Mention of Insurance Defeats Judgment

No Evidence of Exception to Allow Mention of Insurance or Lack of Insurance at Trial

In Maryland, like most states, mention of insurance in a negligence trial is usually prohibited because it can be prejudicial and cause confusion to the party. Maryland allows three exceptions to the general rule of law prohibiting evidence that a defendant is insured against liability:

1. Where the evidence is relevant to the cause of the accident or the liability of the defendant.

2. Where the reference to insurance is made by the defendant or his witness, in which event the testimony is admissible and is subject to legitimate comment and argument.

3. Where the evidence is relevant to an issue of which of two or more defendants was the employer of the operator of the vehicle involved.

In Perry v. Asphalt & Concrete Services, Inc., Court of Appeals of Maryland — A.3d —- 2016 WL 1178073 (March 28, 2016) the issue came to the highest court in the state, the Court of Appeals of Maryland,  that was asked whether evidence of insurance or lack of insurance is admissible to establish a negligent hiring claim. At the core of the case is whether the admission of this evidence likely influenced the jury’s determination of liability for Moran Perry’s (“Perry”) injuries. Perry filed suit against Respondent, Asphalt Concrete Services, Inc. (“ACS”), Higher Power Trucking, LLC (“Higher Power”) and William Johnson, II (“Johnson”) for injuries he suffered when he was struck by a dump truck owned by Higher Power and operated by Johnson.

The Circuit Court for Prince George’s County allowed into evidence witness testimony regarding Johnson’s lack of liability insurance coverage at the time of the accident.

FACTUAL BACKGROUND

On April 28, 2009, Perry was crossing the intersection of Opposumtown Pike and Thomas Johnson Drive in Frederick, Maryland when he was struck by a 2007 Kenworth dump truck operated by Johnson, and owned by Higher Power. As a result of the accident, Perry suffered head trauma and rib fractures. ACS had hired Higher Power to haul asphalt and stone to St. John’s Regional Catholic Church, where ACS was paving a children’s play pad. A preliminary investigation by Officer Joseph Palkovic revealed that neither Johnson nor Higher Power had liability insurance covering the truck because of a lapse in payment on the insurance policy.

Perry sued alleging negligence against Higher Power, Johnson, and ACS. He also alleged that ACS was negligent in its hiring and supervision of Higher Power. ACS filed a motion in limine seeking to exclude evidence that Johnson had a suspended license and that the truck was uninsured at the time of the accident. With respect to lack of insurance, ACS argued that it was inadmissible because liability insurance, based on Maryland Rule 5–411, generally speaking can’t be admitted on the issue of proximate cause of an accident or negligence.

Trial began on October 7, 2013.  Burt Maggio (“Maggio”), President of ACS at the time of the accident, testified and over objection Perry’s counsel asked Maggio to testify about records  and further stated that ACS required proof of insurance because some of their customers required them to show proof of insurance.  On cross-examination, Maggio stated that in April 2009, ACS had fifteen employees and that Johnson was not an employee, but instead worked for Higher Power.

Officer Palkovic testified that he responded to the scene of the accident on April 28, 2009, where Johnson identified himself as the driver who struck the person in the intersection. He stated that Johnson produced evidence of insurance that was not valid due to a lapse in payment.

ISSUE

Did the trial court commit an abuse of discretion by admitting the evidence of insurance?

DISCUSSION

Neither party disputes the trial court’s ruling that the evidence of lack of insurance was not relevant to the claim of ordinary negligence. Perry claims that the evidence of Johnson’s lack of insurance demonstrates it was more likely than not that ACS violated its duty to use reasonable care in hiring Johnson because it knew or should have known of Johnson’s inability to lawfully operate a dump truck.

Under Maryland Rule 5–411 , “[e]vidence that a person was or was not insured against liability is not admissible upon the issue [of] whether the person acted negligently or otherwise wrongfully.” Evidence of liability insurance may, however, be admissible if “offered for another purpose, such as proof of agency, ownership, or control, or bias or prejudice of a witness.”

Establishing Liability for Negligent Hiring

An important issue at trial was determining the relationship between Johnson and ACS: was Johnson (1) an agent, servant, and/or employee of ACS (i.e., in an employment relationship where ACS was the employer) or (2) an independent contractor? An employer is liable for the acts of an independent contractor under the theory of negligent hiring if the harm is caused by “some quality in the contractor which made it negligent for the employer to entrust the work to him.

At trial, the jury found Johnson to be the agent, servant and/or employee of ACS. Therefore, even if Perry failed to prove the negligent hiring count, ACS was liable under the doctrine of respondeat-superior. The trial court found there was enough evidence presented for the jury to determine the type of employment relationship that existed between Johnson and ACS.

Negligent Hiring: Employer’s Duty

Generally, an employer has a duty “to use reasonable care to select employees competent and fit for the work assigned to them and to refrain from retaining the services of an unfit employee” regardless of whether one engages an agent or independent contractor. ACS employees appeared to agree that they were “not allowed to” have truck operators who did not produce insurance information “because of the nature of the work” they did.

Accordingly, under the circumstances of this case, Mr. Johnson’s lack of liability insurance was relevant to whether ACS employed a competent person. Maryland requires vehicles to be covered by liability insurance. The purpose of this law is to ensure that those who own and operate motor vehicles registered in the State are financially able to pay compensation for damages resulting from motor vehicle accidents. ACS hired Higher Power for the specific purpose of transporting materials to job sites.

Negligent Hiring: Causation

The evidence of lack of insurance is relevant to the standard of care exercised by ACS. The requirement that specific negligent conduct be a legally cognizable cause involves a determination of whether it was foreseeable that the negligent act would cause the specific injury complained of in the case.

In this case lack of insurance coverage alone, without more, should not, and did not give ACS an indication of Johnson’s abilities to operate a dump truck. For evidence of insurance to be admissible in a negligent hiring claim, the evidence must also be relevant to the proximate cause of the plaintiff’s injuries. Here, the negligent hiring of Higher Power/Johnson was not, as a matter of law, the proximate cause of the accident. An individual lawfully operating a vehicle covered by liability insurance may nonetheless have a long accident history due to negligent driving or poor driving skills.

Johnson’s lack of liability insurance coverage was irrelevant to the claim of negligent hiring because it was not relevant to the proximate cause of Perry’s injuries, and did not fall within any exceptions to the general rule against admitting evidence of insurance. Irrelevant evidence is not admissible. The Maryland court concluded that it was legal error for the trial court to admit the evidence of lack of insurance coverage.

Prejudicial Effect of Admitting Inadmissible Evidence of Lack of Insurance

Even where evidence is wrongly admitted, under Maryland Rule 5–103(a) , “[e]rror may not be predicated upon a ruling that admits … evidence unless the party is prejudiced by the ruling.”

Since evidence of lack of insurance was irrelevant and immaterial to the claim of negligent hiring. Because references to Johnson’s lack of insurance coverage were not stricken from the record, the admission of that evidence probably influenced the jury in its determination of liability, resulting in prejudice to ACS.

CONCLUSION

The evidence of lack of insurance was brought up repeatedly during trial.

1. Evidence that driver lacked liability insurance was relevant to issue of whether driver’s alleged employer breached a duty by hiring driver;

2. Employer’s alleged negligence in hiring driver who lacked insurance coverage was not the proximate cause of pedestrian’s injuries and, thus, evidence of lack of insurance coverage was inadmissible; and

3. Trial court’s error in admitting irrelevant evidence of driver’s lack of liability insurance prejudiced driver.

ZALMA OPINION

Even though the state of Maryland will allow evidence in a tort case about insurance available or not available to the defendant the exceptions to the general rule that such evidence is not admissible because it will prejudice the defendant. This case must be tried again avoiding the prejudicial mention of insurance to prove the negligence of the person who contracted with the dump truck operator. Their testimony that they did not follow all of their own requirements before hiring a trucker should make the defense difficult.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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