Voss v. State Farm Mutual Automobile Insurance Company

Clifford Voss suffered severe injuries in a car crash and received the at-fault driver's policy limit of $100,000. He then sought additional compensation under his State Farm underinsured motorist policy with a $250,000 limit. State Farm evaluated the claim and offered only $7,500, leading Voss to sue for breach of contract and insurance bad faith. A jury awarded him $25,000 in compensatory damages and $250,000 in punitive damages. The district court reduced the punitive award to $75,000, applying Illinois's cap of three times the compensatory damages. State Farm appealed, challenging the sufficiency of the bad-faith evidence and the punitive damages ruling.

The U.S. Court of Appeals for the Seventh Circuit affirmed the district court's judgment. It upheld the jury's finding of bad faith and the $25,000 compensatory award, and it agreed that the punitive damages must be reduced to $75,000, representing three times the compensatory damages as required by Illinois law.

Whether State Farm's claim handling constituted willful and wanton conduct warranting punitive damages, and whether the punitive damages award properly complied with Illinois statutory limits.

The ruling reinforced the application of statutory caps on punitive damages in insurance bad-faith cases in Illinois, balancing consumer protection against excessive awards. It clarified the standards for proving insurer misconduct and influenced claims handling practices by emphasizing that unreasonable refusal to settle can justify punitive damages within prescribed legal limits.