Opinion
Civil Action No: 99-3033 SECTION: "R"(4)
December 21, 2001
Before the Court are plaintiff's motions for partial summary judgment on defendant's affirmative defense of fraud and on defendant's counterclaim. Also before the Court is the defendant's motion in limine to admit evidence of plaintiff's prior insurance claims as "similar acts" under Rule 404(b) of the Federal Rules of Evidence. For the following reasons, the Court denies plaintiff's motions for summary judgment. The Court denies in part and grants in part defendant's motion to include evidence of prior claims.
I. Background
This case arises out of an alleged automobile accident, that occurred in Detroit, Michigan, on or about December 3, 1998. Plaintiff alleges that while he was operating his vehicle at an intersection, a vehicle operated by an unidentified person ran a red light, broadsided plaintiff's vehicle, and then fled the scene of the accident. plaintiff later identified the driver as Harvey Reed. At the time of the accident, plaintiff and his wife Monica were covered by a GEICO automobile insurance policy, which included an uninsured/underinsured motorist provision. GEICO refused to pay Mr. Pouncey's claim because it believed that the claim was fraudulent — specifically, that Thaddis Pouncey either staged the automobile accident or asserted a claim for damages for an injury that was neither caused nor aggravated by the alleged accident.
On October 5, 1999, plaintiff sued GEICO in this Court, seeking damages for past and future mental anguish and physical suffering, past and future medical expenses, and past and future lost earnings. Plaintiff allegedly injured his lumbar spine as a result of the accident and has since undergone two spinal surgeries. Mrs. Pouncey seeks damages for loss of consortium, services and society of her husband, and a portion of the loss sustained by the marital community as a result of her husband's medical expenses, loss of earnings and impaired earning capacity. Plaintiff also alleges that GEICO was arbitrary and capricious in its evaluation of his uninsured motorist claim and that GEICO misrepresented coverage in this matter. Plaintiff asks for penalties and attorney's fees, under Louisiana Revised Statutes 22:658 and 22:1220, for defendant's alleged bad faith failure to pay.
On March 3, 2000, GEICO asserted a counterclaim against plaintiff, alleging that he submitted a fraudulent claim for fire damage to a 1984 Chevrolet Corvette under the same GEICO policy at issue in the December 1998 accident. The damage allegedly occurred on April 4, 1999 during a garage fire at plaintiff's residence in St. Tammany Parish, Louisiana. Specifically, GEICO claims that plaintiff did not own the Corvette at the time of the fire, and as a result, he breached his insurance contract by filing the claim. Plaintiff argues that at the time of the fire, he had only recently purchased the Corvette and had not added it to his policy yet. As proof, plaintiff faxed a Bill of Sale and Affidavit to defendant. Defendant contends that the notary public's signature on those documents was forged. Defendant seeks reimbursement of $7240, the cash value of the vehicle plus $100 for towing and storage, as well as attorneys' fees and costs.
Plaintiff moves for summary judgment on the issue of fraud and seeks to dismiss defendant's counterclaim. Plaintiff also asks the Court to exclude evidence of plaintiff's prior insurance claims.
II. Discussion
A. Summary Judgment standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2551 (1986). The court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). The moving party bears the burden of establishing that there are no genuine issues of material fact. See Krim v. BancTexas Group Inc., 989 F.2d 1435, 1445 (5th Cir. 1993).
If the dispositive issue is one for which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2552; Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exits. See Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The nonmovant may not rest upon the pleadings but must identify specific facts that establish a genuine issue exists for trial. See id. at 325, 106 S.Ct. at 2553-54; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1996). In addition, an affidavit will not defeat summary judgment if it contains no more than a scintilla of evidence insufficient to create a genuine issue of fact. See Anderson, 477 U.S. at 252, 106 S.Ct. at 2512.
A. Counterclaim
Plaintiff contends that there is no factual basis for the defendant's counterclaim that plaintiff did not own the Chevrolet Corvette at the time of the fire. Plaintiff submits an affidavit attesting to ownership. (Mot. Summ. J., Ex. 4.) In response, defendant submits deposition testimony from the notary public that his signature on the affidavit filed by Mr. Pouncey attesting to car ownership was forged. The Court finds that there is a genuine issue of material fact on the issue of the car's ownership at the time of the fire and denies plaintiff's motion for summary judgment on the counterclaim.
B. Affirmative defense of fraud
In its supplemental and amended answer, GEICO presents an affirmative defense of fraud:
Alternatively, defendants aver that the claim arising from the alleged accident of December 3, 1998, constitutes an attempt to commit insurance fraud upon GEICO either by staging an automobile accident and/or by asserting a claim for damages for an injury that was neither caused nor aggravated by the alleged accident referred to in their complaint for damages.
GEICO presents two theories for its affirmative defense of fraud: 1. That the accident was fraudulent; 2. That the medical claim was fraudulent or fraudulently inflated.
Under Louisiana law, "[f]raud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction." LA. Civ. CODE art. 1953. See also Concise Oil Gas Partnership v. Louisiana Intrastate Gas Corp., 986 F.2d 1463, 1468 (5th Cir. 1993). To prove fraud, a party must show an intent to defraud and actual or potential loss or damages. See Williamson v. Hayes Best Western of Alexandria, 688 So.2d 1201, 1239 (La.App. 4th Cir. 1997).
Plaintiff contends that defendant presents no genuine issues of material fact to support their the affirmative defense of fraud. They argue that defendant has not submitted any evidence indicating that the accident was fraudulent or that any prior claim filed by Pouncey was fraudulent. GEICO contends that genuine issues of material fact exist regarding whether Pouncey made misrepresentations to GEICO with the intent to defraud sufficient to sustain its affirmative defense of fraud.
1. Alleged Misrepresentations
As for its first basis for asserting fraud, GEICO contends that the contradictory statements made by Pouncey about the accident suggest that the accident was either staged or did not occur. Pouncey argues that there is no question of fact as to the collision. He points out that Officer Grohla testified that the yaw marks and scuff marks found on Pouncey's car substantiate Pouncey's claim that he was involved in a collision. (Mot. Summ. J., Ex. 3, Dep. Grohla, at 75-77, 80-81.) Harvey J. Reed, Jr. admits that he was involved in the December 3rd collision with Pouncey. (Mot. Summ. J., Ex. 1, Dep. Reed, at 10-16.) Pouncey lists Susan Williams, an alleged witness to the accident, on his witness list. In addition, Pouncey asserts that GEICO has no evidence to show that the accident was staged. He submits Harvey Reed's deposition testimony in which he denies having met or having any dealings with Pouncey prior to the accident. (Id., at 32.)
In response, GEICO points out that in Pouncey's original complaint, Pouncey asserted that he was hit by an "unidentified person." (Compl.) Pouncey's present counsel argues that that was a mistake on the part of Pouncey's former counsel. (Mem. Opp'n. to Mot. to Amend Answer, at 1.) He notes that Harvey Reed's name appears in the police report as the driver. In his deposition, Pouncey claims that he never spoke to the driver of the car who hit him. He contends that an alleged witness to the accident gave the driver's name to the police officer, Officer Grohla, who then informed Pouncey that the driver's name was Harvey Reed. (Mot. Summ. J., Ex. 3, Dep. T. Pouncey, at 78.)
In contrast, Officer Grohla testified that Thaddis Pouncey gave him the name of the hit and run driver. (Mot. Opp'n Summ. J., Ex. 1, Dep. Grohla, at 79.) Officer Grohla also testified that there was no witness to the accident. ( Id. at 79, 98, 104.) In Reed's deposition testimony, he asserts that after the accident occurred, he left his car, approached Pouncey and gave him information about his car and then left the scene. (Mot. Summ. J., Ex. 1, Dep. Reed, at 11.) Reed also denies running the red light. ( Id. at 12.)
GEICO also argues that plaintiff misrepresented his medical history for the purpose of receiving a larger payout from the insurance company. GEICO submits the medical records of Dr. Elmorshidy, Pouncey's former treating physician, which indicate that Pouncey suffered from significant lower back pain before the accident. (Mot. Opp'n. Summ. J., Ex. 3.) GEICO also submits a letter written by Pouncey in June 1998 to his then-employer that he was returning home to Louisiana for "more in depth tests to determine if further surgery was needed. Each evening I am in extreme pain and I need to seek relief." (Mot. Opp'n. Summ. J., Ex. 4.)
In contrast, the medical records of Dr. Grace, a physician Pouncey saw after the accident, show that Pouncey asserted that his lower back pain began in December 1998 as a result of a car accident. (Mot. Opp'n. Summ. J., Ex. 6.)
The Court finds that a genuine issue of fact exists as to whether plaintiff made material misstatements about the accident and his medical condition.
2. Intent
In order to show fraud as a matter of law, defendant must show that material misrepresentions were made with the intent to defraud. GEICO contends that Mr. Pouncey has tried to inflate the value of this claim by making a claim for lost wages from a job that he did not have. In GEICO's "wage and salary verification" form, Pouncey stated that he had been a full-time employee of Laurent Construction Company, from October 2, 1998 through November 27, 1998, earning $15.00/hour. (Mot. Opp'n. Summ. J., Ex. 7; Ex. 2, Dep. Pouncey, at 11.) GEICO submits Archie Laurent's deposition testimony that Mr. Pouncey was never a full time-employee of his company. (Mot. Opp'n. Summ. J., Ex. 8, Dep. Laurent, at 11-12.) Instead, Laurent testifies that Mr. Pouncey had worked "20 maybe 25 hours" to pay off a debt that he owned Laurent. ( Id. at 15.)
As additional evidence of Pouncey's fraudulent intent, defendant filed a motion in limine seeking to admit into evidence extrinsic evidence, specifically, twenty-five allegedly dubious insurance claims filed from 1993 to 1999 by Thaddis Pouncey. GEICO offers testimony from various insurance representative to authenticate the documents under Federal Rule 30(b)(6). First, GEICO argues the evidence is admissible to support its defense that Pouncey fraudulently filed his claim. More specifically, GEICO contends that the evidence is admissible to establish intent, motive, or absence of mistake or accident. Second, GEICO argues that the evidence is admissible to show that Pouncey was familiar with insurance and insurance recovery in general. Plaintiff objects that these other insurance claims are property claims which are dissimilar to the personal injury claim before the court, that there is no evidence that the claims were fraudulent, and that they are only being offered to show that plaintiff had a propensity to file specious insurance claims.
Although this is a diversity of citizenship case in which Louisiana law provides the substantive law, "the Federal Rules of Evidence govern the admissibility of evidence in the federal courts." Johnson v. William C. Ellis Sons Iron Works, Inc., 609 F.2d 820, 821 (5th Cir. 1980). Under the Federal Rules, evidence is only "relevant" if it has "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." FED. R. EVID. 401. Federal Rule of Evidence .404(b) renders admission of evidence of "other crimes, wrongs, or acts" inadmissible to prove the character of a person in order to show that he acted in conformity with his prior conduct. Rule 404(b), however, allows introduction of extrinsic acts evidence to prove intent, knowledge, preparation, plan or absence of mistake. FED. R. EVID. 404(b). The Supreme Court in Huddleston v. United States, 485 U.S. 681, 108 S.Ct. 1496 (1988), found that a district court need not make a preliminary finding that the moving party has proved the "other act" by a preponderance of the evidence before it submits "similar acts" evidence to the jury. Evidence of prior similar acts is also subject to Rule 403's limitation:
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.
FED. R. EVID; 403.
The two-prong test set forth by the Fifth Circuit in United States v. Beechum, 582 F.2d 898 (5th Cir. 1979), governs the admissibility of evidence of extrinsic offenses. See Aetna Casualty Surety Co. v. Guynes, 713 F.2d 1187 1193 (5th Cir. 1983) (applying Beechum analysis in the civil context). Beechum requires the Court to determine first, whetter the extrinsic acts evidence is relevant to an issue other than the party's character. In this case, evidence of prior or subsequent insurance fraud is relevant as to whether Pouncey's alleged material misstatements were made with the intent to defraud GEICO, rather than the product of mistake. Beechum specifically establishes that where the issue addressed is the party's intent, extrinsic offenses that are similar in nature are admissible because:
the relevance of the extrinsic offense derives from the [person's] indulging himself in the same state of mind in the perpetration of both the extrinsic and charged offenses. The reasoning is that because the [person] had unlawful intent in the extrinsic offense, it is less likely that he had lawful intent in the present offense.Id. at 911. Indeed, presentation of extrinsic evidence is often necessary to show fraud or fraudulent intent, since it can be "seldom proved by categorical facts." Aetna Casualty Surety Company v. Guynes, 713 P.2d 1187, 1192 (5th Cir. 1983). Rather, "such a finding ordinarily arises as an inference." Id.
In the criminal context, the Fifth Circuit upheld the trial court's decision to admit into evidence two subsequent bus accidents and the related insurance claims filed by defendant in a prosecution for filing fraudulent insurance claims arising from a different bus accident. United States v. Osum, 843 F.2d 1394, 1404 (5th Cir. 1991) ("Subsequent, almost identical accidents in which Osum knowingly filed false claims and assisted his relatives in doing so make it improbable that he was an unwitting participant in the charged fraud.")
As part of this first step, however, there must also be proof that the extrinsic event was in fact committed by the party, or otherwise it will not be admissible. See Beechum, 582 F.2d at 912-13; Garcia v. Aetna Casualty and Surety Co., 657 F.2d 652, 655 (5th Cir. 1981). Here, defendant proffers a laundry list of previous insurance claims to be admitted. The Court finds that claims twenty-one is not extrinsic evidence because it is the subject of this suit, and certainly admissible. Some claims are inadmissible because they are not relevant. Claim four involved a claim on Mr. Pouncey's parents' policy and is inadmissible. Defendant must show that Mr. Pouncey committed the extrinsic act for the evidence of similar acts to be admissible. See Garcia, 657 F.2d at 654; Weiskopf v. Bond, 739 F. Supp. 1084, 1086 (E.D. La. 1990). Defendant has not presented any evidence that Mr. Pouncey, rather than his parents submitted this claim, or any evidence that Mr. Pouncey and his parents were so exceptionally close that Mr. Pouncey would benefit from this policy. Compare Dial v. Travelers Indemnity, Co., 739 F. Supp. 1084, 1086 (5th Cir. 1986). Claims five and eleven were theft claims that Pouncey withdrew because he reported that the property was recovered. (Mot. Summ. J., Ex. 7, Dep. Sexton, at 56-57; Ex. 9 Dep. Look, at 40-41) They are inadmissible as irrelevant because filing and then withdrawing those claims does not show that plaintiff had a fraudulent intent.
Claims one, two, three, five, and six, thirteen, seventeen, nineteen, twenty, twenty-two were theft claims between 1993 to 1998. Claim seven was a 1997 collision claim. Claim eight was a
1997 theft claim, which the insurance company denied. Claim nine was a 1996 theft and vandalism claim. Claim ten involved a 1996 vehicle fire. Claim twelve involved a 1996 hit and run accident, in which the insurance company failed to pay. Claim fourteen was a 1996 hit and run accident, where the investigator determined that Pouncey gave the insurance company a false police item number. Claim fifteen involved a 1996 disability claim on plaintiff's life insurance. Claim sixteen involved a 1996 unwitnessed car jacking. Claim eighteen involved flood damage in 1998. Claims twenty-three is a claim by Monica Pouncey for a 1999 garage fire, and claim twenty-four is Thaddis Pouncey's claim for that same fire. Claim twenty-five is a claim for fire damage to an automobile.
Since GEICO seeks to present these other claims for possible fraudulent nature, they must have sufficient evidence to prove the fraud and to tie Pouncey to the fraud. See Garcia, 657 F.2d at 655. The standard the Court must apply to determine whether the predicate extrinsic act has been shown is stated in Rule 104(b): "The preliminary fact can be decided by the judge against the proponent only where the jury could not reasonably find the preliminary fact to exist." See Beechum, 582 F.2d at 913; Dial v. Travelers Indemnity Company, 780 F.2d 520, 523 (5th Cir. 1986).
In Dial, the Fifth Circuit affirmed the district court's decision to admit evidence that plaintiff had intentionally set subsequent fires on insured properties in a suit to recover under his fire policy. 780 F.2d at 523. There, before the district court admitted the evidence, it first determined whether the insurance company could present predicate evidence that indicated that plaintiff committed the extrinsic act. The insurance company represented to the district court that it would present testimony to the court from the deputy state fire marshal who investigated the fires and other witnesses to show that plaintiff had committed the acts. Id. at 523. The Fifth Circuit found that the insurance company's evidence "easily satisfied the standard" established in Rule 104(b).
The Court finds that GEICO has presented sufficient evidence such that a jury could find that several of these claims were fraudulently brought. For claim 25, the subject of the counterclaim, GEICO presents the certified deposition testimony of the notary public, David Sierera, who testifies that his signature was forged on plaintiff's affidavit and bill of sale.
For claim sixteen, GEICO submits the testimony of Franklin Share, a State Farm representative, who testifies that Pouncey submitted a 1996 claim with State Farm insurance that his vehicle had been car jacked, that State Farm paid out $38,840 for the claim, and that someone the police identified as the "owner" was stopped for driving that same car in June 1997. (Mot. Summ. J., Ex. 6, Dep. Share, at 9-15, 17-18.) Share also testified State Farm believed that Pouncey was the "owner" referred to in the police report, and requested that Pouncey return the vehicle or provide proof to them that he did not have possession of the vehicle. ( Id. at 28, 54.) Pouncey failed to provide State Farm with any documentary information. (Id. at 28.)
For claim eight, GEICO submits the deposition testimony of Lori Sexton, an Allstate agent, who testifies Allstate denied the claim due to dubious circumstances, including a determination that the physical evidence did not corroborate Pouncey's statement of the events and that Pouncey failed to disclose the existence of a lien on the car. ( Id. at 45-47, 52.)
For claim fifteen, GEICO also submits the testimony of Randall Lehman, a representative of Guaranty Trust Life, who testifies that the insurance company stopped payments for claim fifteen because of suspicious conditions, including a belief that Pouncey made misrepresentations about his medical history. (Mot. Summ. J., Ex. 8, Dep. Lehmann, at 38.)
For claim ten, GEICO submits the testimony of Mary Look, a representative of AAA, who testifies that Pouncey initially reported that the car was parked and unoccupied when the electrical wires shorted and caused a fire under the hood. (Mot. Summ. J., Ex. 9, Dep. Look, at 10.) An independent investigator later determined that Pouncey was trying to start the car with a spray start ether, which caused the fire. ( Id., at 11-14.)
For claims eight, ten, fifteen, sixteen and twenty-five, the Court finds that the jury "could reasonably find" that plaintiff committed these alleged acts by a preponderance of the evidence. See Huddleston, 485 U.S. 681, 108 S.Ct. 1496 (1988). That these claim are not as factually similar to the present claim as the subsequent acts in Osum were to the claim in question will affect the weight of the evidence, not its relevance. The Court finds that evidence of other fraudulent insurance claims is relevant to the issue of whether plaintiff made material misstatements with a fraudulent intent.
The Court reserves ruling on the remaining claims: one, two, three, six, seven, nine, eleven, twelve, thirteen, fourteen, seventeen, eighteen, nineteen, twenty, twenty-two, twenty-three, and twenty-four. Further, GEICO has only stated generally that it will document the Progressive Insurance, Lafayette Insurance, Audubon Insurance, and other GEICO claims with live testimony. If GEICO represents to the Court the substance of the proposed live testimony or if GEICO is able to offer more specific evidence to show that any of those claims were fraudulently brought, sufficient to satisfy the first Beechum prong, the Court will reconsider their relevance.
The second prong of the Beechum test requires the Court to make a Federal Rule of Evidence 403 determination regarding whether the probative value of the extrinsic acts evidence is substantially outweighed by the danger of unfair prejudice to the party. In weighing the probative value of the evidence against the potential for unfair prejudice, the Court finds that the probative value is great and the potential for prejudice slight. The similar acts evidence is not of a heinous nature that would incite the jury to render an irrational verdict.
Lastly, in order to reduce potential prejudice, the Court notes that it will give a limiting instruction to the jury that they could consider the other insurance claims only if it first found that Pouncey had made material misstatements, and then only for the limited purpose of determining the question of intent.
Accordingly, the Court finds that the facts here present a genuine issue of material fact of the issue of fraud and denies plaintiff's motion for summary judgment on defendant's affirmative defense of fraud.
3. Punitive Damages
If plaintiff submits a claim at trial under Louisiana Revised Statutes 22:658 or 22:1220 based on defendant's alleged arbitrary and capricious failure to pay, the Court will allow GEICO to present evidence of prior insurance claims filed by Pouncey that GEICO relied upon in its decision to deny coverage. See Johnson v. CNA Insurance Company, 1993 WL 54214, at *5, n. 11 (E.D. La. 1993) (admitting prior insurance claims as relevant as justification for defendant's refusal to tender uninsured motorist benefits to plaintiff within 60 days.) Evidence of prior insurance claims is relevant to GEICO's state of mind. The Court notes, however, that insurance claims that GEICO was not aware of at the time it refused to pay Pouncey are not admissible because they are not relevant. GEICO must provide foundation evidence as to which claims it relied upon at the time it decided to deny coverage.
In doing a Beechum analysis, the Court finds that evidence of plaintiff's prior insurance claims is highly probative of defendant's probable cause for nonpayment of this claim, and which will not be outweighed by any unfair prejudice. The Court will issue a limiting instruction that the jury may consider this extrinsic evidence for the limited purposes of determining whether defendant acted in bad faith. See Weiskopf v. Bond, 739 F. Supp. 1087 (E.D. La. 1990).
As of this date, GEICO has not specified which claims provided the basis for its denial of coverage. The Court therefore reserves judgment on the admissibility of the particular claims until GEICO presents the Court with a list of. those specific claims and their foundation.
II. Conclusion
For the foregoing reasons, plaintiff's motions for summary judgment are denied, and defendant's motion in limine is granted in part and denied in part.