King v. Allstate Insurance Company

Filing 246

ORDER On Motions in Limine, Plaintiffs Motion in Limine ECF No. 202 is GRANTED IN PART and DENIED IN PART as set forth ; and Defendants Motion in Limine ECF No. 203 is GRANTED IN PART and DENIED IN PART as set forth by Judge William J. Martinez on 8/20/2013.(ervsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 11-cv-00103-WJM-BNB
DENNIS W. KING, Colorado resident and U.S. Bankruptcy Trustee for bankrupt SHERI
L. LAUK, a Colorado resident,
Plaintiff,
v.
ALLSTATE INSURANCE COMPANY, a foreign corporation,
Defendant.

ORDER ON MOTIONS IN LIMINE

Before the Court are the following motions: (1) Plaintiff’s Motion in Limine (ECF
No. 202); and (2) Defendant’s Motion in Limine (ECF No. 203). Each Motion has
multiple subparts, which will be addressed in turn below.
I. PLAINTIFF’S MOTION IN LIMINE
Plaintiff moves to exclude the following categories of evidence:
A.

After Acquired Evidence
Plaintiff moves to exclude various categories of evidence based on the fact that it

was not part of the claim file during the relevant time period, i.e., from August 24, 2008
through May 21, 2009.
The first category of evidence that Plaintiff moves to exclude on this basis is all
the testimony from Defendant’s experts Michael Zeeb, Dr. David Viano, and Dr. Richard
Smith. (ECF No. 202 at 2.) However, these experts were the subject of prior Motions
to Strike (ECF Nos. 186-88) which were granted by the Court (ECF No. 204) the day

after the Motion was filed. As the Court has already ruled that Defendant will not be
permitted to offer evidence from Mr. Zeeb, Dr. Viano, or Dr. Smith, this aspect of the
Motion is moot.
Plaintiff also moves to exclude evidence from Daniel Dote, an acquaintance of
Scott Martin who apparently contacted Allstate at some point during the claims handling
process and notified it that he believed Mr. Martin was inflating his claim. (ECF No. 202
at 4.) Plaintiff points out that Defendant does not list Daniel Dote as a proposed
witness in this case and, therefore, Plaintiff will not be able to question Mr. Dote directly
about his statements. (Id.) Plaintiff contends that any testimony about what Mr. Dote
told Allstate would be hearsay. (Id.)
Allstate responds by arguing that Mr. Dote’s statements that are recorded in the
claims file would be non-hearsay, as they would fall under the business records
exception. (ECF No. 217 at 2.) The Court agrees that the notes themselves could
likely be business records, however, Mr. Dote’s statements contained in those notes
are an additional level of hearsay. See Fed. R. Evid. 801. Thus, to be admissible,
Allstate needs to come forward with a hearsay exception that is applicable to that level
of hearsay as well. It has not done so.
Additionally, to the extent that Mr. Dote’s statements could be considered nonhearsay if not offered for the truth of the matter asserted (e.g., to show Allstate’s
reaction to the information, or to show that Allstate had the information), the Court
excludes the evidence under Rule 403. The relevant time period in this case was
between August 24, 2008 (the date of the accident) and May 21, 2009 (the day Allstate
offered policy limits to the Martins). Mr. Dote did not contact Allstate until October 7,
2

2009. (ECF No. 202 at 4.) As such, Mr. Dote’s statements to Allstate regarding his
belief that Mr. Martin was exaggerating his symptoms could not have been relevant to
why Allstate declined to settle this case for policy limits before May 21, 2009.
The Court finds that it would be extremely and unfairly prejudicial to Plaintiff to
permit Allstate to put on evidence that its failure to settle was motivated by Mr. Dote’s
statements regarding Mr. Martin’s injuries. The Court finds that such evidence would
be likely to confuse the jury about the issues in this case and would be a waste of time.
As such, it is excluded pursuant to Rule 403 and Plantiff’s Motion is granted as to any
statement made by Daniel Dote.
Finally, Plaintiff moves to exclude any evidence from Robert Garza, an
investigator hired by Allstate to conduct surveillance of Mr. Martin in June 2013. (ECF
No. 202 at 5.) On August 19, 2013, the Court issued an Order denying Defendant’s
Motion to Amend the Final Pretrial Order to name Mr. Garza as a witness. (ECF No.
242.) As the Court has already ruled that Mr. Garza will not be allowed to testify at trial,
Plaintiff’s Motion is moot in this regard.
B.

Attorney Richard Kaudy’s State of Mind
Plaintiff moves to exclude all evidence of attorney Richard Kaudy’s state of mind.

(ECF No. 202 at 6.) Plaintiff contends that Mr. Kaudy’s motivations are irrelevant
because Colorado does not recognize a defense that an insurance company was being
“set up” for extra-contractual liability. (Id.)
Allstate alleges that Mr. Kaudy’s state of mind is relevant to whether the Martins
had any intent to settle their claims against Ms. Lauk, and that such intent goes to
causation. (ECF No. 217 at 2-3.) The Court agrees. Plaintiff bears the burden of
3

establishing that all damages were caused by Allstate’s bad faith decision not to settle
the Martins’ claims before May 21, 2009. Allstate has shown that the Martins were not
permitted to settle their claim without the consent of Mr. Kaudy. (ECF No. 85-10 at 2.)
Thus, Mr. Kaudy’s state of mind is relevant to these proceedings.
Accordingly, Plaintiff’s Motion is denied to the extent it seeks to exclude all
evidence about Mr. Kaudy’s state of mind.
C.

Stephen Prater Being Insured by Allstate
Plaintiff moves to exclude any mention of the fact that its bad faith expert,

Stephen Prater, is insured by Allstate on the ground that it is irrelevant. (ECF No. 202
at 5.) Defendant contends that this fact is relevant to credibility and bias. (ECF No.
217 at 3.) The Court agrees with Defendant. The fact that Mr. Prater chooses to do
business with Allstate as his insurance company is relevant to his credibility and bias as
a witness. Thus, Plaintiff’s Motion is denied to the extent it seeks to preclude evidence
showing that Mr. Prater is insured by Allstate.
D.

Testimony by the Lauk family
Plaintiff moves to exclude all testimony from Sherri Lauk and her parents on the

basis that it is not relevant. (ECF No. 202 at 6-7.) Ms. Lauk’s bad faith claim for
economic damages is part of the bankruptcy estate and is being pursued by the Plaintiff
in this case, and she settled the claim for non-economic damages. As Ms. Lauk is not
the real party in interest, Plaintiff contends that she and her parents have no role to
play. (Id.)

4

Defendant contends that this testimony is relevant as it shows the interactions
between the insurer and the insured during the relevant time period. (ECF No. 217 at
3.) Defendant also contends that it should be permitted to introduce evidence about
how the insured (to whom it owed the duty of good faith and fair dealing) viewed its
actions, and whether the insured wanted to settle the case. (Id.)
The Court agrees with Defendant. An insurance company is permitted to
consider the opinions of the insured in deciding whether to settle. See Bankr. Estate of
Morris v. COPIC Ins. Co., 192 P.3d 519, 525-26 (Colo. App. 2008). Therefore,
Defendant is permitted to elicit testimony about whether and to what extent Ms. Lauk
was interested in settling the Martins’ claims against her. Additionally, the Lauks’
testimony provides necessary context for the case in that Sherri Lauk was the insured
during the relevant time period.
The Court agrees with Plaintiff that the Lauks are not insurance experts and that
any attempts to elicit testimony from them about what a reasonable insurer would have
done would be improper. Should Defendant ask such questions at trial, Plaintiff is free
to object and the Court will make the appropriate ruling at that time.
Accordingly, Plaintiff’s Motion is denied to the extent it seeks to preclude all
testimony from Sherri Lauk and her parents.
E.

“Litigation funding” Loans
Scott Miller obtained loans that allowed him to meet his basic needs while

pursuing the underlying litigation. The loan documents state that they are for the
purposes of “affording” Mr. Martin “sufficient funds to proceed with the Litigation”. (ECF

5

No. 217 at 4.)
Plaintiff moves to prevent Defendant from referring to the loans as “litigation
funding” loans because they did not go to fund any aspect of the actual litigation. (ECF
No. 202 at 7-8.) Defendant contends that “litigation funding” loans is not a
mischaracterization based on the actual loan documents. (ECF No. 217 at 4.)
The Court finds that referring to the loans received by the Martins as “litigation
funding loans” is not unfairly prejudicial to Plaintiff. The parties are free to elicit
testimony about the nature of these loans, why the Martins felt they needed to obtain
the loans, and the ultimate use of the funds received. The jury will then be able to draw
its own conclusions based on the evidence.
Accordingly, Plaintiff’s Motion is denied to the extent it seeks to preclude
Defendant from referring to the loans the Martins obtained during the underlying
litigation as “litigation funding loans”.
F.

Evidence About Punishing Karla Cosgrove
Plaintiff moves to exclude any reference to this suit being brought to punish Karla

Cosgrove, who was Allstate’s adjuster on this case. (ECF No. 202 at 8.) Plaintiff points
out that Ms. Cosgrove will not personally liable for any judgment, so there is no
punishment to her. (Id.) Defendant contends that, although Ms. Cosgrove will not be
liable on any judgment, any punitive damage award is intended to punish Allstate for
Ms. Cosgrove’s conduct. (ECF No. 217 at 4.) Defendant argues that it should be
permitted to argue that Ms. Cosgrove did nothing worth punishing and, therefore,
punitive damages are not appropriate. (Id.)

6

Having presided over a number of trials and having seen how seriously the jurors
take their obligations, the Court is confident that the jury is capable of understanding
the difference between an individual’s personal liability on a judgment and the concept
of awarding damages against a company based on the actions of its employees. The
Court agrees that, if the jury decides to award punitive damages, it is in essence
punishing Allstate for the actions and decisions of its employees, primarily Karla
Cosgrove. Thus, any potential statement about Ms. Cosgrove’s actions not being
worthy of punishment does not mischaracterize the situation and is not unfairly
prejudicial. Therefore, the Court will not preclude Defendant from making such
references.
However, Defendant may not mislead the jury by attempting to make it appear
that Karla Cosgrove is personally liable for any judgment in this case. Any effort to
confuse the jury in such a manner will not be tolerated by the Court.
Accordingly, Plaintiff’s Motion is denied to the extent it seeks to preclude any
reference to statements referring to “punishment” in the context of Ms. Cosgrove and
her actions. However, Defendant is cautioned not to push the limits with this phrasing.
G.

Trustee’s fee agreement
Plaintiff moves to exclude as irrelevant any reference to the Trustee’s fee

agreement with his counsel. (ECF No. 202 at 8-9.) Defendant contends that the
various fee agreements are relevant because Mr. Kaudy will be paid from Plaintiff’s
counsel’s share of any verdict in this case. (ECF No. 217 at 4.)
Mr. Kaudy’s testimony in his deposition shows that he believes there is a
possibility that he may recover some money for costs and/or fees if the Plaintiff prevails
7

in this case. (ECF No. 90 at 4-5.) The Court agrees with Defendant that, to whatever
extent Mr. Kaudy may have (or may believe he has) some financial stake in the
outcome of this trial, it is relevant to his bias. However, the Court does not see how any
other aspect of a the trustee’s fee agreement is relevant. Therefore, Plaintiff’s Motion is
denied to the extent it seeks to preclude any mention of Mr. Kaudy’s financial interest in
this trial but granted in all other respects.
II. DEFENDANT’S MOTION IN LIMINE
Defendant moves to exclude the following four categories of evidence:
A.

Evidence of Mr. Kaudy’s state of mind
Defendant moves to exclude two exhibits which it believes Mr. Kaudy will utilize

to testify about why he took certain actions. (ECF No. 203 at 1-2.) Defendant contends
that this is impermissible state of mind evidence. (Id.)
Defendant has made clear that it intends to make Mr. Kaudy’s motivations a
central issue in this case and will present evidence, including expert testimony, about
why Mr. Kaudy may have made certain tactical decisions. (See ECF No. 192 at 7-12.)
This being the case, it makes no sense that Mr. Kaudy would not be able to offer his
own testimony about his motivations, and also refer to evidence that forms the basis for
his relevant beliefs.
To the extent that there may be evidentiary objections to the evidence proffered
(e.g., hearsay, authenticity), the Court will rule on those issues during trial. Additionally,
to the extent Defendant is seeking to preclude Mr. Kaudy’s “unhinged, anti-Allstate
rants shared at his deposition”, the Court is confident that Mr. Kaudy will comport

8

himself professionally during his trial testimony. Should his testimony start to cross the
line into inflammatory and unfairly disparaging commentary, Defendant may make the
appropriate objection and the Court will handle that during trial.
Accordingly, Defendant’s Motion is denied to the extent it seeks to exclude
evidence about Mr. Kaudy’s state of mind. The Court will rule on the admissibility of
any exhibit utilized by Mr. Kaudy during his testimony at the relevant point during trial.
B.

Loss Reserve Information
Defendant moves to exclude any reference to loss reserve information. (ECF

No. 203 at 4-5.) However, in its Order on the parties’ expert motions, the Court held
that loss reserve evidence was relevant to show Allstate’s knowledge about potential
liability on the claim. (ECF No. 203 at 13.) As is apparent from the expert motions, the
parties will offer competing expert testimony on the role of loss reserves and, to the
extent necessary, the Court can instruct the jury on the governing law.
Accordingly, Defendant’s Motion is denied to the extent it seeks to preclude all
evidence on loss reserves.
C.

Settlement Agreement between Lauk & Allstate
Ms. Lauk exempted her claims for emotional distress and non-economic

damages from her bankruptcy estate and subsequently settled those claims for
$10,000. (ECF No. 203 at 5-6.) Defendant moves to exclude any reference to this
settlement based on Rule 408 and argues that Plaintiff is attempting to use the
settlement to show that Allstate has admitted liability. (Id.) Plaintiff argues that the
settlement is admissible to show bias and is relevant to the jury’s assessment of Ms.

9

Lauk’s credibility. (ECF No. 216 at 3.)
The Federal Rules of Evidence plainly prohibit the use of any settlement
agreement to show an admission of liability. See Fed. R. Evid. 408 (a settlement is not
admissible “either to prove or disprove the validity or amount of a disputed claim or to
impeach by a prior inconsistent statement or a contradiction”). However, the Court may
admit evidence of a settlement “for another purpose, such as proving a witness’s bias
or prejudice”. Id.
The Court agrees with Plaintiff that the Lauks’ settlement with Allstate may have
some relevance to bias. However, as the settlement has been paid and there is no
evidence of continuing obligation on the part of the Lauks to Allstate, any such
relevance is minimal. Additionally, there is a significant possibility that the jury may
misuse any evidence of a settlement to conclude that Allstate has accepted fault for Ms.
Lauk’s injuries, which is the precise reason for Rule 408. The Court finds that the
potential for unfair prejudice to Allstate greatly outweighs the minimal relevance of the
settlement and, therefore, the evidence should be excluded under Rule 403. See
Bradbury v. Phillips Petroleum Co., 815 F.2d 1356, 1364 (10th Cir. 1987) (when the
admissibility of a settlement is “doubtful”, “the better practice is to exclude evidence of
compromises or compromise offers.”).
Accordingly, Defendant’s Motion is granted to the extent it seeks to preclude any
evidence of the settlement between the Lauks and Allstate.
D.

Comfort Letter Testimony
At his deposition, Mr. Kaudy testified that Allstate could have or should have

10

offered a “comfort letter” to Ms. Lauk. A “comfort letter” is given to an insured by his or
her insurer in advance of trial. In a “comfort letter”, the insurer typically waives the
policy limit and agrees to pay the full amount of any excess judgment. Plaintiff’s expert
also apparently testified about “comfort letters” and their use in the insurance industry.
Defendant moves to exclude any testimony of this sort because there is no
requirement that an insurance company offer a “comfort letter” to its insured. (ECF No.
203 at 6-7.) Plaintiff contends that it intends to offer testimony about the use of comfort
letters in general, not as a matter of Colorado law, but as an industry practice. (ECF
No. 216 at 3-4.) Plaintiff argues that evidence that reasonable insurers offer comfort
letters to insureds when they choose to dispute a clear liability claim shows that Allstate
did not act reasonably in this case. (Id.)
Plaintiff has cited no authority requiring the offer of a “comfort letter” under
Colorado law. The Court will not permit Plaintiff to enumerate a list of things Allstate
hypothetically “could have” or “should have” done. The Court finds that allowing
evidence of the possibility of a “comfort letter” would unfairly prejudice Allstate, could
confuse the jury as to the relevant issues in this case, and would be a waste of time.
Accordingly, pursuant to Rule 403, the Court finds that evidence that Allstate could
have offered Ms. Lauk a “comfort letter” is inadmissible and Defendant’s Motion is
granted in this respect.
III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

Plaintiff’s Motion in Limine (ECF No. 202) is GRANTED IN PART and DENIED
IN PART as set forth above; and
11

2.

Defendant’s Motion in Limine (ECF No. 203) is GRANTED IN PART and
DENIED IN PART as set forth above.
Dated this 20th day of August, 2013.
BY THE COURT:

William J. Martínez
United States District Judge

12