People v. Carlson

• Citation: 712 P.2d 1018
• Decision Date: 27 January 1986
• Docket Number: No. 83SC392,83SC392
• Parties: The PEOPLE of the State of Colorado, Petitioner, v. Beverly CARLSON, Respondent.
• Court: Supreme Court of Colorado

Page 1018

712 P.2d 1018

The PEOPLE of the State of Colorado, Petitioner, v. Beverly CARLSON, Respondent.

No. 83SC392.

Supreme Court of Colorado,

En Banc.

Jan. 27, 1986.

Duane Woodard, Atty. Gen., Charles B. Howe, Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Robert M. Petrusak, Asst. Atty. Gen., Denver, for petitioner.

David F. Vela, State Public Defender, Thomas R. Williamson, Karen A. Chaney, Jody Sorenson Theis, Deputy State Public Defenders, Denver, for respondent.

QUINN, Chief Justice.

We granted certiorari to review the decision of the court of appeals in People v. Carlson, 677 P.2d 390 (Colo.App.1983), which reversed the conviction of the defendant, Beverly Carlson, for first degree arson. § 18-4-102, 8 C.R.S. (1978). The court of appeals held that the trial court committed reversible error in permitting a claims manager of an insurance company to testify that the company had denied the defendant's claim for fire loss to her business because the company believed it had a provable arson defense to the claim. We conclude that this evidence should have been excluded as irrelevant and that the error in admitting this improper evidence was not harmless. We accordingly affirm the judgment of the court of appeals.

I.

A summary of the prosecution's evidence will prove helpful to an understanding of the evidentiary issue raised in this appeal. The defendant was charged with first degree arson by knowingly setting fire to the building of Ione Jacobs at 1018 Eighteenth Street in Greeley, Colorado on February 13, 1980. The defendant leased store space in this building and operated a business consisting of the sale of genealogical books and supplies, other rare and used books, and Scottish imports. The defendant's inventory and other property utilized in the operation of her business were completely destroyed in the fire.

On February 13, 1980, at approximately 4:20 p.m. the defendant visited the Dial Finance Company, which was located next to her store, in order to obtain information about collecting on some of her accounts. Margo Scott, an employee in the Dial office, told her to go back to her store and bring back her records pertaining to the delinquent accounts. The defendant, according to Scott, hesitated about returning to her store, but eventually left to retrieve the documents. A few minutes later the defendant returned to the Dial office and stated that there was a fire in her store. She asked the manager of the Dial office to do something about the fire. The manager determined that the fire was too big for him to handle so he told Margo Scott to telephone the fire department. The Greeley fire department arrived at the defendant's store at approximately 4:40 p.m. and proceeded to extinguish the fire.

The cause of the fire was investigated by Lieutenant Don Alexander of the Greeley Fire Department. Alexander testified that he observed charred patterns on the tile beneath the store's carpeting and explained that these patterns were similar to those associated with fires ignited by a flammable liquid. Detective Roger Muller of the Greeley Police Department testified that he interviewed the defendant on February 18, 1980, at the Greeley police station. The defendant, who was accompanied by her husband and who was not under arrest at the time, gave the detective the following account of the fire: after securing the back door of her store with a two-by-four, she left the store through the front door, locked it, and went to the Dial office where she remained for approximately twenty minutes; she then returned to her store to get some papers and smelled smoke upon entering the store; she walked back to the rear of the store where she discovered smoke coming from inside a closet and immediately returned to the Dial office where she alerted the people there about the fire. ¹

James Jordon, an arson investigator with the Colorado Bureau of Investigation, testified that, based on the evidence admitted at trial that pertained to the fire, it was his opinion that the fire did not originate inside the closet but was deliberately set in the hallway in front of the closet and that the fire was of an incendiary nature. The prosecution also called several witnesses who testified to various debts and other financial difficulties of the defendant prior to the fire. ²

The prosecution's evidence directly bearing on the issue raised here centered on the defendant's insurance coverage in effect at the time of the fire. This evidence established that Commercial Union Insurance Company (Commercial Union) had issued a policy to the defendant insuring her for $40,000 against all direct physical loss to "business personal property," which was defined as including all inventory and other property owned by the defendant and usual to her business while the property was in or on the insured premises. The policy contained a loss payable clause for the benefit of the Small Business Administration, which held a $25,000 security interest in the defendant's equipment, furniture, inventory, and accounts receivable, and also contained the following exclusion:

[Commercial Union] will not pay you for loss caused by any fraudulent, dishonest, or criminal act committed by, or at the instigation of:

(a) You,

(b) Any partner or joint venturer of yours;

(c) Any of your employees,

(d) If you are a corporation, any director, trustee, officer, or their authorized representatives, or

(e) Any other person to whom the property is entrusted. Whether acting alone or in collusion with others.

(emphasis in original).

A claim adjuster for Commercial Union testified that the defendant submitted an insurance claim for $51,953.85, based on the value of her inventory and other equipment destroyed in the fire. The prosecution then called the claims manager for Commercial Union and elicited the following testimony:

Q With respect to Mrs. Carlson's claim, did you make a decision as to whether or not her claim could be reimbursed and paid under her policy?

A Yes, I did.

Q And what was that decision?

A We denied it[.]

Q Why did you deny it?

At this point defense counsel objected, claiming that the reason for the company's denial of the defendant's claim was irrelevant. The trial court overruled the objection and permitted the question for the limited purpose of showing the reason for the insurance company's denial of the claim but not to establish that arson had occurred. The questioning of the claims manager then continued as follows:

Q Mr. Gardner, why did you reject the claim?

A Based on our evaluation of the evidence we had, and on the advice of our attorney we felt a proveable [sic] arson defense.

Immediately after admitting the claims manager's testimony, the trial court orally instructed the jury that this evidence was admitted for the limited purpose of establishing the reasons for "denying coverage on the insurance policy" and that it should not be considered by the jury "as proof of the fact that arson occurred, but only to show the corporate state of mind, if you will, in their refusing to guarantee coverage on the policy."

The jury returned a guilty verdict to the charge, and the court sentenced the defendant to eight years of probation and ordered restitution in the amount of $14,129.22. The court of appeals reversed the conviction and ordered a new trial, holding that the admission of the claims manager's testimony about the reason for the insurance company's denial of the defendant's claim was irrelevant and highly prejudicial to the defendant. We granted the People's petition to review the decision of the court of appeals.

II.

The question before us is whether, as the court of appeals held, the trial court erred in admitting into evidence the claims manager's testimony that the insurance company denied the defendant's claim because the company believed it had a provable arson defense to the claim. ³ Article IV of the Colorado Rules of Evidence, which is entitled Relevancy and Its Limits, provides the framework for our resolution of this issue.

A.

Relevant evidence is defined in CRE 401 as "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." CRE 402 expressly provides that "[e]vidence which is not relevant is not admissible." If, on the other hand, evidence is relevant, it may nonetheless be excluded under CRE 403 "if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless preparation of cumulative evidence."

In resolving an issue of relevancy, a court must first ask whether the proffered evidence relates to a fact "that is of consequence to the determination of the action," CRE 401--in other words, whether the proferred evidence is legally material to some factual issue in the case. If this question is answered in the negative, the evidence is simply inadmissible as having no bearing whatever on any issue in the case. If this initial question is answered in the affirmative, the next question centers on the matter of logical relevancy. The appropriate inquiry here is whether, as provided in CRE 401, the evidence makes the existence of a consequential fact "more probable or less probable than it would be without the evidence." If the proffered evidence is not logically relevant, the inquiry is at an end and the evidence should not be admitted. If, on the other hand, the evidence is logically relevant to a consequential fact, a third question must then be addressed--that is, whether under CRE 403 the probative value of the evidence is substantially outweighed by the danger of unfair prejudice. People v. Lowe, 660 P.2d 1261, 1265 (Colo.1983); 1 J....