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Univ. of South Carolina School of Law

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Wednesday, January 11, 2012

"State Farm Is There" Take On New Meaning In Character Evidence Case Involving Undercover Surveillance

State Farm's slogan is, "Like a good neighboor, State Farm is there." What I didn't realize until reading the recent opinion of the Sixth Circuit in State Farm Mut. Auto Ins. Co. v. Accident Victims Home Health Care Services, Inc., 2012 WL 48338 (6th Cir. 2012), is that if you're injured in a car accident and State Farm provodes you with home attendant care supervision services, State Farm will really be there. Carrie Mathison in "Homeland" there.  

In State Farm, Wendell Jackson and Luella Neal were insured by State Farm and injured in an automobile accident. Pursuant to Michigan's no-fault law, State Farm paid Accident Victims Home Health Care Services, Inc. personal injury protection insurance benefits for all necessary and reasonable services for Jackson and Neal.

AVHHC employees used a "Daily Observation Report" to record their time and activities while providing attendant care supervision to clients. As AVHHC's president, [George] Paige reviewed the accuracy of these reports and corrected any errors before forwarding the reports to the insurance company with a request for payment.

State Farm conducted twenty-four days of undercover surveillance, which yielded minutes of video showing Jackson unsupervised on two occasions and Neal unsupervised playing a casino slot machine.

State Farm thereafter filed an action against AVHHC and Paige to recover all of the benefits it had paid for Jackson and Neal in the amount of $916,754.00. State Farm alleged that the services AVHHC provided to these two clients were unnecessary or unreasonable or, alternatively, AVHHC submitted fraudulent claims. The district court entered summary judgment in favor of Paige and dismissed him from the suit, and the action against AVHHC proceeded to trial.

Before trial, AVHHC filed a motion in limine.

AVHHC's motion in limine sought to exclude evidence concerning a Michigan state court proceeding, Owens v. State Farm. That case involved Kathy Owens, an AVHHC client who sued State Farm to recover first-party no-fault benefits. State Farm settled with Owens. AVHHC intervened in the suit as a plaintiff to pursue a reimbursement claim against State Farm for services it provided to Owens. During trial, the state court judge found that Paige had tampered with documentary evidence shortly before trial by fraudulently altering certain AVHHC daily observation reports. As a sanction for Paige's conduct, the court dismissed AVHHC's case against State Farm.

The district court denied AVHHC's motion, and judgement as eventually entered in favor of State Farm. AVHHC thereafter appealed, claiming that evidence realting to the prior proceeding was inadmissible propensity character evidence under Federal Rule of Evidence 404(a)(1), which provides that

Evidence of a person’s character or character trait is not admissible to prove that on a particular occasion the person acted in accordance with the character or trait.

The Sixth Circuit agreed, finding that it was evident from the district court's denial or AVHHC's motion that the subject evidence was propensity character evidence. That ruling stated:

The prior litigation unfortunately will have to be admitted. I don't think it's more prejudicial than probative. It is relevant not only to the character of the defendant but to the fact of a fraud having been committed once before, the same type of fraud, and it's not 404(b) evidence.

-CM

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