Rabon v. Great Southwest Fire Ins. Co.

• Decision Date: 08 May 1987
• Docket Number: 86-1554,Nos. 86-1552,s. 86-1552
• Citation: 818 F.2d 306
• Parties: 22 Fed. R. Evid. Serv. 1641 Grover E. RABON, Jr., Appellee, v. GREAT SOUTHWEST FIRE INSURANCE COMPANY, Appellant. Grover E. RABON, Jr., Appellant, v. GREAT SOUTHWEST FIRE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 306

818 F.2d 306

22 Fed. R. Evid. Serv. 1641

Grover E. RABON, Jr., Appellee, v. GREAT SOUTHWEST FIRE INSURANCE COMPANY, Appellant.

Grover E. RABON, Jr., Appellant, v. GREAT SOUTHWEST FIRE INSURANCE COMPANY, Appellee.

Nos. 86-1552, 86-1554.

United States Court of Appeals, Fourth Circuit.

Argued Feb. 2, 1987.

Decided May 8, 1987.

Thomas C. Salane (Turner, Padget, Graham & Laney, P.A., Columbia, S.C., on brief), for appellant.

Kenneth R. Young, Jr., M.M. Weinberg, Jr. (Weinberg, Brown & McDougall, Sumter, S.C., on brief), for appellee.

Before HALL, PHILLIPS, and WILKINSON, Circuit Judges.

JAMES DICKSON PHILLIPS, Circuit Judge:

On April 5, 1984 Grover E. Rabon, Jr. filed this diversity action in United States District Court for the District of South Carolina. Rabon sought to recover money allegedly due under a fire insurance policy issued by Great Southwestern Fire Insurance Company (Great Southwestern). Rabon claimed that on June 24, 1983 a fire destroyed an insured structure, known as "Rabon's Superette," and that Great Southwestern unreasonably denied his claim against the policy. Great Southwestern asserted the affirmative defense of arson.

Great Southwestern here appeals the district court's refusal to grant its motion for judgment notwithstanding the verdict or, in the alternative, its motion for a new trial. Rabon cross-appeals the district court's failure to add prejudgment interest to the judgment. While the district court properly denied Great Southwestern's motion for judgment notwithstanding the verdict, we conclude that Great Southwestern must receive a new trial. Because there will be a new trial, we need not consider Rabon's cross-appeal for prejudgment interest.

I

When it asserted the affirmative defense of arson, Great Southwestern assumed the burden of proving, by a preponderance of the evidence, that the fire which consumed "Rabon's Superette" was incendiary in origin and that Rabon, the insured, caused the fire. Rutledge v. St. Paul Fire and Marine Insurance Co., 286 S.C. 360, 334 S.E.2d 131, 138 (1985). Insurers can rarely prove these two elements of the arson defense directly, but courts have freely permitted insurers to present the issue to the trier of fact through circumstantial evidence. Great Southwestern complains, however, that the circumstantial evidence supporting its defense was so strong here that the district court should have not only allowed the issue to go to the jury but then entered judgment in its favor notwithstanding the verdict. The relevant inquiry is whether, viewing the evidence most favorably to Rabon, any rational jury must have concluded that Rabon himself burned his store. Walker v. Pettit Construction Co., 605 F.2d 128, 130 (4th Cir.1979).

Great Southwestern offered compelling evidence that the fire was incendiary in origin. The official fire investigators, as well as private investigators, hired by Great Southwestern, ruled out accidental origins and discovered that several separate fires burned in the store. In addition, Rabon was unable to account for the aliphatic petroleum distillates detected by investigators at the fire scene. Great Southwestern also offered evidence suggesting that Rabon himself had the opportunity and motive to set the fire. The fire began early on a Saturday morning in the locked store and only Rabon and his son (whose whereabouts were established at the time of the fire) had keys to the premises. Rabon admitted spending the night before the fire drinking, and he admitted visiting the store on several occasions between Friday evening and early Saturday morning. One witness placed Rabon near the store shortly before the fire was discovered. Rabon admitted substantial gambling debts and Great Southwestern offered evidence that the equipment and contents of the store were insured for more than their actual value.

Despite this varied circumstantial evidence, Rabon was able to contest Great Southwestern's theory of the fire's origins. His principle argument was that the professional gamblers to whom he owed money, and who had threatened him, might have set the fire. Rabon emphatically denied responsibility, and suggested that the fire was started by the unidentified owner of a light blue car with Georgia tags which witnesses placed at the scene shortly before the fire. Rabon also denied any financial motive to collect on the fire insurance policy, though the dearth of financial records for the store, and Rabon's failure to file any state or federal income tax returns after 1980, made this claim difficult either to prove or disprove.

Arson, whether charged as a crime or asserted as an affirmative defense in a civil trial for insurance proceeds, is notoriously difficult to prove. Great Southwestern asks us to enter a judgment in its favor because its circumstantial evidence is unusually strong here. However, Great Southwestern has cited no case where a court has directed a verdict in an insurance company's favor for that reason alone. The reason is apparent: where the burden of proof rests on the insurance company and its evidence merely circumstantial, the trier of fact must decide whether the burden is met in the face of the insured's denial and other possible explanations for the fire. We will not reweigh the evidence on appeal, and we cannot say that a reasonable jury, weighing the credibility of the witnesses, might not have concluded that Great Southwestern failed to meet its burden of proof.

II

While we will not reverse the refusal to enter judgment in Great Southwestern's favor notwithstanding the jury's verdict, we will reverse the denial of Great Southwestern's motion for a new trial. The combined effect of highly improper jury argument by Rabon and a pivotal and misleading jury instruction on the "presumption of innocence" was sufficiently prejudicial that Great Southwestern was entitled to that relief.

In his closing argument, Rabon asserted that Great Southwestern's refusal to pay on the policy was part of a vendetta against Rabon, and that the state's prior dismissal of criminal arson charges proved that Great Southwestern's position was unreasonable. First Rabon argued: "They had seized his property. They had seized his property in order to try to put Grover Rabon in jail. And after law enforcement investigated this matter, they dismissed the charges, and nobody has gone forward with it but INS [an independent investigation agency hired by Great Southwestern], who is conspicuous today by its absence." Later he suggested:

What they are asking you to do is find Grover Rabon guilty of arson, ladies and gentlemen. There isn't any question about that. They are not playing around here, this is serious business. They are asking you to do what they couldn't get done in criminal courts over in Sumter County. Because ladies and gentlemen, these INS people, they didn't come down there to investigate a case, they came down to make one. And the victim of that was Grover Rabon.

Finally, after suggesting that fire investigators tried to manufacture arson charges against him, Rabon concluded:

That does not give Southwestern the right to arbitrarily come in here--first of all to try to get him convicted, and then after it has thoroughly investigated, see their case fall apart and thrown out of court, and then to come in here now and ask another jury of twelve to find him guilty of arson, because they still don't want to pay him. ¹ We adopt and apply here the rule that a federal trial court commits reversible error when it permits the plaintiff in a suit for fire insurance proceeds to present evidence of his nonprosecution or acquittal on related criminal arson charges. See, for example, Kelley's Auto Parts, No. 1, Inc. v. Boughton, 809 F.2d 1247, 1253 (6th Cir.1987); Goffstein v. State Farm Fire & Casualty Co., 764 F.2d 522, 524 (8th Cir.1985); Galbraith v. Hartford Fire Insurance Co., 464 F.2d 225, 227-28 (3d Cir.1972). The reasons for this rule are easy to appreciate. First, such evidence goes directly to the principal issue before the jury and is highly prejudicial. Second, a prosecutor's decision not to prosecute and a jury's decision to acquit in a criminal trial are based on different criteria than apply in a civil proceeding. In particular, a prosecutor's decision to nolle prosse may take into account many factors irrelevant in a civil suit, such as the higher standard of proof required for criminal conviction. In any event, a prosecutor's opinion whether the insured started the fire is inadmissible since based on knowledge outside his personal experience. Fed.R.Evid. 602, 701. See generally, American Home Assurance Co. v. Sunshine Supermarket, Inc., 753 F.2d 321, 325 (3d Cir.1985).

Rabon acknowledges these hornbook principles, and does not directly deny that the substance of his closing argument was irrelevant and prejudicial. He argues, instead, that Great Southwestern "opened the door" for his statements. To our eyes, however, it was Rabon who injected the evidence of nonprosecution into the trial. The initial reference to the prior criminal charges came from Rabon's own witness, his accountant, on direct examination, and Great Southwestern promptly objected. While in cross-examining the witness Great Southwestern briefly referred to the grand jury which the accountant had "inadvertently" identified as subpoenaing Rabon's tax records, this cross-examination was not enough to inject this extraneous issue into the trial. It was again Rabon himself who squarely focussed the jury's attention on the prior charges when he asked the accountant on redirect: "You have answered questions from [Great Southwestern] pertaining to a federal grand jury. I ask you, as of today, or as of the year 1985, to your knowledge, are there any charges pending against Grover Rabon for arson anywhere that you know of?"

Great Southwestern's subsequent use of evidence developed during the fire investigation was clearly relevant, and...