State Farm v. Carter
| Decision Date | 29 December 2003 |
| Docket Number | No. 2384,2384 |
| Citation | 154 Md. App. 400,840 A.2d 161 |
| Parties | STATE FARM FIRE & CASUALTY CO. v. Damon Alfonzo CARTER. |
| Court | Court of Special Appeals of Maryland |
Paul M. Finamore (Brett A. Buckwalter, Niles, Barton & Wilmer, LLP on the brief), Baltimore, for Appellant.
Samuel M. Grant (William N. Butler, Howard, Butler & Melfa, PA on the brief), Towson, for Appellee.
Panel: HOLLANDER, SALMON, and BARBERA, JJ.
This case is rooted in a contractual dispute between Damon A. Carter, appellee and cross-appellant, and his automobile insurer, State Farm Fire & Casualty Company ("State Farm"), appellant and cross-appellee. Although State Farm insured Carter's motor vehicle for theft, it refused to pay Carter's claim of loss arising from the alleged theft of his automobile, because it considered the claim bogus. That decision prompted Carter to file suit against State Farm for breach of contract. A jury in the Circuit Court for Baltimore County found in favor of Carter, awarding him damages of $22,749.18.
At issue here is the ruling of the trial court allowing Carter to testify that criminal charges were brought against him with regard to his alleged loss, but that the charges were dismissed or "nolle prossed." On appeal, State Farm asks:
Whether the trial court committed reversible error in permitting the Appellee to introduce evidence regarding his nolle pros. on criminal charges stemming from the same occurrence underlying the present civil suit and/or abused its discretion by denying Appellant's request for mistrial and subsequent Motion for New Trial.
In his cross-appeal, Carter poses one issue:
Whether the trial court erred in declining to award costs, expenses, and attorney fees, and in holding that State Farm's defense was made with substantial justification, as State Farm never established a reason, in good faith, for denying cross-appellant's claim.
For the reasons stated below, we shall reverse and remand.
Appellee claimed that he purchased a 1993 BMW 325i on August 27, 1998, for the sum of $14,000. He obtained a policy of insurance for the vehicle from State Farm. On November 17, 1998, Carter notified State Farm that the vehicle had been stolen. He also reported the theft to the police. According to Carter, the vehicle was stolen from the rear of his place of employment and was never recovered.
Several concerns surfaced during State Farm's investigation of appellee's claim. As a result, State Farm referred the claim to its Special Investigative Unit. By letter of July 7, 1999, from Paul Holland to appellee, State Farm denied Carter's claim. Holland advised Carter that the investigation "revealed that no accidental loss has occurred as defined under ... this policy"; there were "material misrepresentations and concealments made by [appellee] following the loss," and appellee had refused "to cooperate with appellant," as required by the policy.
In the meantime, in March 1999, Carter was arrested and charged, inter alia, with insurance fraud in connection with the alleged theft of his vehicle. On December 6, 1999, the date set for Carter's criminal trial, the prosecutor entered a nolle prosequi ("nol pros") as to the criminal charges.
Thereafter, in September 2000, Carter sued State Farm for breach of contract.2 State Farm asserted affirmative defenses in support of its denial of Carter's claim, consistent with the contentions advanced by Holland in his letter of July 7, 1999.
At the outset of the jury trial in October 2002, State Farm moved in limine to bar evidence of the criminal prosecution of appellee and the subsequent nol pros. State Farm argued that appellee should not be permitted to suggest to the jury that, because the State declined to prosecute him, this established that he did not engage in any wrongdoing with regard to his insurance claim. In effect, the court denied the motion, stating that it would "wait and see."
Carter was called as the first witness at trial. An employee since 1984 of Michael Jacobs Audio Visual Electronics in Baltimore City, Carter testified that he purchased the BMW from Jacobs for the sum of $14,000. Carter recalled that he borrowed the money from his mother and sister, and paid cash for the vehicle.
According to Carter, on the night of November 16, 1998, he left the BMW in the alley behind his place of employment, because he planned to install upgraded sound speakers the following day. The next morning, Carter discovered that the car was gone. He reported the theft to the police. In addition, he notified State Farm that the vehicle had been stolen.
During Carter's direct examination, Carter's attorney questioned him about an interview conducted by James Reichlin, a claims specialist in State Farm's Special Investigative Unit. The following testimony is in issue:
(Emphasis added).
Michael Jacobs, appellee's employer, was called as a witness by State Farm. Jacobs testified that he purchased the vehicle in New York for $7,000. At the time, the vehicle was inoperative, had minor body damage, and there was mud in the interior. Moreover, Jacobs did not know the mileage at the time of purchase, because the car had no battery and the mileage display required electricity. Jacobs shipped the vehicle to Maryland for repair; the engine and transmission were replaced and the car was cleaned for the total sum of $7,000.
Jacobs testified that he sold the BMW to Carter for $14,000 in "cash." He also claimed that the mechanic had the vehicle inspected and showed him (Jacobs) the certificate. Jacobs stated that he had no reason to believe that the inspection was inadequate or fraudulent.
Reichlin, State Farm's claims specialist, testified that State Farm had previously insured the same vehicle in 1997, when it was involved in a mud slide in California. At that time, the vehicle was declared a total loss and was sold for salvage value. Reichlin claimed that State Farm became suspicious about appellee's claim for several reasons.
Reichlin noted that Carter made several inconsistent statements in regard to the vehicle. For example, Reichlin said that concerns arose when Carter tried to claim the loss of after-market stereo equipment that was allegedly in the BMW, because in the earliest days after the loss, Carter had not mentioned this equipment. State Farm also regarded as questionable the receipts Carter provided to State Farm for the equipment, because State Farm was unable to verify the existence of the company, "Wheel-A-Deal," from which Carter allegedly purchased the equipment. When State Farm went to the address on the receipts, it found a church at the location. Moreover, despite claiming that the faceplate to his after-market car stereo was not stolen, Carter refused to produce it for State Farm's inspection.
In addition, State Farm claimed that appellee failed to cooperate with State Farm, as required by the insurance policy. Among other things, Carter refused to produce the key to the vehicle, as well as financial information concerning his ability to purchase it. State Farm's investigation also generated concerns about whether the purported seller had legal title to the car on the date Carter claimed to have purchased it; the amount of the purchase price; the vehicle's mileage; and the validity of the inspection.
After the jury found in favor of Carter, he requested counsel fees pursuant to Rule 1-341. The court determined that "the defense set forth by [appellant] was made with substantial justification and therefore, not made in bad faith." Accordingly, the court denied appellee's request.
We shall include additional facts in our discussion.
Appellant contends that the court committed reversible error by allowing Carter to testify about the nol pros of the criminal charges "stemming from the same occurrence underlying the present civil action." According to State Farm, "[t]here is a strong likelihood that the evidence of the nolle pros. misled...
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