Admissibility of Evidence of Other Wrongful Acts In Insurance Litigation:

Application of the Federal Rules of Evidence

James W. Springer

I.

Introduction

When an insured sues to enforce a contract of insurance, or when an insurer files a declaratory judgment action, either party may wish to introduce evidence of the other party’s wrongful conduct on some previous occasion in order to prove or disprove liability in the case at bar. In the federal courts, such offers of evidence are governed by the Federal Rules of Evidence, whether the underlying substantive law is state or federal. Most insurance suits in federal court are, in fact, based upon state substantive law, whether it be the common law of contracts or state statutes regulating the insurance industry. Forty-one states have adopted the Federal Rules of Evidence (often with some modification); thus, the principles of evidence discussed here have application beyond the federal courts.[1] While this article focuses on the Federal Rules of Evidence, it also includes a few extraneous cases where the courts address relevant issues not specific to the Federal Rules.

II.

The Federal Rules of Evidence

Four rules are relevant to the admissibility of other wrongful acts evidence in insurance litigation. Fed. R. Evid. 402 states that all relevant evidence is admissible, unless excluded by one of the other rules. Fed. R. Evid. 403 establishes a balancing test applicable to all otherwise relevant and admissible evidence. In its entirety, it reads as follows: “Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”

More directly relevant to the present discussion is Fed. R. Evid. 404, which is entitled, “Character Evidence Not Admissible to Prove Conduct,” and which generally proscribes the circumstantial use of character evidence. Fed. R. Evid. 404(a) states that “character evidence” is not admissible to prove “action in conformity therewith,” with certain exceptions for proving the character of an “accused” or “victim” or for impeaching a witness. Fed. R. Evid. 404(b) allows for the admission of “other crimes, wrongs, or acts” evidence, not to prove conduct in conformity with a person’s character, but for other purposes “such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.”

The official notes to Fed. R. Evid. 404 and cases discussing it offer two policy reasons for the exclusionary provisions of that rule. The first precludes “proclivity” or “propensity” evidence. In other words, evidence that a person was negligent, violent, or drunken on other occasions may not be used to prove that he or she is generally negligent, violent, or drunken, such that the person probably exhibited those traits on the occasion at bar. Such evidence, by its very similarity to the allegations of the case at bar, is believed to tempt the trier of fact into deciding erroneously on the only occurrence at issue.[2]

A second policy reason for the exclusionary provisions of Fed. R. Evid. 404 precludes consideration of acts or circumstances which, though totally distinct from the issues surrounding the case at bar, may be the subject of popular hostility. Examples include homosexuality, abortion or litigiousness, as expressed in previous lawsuits.[3]

The fourth rule at issue in this discussion concerns the use of “habit.” In that regard, Fed. R. Evid. 406 reads as follows:

Evidence of the habit of a person or of the routine practice of an organization, whether corroborated or not and regardless of the presence of eyewitnesses, is relevant to prove that the conduct of the person or organization on a particular occasion was in conformity with the habit or routine practice.

With respect to Rule 406, the principal controversy turns upon what constitutes a habit or routine practice. More specifically, what kind of proof is adequate to establish a habit or routine practice before the trier of fact will be allowed to consider it. Following the relevant advisory committee notes, many courts state that a habit or routine practice must be reflexive, almost unconscious or “semi-automatic.”[4] In this regard, “adequacy of sampling” (the number of probative occurrences and the occasions on which the witness had the opportunity to observe the occurrence or non-occurrence) is relied upon many courts as the foundation for admission.[5] However, a quantitative discussion of the issue rarely occurs. According to the advisory committee notes, proof of drunkenness and violence were traditionally excluded as habits, but recent decisions are found to admit them under Fed. R. Evid. 406 or without citation to any Rule of Evidence.[6]

The following discussion seeks to arrange the cases and arguments governing “other acts” evidence according to the type of insurance policy at issue. Although the Federal Rules of Evidence neither distinguish insurance policy litigation from other lawsuits, nor discriminate among the various types of insurance policies, the format followed below best discloses certain common factual patterns and policy considerations adopted by the federal courts in dealing with these issues.

III.

Suits on Fire Insurance Policies

A. Introduction

Evidence of other acts is most commonly litigated in civil suits involving fire insurance policies. The most common situation occurs when the insurer wishes to offer evidence of other fires for which the insured may have been responsible, in order to suggest that the insured deliberately set the fire in the instant case. Admissibility issues generally concern whether such evidence is admissible at all and, if so, what constraints will govern use of the evidence and what demands must be met before the evidence will be admitted. For example, must the insurer offer proof that the other fire was actually set by the insured? Must the other fire bear some similarity to the fire at issue, or must the other fire have occurred within a certain period of time before or after the fire at issue?

B. Cases Affirming Admissibility of Other Fire Evidence

Evidence of other fires is most clearly used by the insurer in a declaratory judgment action or when defending a suit on the insurance policy brought by the insured, to imply or suggest that the insured committed arson both in the case at bar and in the prior instance. Such evidence was held properly admitted in Dial v. Travelers Indemnity Company,[7] when offered by the insurer in defense of a suit by the insured. The Dial court followed a test governing criminal liability established in United States v. Beechum[8] for use of “extrinsic evidence.” Admissibility required that the evidence have relevance to an issue other than the defendant’s character, carry a probative value that was not substantially outweighed by undue prejudice, and depend on proof that the defendant committed the previous act. The extrinsic evidence in Dial concerned the fact that the Dials (the insureds) had suffered earlier fires at their prior residences and that they had occupied property owned by Mr. Dial’s father on those occasions. Given the close relationship between father and son, the fires on the father’s premises could be taken as evidence of the son’s intent and “common plan” to burn his own house. The evidence was thus properly admissible under Fed. R. Evid. 404(b).[9]

Likewise, the Fourth Circuit adopted a criminal rule of evidence in Westfield Insurance Co. v. Harris,[10] holding that evidence of other fires was improperly excluded at trial. Westfield Insurance articulated a four-part test for the admission of prior acts evidence under Fed. R. Evid. 404(b): (1) the evidence must be relevant based upon its similarity to the case at bar; (2) the previous act must be probative of an essential element of the claim or defense; (3) the proffered evidence must be reliable, and (4) confusion or unfair prejudice must not outweigh its probative value. The fire at issue in Westfield occurred in 1996, but the appellate court stated that evidence of six previous fires, extending back to 1979, should have been admitted to determine whether the fire at issue was accidental or was set by the insured as part of a scheme to commit insurance fraud. Other than the fact that the fires had all occurred at the insured’s properties, there were no consistent similarities among the fires.[11]

Similarly, in Hammann v. Hartford Accident & Indemnity Co.,[12] the court held that evidence of six other fires occurring at other properties owned by the plaintiff had been properly admitted to probe the insured’s motive in the case at bar. The plaintiff had recovered from his insurer in all of those fires. Beyond that, the court required no further proof of any similarity between the earlier fires and the case at bar, and rejected the need for proof of incendiary origin or evidence that the insured had started those fires.[13]

The admissibility of past claims for fire losses on the part of the insured was proper as well in Stout v. Farmer’s Insurance Exchange.[14] The court there held that the evidence was probative that the insured’s “past experience with fire insurance had proven to him that he would indeed receive payment as a result of the fire.”[15] Likewise, evidence of prior insurance claims by the insured was admissible in Standard Fire Insurance Company v. Mitchell, since it probed the issue of motive, opportunity, intent, and preparation under Fed. R. Evid. 404(b).[16]

C. Evidence of Other Misconduct by Insured

In several cases involving fire insurance policies, the insurer offered evidence of prior acts of misconduct by the insured, but these were not acts of presumed arson. For example, the issue in Aetna Casualty & Surety Co. v. Gosdin[17] concerned whether the insurer could introduce evidence of criminal charges against the insured. These included pimping, pandering, drug charges, and burglary. The appellate court determined that the burglary charge was admissible as evidence of the insured’s motive for starting the fire, but that evidence of the other criminal charges was not. Consequently, the court reversed the judgment for the insurer and remanded for a new trial, at which evidence of the criminal charges other than burglary would be excluded.[18]

Likewise, evidence of an earlier suit by the United States government against the insured to recover moneys illegally received by the insured was held properly admissible in Powell v. Merrimack Mutual Fire Insurance Co.[19] The appellate court determined that this evidence was relevant “to show the plaintiff’s state of mind as to his financial condition at the time of the fire.”[20] Although the court did not cite Fed. R. Evid. 404(b), its ruling appears to be consistent with the intent, motive, or plan provisions of Fed. R. Evid. 404(b).[21]

D. Cases Excluding Evidence of Other Fires

In the four cases analyzed below, the insurer was unsuccessful in its attempts to procure the admission of evidence of “other fires.” In all four cases, the federal court of appeals affirmed the district court’s holding that exclusion was proper.

The Fifth Circuit determination in Smith v. State Farm Fire & Casualty Co.[22] followed the Beechum[23] test noted earlier, and can be considered the most demanding. The defendant insurance company proffered evidence that the plaintiff had owned five prior dwellings that had been destroyed by fire, for which the plaintiff had collected insurance proceeds. Affirming the district court, the Fifth Circuit narrowly construed the parameters of acceptable evidence under Fed. R. Evid. 404(b). For example, there was testimony by the plaintiff’s wife that the plaintiff had confessed to starting two of the earlier fires. Nevertheless, the court ruled such evidence to be vague, too remote in time, or too dissimilar to the fire at issue to warrant admissibility.[24]

Two other Fifth Circuit cases also affirmed the exclusion of such “other fire” evidence. In Garcia v. Aetna Casualty & Surety Co.,[25] there was evidence that another building owned by the insureds had been destroyed by fire. Since there was no evidence that the insureds had started that fire, however, the evidence was properly excluded.[26]

Likewise, in Warner v. Transamerica Insurance Co.,[27] the court of appeals affirmed the district court’s exclusion of evidence that the insured’s residence had burned fifteen days before the fire in issue at his place of business. Given the absence of evidence that the insured had burned his residence, or even that the residential fire was of incendiary origin, the evidence was properly excluded.[28]

A similar exclusion was affirmed in Aetna Casualty & Surety Co. v. Guynes.[29] The insurance company there alleged that the insured had conspired with a relative to commit arson on an earlier occasion, where the insured had served as an alibi witness for the relative in the other case. Though such evidence was excluded for lack of proof regarding the insured’s participation in the scheme, the district court had properly allowed the insurer to inquire into the insured’s own previous fire insurance claims.[30]

E. Evidence of Other Acts Offered by Insured

Sometimes it is the insured who offers evidence of prior similar acts. Such proof may be relevant on the issue of an arson perpetrator’s identity, which is specifically recognized by Fed. R. Evid. 404(b). Evidence of this nature was properly admitted in Glados, Inc. v. Reliance Insurance Co.[31] The insured there had purchased the restaurant at issue under a promissory note from a previous owner. The seller had required that the new owners purchase fire insurance and name the previous owner as an additional insured. When the building was later damaged by fire, the seller claimed the insurance proceeds. The new owners offered evidence that similar events had occurred at two prior restaurants owned by the same seller. Since there was clear evidence of arson in the case at bar, the insurance company argued that the new owners’ poor financial condition provided a motive for the arson. Given these circumstances, the court held that it was proper for the new owners to rebut the insurer’s arguments by showing the existence of a motive and plan on the part of another person.[32]

The insured likewise offered evidence of other wrongful acts in a Louisiana state court proceeding. In Fontenot v. Hanover Insurance Co.,[33] the plaintiff had owned sweet potatoes that were stored in a shed later destroyed by fire. The plaintiff introduced evidence at trial that his property had been subject to prior acts of burning and vandalism. The trial court excluded such evidence, however, finding the evidence ambiguous since it might also support an inference that the plaintiff himself habitually burned his property for profit. Nevertheless, the appellate court reversed and entered judgment on the record in favor of the plaintiff-insured, ruling that the insurer had failed to prove that the plaintiff was the arsonist.[34]

Likewise, in Continental Casualty Co. v. Howard,[35] the insurer denied recovery on grounds that the insured had set the fire. On appeal, the insured claimed that the district court had improperly excluded prior conduct evidence of his “good character.” The court of appeals upheld the exclusion as proper under Fed. R. Evid. 404(a), however.[36] Such a ruling is consistent with determinations in negligence cases, where evidence that the injured person is generally a careful person is routinely excluded.[37]

F. Criminal Proceedings in the Case at Bar

Although this discussion is beyond the scope of this article, several cases have litigated the relevance of criminal proceedings concerning the fire at issue. In particular, issues arise whether the absence of criminal proceedings, or the result of criminal proceedings regarding the same fire, may be introduced to prove or disprove arson by the insured.[38]

IV.

Suits on Life Insurance Policies

A. Misrepresentations in Sale or Purchase of Life Insurance

Either the insurer or the insured often alleges that misrepresentations or omissions existed in connection with the sale and purchase of the life insurance policy at issue. Under these circumstances, the party asserting such misrepresentations or omissions may wish to offer evidence that the opposing party has behaved in similar fashion on other occasions.

In Rosenburg v. Lincoln American Life Insurance Co.,[39] the defendant-insurer alleged that the plaintiffs did not meet certain conditions necessary to the issuance of a life insurance policy, in defending the beneficiaries’ suit on the policy. The plaintiffs argued, however, that in their representations to them and to others, the defendant-insurer’s agents had omitted any reference to the conditions precedent, or had misrepresented them. On appeal, the reviewing court held that the trial court had properly admitted evidence of similar misrepresentations and omissions to other insureds as a matter of habit or routine practice under Fed. R. Evid. 406.[40]

Fed. R. Evid. 406 was the basis of another successful plaintiff’s claim in Vining v. Enterprise Financial Group, Inc.[41] The defendant-insurer there had denied coverage on grounds that the decedent had misrepresented his medical condition. The plaintiff, however, introduced evidence of the insurer’s routine denial of claims with little or no investigation. The disputed testimony came from other claimants who had disclosed medical conditions to the insurer’s agents, only to be denied benefits at a later time. Although the claimant in the case at bar had not disclosed his heart condition, the appellate court determined that the testimony of the other claimants was admissible.[42]

Likewise, the insurer in Gintner v. Northwestern Mutual Life Insurance Co.[43] had denied the payment of benefits on grounds that the deceased had failed to disclose treatment for depression. The beneficiary proposed to offer evidence that the deceased “was a man of good character who would be unlikely to submit a fraudulent or erroneous application.”[44] Consistent with standard reference works on this subject, the court held that the circumstantial use of the deceased’s good character was prohibited under Fed. R. Evid. 404(a).[45]

B. Prior Acts by Decedent or Beneficiary in Suits to Collect Life Insurance

The following cases turn upon evidence of either the decedent’s behavior or the claimant’s as it bears on the issue of decedent’s death, when such behavior is alleged to be relevant to the insurance company’s liability on a life insurance policy. In Hastings v. Boston Mutual Life Insurance Co.,[46] the decedent had been killed by his wife after he had beaten her. The defendant-insurance company denied coverage on grounds that the decedent, by his conduct, should have anticipated retaliation, for which reason his death was not accidental. It also argued that decedent was killed during the commission of a felony. The trial court excluded evidence of “prior violent episodes” between the husband and wife, however, ruling that their prejudice outweighed their probative value. Though the appellate court affirmed,[47] these rulings may be questionable. Prior violence against the same victim in this case was probative of whether the decedent should have expected his conduct to result in his death. If the evidence were offered simply to show that the decedent was generally a violent man, then its exclusion properly would have rejected the circumstantial use of character evidence. However, it is difficult to see any unfair prejudice to the plaintiff under the circumstances of this case since she (the claimant) was not accused of any prior violent acts. It is thus reasonable to assume that the district court simply feared that such evidence would prejudice the jury against the decedent, affording gratuitous benefit to the plaintiff. Such an explanation, however, is not germane to the Rule 403 balancing test.

In Cerro Gordo Charity v. Fireman’s Fund American Life Insurance Co.,[48] the trial court admitted evidence that the decedent had been insured under numerous health and life insurance policies. The appellate court found such evidence probative of the claimant’s motive to murder the decedent. Evidence of a prior incident, in which the claimant apparently attempted to murder or injure the decedent, was also admissible to show the claimant’s control over the decedent, although the court omitted any explanation of its immediate relevance.[49]

Finally, in Crumpton v. Confederation Life Insurance Co.,[50] the decedent had been shot to death by a woman whom he had allegedly raped and threatened. The insurance company denied coverage on grounds that the death was not accidental and that the decedent “should have anticipated that his actions would result in bodily injury.”[51] The plaintiff-beneficiary was permitted to call several witnesses who testified regarding the decedent’s character, emphasizing that he was not violent, was not profane, and did not make sexual advances to women. As affirmed by the court of appeals, the district court properly determined that the decedent’s character was at issue since the insurance company had raised the defense that he should have anticipated his own bodily injury. The court of appeals noted that where character is placed in issue, the evidence is not circumstantial but direct, and Fed. R. Evid. 404 does not apply.[52]

The court’s rationale is difficult to fathom, since the defense offered by the insurance company was simply one of reasonable knowledge or anticipation on the part of the decedent. If this defense is sufficient to place character in issue, then every negligence action would seemingly put character in issue. On the other hand, the evidence might have been admissible under Rule 404(b) if it had been limited to behavior toward the victim who shot him, as noted in the Hastings analysis above.

The Crumpton court also held that, in the alternative, Fed. R. Evid. 404(a) would apply to admit such evidence even though the rule appeared limited to criminal cases.[53] The court reasoned that the instant case contained factual allegations that were similar in nature to those of a criminal case.[54] While an extension of Fed. R. Evid. 404(a) to civil cases might be justified, however, the Crumpton court paid no heed to the requirements of Fed. R. Evid. 404(a) regarding the process for introducing character evidence. In a criminal case, character evidence is generally introduced first by the accused, except where a homicide has occurred and the prosecution introduces evidence of the homicide victim’s peaceful character to rebut evidence that the victim was the aggressor. Applying these principles to an insurance suit would require an analysis much beyond that provided by the Crumpton court.

V.

Suits on Fidelity Bonds

In Federal Deposit Insurance Corporation v. Fidelity & Deposit Co. of Maryland,[55] the Federal Deposit Insurance Corporation, as successor to the bank, brought suit on a fidelity insurance bond. One of the bank’s loan officers had approved loans to a variety of entities with whom the officer was personally doing business and which benefited him personally. The plaintiff offered proof that after the loan officer had resigned from the plaintiff’s employ, he went to a new bank and continued to approve loans to one of the entities with whom he had previously dealt. These loans likewise provided a personal benefit to the loan officer. The appellate court confirmed that this evidence had been properly admitted under Fed. R. Evid. 404(b), although it did not specify the applicable provisions of 404(b). Presumably, the court inferred that the evidence showed a corrupt intent or motive on the part of the loan officer.[56]

Leucadia, Inc. v. Reliance Insurance Co.,[57] is another decision covering a fidelity bond issued to an insurance company. The appellate court affirmed the district court’s determination that the defendant bonding company was liable only for dishonest acts during the period that the bonds were in force, but it held that the employee’s dishonesty outside that period was admissible to demonstrate the employee’s fraudulent intent and lack of mistake.[58]

VI.

Miscellaneous Cases of Other Wrongful Acts by Insured

In Turley v. State Farm Mutual Automobile Insurance Co.,[59] the plaintiff-lessor-insured of an automobile sued for damages caused when the automobile was stolen. His co-insureds had leased and then purchased the automobile under unusual and dubious circumstances, later reporting it stolen. The co-insureds made misrepresentations and inconsistent statements as to the time and manner of theft. The defendant -insurance company proposed to introduce evidence that the plaintiff-insured and his co-insureds previously had perpetrated an insurance fraud scheme which involved faking a slip and fall accident. The trial court excluded the evidence, but the appellate court determined that the exclusion constituted reversible error. Such evidence instead was admissible under Fed. R. Evid. 404(b) to show plaintiff’s knowledge of his co-inureds’ intent and the absence of accident or mistake. It should be noted that the prior fraudulent act was not the theft of an automobile, but an entirely different type of insurance fraud. The court believed, however, that they were sufficiently similar to warrant admission.[60]

In Walters v. Monarch Life Insurance Co.,[61] a suit to enforce the terms of a disability insurance policy, the defendant-insurer offered evidence of “a prior similar insurance fraud,” which was not further described. The appellate court affirmed the exclusion under Fed. R. Evid. 404(b), on grounds that the determination fell within the trial court’s discretion.[62]

The policy at issue in Firemen’s Fund Insurance Co. v. Thien[63] concerned tort liability. The insurer filed a declaratory judgment action against the insureds, who were defendants in an earlier wrongful death action. The insurance company asserted an exclusion on grounds that the decedent was employed by the corporation to whom the policy had issued; it introduced paychecks and other documents to support its position. The insureds sought to introduce evidence that the employer’s director of operations had falsified the airplane’s log book, as disclosed by an FAA investigation. Such evidence was offered to show that the employer’s records and its director of operations generally were untrustworthy. The trial court excluded such evidence, however, and the appellate court affirmed. It held that the excluded evidence related to flight safety and thus bore upon the issue of responsibility for the decedent’s death. The evidence was prejudicial, however, because it would tend to show that the corporation and the director of operations were responsible for the death, which was not properly at issue in the declaratory judgment action. Thus, the danger of unfair prejudice outweighed its probative value.[64]

C.P.C. International, Inc. v. Northbrook Excess and Surplus Insurance Co.,[65] involved a suit by an insured against its insurer on an environmental liability policy, where the insurer sought to introduce evidence of other chemical spills. The spill at issue had occurred in 1974, but the contamination had not surfaced until 1979. The issue concerned whether the insured knew about the harmful effects of a particular chemical from previous litigation. The appellate court later affirmed the exclusion of such evidence on grounds that the other claims involved different sites, different chemicals, and different modes of contamination.[66]

VII.

Discussion and Conclusion

The cases analyzed throughout this article are classic examples of the circumstantial use of character evidence to prove mental state. Though the cases are not entirely consistent, they evidence two overriding principles that are sometimes in conflict. For purposes of further discussion, they can be termed the “substantial similarity” principle and the “evidence of dishonesty” principle.

The “substantial similarity” principle demands that to be admissible, instances of conduct on other occasions must be temporally close to the incident at bar, must demonstrate similar factual circumstances of commission, and must demonstrate that a party to the case at bar committed the other acts. Beyond these, the court may add other limitations, such as restrictions upon extraneous prejudicial facts. The “substantial similarity” principle is well established in the products liability area, and it has the undeniable virtue of placing some limitation on the evidence that a party might seek to admit.[67] Any failure to apply that principle could easily turn the trial into a general contest over the character and biography of the parties.

It is also apparent that the “evidence of dishonesty” (or “evidence of honesty”) principle has some appeal to the courts when engaged in insurance litigation. Some cases appear to reject the principle entirely, such as Continental Casualty v. Howard.[68] But others, such as Turley v. State Farm,[69] seem to accept it. In causes of action premised on fraud, the courts tend to liberally admit evidence of prior fraudulent acts and schemes, although such evidence is usually said to prove intent, knowledge or motive, rather than dishonest character.[70] The courts are usually reluctant to make character an explicit issue, and for good reason, since Fed. R. Evid. 404 places severe limits on the use of such evidence. Nevertheless, there is at least an implication that dishonest character is more relevant or probative than negligent or violent character. Since the insurance cases almost always revolve around the insured’s sworn proof of loss, perhaps the insured’s honesty or dishonesty is more clearly relevant.

Notwithstanding the foregoing analysis, the process by which certain facts are disputed, especially so as to make other acts relevant, is rarely discussed. The cases simply aver that by means of pleading or proof one party or the other has put the insured’s character (or someone else’s character) in issue. Referring to Fed. R. Evid. 404(a), Crumpton v. Confederation Life[71] had the opportunity to address this issue, but chose not to do so. The issue therefore remains a difficult one. If a person testifies that he or another person is generally honest or careful or peaceful, does that testimony put the person’s character trait in issue? Can the opposing party introduce evidence of events that show a lack of honesty or carefulness or peacefulness? Most courts would probably say yes, which suggests that indiscrete testimony, even if elicited on cross-examination, could make evidence admissible that would otherwise be objectionable as irrelevant or prejudicial.[72]

An even more difficult issue concerns whether a party can offer character evidence that is not a necessary element of the case, if it is arguably probative. If a party only need prove negligence or breach of contract, can the party offer to prove intent or motive, using proof of other acts or character evidence? If motive is not a necessary element of the cause of action or defense, can a litigant nonetheless offer evidence of motive, using other act evidence to support it? This issue has not been directly litigated in insurance cases, although it has been litigated in other types of cases.[73] In many insurance cases, the insurer’s defense is that the insured violated a contractual term by, for example, failing to disclose a medical condition or previous insurance claim, or by failing to carry out a condition precedent to recovery. Could the insurer offer evidence of the insured’s actions on some other occasion to prove that the insured performed these actions with a corrupt motive or intent? Could the insured offer such evidence against the insurer? The decision in Turley v. State Farm[74] would suggest that such evidence might be admissible.

Clearly, it is necessary for the courts to be as thorough and explicit as possible when ruling on the purposes for which evidence of other acts may be admitted. As demonstrated by the cases above, both practicing attorneys and trial court judges would benefit from greater consistency in the appellate courts.

V.

Conclusion

A clear understanding of the interrelationship of the foregoing principles will enable the claims professionals and counsel to assess the appropriate mechanisms needed to shifting liability. While the plaintiff will merely focus on collecting damages from the primary defendant and its insurer, the defendant and its insurer will attempt to shift liability on to any excess insurer, reinsurer and/or the third-party defendant and its insurer. Out of necessity the third-party defendant and its insurer will seek any options to shift their exposure. When faced with significant exposures, each of the parties in this chain will be required to follow various procedural and legal requirements to achieve the desired result. Unfortunately, the failure to strictly comply with these requirements can result in the failure to shift liability, which will result in the over payment of claims or the forfeiture of insurance coverage. Many of the traditional principles take on a new life when insurers and insureds are faced with catastrophic damages. Absent an overall comprehension of what is necessary to protect and perfect one’s rights can result in receivership or insolvency – a serious consequence for one misstep.

ENDNOTES

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[1] 21 Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice And Procedure §5009 (1977).

[2] Fed. R. Evid. 404, Advisory Committee Notes, 1972 Proposed Rules. See also Hopson v. Fredericksen, 961 F.2d 1374 (8th Cir. 1992) (proclivity evidence properly excluded); Berkovich v. Hicks, 922 F.2d 1018 (2d Cir. 1991) (propensity evidence properly excluded); Reyes v. Missouri Pacific Railroad Co., 589 F.2d 791 (5th Cir. 1979) (error to admit evidence of convictions for public intoxication on prior occasions).

[3] See Mathis v. Phillips Chevrolet, Inc., 269 F.3d 771, 776 (7th Cir. 2001) (litigiousness); Nichols v. Am. Nat’l Ins. Co., 154 F.3d 875, 884 (8th Cir. 1998) (abortion); Cohn v. Papke, 655 F.2d 191, 194 (9th Cir. 1981) (homosexuality).

[4] Fed. R. Evid. 406, Advisory Committee Notes, 1972 Proposed Rules. See also Simplex, Inc. v. Diversified Energy Systems, Inc., 847 F.2d 1290, 1293 (7th Cir. 1988).

[5] G.M. Brod & Co. v. U.S. Home Corp., 759 F.2d 1526, 1533 (11th Cir. 1985).

[6] Fed. R. Evid. 406, Advisory Committee Notes, 1972 Proposed Rules. See also Carter v. Fenner, 136 F.3d 1000, 1011 (5th Cir. 1998) (violence); Loughan v. Firestone Tire & Rubber Co., 749 F.2d 1519, 1524 (11th Cir. 1985) (drinking on the job); Keltner v. Ford Motor Co., 748 F.2d 1264, 1268 (8th Cir. 1984) (drunkenness).

[7] 780 F.2d 520 (5th Cir. 1986).

[8] 582 F.2d 898, 911-913 (5th Cir. 1978).

[9] Dial, 780 F.2d at 523-24.

[10] 134 F.3d 608 (4th Cir. 1998).

[11] Id. at 613-15.

[12] 620 F.2d 588 (6th Cir. 1980).

[13] Id. at 589.

[14] 881 F. Supp. 401 (S.D.Ind. 1994).

[15] Id. at 405.

[16] 666 F. Supp. 950, 954 (E.D.Tex. 1987).

[17] 803 F.2d 1153 (11th Cir. 1986).

[18] Id. at 1157-59.

[19] 667 F.2d 26 (11th Cir. 1982).

[20] Id. at 30.

[21] Although it is beyond the scope of this paper, some courts hold, or at least imply, that evidence of the insured’s financial condition, quite apart from any misconduct, is relevant on the issue of motive or intent to commit arson. See, e.g., Dial, 780 F.2d at 521.

[22] 633 F.2d 401 (5th Cir. 1980).

[23] 582 F.2d 898.

[24] Smith, 633 F.2d at 402-04.

[25] 657 F.2d 652 (5th Cir. 1981).

[26] Id. at 654-55.

[27] 739 F.2d 1347 (8th Cir. 1984).

[28] Id. at 1350-51.

[29] 713 F.2d 1187 (5th Cir. 1983).

[30] Id. at 1193.

[31] 888 F.2d 1309 (11th Cir. 1987), cert. denied, 497 U.S. 1025 (1990).

[32] Id. at 1311-12.

[33] 473 So. 2d 145 (La. Ct. App. 1985).

[34] Id. at 149, 154-55. This case does not cite any principle or rule of evidence as the basis for its holding.

[35] 775 F.2d 876 (7th Cir. 1985), cert. denied, 475 U.S. 1152 (1986).

[36] Id. at 879 n. 1. See Stone v. Hawkeye Ins. Co., 28 N.W. 47, 49-50 (Iowa 1886), which held that admitting evidence of the insured’s “good character for honesty” was reversible error where the insurer alleged that the insured had burned his own property.

[37] Puckett v. Soo Line R.R. Co., 897 F.2d 1423, 1428 n. 6 (7th Cir. 1990).

[38] Fontenot, 437 So.2d at 148; Dawson v. Miller, 594 So. 2d 970 (La.App. 1992); Galbraith v. Hartford Fire Ins. Co., 464 F.2d 225 (3rd Cir. 1992); Lichon v. Am. Universal Ins. Co., 459 N.W.2d 288 (Mich. 1990), reh’g denied; Krupp v. Aetna Life & Cas. Co., 540 N.Y.S.2d 869 (App. Div. 1989); Am. Home Assur. Co. v. Sunshine Supermarket, Inc., 753 F.2d 321 (3rd Cir. 1985); Kelly’s Auto Parts No. 1, Inc. v. Boughton, 809 F.2d 1247 (6th Cir. 1987); Rabon v. Great Southwest Fire Ins. Co., 818 F.2d 306 (4th Cir. 1987); Williams v. Cambridge Mut. Fire Ins. Co., 230 F.2d 293 (5th Cir. 1956); McSweeney v. Utica Fire Ins. Co., 224 F.2d 327 (4th Cir. 1955).

[39] 883 F.2d 1328 (7th Cir. 1989).

[40] Id. at 1336.

[41] 148 F.3d 1206 (10th Cir. 1998).

[42] Id. at 1218-19.

[43] 576 F. Supp. 627 (E.D.Ky. 1984).

[44] Id. at 628.

[45] Id. at 630.

[46] 975 F.2d 506 (8th Cir. 1992).

[47] Id. at 510.

[48] 819 F.2d 1471 (8th Cir. 1987).

[49] Id. at 1483-84.

[50] 672 F.2d 1248 (5th Cir. 1982).

[51] Id. at 1251.

[52] Id. at 1251-53. But see Knights of Maccabees v. Shields, 164 S.W. 1043 (Ky. 1913), holding that where the insured-deceased was killed in a fight, testimony as to his reputation for peacefulness was not competent evidence.

[53] Crumpton, 672 F.2d at 1253.

[54] Id.

[55] 45 F.3d 969 (5th Cir. 1995).

[56] Id. at 979-80.

[57] 864 F.2d 964 (2d Cir. 1988), cert. denied, 490 U.S. 1107 (1989).

[58] Id. at 971.

[59] 944 F.2d 669 (10th Cir. 1991).

[60] Id. at 673-74.

[61] 57 F.3d 899 (10th Cir. 1995).

[62] Id. at 903.

[63] 63 F.3d 754 (8th Cir. 1995).

[64] Id. at 758-60.

[65] 144 F.3d 35 (1st Cir. 1998).

[66] Id. at 44-45.

[67] Pandit v. Am. Honda Motor Co., Inc., 82 F.3d 376, 380 (10th Cir. 1996); McKnight v. Johnson Controls, Inc., 36 F.3d 1396, 1410 (8th Cir. 1994).

[68] 775 F.2d 876.

[69] 944 F.2d 669.

[70] Morley v. Cohen, 888 F.2d 1006, 1011 (4th Cir. 1989).

[71] 672 F.2d 1248.

[72] In Gray v. Sherril, 542 F.2d 953 (5th Cir. 1976), the plaintiff-arrestee alleged that his arrest was unlawful under 42 U.S.C. §1983, but the officers testified that the defendant was profane and abusive and had run from them. When the plaintiff asserted “that he was a calm and temperate man, one who would not have provoked the incident,” the court of appeals found that he had placed his character in issue; thus, the defense was properly allowed to present testimony of argumentativeness and emotionalism. Id. at 954. Likewise, in In re Air Crash in Bali, Indonesia on April 22, 1974, 684 F.2d 1301, 1313-15 (9th Cir. 1982), the court of appeals held that evidence of the pilot’s incompetence, based upon his training records, would not normally have been admissible under Fed. R. Evid. 404 to prove the pilot’s negligence in the case at bar. However, where the defendant-airline had placed its pilot’s competence in issue by its own testimony that all of its pilots were competent, that evidence should have been admitted and its exclusion was error. Cf. Croce v. Bromley Corp., 623 F.2d 1084, 1091 (5th Cir. 1980) (defense experts put pilot’s competence in issue by their testimony; thus, evidence of previous accidents by that pilot was properly admitted).

[73] In Sparks v. Gilley Trucking Co., 992 F.2d 50 (4th Cir. 1993), the plaintiff-automobile driver sued the employer of the truck driver who allegedly forced him off the road for negligence. The defendant asserted contributory negligence and attempted to prove that the plaintiff was racing with another driver at the time the accident occurred. For that purpose, the defendant offered, and the trial court admitted, evidence that the plaintiff had been convicted of speeding on several occasions. A majority of the court of appeals held that the admission of evidence was improper, since the defense of contributory negligence was governed by a reasonable person standard. The defendant had no obligation to prove intent; thus, proof of intent to race was prejudicial and not properly admitted. The dissent argued that while intent was not an element of speeding, it was an element of racing and pertinent to the defendant’s theory that the plaintiff had engaged in a race. For that purpose, the prior convictions were admissible on the issue of intent. Likewise, in Roshan v. Fard, 705 F.2d 102 (4th Cir. 1983), a suit for battery, the plaintiff and the defendant had been involved in a bar fight and each claimed that the other had begun the fight. The trial court excluded evidence that the defendant was an informant for the Drug Enforcement Administration and that the plaintiff had been convicted based upon information supplied by the defendant. The court of appeals held that exclusion was reversible error, however, on grounds that the evidence was offered to prove motive rather than to attack credibility. Thus, it was admissible under Fed. R. Evid. 404(b).

[74] 944 F.2d at 673-694.

(Author’s bio)

James W. Springer is a shareholder with the Peoria, Illinois firm of Kavanagh, Scully, Sudow, White & Frederick, P.C. He practices civil litigation in state and federal court and practices workers’ compensation law as well. In addition to his legal practice, Mr. Springer has taught anthropology and legal history at the college level. He received his A.B. and J.D. degrees from the University of Illinois and his M.Phil. and Ph.D. degrees from Yale University.