agents changed the contents of files, lied to customers, and committed other dishonest and fraudulent acts in order to meet financial goals. Id. at 17-27. For example, a State Farm official in the underlying lawsuit in Logan instructed the claim adjuster to change the report in State Farm's file by writing that Ospital was speeding to visit his pregnant girlfriend. Id. at 35. There was no evidence at all to support that assertion. Ospital was not speeding, nor did he have a pregnant girlfriend. Id. The only purpose for the change was to distort the assessment of the value of Ospital's claims against State Farm's insured. As the trial court found, State Farm's fraudulent practices were consistently directed to personspoor racial or ethnic minorities, women, and elderly individuals who State Farm believed would be less likely to object or take legal action. Id. at 26-27. ¶ 30 Second, State Farm engaged in deliberate concealment and destruction of all documents related to this profit scheme. Id. at 31-33. State Farm's own witnesses testified that documents were routinely destroyed so as to avoid their potential disclosure through discovery requests. Id. at 29-30. Such destruction even occurred while this litigation was pending. Id. at 30. Additionally, State Farm, as a matter of policy, keeps no corporate records related to lawsuits against it, thus shielding itself from having to disclose information related to the number and scope of bad faith actions in which it has been involved. Id. at 30. ¶ 31 Third, State Farm has systematically harassed and intimidated opposing claimants, witnesses, and attorneys. Id. at 33-37. For example, State Farm published an instruction manual for its attorneys mandating them to ask personal questions as part of the investigation and examination of claimant in order to deter litigation. Id. at 34. Several witnesses at trial, including Gary Fye and Ina DeLong, testified that these practices had been used against them. Id. at 34-35. Specifically, the record contains an eighty-eight page report prepared by State Farm regarding DeLong's personal life, including information obtained by paying a hotel maid to disclose whether DeLong had overnight guests in her room. Id. at 35. There was also evidence that State Farm actually instructs its attorneys and claim superintendents to employ mad dog defense tacticsusing the company's large resources to wear out opposing attorneys by prolonging litigation, making meritless objections, claiming false privileges, destroying documents, and abusing the law and motion process. Id. at 36-37. ¶ 32 Taken together, these three examples show that State Farm engaged in a pattern of trickery and deceit, false statements, and other acts of affirmative misconduct targeted at financially vulnerable persons. BMW, 517 U.S. at 575, 576, 116 S.Ct. 1589. Moreover, State Farm has strategically concealed evidence of [its] improper motive to shield itself from liability, which was furthered by State Farm's treatment of opposing witnesses and counsel. BMW, 517 U.S. at 579, 116 S.Ct. 1589. Such conduct is malicious, reprehensible, and wrong. ¶ 33 State Farm responds by arguing in its brief that even if its conduct was wrong, it does not after all, involve murder, torture, or deliberate poisoning of the environment, and thus cannot warrant millions of dollars in punitive damages. Additionally, State Farm argues that under Crookston II, willful calculated fraud was not sufficient to justify a higher than ordinary ratio of punitive to compensatory damages. Crookston II, 860 P.2d at 940. ¶ 34 State Farm fails to realize that, while Crookston II held that fraudulent conduct alone was insufficient to justify a large punitive damage award, it also observed that fraud combined with other factors justifies a higher award. Id. at 940-41. Specifically, Crookston II stated that an additional unique factor justifying the punitive award, both in its dollar amount and in its proportion to the hard compensatory damages [is]... the company's `calculated and calloused attitude' toward settling valid claims. Id. at 941 (citation omitted). In this case, the jury was convinced, and the evidence shows, that State Farm engaged in a widespread pattern of fraud. Moreover, the evidence of its PP & R scheme demonstrates that State Farm specifically calculated and planned to avoid full payment of claims, regardless of their validity. Thus, the nature of State Farm's conduct supports the imposition of a higher than normal punitive damage award.