ADMISSIBILITY OF SIMILAR CONDUCT EVIDENCE: DEGREE OF SIMILARITY
By Mike Abourezk and Marialee Neighbours
Evidence of other acts of similar conduct is highly relevant in an insurance bad faith action. Similar conduct evidence may be offered to prove: (1) the elements of a prima facie claim of bad faith, including wrongful intent; (2) a pattern of practice of wrongful claims handling; and (3) recidivism and the right to punitive damages.
Insurers, like other defendants, often argue that similar conduct evidence is inadmissible because it is not "sufficiently similar." Usually, they rely on State Farm Mutual Auto Insurance Co. v. Campbell, 123 S. Ct. 1513 (2003). However, their reliance on Campbell is misplaced. Basically, Campbell affirms earlier Supreme Court guideposts regarding the constitutional analysis of punitive damages. The federal court evaluating the punitive damages award in Exxon Valdez aptly noted:
State Farm adds no new, free-standing factor to the constitutional analysis of punitive damages... It is the court's view that State Farm, while bringing the BMW guideposts into sharper focus, does not change the analysis. In fact, there are aspects of the due process evaluation of punitive damages awards which have not changed at all as a result of State Farm.
In re the Exxon Valdez, 296 F.Supp.2d 1071,1076 (D.Alaska 2004)
Campbell Does Not Address the Evidence That Is Discoverable or Admissible In a State Court Bad Faith Action
Contrary to insurer arguments, Campbell does not deal with discoverability or admissibility issues. It deals only with a constitutional analysis of what kinds of evidence will be considered by appeals courts reviewing the constitutionality of punitive damages verdicts. In Campbell, the Supreme Court concluded that out-of-state evidence of wrongdoing with no demonstrable nexus could not be considered by appeals courts to justify punitive damages. The court decided that the plaintiffs in Campbell had not shown the required nexus.
In that case, the Court said: "A Defendant's dissimilar acts, independent from the acts upon which liability is premised, may not serve as the basis for punitive damages." Id. at 1523 (emphasis added). Because there was scant evidence of the kind of conduct that harmed the Campbells, the only relevant evidence was the evidence that harmed them. Conversely, if there had been evidence of similar conduct it could have been introduced for purposes of enhancing punitive damages. Significantly, the Campbell Court said that: "evidence of other acts need not be identical to have relevance in the calculation of punitive damages." Id. (emphasis added).
In Perez Librado v. Carriers, Inc., a federal court explained the Campbell rulings:
The Supreme Court found that the Utah court erred in relying and awarding punitive damages on evidence of lawful out of state conduct that bore no relationship or was dissimilar to the conduct which harmed the plaintiffs.
2003 WL 21075918 (N.D. Tex.), citing Campbell, 123 S. Ct. 1523-26.
Analyzing Campbell further, the court noted:
The Court expressly stated, however, that "evidence of other acts need not be identical to have relevance in the calculation of punitive damages."
Id. at *2, citing Campbell, 123 at 1523 (emphasis added).
Then the court concluded:
Thus, evidence of similar conduct or conduct having a nexus to the specific harm suffered by the plaintiff may still be admitted and considered in assessing punitive damages.
In Perez Librado, the court emphasized that: "Campbell addressed the scope of admissible evidence, not discoverable evidence. Discoverability is a separate issue from admissibility at trial; all that is required under Federal Rule of Civil Procedure 26 is that the requested discovery would likely lead to discovery of useful relevant/material evidence." Id. at * 3.
Of course, Campbell in no way changes South Dakota law, which favors admitting evidence of similar conduct to show intent. Novak v. McEldowney, 655 N.W.2d 909 (S.D. 2002). Under S.D.C.L. § 19-12-5, evidence of other acts may be admitted for purposes that include motive, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.
Degree of Similarity Necessary To Admit Similar Conduct Evidence -
There Are No Hard and Fast Rules Used To Determine Degree of Similarity
There are no hard and fast rules used by courts to determine the degree of similarity necessary to admit similar conduct evidence. See, e.g., Sweet v. Roy, 17 D.3 Vt. 418, 801 A.2d 694 (Vt. 2002)(Although trial court could consider similarity in determining admissibility of other acts evidence, there were no hard and fast lines as defendants suggested.); U.S. v. Torres, 977 F.2d 321(7th. Cir.1992)("[Q]uestions about 'how similar is similar enough' also do not have uniform answers..."). Naturally, the similar conduct or other acts evidence must be relevant to the particular theory, facts and circumstances of a case.
Degree of Similarity Required Depends on Purpose For Which Evidence Is Offered
When other crimes, wrongs, or acts evidence is admitted under S.D.C.L. § 19-12-5 or Rule 404(b), "the degree of similarity required for other acts evidence depends on the purpose for which it is offered." State v. Wright, 593 N.W.2d 792 (S.D.1999). In Wright, a child abuse case, the trial court admitted evidence of prior child abuse acts by the defendant. In that case, the South Dakota Supreme Court found that the other acts of child abuse were admissible to establish that the defendant had a plan or design to inflict excessive punishment on his children. Id.
In reaching its decision, the Court discussed admission of other act evidence under Rule 404(b). In that case, the court said:
It is admissible when similar in nature and relevant to the material issue, and not substantially outweighed by its prejudicial impact. The degree of similarity required for other act evidence will depend on the purpose for which it is offered.
Then the court explained:
But close similarity is not required of common plan or scheme evidence if it is not used to prove identity. As the California Supreme Court made clear, "unlike evidence of uncharged acts used to prove its identity, the plan need not be unusual or distinctive; it need only exist to support the inference that the defendant employed that plan in committing the charged offense."
Id., citing People v. Ewoldt, 7 Cal.4th 380, 27 Cal. Rptr. 2d 646, 659, 867 P.2d 757, 770 (1994)(en banc).
Thus, close similarity is not required when other acts are introduced to show common plan or scheme as long as it is not used to prove identity. Moreover, the plan need not be unusual or distinctive. The plan or scheme only has to support the inference that the defendant employed the plan in committing the charged offense. In addition, the Wright Court found that other acts were admissible to show absence of mistake or accident. Id. at 801. See also State v. Reutter, 374 N.W. 2d 617, 625 (S.D.1985)(similar conduct evidence relevant to show defendant's overall scheme, including preparation and planning "[e]vidence of other crimes, wrongs or acts is relevant if it has 'any tendency to make the existence of any fact of consequence to determination of action more or less probable than it would be without the evidence' "); U.S. v. Carr, 764 F.2d 496 (8th Cir. 1985)(In bank fraud case involving kick-backs on loan transactions, Eighth Circuit found that evidence relating to how other loan transactions were handled enabled jury to place events in proper context and to understand overall scheme.)
Courts Are Not Unduly Restrictive In Determining Degree Of Similarity Required
Courts are not unduly restrictive in determining the degree of similarity required when similar conduct evidence is offered. For instance, in Hawkins v. Allstate Insurance Co., a bad faith case, there was evidence that in every " total loss" to an automobile, Allstate instructed its claims adjusters to deduct a $35 "cleaning fee" from claim payments. 152 Az. 490, 733 P.2d 1073 (Ariz. 1987). The cleaning fee was taken whether a car was clean or not.
In Hawkins, an Arizona appellate court found that testimony of a former employee, Boettcher, lacked sufficient similarity to the Hawkins' experience and the testimony of other adjustors. Boettcher did not discuss the specific cleaning fee. The Arizona Supreme Court found that this difference was immaterial and said:
Boettcher's testimony was offered to show that Allstate engaged in a conscious course of conduct, firmly grounded in corporate policy, which denied Hawkins and countless other insureds the actual cash value of their property. The evidence was not offered to establish any particular conduct regarding the Hawkins' claim. This testimony was offered to explain Allstate's motive or its state of mind when dealing with the Hawkins and other insureds.
Id. at 498 (emphasis added).
Thus, the Arizona Supreme Court found that Boettcher's testimony was relevant and admissible to prove Allstate's improper motives for purposes of establishing a prima facie case of bad faith and to prove punitive damages. In addition, the court noted that Boettcher's testimony was admissible to rebut Allstate's defense that its claim practices were innocent cost saving measures taken to prevent overpayment of claims. Id.
Criminal Cases Offer Examples Regarding Degree of Similarity
Because similar conduct evidence is routinely offered in criminal cases to prove the charged offense, these cases provide excellent examples of how courts resolve similarity issues. Significantly, the defenses used by defendants in criminal cases, parallel the defenses used by defendants in bad faith actions. For instance, insurers in bad faith actions typically argue that their misconduct was unintentional, claiming that their acts were simply mistakes or accidents. See, e.g., U.S. v. Burk, 912 F.2d 225, 228 (8th Cir. 1990) (Eighth Circuit held that the prior act of threatening a police officer was sufficiently similar to the charge of striking an IRS agent to be admissible to show defendant's intent); U.S. v. Johnson, 562 F.2d 515, 517 (8th Cir. 1977)(Eighth Circuit upheld admissibility of similar conduct evidence; court concluded that testimony about defendant's former offers to sell firearms to agents allowed the jury to infer that he knowingly possessed a shotgun.
Evidence of Similar Conduct Admitted Under Totality of The Circumstances Rule
Another theory that is useful in admitting similar conduct evidence is the "totality of the circumstances." For instance, in Looks Twice v. Whidby, 569 N.W.2d 459 (S.D.1997), the South Dakota Supreme Court admitted evidence of similar conduct based on the "totality of the circumstances." In that case, the court said:
Prior incidents, whether similar or not, were properly held to constitute evidence of foreseeability. Such incidents are helpful in establishing foreseeability, but not required to satisfy this element. In other words, such other incidents are not by themselves controlling in establishing foreseeability, but can be considered with all the other facts and circumstances relating to the issue.
569 N.W.2d 459, 462 (S.D.1997)(emphasis added).
Thus, when evidence is admitted based on the totality of the circumstances, evidence of other instances may be admitted whether they are similar or not.