Why Can’t You Talk About Insurance in a Trial?

stockfresh_5321475_judge-giving-verdict-by-hitting-mallet_sizeS-300x200I handed the document to my client while the jury watched us. I asked my client, “Can you tell me what this document is?” He answered honestly, “It’s the property damage estimate… prepared by State Farm”.  I knew what was coming, and I slumped. Defense counsel stood up and asked the judge, “Can I take a matter up outside of the presence of the jury?” The jury was marched out of the courtroom so the lawyers could speak to the judge.

At that point, the lawyer hired by the insurance company to represent the person who rear-ended my client made a motion for mistrial.  Mistral means that the trial is so irretrievably broken that a whole new trial must be started. Bear in mind that only the truth had been spoken. The document had been prepared by State Farm, but it also had been carefully redacted by agreement of the parties to remove all reference to State Farm. There was no mention as to who State Farm Insurance Company insured in the case, and it was just as likely that State Farm insured my client and prepared the property damage estimate for him. Furthermore, state law requires that owners have car insurance. Nevertheless, the trial court granted the insurance company lawyer’s motion for mistrial. Days of preparation for that trial were wasted. We will re-try the case, but much will have to be redone.

There is no doubt but that the rules of trial do not allow the existence of liability insurance to be introduced into evidence. Rule 414, North Carolina Rules of Evidence, states, “Evidence that a person was or was not insured against liability is not admissible upon the issue whether he acted negligently or otherwise.” Rule 414, South Carolina Rules of Evidence, is identical.

Why do these rules exist when state law requires that all cars have liability insurance? Why is it that jurors are not allowed to know whether there is insurance that will cover a verdict? The purpose for the rule is to assure that people with insurance and people without insurance are treated equally.

This is a legitimate purpose, but this rule consistently confuses jurors and parties.  As a trial attorney, the most common question I have heard from jurors is whether there is insurance. Jurors are naturally curious as to whether bills have been paid by health insurance, whether the at-fault party will have to pay a judgment out of their pocket or will it be covered by liability insurance. It only confuses jurors when they aren’t allowed to know that there may be insurance. I have seen many, many cases where the jury obviously reached a decision assuming insurance had covered part of the loss, and they deducted it from the verdict. This is not a fair result. Oftentimes health insurance must be repaid out of a verdict, so the Plaintiff loses twice if the jury doesn’t award the bills, and then the health insurer must be repaid from the already slim verdict. The current instruction favored by the court to the jury when the court receives a question about insurance is “You are to decide the case based on what you have heard inside the court room. Don’t take any other matters not in evidence into consideration”. Unfortunately, this doesn’t really answer the jurors’ questions.

There is a solution to remedy some of this confusion. A better instruction would be “There may or may not be insurance. You are to decide the case based on the evidence you’ve heard in the court room. You should decide the case regardless of whether there is insurance and regardless of the defendant’s ability or inability to pay the judgment.” Such an instruction would give the jurors better instructions and information regarding how to decide the case without introducing the existence of liability insurance. Under current practice, jurors are only confused. This would not necessarily solve the problem raised in the trial discussed above, but it would make a mistrial less likely. This solution would reduce the waste of time in trial, and enhance jurors’ understanding of the trial process.

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