…as business records of the insurer where the insured gives a statement to the insurer.
Thanks to Steven Neuwirth, Esq. for bringing it to my attention.
Hochhauser v Electric Ins. Co., 2007 NY Slip Op 08037 (App. Div. 2nd Dept.)
The insurer presented insurance investigator Edward Quinn, Jr., as its sole witness. Quinn prepared the insurance investigation report, which concluded that the plaintiff was not a resident of the insured’s residence based on his interview with the insured. At the outset of Quinn’s testimony, the plaintiff objected, and the Judicial Hearing Officer overruled the objection. Following foundational testimony, the insurer sought to introduce the insurance investigation report into evidence as a business record. The plaintiff again objected, explaining that “anything that is contained in this record which is a recitation of what [the insured] allegedly told to Mr. Quinn is hearsay.” The Judicial Hearing Officer overruled the objection and, without further objection, Quinn testified that the insured informed him that the plaintiff stayed with the insured and his family “for a weekend every other month, now since the accident more frequently.”
We now turn our focus to whether Quinn’s testimony was based on impermissible hearsay and, concomitantly, whether the insurance investigation report was properly admitted into evidence under the business records exception to the hearsay rule. The plaintiff argues that neither the testimony nor the record was properly admitted since the insured lacked a business duty to report information regarding the plaintiff’s residence to the insurer.
The basis of the business records exception to the hearsay rule is the trustworthiness of the document (see 5 Wigmore, Evidence § 1522, at 442 [Chadbourn rev 1974]; Barker and Alexander, Evidence in New York State and Federal Courts § 8:41, at 875; Frumer and Biskind, 6 Bender’s New York Evidence CPLR § 19.04, at 19-71). “The essence of the business records exception to the hearsay rule is that records systematically made for the conduct of a business as a business are inherently trustworthy because they are routine reflections of day-to-day operations and because the entrant’s obligation is to have them truthful and accurate for the purposes of the conduct of the enterprise” (Prince, Richardson on Evidence § 8-301 [Farrell 11th ed.], citing People v Kennedy, 68 NY2d 569, 578-579).
Further, the concern relating to trustworthiness extends to “each participant in the chain producing the [business] record, from the initial declarant to the final entrant” (see Matter of Leon RR, 48 NY2d 117, 122). As one treatise explains:
“In the leading case of Johnson v Lutz (253 NY 124) the Court of Appeals read into [*4]the business records statute a qualification which, though not traceable to the language of the statute itself, is not controverted as a sound interpretation of the statute’s intent. The effect of Johnson v Lutz and its progeny is a refusal by the courts to admit into evidence, solely on the strength of the business records statute, those entries in business records which, though otherwise qualified under the statute, are based on information supplied by a person who was outside of the enterprise and who was not therefore communicating the information under the compulsion of a business duty”
Here, undisputedly, the insured was outside the insurer’s enterprise. Thus, under the rationale presented in both Johnson v Lutz and Matter of Leon RR, as well as their progeny, and the policy underlying the business records hearsay exception, the insured’s statement regarding the plaintiff’s residence and Quinn’s testimony regarding that statement are inadmissible hearsay. The insurer, however, argues that the insured had a duty to speak with the insurance investigator based on the underlying contractual duty which requires all insureds to cooperate with their insurer during an insurance investigation.
As the insurer correctly notes, generally an insured has a duty to cooperate in an insurance investigation by its insurer. In fact, typically, an insurer may disclaim coverage where an insured deliberately fails to cooperate with its insurer as required by an insurance policy (see City of New York v Continental Cas. Co., 27 AD3d 28, 31-32; Utica Mut. Ins. Co. v Gruzlewski, 217 AD2d 903, 903-904; State Farm Fire & Cas. Co. v Imeri, 182 AD2d 683, 683). The insurer, however, fails to support this argument with any case law holding that the duty to cooperate with an insurer equates to a business duty to report information during an insurance investigation, thereby affording a statement given by an insured during the course of such an investigation the requisite reliability or trustworthiness to fall within the business records exception to the hearsay rule.
Without the benefit of the business records exception to the hearsay rule, both Quinn’s testimony regarding the insured’s statement and the statement itself in the subject business record equate to impermissible hearsay, unless an independent basis for their admission exists (see Taft v New York City Tr. Auth., 193 AD2d 503, 504; Toll v State of New York, 32 AD2d 47, 50). Here, no such independent basis exists. Contrary to the holding of the Supreme Court, the insured’s statement is not admissible as a statement against interest (see Kelleher v F.M.E. Auto Leasing Corp., 192 AD2d 581, 583; Basile v Huntingon Util. Fuel Corp., 60 AD2d 616, 617; Jamison v Walker, 48 AD2d 320, 323).
Would this apply to documents provided to an insurance company as a result of a verification request? Just as in this decision, there is no duty to report that information, rather, it is a contractual obligation.
Any opinions?