Insurance Contract Not Relevant Or Admissible In Breach of Contract Action for Nonpayment of Underinsured Motorist Benefits

William J. Farley, Jr. v. Allstate Insurance Co., No. 119, September Term, 1998, July 27, 1999

The Court of Appeals of Maryland held that a trial court did not err in refusing to admit the automobile insurance contract into evidence, as its admission would be more prejudicial than probative. Unless the amount itself is in controversy, the admission of the contract into evidence, in order to get before the jury the available amount of underinsurance motorist coverage, would likely result in a distorted jury verdict.

Prior to the start of the trial testimony, the trial judge had instructed counsel not to divulge to the jury the terms of the insurance contract, including its policy limits, nor the amount of the settlement with Gregory. The trial judge also instructed counsel not to inform the jurors that the case involved underinsured motorist coverage. On appeal, the plaintiffs argued that by not allowing the contract into evidence, the trial judge prevented the jurors from seeing the "whole picture", thus causing them to decide the case in a "vacuum." The Court of Appeals rejected that argument.

The Court began by quoting a definition of relevancy that pre-dated Maryland’s adoption of the Maryland Rules of Evidence: "[F]or an item of evidence to be admissible, it must be both relevant and material. Evidence is material if it tends to establish a proposition that has legal significance to the litigation. Evidence is relevant if it is sufficiently probative of a proposition that, if established, would have legal significance to the litigation."

However, the true basis of the decision is the discretion of the trial judge to determine whether the probative value of the evidence outweighs any unfair prejudice.

The Court reaffirmed an earlier holding that the amount of policy limits is in no way probative of the issue of damages, absent a controversy in the amount of coverage itself.

Although this case was a breach of contract case, the Court found that functionally it was a tort case, and that the amount of coverage under the contract of insurance was not in controversy.

[Ed. Note: Maryland Rule of Evidence 5-401, which is derived from Fed. R. Evid. 401, states that, "‘Relevant evidence’ means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." The Advisory Committee Note to Fed. R. Evid. 401 states flatly: "The fact to which the evidence is directed need not be in dispute." (Emphasis added). However, the Note points out that where liability is admitted, the court can exclude evidence under Rule 403.However, as one commentator points out, how is the court to assess the probative worth of evidence of a fact not in issue? Salzburg, Federal Rules of Evidence Manual, §5164, p. 44.

Maryland courts apparently have not spoken directly on this issue since the adoption of the Maryland Rules of Evidence. Generally, Maryland courts define relevance with reference to the issues in the litigation, as the Court of Appeals reiterated in the Farley case.

The Supreme Court discussed Rule 401 in Old Chief v. United States, 519 U.S. ___, 136 L.Ed.2d 574, 117 S.Ct. 644 (1997), in which it held that under some limited circumstances, a trial court in a criminal matter will abuse its discretion under Rule 403 if it admits evidence on a point that the opponent has offered to stipulate. There, the Court found that the trial court erred in allowing the prosecution to prove a prior felony in support of a prosecution under gun control laws, where the defense had offered to stipulate to the existence of a prior felony. The Court found that tactic by the prosecution was unfairly prejudicial in the context of that case because the prior felony also involved assault with a deadly weapon.

Significantly, however, the Court persuasively stated reasons why offers to stipulate cannot automatically preclude evidence offered by the proponent.

First, the Court stated that evidentiary relevance under Rule 401 was not affected by the alternative proofs of the element to which it went, such as an admission by the defendant of that fact, and the Court quoted with approval the same Advisory Committee Note to Rule 401 quoted above. Id., 136 L.Ed.2d at 587. The Court stated that exclusion therefore must rest on Rule 403.

The Court continued on to acknowledge the general rule that a party may present to the jury a picture of the events relied upon. To substitute for such a picture a naked admission might have the effect to rob the evidence of much of its fair and legitimate weight. Id., 136 L.Ed.2d at 592. The Court expanded on that as follows:

The "fair and legitimate weight" of conventional evidence showing individual thoughts and acts . . . reflects the fact that making a case with testimony and tangible things not only satisfies the formal definition of an offense, but tells a colorful story with descriptive richness. . . . A piece of evidence may address any number of separate elements, striking hard just because it shows so much at once . . . . Evidence thus has force beyond any linear scheme of reasoning, and as its pieces come together a narrative gains momentum, with power not only to support conclusions but to sustain the willingness of jurors to draw the inferences, whatever they may be, necessary to reach an honest verdict. . . . [B]eyond the power of conventional evidence to support allegations and give life to the moral underpinnings of law’s claims, there lies the need for evidence in all its particularity to satisfy the jurors’ expectations about what proper proof should be. Some such demands they bring with them to the courthouse, assuming, for example, that a charge of using a firearm to commit an offense will be proven by introducing a gun in evidence. A prosecutor who fails to produce one, or some good reason for his failure, has something to be concerned about. ‘If [jurors’] expectations are not satisfied, triers of fact may penalize the party who disappoints them by drawing a negative inference against that party.’ . . . A party seemingly responsible for cloaking something has reason for apprehension, and the prosecution with its burden of proof may prudently demur at a defense request to interrupt the flow of evidence telling the story in the usual way.

Id., 136 L.Ed.2d at 592-93.]

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