Hochhauser v. Electric Ins.

• Decision Date: 23 October 2007
• Docket Number: 2006-03097.,2006-03096
• Citation: 844 N.Y.S.2d 374,2007 NY Slip Op 08037,46 A.D.3d 174
• Parties: RACHEL HOCHHAUSER, Appellant, v. ELECTRIC INSURANCE COMPANY, Respondent.
• Court: New York Supreme Court — Appellate Division

46 A.D.3d 174

844 N.Y.S.2d 374

2007 NY Slip Op 08037

RACHEL HOCHHAUSER, Appellant, v. ELECTRIC INSURANCE COMPANY, Respondent.

2006-03096

2006-03097.

Appellate Division of the Supreme Court of the State of New York, Second Department.

October 23, 2007.

Lester B. Herzog, Brooklyn, for appellant.

Herzfeld & Rubin, P.C., New York City (David Hamm and Herbert Lazar of counsel), for respondent.

OPINION OF THE COURT

McCARTHY, J.

These appeals present a novel issue as to whether an insured's statement in an insurance investigation report, as well as testimony regarding the statement, are admissible at a hearing under the business records exception to the hearsay rule. We hold that, since an insured lacks a business duty, as opposed to a contractual duty, to report to his or her insurer in the course of its investigation regarding insurance coverage, neither the insured's statement nor testimony regarding such a statement is admissible pursuant to the business records exception to the hearsay rule.

This action arises from a motor vehicle-pedestrian accident that occurred on February 14, 2003, at approximately 1:00 P.M., while the plaintiff, Rachel Hochhauser, was vacationing in Florida. A motor vehicle driven and owned by an uninsured motorist struck the plaintiff while she was crossing a street in a crosswalk. As a result of the accident, the plaintiff sustained, inter alia, fractures of her left leg.

On May 14, 2003, the plaintiff's son, Bernard Hochhauser (hereinafter the insured), submitted a claim to the defendant, Electric Insurance Company (hereinafter the insurer), for uninsured motorist benefits for the plaintiff under his automobile insurance policy with the insurer. The insured claimed that the plaintiff was a resident of his household, thus entitling her to such benefits. The relevant portion of the insured's supplementary uninsured/underinsured motorist endorsement defines "insured" as: "You, as the named insured and, while resident of the same household, your spouse and the relatives of either you or your spouse."

On August 26, 2003, after completing an investigation, which included an interview with the insured, the insurer disclaimed coverage. The disclaimer noted that, in August of 2003, the insured advised the insurer's investigator that the plaintiff resided at an address different than the insured and had for over 30 years. Further, the disclaimer indicated that the insured reported that the plaintiff visits his home, "occasionally spending weekends." The disclaimer notice concluded: "As such Rachel Hochhauser is not a resident relative and is not entitled to Personal Injury Protection Coverage under this policy. Therefore, any and all claims are hereby denied."

The plaintiff then commenced this action against the insurer, inter alia, to recover uninsured motorist benefits. Shortly after joinder of issue, the plaintiff moved, in part, for summary judgment seeking, in essence, a declaration that she was entitled to uninsured motorist benefits under the insured's policy. The insurer opposed the plaintiff's motion and cross-moved for summary judgment. In an order dated January 12, 2005, the Supreme Court held the motion and cross motion in abeyance and referred the matter to a Judicial Hearing Officer to hold a hearing on the issue of whether the plaintiff was a resident of the insured's household.

At a hearing held on May 9, 2005, the plaintiff testified that she owns two homes and resides in both of them. The plaintiff further testified that her son, the insured, and his family live in one of the two homes and, prior to the accident, she resided with her son and his family an average of three weekends per month, plus holidays.

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."

On May 9, 2005, the Judicial Hearing Officer issued a report concluding that, for insurance purposes, the plaintiff was not a resident of the insured's household. On January 14, 2006, the Supreme Court granted the insurer's motion to confirm the Judicial Hearing Officer's report, denied the plaintiff's motion for summary judgment, and granted the insurer's cross motion for summary judgment. The plaintiff appeals, and we reverse the order dated January 14, 2006.

We reject the insurer's contention that the plaintiff failed to object to Quinn's testimony on hearsay grounds. CPLR 4017 provides:

"Formal exceptions to rulings of the court are unnecessary. At the time a ruling or order of the court is requested or made a party shall make known the action which he requests the court to take or, if he has not already indicated it, his objection to the action of the court. Failure to so make known objections, as prescribed in this section ... may restrict review upon appeal" (see Horton v Smith, 51 NY2d 798, 799 [1980]).

Further, "[a]n objection must be clear enough to apprise the court of the nature of the objection" (Gallegos v Elite Model Mgt. Corp., 28 AD3d 50, 59 [2005]). Here, the plaintiff lodged a general objection based on hearsay prior to Quinn's testimony but did not object to Quinn's specific testimony that constituted the hearsay. Since the general objection to both the testimony and the business record apprised the Judicial Hearing Officer that the plaintiff objected on the grounds of hearsay, the plaintiff preserved the issue for appellate review (see CPLR 4017; Gallegos v Elite Model Mgt. Corp., 28 AD3d 50 [2005]).

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.

As often defined, "[h]earsay is `a statement made out of court ... offered for the truth of the fact asserted in the statement'" (People v Goldstein, 6 NY3d 119, 127 [2005], cert denied 547 US 1159 [2006], quoting People v Romero, 78 NY2d 355, 361 [1991]; see Gelpi v 37th Ave. Realty Corp., 281 AD2d 392, 392 [2001]). Such a statement "`may be received in evidence only if [it] fall[s] within one of the recognized exceptions to the hearsay rule, and then only if the proponent demonstrates that the evidence is reliable'" (Nucci v Proper, 95 NY2d 597, 602 [2001], quoting People v Brensic, 70 NY2d 9, 14 [1987]). Further, in assessing reliability, "a court must decide `whether the declaration was spoken under circumstances which render ... it highly probable that it is truthful'" (Nucci v Proper, 95 NY2d at 602, quoting People v Brensic, 70 NY2d at 14-15).

The business records exception to the hearsay rule provides:

"Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter" (CPLR 4518 [a]).

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; 6 Frumer and Biskind, 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 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 [1986]).

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 [1979]). As one treatise explains:

"In the leading case of Johnson v. Lutz the Court of Appeals read into 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" (6 Frumer and Biskind, Bender's New York Evidence—CPLR § 19.04 [4], at 19-104 [additi...