Evidence of out-of-state conduct next up in McIntosh v State Farm

Judge Senter issued a text only order yesterday giving counsel for McIntosh additional time to file their response.

TEXT ONLY ORDER granting Plaintiffs’ 1222 Motion for Extension of Time to File Response/Reply re 1215 MOTION in Limine No. 6: To Exclude Evidence of Out-of-State Conduct (Renewed). Plaintiffs’ Response shall be due no later than 7/16/2008. NO FURTHER WRITTEN ORDER SHALL ISSUE. Signed by District Judge L. T. Senter, Jr., on July 9, 2008.

Just days earlier, June 23 to be exact, ever faithful follower E.A. Renfroe had filed an objection to Senter’s April 23 Order requiring State Farm to enter individual objections to each witness McIntosh counsel proposed to call.

The Court did not set a schedule for filing such objections, but stated that the Court will rule on these objections at or before the pre-trial conference. [1187 at 2.] Accordingly, Renfroe files these objections to Plaintiffs’ proffered evidence of out-of-state conduct, some of which refers to State Farm’s use of independent adjusters from Renfroe and other adjusting services companies.

Plaintiffs have identified twelve documents and two witnesses pursuant to the Court’s April 23, 2008 order that they intend to offer at trial and which have not been previously disclosed. None of this evidence involves the McIntosh claim. Rather, it all relates to other, dissimilar claims against State Farm and its related entities, and cases to which Renfroe was not a party.

These cases are Watkins, et al. v. State Farm Fire and Casualty, et al. (“Watkins”) (Plaintiffs’ proffered Exhibits 1-8, 12, testimony of Messrs. Strzelec and Ryles), State Farm Lloyds v. Nicolau, 951 S.W. 2d 444 (Tex. 1997) (“Nicolau”) (Plaintiffs’ proffered Exhibits 10- 12, testimony of Messrs. Strzelec and Ryles), and Campbell v. State Farm (“Campbell”) (Plaintiffs’ proffered Exhibit 91). (emphasis added)

None of this evidence is relevant to Plaintiffs’ claims or relates to Renfroe’s work on Plaintiffs’ claims. Accordingly, Renfroe joins, and hereby incorporates by reference as set forth below, State Farm’s objections that Plaintiffs’ proposed evidence is irrelevant, unfairly prejudicial, overly confusing, infringing on Renfroe’s due process rights, and was untimely disclosed both under this Court’s September 14, 2007 Case Management Order and the Federal Rules of Civil Procedure.2.

I doubt the word irrelevant has been used to describe Campbell vs State Farm – the subject of a new book, Stimple’s Litigation Road, by the way.

This text examines the 25-year case that began as an auto accident and concluded by making constitutional law. It produced both a hotly contested negligence trial and a pathbreaking insurance bad faith case. Along the way, both the Utah and United States Supreme Courts would make significant rulings on settlement, evidence, and punitive damages. The text demonstrates the manner in which many strands of law and policy coalesce in a lawsuit, illustrating the modern legal landscape of torts, civil litigation, contracts, evidence, insurance, professional responsibility, and negotiation and settlement, as well as trial practice.

I wasn’t able to run out and pick up a copy; but, I found a syllabus on the Cornell Law website – note the mention of out-of-state conduct just in this introductory portion of text.

Although investigators and witnesses concluded that Curtis Campbell caused an accident in which one person was killed and another permanently disabled, his insurer, petitioner State Farm Mutual Automobile Insurance Company (State Farm), contested liability, declined to settle the ensuing claims for the $50,000 policy limit, ignored its own investigators’ advice, and took the case to trial, assuring Campbell and his wife they had no liability for the accident, that State Farm would represent their interests, and that they did not need separate counsel.

In fact, a Utah jury returned a judgment for over three times the policy limit, and State Farm refused to appeal. The Utah Supreme Court denied Campbell’s own appeal, and State Farm paid the entire judgment. The Campbells then sued State Farm for bad faith, fraud, and intentional infliction of emotional distress.

The trial court’s initial ruling granting State Farm summary judgment was reversed on appeal. On remand, the court denied State Farm’s motion to exclude evidence of dissimilar out-of-state conduct. In the first phase of a bifurcated trial, the jury found unreasonable State Farm’s decision not to settle. Before the second phase, this Court refused, in BMW of North America, Inc. v. Gore, 517 U. S. 559, to sustain a $2 million punitive damages award which accompanied a $4,000 compensatory damages award.

The trial court denied State Farm’s renewed motion to exclude dissimilar out-of-state conduct evidence. In the second phase, which addressed, inter alia, compensatory and punitive damages, evidence was introduced that pertained to State Farm’s business practices in numerous States but bore no relation to the type of claims underlying the Campbells’ complaint. The jury awarded the Campbells $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25million respectively. Applying Gore, the Utah Supreme Court reinstated the $145 million punitive damages award.

The link to Cornell will also connect to the opinion of the Supreme Court and the dissenting views of Scalia, Thomas, and Ginsburg.

25 thoughts on “Evidence of out-of-state conduct next up in McIntosh v State Farm”

  1. Gee, an auto case from 25 years ago? I can’t imagine why anyone would think that is irrelevant in a Katrina case. They both have the word “insurance” in them somewhere, don’t they?

  2. I guess it has to do with State Farm’s business practices of bad faith, fraud, and intentional infliction of emotional distress. You know, the Courts don’t take too kindly to such things as that.

  3. Uh, read the last sentence there, claimsguy.

    The jury awarded the Campbells $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25million respectively. Applying Gore, the Utah Supreme Court reinstated the $145 million punitive damages award.

    $146,000,000.00!!! That is not nonsense. That is a big slap in the face.

  4. Have you people even READ Campbell?

    If you had, you would understand how absurd it is to bring it up in the Katrina context.

    Try starting with this: what is the key holding of the US Supreme Court opinion in Campbell? Consider this a test of your reading comprehension skills.

  5. Key holding: A punitive damages award of $145 million, where full compensatory damages are $1 million, is excessive and violates the Due Process Clause of the Fourteenth Amendment

  6. Just reading the syllabus makes me wonder if all the bad press about juries and lawyers in our state should not have been directed to judges.

    The excessive punies that have been reduced seem to be more a matter of jury instruction than anything else.

    I assume Merlin’s interest in Campbell is a signal he wants to avoid that mistake in McIntosh and will only be asking for a reasonable amount.

    Senter earlier dismissed the “fraud” as you recall; but, can he reinstate it if there is evidence presented that documents there was more than bad faith involved?

  7. Belle flunks, as discerning the holding isn’t simply about counting judges.

    Nowdoucit passes: the $145M (which one of you thought was terribly relevant) was tossed, with guidance given that it should be a number like $3M, but at worst $10M. (Since then, in the Exxon Valdez matter, the Court wnt all the way down to a 1-to-1 ratio, but they confined that to maritime cases. That is probably Roberts doing his thing, keeping the holding narrow to keep the votes, but it does seem like there is a trend to further restrict punis, and judges and lawyers ought to be thinking about that.

    For bonus points: were there any other points made by the Campbell court that are relevant here?

  8. Claimsguy, doesn’t it concern you that American Association for Justice found Allstate, AIG and State Farm the worst insurance companies for denying claims and refusing to pay insurance claims to those who need it in its most recent report found here?

    As the biggest property casualty insurance company in America, State Farm has become notorious for its deny and delay tactics. In many cases, the company has gone to extreme lengths to avoid paying claims, including forging signatures on earthquake waivers after the deadly
    Northridge earthquake, and altering engineering
    reports regarding damage after Hurricane Katrina.

  9. Belle:

    The lawyers of the AAJ (formerly ATLA: they changed the name when they discovered how unpopular they had become) make their living suing the policyholders of companies like State Farm, Allstate and AIG. To the extent that the plaintiff lawyers are unhappy with such a carrier, that means the carrier has been doing an effective job defending its customers.

    There are exceptions to this, of course. Maybe one case in a hundred involves some other fact pattern that makes this analysis inapplicable to that case. But the vast majority of AAJ/ATLA cases are quite simple: plaintiff lawyer sues policyholder, carrier defends policyholder, if carrier is GOOD at defending policyholder, then plaintiff lawyer is unhappy.

    In that context, being on the list is not exactly a problem.

    (I note that there are carriers on that list that mainly handle lines of business where this analysis would not apply. Unum Provident is the classic example of that. I don’t know enough about their business to comment.)

  10. Thanks for the laugh, claimsguy. I needed that. Talk about spin? Yeah, right! So, you’re saying these lawyers a rating these companies as the worst because they are so successful in litigating claims for the policyholders? I don’t think so. You better go read for yourself, you’ve been listening to too much spin.

  11. I didn’t make it back fast enough to answer the question but my guess it was the court’s opinion on relevance of out of state conduct, claimsguy.

    It will be interesting to see what happens in McIntosh as well as the RICO case.

  12. Belle:

    I have read the AAJ report. It is a collection of random, dated garbage. There is no methodology, zero, that supports it. These are companies that handle literally hundreds of thousands of claims a year. The AAJ takes maybe five or ten from over twenty years ( and some non-claim behavior, to boot) and reaches a meaningful conclusion from that? Please. THAT is spin.

    As I have pointed out to you in the past, there are things in this world that I know a lot more about than you. This is one of those things. I am right on this: the AAJ hates carriers that defend vigorously. Allstate, State Farm, and AIG are in that class.

    Nowdoucit: you are correct. Campbell also stands for the proposition that out-of-state conduct is inadmissible and irrelevant in cases where plaintiffs seek punitive damages. It is ironic, is it not, that plaintiffs seek to introduce Campbell, a 25 year old Utah auto case that stands for out-of-state conduct being irrelevant, in a Mississippi property case? Do you see how wildly outrageous that is?

    My conclusion is that plaintiffs propose its inclusion knowing they will be slapped down because they want it as a sacrificial lamb. Their thinking must be that by giving the Court this to say “no” to, they might have a better chance on the ones they think are closer calls. It must be something like this, because no Court lets Campbell into this case unless it is determined to see its rulings overturned on appeal.

  13. Five or ten over 10 years is not good either, claimsguy. The conduct of those insurers and the continuing conduct of State Farm in these cases is deplorable. Can’t you at least admit that? That they committed fraud upon their policyholders? Just five or 10? Why was there one? Not everyone has the bucks to fight these things and the insurers know it. Do you excuse using the justice system and paying lawyers so you don’t have to pay claims to policyholders is abhorent.

  14. Do the math, Belle.

    What error rate are you deploring?

    Remember, these aren’t doctors or lawyers we are talking about, but insurance claims staff, who are (because of the financial imperative to keep rates low) not paid all that well and who (again, in an effort to keep policyholder rates low) are very, very busy.

    If you want NASA-like perfection, you would have to pay for it. And given that you and your buddies aren’t even willing to pay for insurance now at market prices (you would rather the government give it to you in a welfare program) you would most certainly not be willing to pay for it were it built with perfection in mind, as it would be a lot more expensive.

    Every carrier I know of has quality control and audit programs in place to monitor and improve their claim handling product. They all try very hard to get it right. But zero defects is unreasonable and commercially impossible.

  15. Claimsguy, hate to risk my score but that’s not what I read in the Campbell syllabus.

    …this Court has instructed courts reviewing punitive damages to consider (1) the degree of reprehensibility of the defendant

  16. Are you saying no court would/should let Campbell into this case because it was auto and this is homeowner/property? If so, I agree to the extent that would be the way Campbell was used.

    However, I can see reasons for using Campbell to establish basis for “reasonable” amount of puni award, can’t you?

  17. Claimsguy, I am not talking about error rates. Those cases were NOT because of errors. If they were, why didn’t the insurers correct the error rather than go to court?

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