In the case of Bankers Life & Casualty Co. v. Crenshaw, the U.S Supreme Court ruled on a dispute regarding punitive damages awarded by Mississippi state courts in an insurance claim lawsuit. The plaintiff, Crenshaw, had sued his insurer (Bankers Life) for not paying out benefits under a health policy after he suffered from a heart attack and stroke. He was initially awarded both compensatory and punitive damages by the lower court due to bad faith refusal to pay claims by Bankers Life. The main issue before the Supreme Court was whether or not these punitive damages violated constitutional principles of due process because they were excessive and arbitrary as argued by Bankers Life. In its decision, however, the Supreme Court upheld that while there is indeed constitutional limitation on punitive damage awards which should be reasonably necessary to vindicate societal interest in punishment and deterrence; it did not find any violation in this particular case since Mississippi law provided standards guiding discretion over such awards thereby preventing them from being grossly excessive or arbitrary. Therefore, although acknowledging potential issues with large punitive damage awards generally speaking; it found no specific problem with how they were applied here thus affirming their constitutionality within certain bounds.

In the dissenting opinion for Bankers Life & Casualty Co. v. Crenshaw, Justice Blackmun argued that Mississippi's statutory penalty should not be considered punitive and therefore it does not violate the Fourteenth Amendment's Due Process Clause. He contended that this statute serves a compensatory purpose by providing additional damages to plaintiffs who have been wronged by an insurance company’s unreasonable delay in settling claims, thus incentivizing companies to settle promptly and fairly. The justice also pointed out inconsistencies in how the majority applied their own standards for determining whether a state law is punitive or compensatory, suggesting they were selectively interpreting these standards to reach their desired outcome.