Insurer’s acts in other states not
proof of bad faith
(Continued - Page 2)
In 1989, brought the Campbell v. State Farm bad-faith
action. Campbell put State Farm’s practices on trial and presented
evidence ranging over 20 years in numerous states. Over State Farm’s
objection, the trial court allowed evidence of practices unrelated
to third-party automobile claims. State Farm appealed. The Utah
Supreme Court approved the trial court’s decision to allow
evidence of State Farm’s national policies and upheld the
damage award.
Most of the Supreme Court’s analysis of the
Utah decision focused on the relationship of punitive damages and
constitutional protections against the imposition of grossly excessive
or arbitrary punishments. However, the Court’s disapproval
of the use of evidence from states outside Utah has application
in other jurisdictions, including Washington.
The Court found the Campbell case had been converted
into a platform to expose and punish the perceived deficiencies
of State Farm’s operations throughout the country. The Court
determined this was improper and noted that lawful out-of-state
conduct may be probative when it demonstrates the deliberateness
of the behavior in the state where it is tortious only so long as
the out-of-state conduct has a nexus to the specific harm suffered
by the plaintiff.
An agreed judgment between a claimant and a policyholder
is presumed to be reasonable and enforceable against the policyholder’s
liability insurer where the insurer has acted in bad faith, the
Washington Supreme Court has held.
In Truck Ins. Exchange v. VanPort Homes, no. 70747-2
(Nov. 2002), the policyholder, VanPort, provided consulting services
for customers who wanted to build their own homes. VanPort would
assist with budgets, schedules, and compliance with government requirements.
Several of VanPort’s customers sued it, alleging
construction defects and that VanPort negligently failed to detect
those defects when inspecting subcontractors’ work. In July
through October 1992, VanPort tendered defense of the lawsuits to
Truck, its comprehensive general liability (CGL) insurer.
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