Insurance shares got a boost Monday when the Supreme Court said a lower court had erred when it ordered State Farm Mutual Automobile Insurance Co. to pay $145 million in punitive damages for failing to settle a claim.
The justices, in a split decision that is being viewed sympathetically by businesses trying to stem the cost of litigation, sent the case back to a state court in Utah for further adjudication.
Among insurance stocks whose gains were goosed by the finding were
American International Group
, up 4% to $55.79;
, up 4.5% to $39.41; and
, up 3.5% to $47.60. Another beneficiary was
, which is trying to argue itself out of having to come up with a $10 billion bond required to appeal a huge legal penalty. The shares were up 3% to $29.06.
In its ruling, the Supreme Court said punitive damages should have some reasonable relationship to the compensatory damages awarded in a trial.
"Single digit multipliers are more likely to comport with due process, while still achieving the state's goals of deterrence and retribution than awards with ratios in range of 500 to 1," Justice Anthony Kennedy wrote.