Trial Court Did Not Abuse Its Discretion in Excluding Reference to Defendant's Expert's Stock Ownership in Defendant's Liability Insurer

EVIDENCE OF DEFENDANT'S LIABILITY INSURANCE – PROBATIVE VS. PREJUDICIAL VALUE
Salm v. Moses
(Ct. Apps., decided 10/22/2009)

Hat tip to Gregory McGoldrick over at McGoldrick's New York State Civil Evidence for spotting and blogging this decision. 

This is not an insurance coverage decision, but one about insurance coverage.  It has long been the rule in New York that evidence that a civil defendant carries liability insurance is generally inadmissible at trial.  In this dental malpractice action, moved in limine to preclude plaintiff from cross-examining defendant's expert regarding the fact that he and defendant were both shareholders of and insured by the same dental malpractice insurance company.  Plaintiff opposed the motion, but did not request a voir dire of the expert to inquire into his connection to the insurer.  After a colloquy with counsel, Supreme Court granted the motion, finding that the probative value of the inquiry would be outweighed by the prejudicial effect of having defendant's insurance coverage revealed to the jury. Upon plaintiff's appeal following a jury verdict in favor of defendant, the Appellate Division affirmed (57 AD3d 370 [1st Dept 2008]). The Court of Appeals granted plaintiff leave to appeal.

In AFFRIMING the Appellate Division's decision, the Court of Appeals held that the trial court did not abuse its discretion in granting the defendant's motion in limine:   

Evidence that a defendant carries liability insurance is generally inadmissible (see Leotta v Plessinger, 8 NY2d 449, 461 [1960], rearg denied 9 NY2d 688 [1961]; Simpson v Foundation Co., 201 NY 479, 490 [1911]). The rationale underlying this rule is twofold. First, "it might make it much easier to find an adverse verdict if the jury understood that an insurance company would be compelled to pay the verdict" (Loughlin v Brassil, 187 NY 128, 135 [1907]). Second, evidence of liability insurance injects a collateral issue into the trial that is not relevant as to whether the insured acted negligently. Although we have acknowledged that liability insurance has increasingly become more prevalent and that, consequently, jurors are now more likely to be aware of the possibility of insurance coverage, we have continued to recognize the potential for prejudice (see Oltarsh v Aetna Ins. Co., 15 NY2d 111, 118-119 [1965]; see also Barker and Alexander, Evidence in New York State and Federal Courts § 4:63, at 260-261 [5 West's NY Prac Series 2001] ["Because the prejudice quotient is obvious, the rule barring such evidence is one of the least controversial in the law of evidence"]).

The rule, however, is not absolute. If the evidence is relevant to a material issue in the trial, it may be admissible notwithstanding the resulting prejudice of divulging the existence of insurance to the jury. For example, we have held that evidence that a defendant insured a premises is relevant to demonstrate ownership or control over it (see Leotta, 8 NY2d at 462). Likewise, it was proper to allow cross-examination of a physician regarding the fact that the defendant's insurance company retained him to examine the plaintiff in order to show bias or interest on the part of the witness (see Di Tommaso v Syracuse Univ., 172 App Div 34, 37 [4th Dept 1916], affd without opn 218 NY 640 [1916]).

Here, we perceive no abuse of discretion in Supreme Court's evidentiary ruling. Such evidence may be excluded if the trial court finds that the risk of confusion or prejudice outweighs the advantage in receiving it (see Kish v Board of Educ. of City of N.Y., 76 NY2d 379, 384-385 [1990]). In this case, plaintiff speculated during the colloquy that a verdict in defendant's favor could result in a $100 benefit — at the time of the expert's death, disability or retirement — based on the expert's shareholder status in OMSNIC. The trial court's finding that any such financial interest was likely "illusory" and that the possibility of bias was attenuated was reasonable on this record. Absent a more substantial connection to the insurance company — or at least something greater than a de minimis monetary interest in the carrier's exposure — the court did not engage in an abuse of discretion in precluding the testimony. We note that a voir dire of an expert outside the presence of the jury can better aid the court in exploring the potential for bias.

Judge Piggott concurred in the majority's conclusion but wrote separately because, in his view, "courts should no longer treat insurance coverage as the third rail of trial practice such that it can neither be mentioned, even incidentally, nor be the basis of appropriate inquiry as to possible bias, as in the ruling here."