Case Title: Brown . Liberty Mutual Insurance Company

Citation: 

Docket Number: 115, 2000

State: delaware

Court: Delaware Supreme Court

Date: 2001-06-13T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE
MICHELLE BROWN,
Plaintiff Below,
Appellant,
v.
LIBERTY MUTUAL
INSURANCE COMPANY,
Defendant Below,
Appellee.
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No. 115, 2000
Court Below:  Superior Court
of the State of Delaware in and
for Kent County
C.A. No. 97C-05-023
Submitted:  April 3, 2001
Decided:  
June 13, 2001
Before VEASEY, Chief Justice, WALSH, HOLLAND, BERGER and
STEELE, Justices, constituting the Court en Banc.
Upon appeal from the Superior Court.  AFFIRMED.
Douglas B. Catts, Esquire (argued), and Donna L. Harris, Esquire, of
Schmittinger & Rodriguez, P.A., Dover, Delaware, Attorneys for Appellant.
Nancy Chrissinger Cobb, Esquire (argued), and Christopher T. Logullo,
Esquire, of Chrissinger & Baumberger, Wilmington, Delaware, Attorneys for
Appellee.
VEASEY, Chief Justice:
The pivotal issue in this case is the admissibility of hearsay evidence.
Here, the trial judge excluded evidence of a physician’s office notation offered by
a patient-claimant for the purpose of showing that the claimant’s insurer refused
in bad faith to pre-authorize a necessary medical procedure.  Having excluded
this crucial evidence for the claimant’s intended purpose while admitting it for
other limited purposes that were not applicable to support a finding of bad faith
refusal to authorize required medical treatment, the Superior Court entered
judgment as a matter of law in favor of the insurer.  The claimant appeals.
Although our analysis of the application of the rules of evidence differs
from that of the trial judge, we affirm the judgment of the Superior Court.  The
trial judge did not abuse his discretion in excluding the evidence for the purpose
offered.  Accordingly, there was insufficient evidence to go to the jury on the
bad faith claim.
Facts
During the course of her employment at the Country Pantry Restaurant,
Michelle Brown developed carpal tunnel syndrome in her right arm as the result
of an industrial accident in October 1993.  Brown underwent two surgeries to
correct the problem in November 1993 and October 1994, but her condition did
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not improve significantly.  These procedures were ultimately paid for by Country
Pantry’s workers’ compensation insurer, Liberty Mutual Insurance Company.
By May 1995, Brown’s condition had taken a turn for the worse, and
Brown’s primary physician, Dr. Richard DuShuttle, diagnosed her with causalgia
in her right hand.1  Based on this diagnosis, Dr. DuShuttle referred Brown to Dr.
Janine Islam, a pain management specialist.  On May 12, 1995, Dr. Islam, in
turn, recommended that Brown see Dr. Eugene Godfrey to receive stellate
ganglion nerve blocks to prevent further deterioration of Brown’s condition.2
Brown’s doctors were particularly concerned that her causalgia could develop
into reflex sympathetic dystrophy (“RSD”), a debilitating condition in which the
patient experiences severe pain and hypersensitivity in the affected extremity.
In his testimony outside the presence of the jury, Dr. DuShuttle stated that
the billing department in his office contacted Liberty Mutual several times
between June and October of 1995 to obtain pre-authorization for the nerve block
treatments.  Dr. DuShuttle also stated that, at some point during this period, a
billing clerk informed him that Liberty Mutual refused to pre-authorize treatment
                                   
1 Causalgia is a condition marked by a burning pain in the hand or foot generally caused by a nerve injury.
2 Nerve block treatments consist of a series of injections into the sympathetic nerve.  The injections reduce pain in
the affected area and thus permit the patient to engage in a wider range of activities.
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for Brown.3  During Brown’s October 7, 1995 office visit, Dr. DuShuttle then
made the following notation in Brown’s medical records:  “The insurance
company would not approve the stellate ganglion blocks which Dr. Islam
recommended.”  According to Brown, Dr. Godfrey would not administer the
nerve block treatment without pre-approval by an insurer.
Without the prescribed nerve blocks, Brown’s condition deteriorated
rapidly and, by October 1995, Brown had developed RSD.4  In December 1995,
Dr. David Sowa, Liberty Mutual’s medical expert, examined Brown and agreed
that she had developed RSD and that she urgently required nerve block
treatments.  According to Dr. Sowa, the RSD had produced “severe deformity,
disability and pain of [Brown’s] right upper extremity.”  In his report, Dr. Sowa
also mentioned that Brown’s insurer had not approved the nerve block treatments
that he and Brown’s other physicians had recommended based on their earlier
examinations of Brown.
Brown filed suit against Liberty Mutual in May 1997 on three grounds,
including a contract claim alleging that Liberty Mutual had breached the implied
covenant of good faith and fair dealing by refusing pre-authorization for the
                                   
3 Dr. DuShuttle could not recall when the billing clerk reported to him.  The billing clerk in Dr. DuShuttle’s office
did not testify because no one could identify the clerk who spoke to Liberty about Brown’s claim and who reported
to Dr. DuShuttle.  Therefore, there was no direct evidence and no notation by a clerk of any such conversation.
4  Specifically, between May and October 1995, the impairment in Brown’s arm increased from 12% to 70%.
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nerve block treatments.  The Superior Court granted Liberty Mutual’s motion for
summary judgment on all issues except the breach of contract claim.5  Brown
does not challenge this decision on appeal.
Before trial, Liberty Mutual also filed a motion in limine requesting that
the Superior Court exclude, among other things, the notation in Brown’s medical
records concerning Liberty Mutual’s alleged denial of approval for nerve block
treatments and Dr. DuShuttle’s related testimony concerning the alleged contact
between his office and Liberty Mutual.  Liberty Mutual argued that this evidence
is barred by the rule against hearsay.  The court held that Dr. DuShuttle’s
notation was not admissible under exceptions to the hearsay rule to prove the
truth of the assertion that Liberty Mutual knew that the treating physician
required pre-approval and that Liberty Mutual refused.  The trial judge admitted
the notation only for other limited purposes that did not tend to support the bad
faith claim.
At the close of Brown’s evidence, Liberty Mutual moved for judgment as a
matter of law on Brown’s breach of contract claim.  In a bench ruling, the trial
court granted Liberty Mutual’s motion, concluding that Brown had failed to
present sufficient evidence from which the jury could reasonably find that Liberty
                                   
5  See Brown v. Liberty Mutual Ins. Co., Del. Super., C.A. No. 97C-05-023 (Aug. 20, 1999) (Mem. Op.).
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Mutual knew that Brown’s doctors would not treat her unless Liberty Mutual pre-
approved treatment or that it would have refused to pay for treatment if requested
to do so.  Brown now appeals the judgment of the trial court based on its
evidentiary ruling.
Admissibility of Dr. DuShuttle’s Notation
The evidence offered by Brown to prove the insurer’s bad faith refusal to
authorize necessary medical treatment is the asserted truth of the note in Dr.
DuShuttle’s medical records stating:  “The insurance company would not
approve the stellate ganglion blocks which Dr. Islam recommended.”6  The trial
court permitted Brown to introduce Dr. DuShuttle’s notation under the medical
diagnosis and business record exceptions to the hearsay rule,7 but only for limited
purposes and not to prove the insurer’s knowledge that pre-approval was required
by the treating physician and that approval was refused.  Specifically, the court
                                   
6 Liberty Mutual argues that this issue is moot because Dr. DuShuttle’s testimony on cross-examination and re-direct
examination was not subject to the limitations imposed by the court and was thus admissible for all purposes.  As a
result, Liberty argues, Brown was not prejudiced by the trial court’s decision to limit the purposes for which the
evidence was admitted.  Liberty’s argument, however, runs against the general rule that “[w]hen evidence which is
admissible as to 1 party or for 1 purpose but not admissible as to another party or for another purpose is admitted,
the court, upon request, shall restrict the evidence to its proper scope and instruct the jury accordingly.”  D.R.E. 105.
Moreover, the case cited by Liberty, James v. Glazer, Del. Supr., 570 A.2d 1150, 1156 (1990), does not support the
proposition that the court’s limitations on the admission of evidence do not apply to cross-examination testimony.
To the contrary, the Court in Glazer affirmed a trial court’s decision to admit cross-examination testimony for the
limited purpose of impeaching a witness and not with respect to the ultimate issues in the case.
7 The trial court did not state clearly on which exception it relied and held that:  “[T]he business record, or medical
record referred to by the witness may be admitted but for a limited purpose . . . to explain Dr. DuShuttle’s belief and
course of medical treatment based on that belief [and] to show the medical record that Brown contends was
transmitted to Liberty Mutual.”
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instructed the jury that it could consider the notation only as evidence of Dr.
DuShuttle’s beliefs in devising a course of treatment for Brown and as evidence
of the medical record that was transmitted to Liberty Mutual.
On appeal, Brown argues that Dr. DuShuttle’s notation was admissible for
all purposes and that the court should have considered the notation as substantive
evidence of bad faith refusal in deciding Liberty Mutual’s motion for judgment as
a matter of law.  We review a trial court’s decision to admit or to exclude
evidence to determine whether the court’s ruling was an abuse of discretion.8  We
hold here that the Superior Court did not abuse its discretion in excluding the
evidence for the purpose offered, but our analysis differs from that of the trial
court on the application of the hearsay rules.
Hearsay is a statement made by a declarant outside the courtroom that is
offered to prove the truth of the contents of the statement.9  The disputed notation
in this case is an out-of-court statement attributed to the insurer by an employee
in Dr. DuShuttle’s office and recorded by Dr. DuShuttle in Brown’s medical file.
Therefore, the notation is inadmissible hearsay if it is offered to prove that
Liberty Mutual actually denied pre-approval—unless the notation falls within a
                                   
8  See Gannett Co., Inc. v. Kanaga, Del. Supr., 750 A.2d 1174, 1183 (2000); see also D.R.E. 103(a).
9  See D.R.E. 801(c).
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recognized hearsay exception.10  Similarly, Dr. DuShuttle’s testimony describing
his conversations with the clerks in his billing department during the pre-approval
process is inadmissible hearsay unless it is offered for a nonhearsay purpose or it
falls within a hearsay exception.
Brown presents five theories under which Dr. DuShuttle’s testimony and
the notation may be admissible for all purposes, either under a hearsay exception
or as evidence that falls outside the definition of hearsay.  Brown argues that the
evidence is admissible:  (1) as a record kept in the regular course of business,11
(2) as a statement “for purposes of medical diagnosis or treatment,”12 (3) as a
statement with sufficient “circumstantial guarantees of trustworthiness,”13 (4) as
the “routine practice of an organization,”14 and (5) as a nonhearsay statement
indicating that  Liberty Mutual had notice that pre-authorization was required for
treatment.  We address each argument in turn.
                                   
10  See D.R.E. 802.  As we discuss in more detail below, the statement actually constitutes hearsay within hearsay
because Dr. DuShuttle made the notation based on a statement by his billing clerk.  See D.R.E. 805.
11  See D.R.E. 803(6).
12  See  D.R.E. 803(4).
13  See D.R.E. 803(24).
14  See D.R.E. 406.
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A.
Business Records Exception
Brown’s strongest argument is that Dr. DuShuttle’s notation is admissible
under the hearsay exception for records kept in the regular course of business.
Although Dr. DuShuttle’s notation in Brown’s medical record satisfies some of
the requirements for admission under the business record exception, the
circumstances surrounding the making of the notation cast serious doubt on its
reliability.  We conclude that the notation is not admissible as a business record
and thus should have been excluded for all purposes under D.R.E. 803(6).
An out-of-court record of an act or event is admissible under the business
records exception (1) if the record was “made at or near the time” of the act or
event (2) “by, or from information transmitted by, a person with knowledge,” (3)
if the record is prepared and maintained “in the course of a regularly conducted
business activity” and (4) if it was the regular practice of the organization to
make a record of the act or event.15  Even if the statement satisfies these
requirements, however, the trial court may nevertheless exclude the statement
where the method of preparation of the record or the source of the information
“indicate[s] [a] lack of trustworthiness.”16
                                   
15  D.R.E. 803(6); McLean v. State, Del. Supr., 482 A.2d 101, 104-05 (1984).  The proponent of the business record
must establish these facts through “the testimony of the custodian or other qualified witness.”  D.R.E. 803(6).
16  D.R.E. 803(6).
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Although neither party discusses the issue at length, Dr. DuShuttle’s
notation in Brown’s medical records technically constitutes hearsay within
hearsay under D.R.E. 805.17  The first layer of hearsay is the billing clerk’s
statement that Liberty Mutual refused to authorize the nerve blocks.  The second
layer is Dr. DuShuttle’s notation of the clerk’s statement in Brown’s medical
record.  Even if a business record includes hearsay within hearsay, however, the
record may fall within the business record exception so long as the source of the
information and the person who records the information are acting in the regular
course of business.18  In the present case, both Dr. DuShuttle and the billing
clerk were acting in the regular course of business and both had a business duty
to provide accurate information in Brown’s medical records.  If the notation
satisfies the other requirements for admission outlined above, the notation may
therefore fall within the business record exception.
                                   
17 The term “hearsay within hearsay” describes a situation in which a statement or record is made by one person
based on information supplied by another person.  Rule 805 provides that “[h]earsay included within hearsay is not
excluded under the hearsay rule if each part of the combined statements conforms with an exception to the hearsay
rule provided in these rules.”
18  See United States v. Turner, 8th Cir., 189 F.3d 712, 719-20 (1999) (“If both the source and recorder of the
information were acting in the regular course of the organization’s business, however, the hearsay upon hearsay
problem may be excused by the business records exception to the rule against hearsay [in F.R.E. 803(6)].”); 3
Federal Rules of Evidence Manual 1673 (7th ed. 1998) (“If the reporter is operating under the same or similar
“business” duty (i.e., duty to report accurately) as the recorder, then the risk of inaccuracy is substantially reduced—
the same guarantees of reliability apply to the observer and the recorder.”); 3 Handbook of Fed. Evid. § 803.6 n.25
(5th ed. 2001) (“If both the source and the recorder of the information, as well as every other participant in the chain
producing the record, are acting in the regular course of business, the multiple hearsay is excused by Rule 803(6).”).
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Even assuming that Dr. DuShuttle’s notation in Brown’s record technically
satisfies the three main elements of the business records exception, however, we
conclude that the notation is inadmissible because “the source of information or
the method or circumstances of preparation indicate lack of trustworthiness.”19
The business records exception to the hearsay rule permits the admission of
hearsay documents that are likely to be trustworthy because a business regularly
maintains and relies on them.20  Thus, as the Second Circuit has observed: “The
principal precondition to admission of documents as business records pursuant to
Fed.R.Evid. 803(6) is that the records have sufficient indicia of trustworthiness
to be considered reliable.”21
In the present case, the entry in Brown’s record was made under
circumstances that seriously undermine the reliability of the notation.   First, Dr.
DuShuttle is unsure about the precise time that elapsed between his conversation
with the billing clerk and his recording of the notation in Brown’s records.  The
question here is similar to the first element of the business records exception:
Whether Dr. DuShuttle recorded the statement “at or near the time” that his
                                   
19 D.R.E. 803(6).
20  See McLean, 482 A.2d at 104 (“It is the habit and continuity of keeping records germane to the business activity
which lends reliability to the business records.”); see also 3 Federal Rules of Evidence Manual, supra, at 1670-71
(noting that the “organization’s reliance on the records is a basis for the reliability for the exception”).
21  Saks Int’l, Inc. v. M/V Export Champion, 2nd Cir., 817 F.2d 1011, 1013 (1987).
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billing clerk told him that Liberty Mutual had denied pre-authorization.  The
general rule is that the record must be made within a “reasonable time” of the
underlying event.22  The definition of “reasonable time” varies from case to case,
but courts generally require that the record be created within a few weeks of the
event.23  This remoteness inquiry “depends upon whether the time span between
the transaction and the entry was so great as to suggest a danger of inaccuracy by
lapse of memory.”24
Dr. DuShuttle testified during voir dire that, around May or June of 1995,
his billing clerk informed him of the alleged denial, but it was not until October
7, 1995 that he entered the note that documented this conversation.  From Dr.
DuShuttle’s testimony, the best that can be inferred is that the notation was not
made until over three months after his conversation with the unidentified billing
clerk.  In the circumstances of this case, the length of the interval between the
conversation and the entry in Brown’s records raises a serious concern that the
                                   
22  See Seattle-First Nat’l Bank v. Randall, 9th Cir., 532 F.2d 1291, 1296 (1976) (observing that a business record
should be “made contemporaneously with the transaction or a reasonable time thereafter.”).
23  See, e.g., Hiram Ricker and Sons v. Students Int’l Meditation Soc., 1st Cir., 501 F.2d 550, 554 (1974) (finding
that one week is too long); Willco Kuwait S.A.K. v. deSavary, 1st Cir., 843 F.2d 618, 627-628 (1988) (finding that
three months is too long); see also 2 McCormick on Evidence § 289, at 258 & n.3 (5th ed. 1999) (observing that, in
determining the reasonableness of the interval between the transaction and the making of the record, courts should
consider the circumstances of each case).
24 2 McCormick on Evidence, supra, § 289 at 258.
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notation may have been the product of a faulty hearing, transmission or recall of
the conversation.
Second, Dr. DuShuttle could not identify the clerk in his office who
telephoned Liberty Mutual to get the pre-authorization or the person who told
him that Liberty Mutual denied the authorization.25  Consequently, Liberty
Mutual had no opportunity to call as a witness or to question the person who
allegedly spoke to the Liberty Mutual agent to request the pre-authorization.
Third, Dr. DuShuttle testified that, although he regularly consults with his billing
department and regularly records denials of pre-authorization in patient records,
the billing department does not document its communications with insurance
companies.
These factors indicate a high risk that either or both of the following
problems may have infected the evidence offered:  (1) that Dr. DuShuttle’s
                                   
25  This analysis also relates to whether Dr. DuShuttle received the information from “a person with knowledge”
under the second prong of Rule 803(6).  As a general rule, business records are admissible under Rule 803(6) even if
the original source of the underlying information is unknown, so long as the information is prepared and maintained
in the regular course of business by employees with a business duty to report the information accurately.  See Saks,
817 F.2d at 1013 (“[T]here is no requirement that the person whose first-hand knowledge was the basis of the entry
be identified, so long as it was the business entity's regular practice to get information from such a person.”); see
also Lacy v. CSX Transp. Inc., W.V. Supr., 520 S.E.2d 418, 435 (1999) (same); Baxter Healthcare Corp. v.
Healthdyne, Inc., 11th Cir., 944 F.2d 1573, 1577 (1991) (same).  Where one or more of the parties was not under a
business duty to report, by contrast, the original source of the information in a business record must be identified
because the opposing party must have an opportunity to test the reliability of the information.  See, e.g., Ricciardi v.
Children’s Hosp. Med. Ctr., 1st Cir., 811 F.2d 18, 22-23 (1987) (holding that note describing accident during
surgery did not fall within exception because the doctor who made the note did not see the operation and could not
identify the source of the information).  Since Dr. DuShuttle testified that employees in the billing department are
under a business duty to report the status of insurance authorizations accurately to him, the notation technically
satisfies the “personal knowledge” element of the exception.
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notation was based on a faulty memory of what his billing clerk told him, or (2)
that the billing clerk did not accurately hear or report the details of the alleged
conversation with Liberty Mutual.26  As a general rule, issues of faulty memory
and inaccurate reporting merely affect the weight and credibility of testimony,
which must, of course, be resolved by the jury.27   But that is the case only when
the evidence does not require a foundation to authorize its admission under the
hearsay rules.
The lack of reliability of the notation is problematic in this case because a
foundation must be established to allow the evidence to be admitted for its truth
under the business records exception and to prove the elements necessary to
resolve the breach of contract issue.  That issue depends upon exactly what
Liberty Mutual knew when and if it refused to pre-approve Brown’s treatment.
The precise wording of the record documenting the alleged conversation between
the billing clerk and a Liberty Mutual agent therefore becomes crucial because it
purports to describe what Liberty Mutual was told and how it responded.
                                   
26  There is no suggestion that Dr. DuShuttle had a motivation to fabricate the notation, for example in anticipation
of litigation.  Rather, the concern is that the notation is not trustworthy because of the length of time that elapsed
between the Dr. DuShuttle’s conversation with his billing clerk and the entry in Brown’s records.
27  See Pryor v. State, Del. Supr., 453 A.2d 98, 100 (1982) (“The jury is the sole judge of a witness’ credibility and is
responsible for resolving conflicts in testimony.”).
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In view of these concerns, we find that the circumstances under which the
notation was prepared “indicate lack of trustworthiness.” Accordingly, we
conclude that the notation was not admissible under the business records
exception to the rule against hearsay, and the trial judge did not abuse his
discretion in refusing to admit this evidence to prove its truth.
B.
Medical Diagnosis or Treatment Exception
Brown next argues that Dr. DuShuttle’s notation in Brown’s medical
record is admissible as a statement “for purposes of medical diagnosis or
treatment” under D.R.E. 803(4).  This exception authorizes the admission of
statements  (1) “made for purposes of medical diagnosis or treatment” and (2)
“describing medical history, or past or present symptoms, pain or sensations, or
the inception or general character of the cause or external course” of the
symptoms.28  As noted above, under D.R.E. 805, statements that include hearsay
within hearsay are admissible only if each layer of hearsay is covered by an
exception.
Even assuming for the sake of simplicity that the first layer of hearsay (that
is, the billing clerk’s statement to Dr. DuShuttle) falls under the business records
exception, the second layer of hearsay (the notation by Dr. DuShuttle in Brown’s
                                   
28  D.R.E. 803(4).
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medical records) is not admissible as a statement for medical treatment or
diagnosis.  Under the second prong of Rule 803(4),29 the notation concerns only
the alleged denial of coverage and does not describe Brown’s condition,
symptoms, or sensations or relate to Brown’s medical history or to the cause of
her symptoms.  The notation, therefore, does not satisfy the requirements for
admission as a statement for the purpose of medical treatment or diagnosis.
C.
Residual Exception
Brown argues that, if the notation does not fall under either the medical
diagnosis or the business records exception, it is admissible under the residual
hearsay exception provided by D.R.E. 803(24).  This exception covers hearsay
statements that are not admissible under the other exceptions but have “equivalent
circumstantial guarantees of trustworthiness.”30  To be admitted under this
exception, the statement must satisfy three conditions:  (1) “the statement [must
be] offered as evidence of a material fact,” (2) the proponent could not find more
probative evidence of that fact by reasonable efforts, and (3) admission of the
                                   
29  Under the first prong of Rule 803(4), Dr. DuShuttle testified that he recorded the alleged denial of pre-
authorization in Brown’s records because he used this information in setting the course of her treatment.  This
testimony provides a sufficient indication that Dr. DuShuttle made the notation for purposes of medical treatment.
Liberty argues that Dr. DuShuttle did not make the notation for purposes of treatment because the alleged denial of
coverage did not actually change the course of treatment.  This argument mischaracterizes the requirements of the
exception.  Rule 803(4) does not require that the medical record actually affect the course of treatment; rather, the
exception may apply so long as the record was made “for purposes of medical diagnosis or treatment.”  In any event,
Brown’s course of treatment may have changed as a result of the alleged denial:  According to Brown, if Liberty had
approved payment, Brown would have received the recommended nerve block treatments.
30 D.R.E. 803(24).
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statement serves the purposes of the Rules.31  These requirements must be
construed narrowly to ensure that application of the residual exception does not
“dramatically revis[e] the hearsay rule.”32
The issue here is whether Dr. DuShuttle’s notation carries sufficient
circumstantial guarantees of trustworthiness.  For at least the same reasons that
the notation is not admissible under the business records exception, it fails to
meet the criteria of the residual hearsay exception.  The significant lapse in time,
amounting to at least three months between the billing clerk’s conversation with
the Liberty Mutual agent and the entry of the notation in Brown’s records,
seriously undermines the reliability of the notation.33  We need not consider other
problems relating to the trustworthiness of the notation because the time lapse
                                   
31 D.R.E. 803(24).  The exception also requires the proponent of the statement to notify the opposing party of the
proponent’s intention to introduce the statement “sufficiently in advance of the trial or hearing to provide the
adverse party with a fair opportunity to meet it.”
32 United States v. Sinclair, 7th Cir., 74 F.3d 753, 759 (1996) (citing Notes of the Committee on the Judiciary,
S.Rep. No. 93-1277, Note to Paragraph (24), Fed.R.Evid. 803, 28 U.S.C.A. (West 1984)).
33 See Sinclair, 74 F.3d at 759 (“Most of the recognized exceptions to the hearsay rule permit the admission of
hearsay statements that convey personal knowledge at the time of their utterance . . . . The immediacy of this
knowledge is one of the key circumstances indicating trustworthiness. These exceptions to the hearsay rule do not
include statements that express memory of distant events.”) (internal citation omitted).
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alone is sufficient to render the residual hearsay exception inapplicable in this
situation.34
D.
Evidence of Office Routine
Brown next contends that Dr. DuShuttle’s testimony about his office
procedures for documenting the denial of pre-authorization is admissible as the
“routine practice of an organization . . . [offered] to prove that the conduct of the
person or organization on a particular occasion was in conformity with the . . .
routine practice.”35  Brown seeks to show that Liberty Mutual was aware that
pre-authorization was required for Brown’s treatment by proving that Dr.
DuShuttle would note a denial of pre-authorization in a patient’s records only if
the billing department had conclusively confirmed the denial.
Rule 406 does not authorize the admission of every personal habit or office
routine.  Under this rule, only evidence of “specific, ‘semi-automatic’ conduct
that is capable of consistent repetition” is admissible to prove conformity with
that habit on a particular occasion.36  Courts generally apply a more liberal
                                   
34  Liberty also observes that Brown failed to seek out more probative evidence of Liberty’s alleged denial of pre-
authorization because Brown did not produce any of the employees in the billing department of Dr. DuShuttle’s
practice. Brown counters that “no staff member could be found who has a specific recollection of calling Liberty
Mutual on Ms. Brown’s behalf” because of the volume of calls that the staff makes each day.  In view of the
reliability problems discussed above, there is no need to reach this issue.
35 D.R.E. 406.
36  Brett v. Berkowitz, Del. Supr., 706 A.2d 509, 516-17 (1998).
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standard to evidence of office routine than they apply to evidence of personal
habit because there is no concern that the evidence could be used improperly as
character evidence.37  Nevertheless, to be admissible under Rule 406, the office
routine must be relatively simple, involve little judgment, and not be “susceptible
to too much variation.”38     
Although Dr. DuShuttle’s voir dire testimony established that the billing
department followed the same general procedure in documenting denied pre-
authorizations, this procedure is not a series of “semi-automatic” actions
involving minimal judgment or variation.  On the contrary, the office routine
appears to be relatively informal and ad hoc.  For example, Dr. DuShuttle
testified that requests for pre-authorization are not always performed by the same
employees in his office.  Dr. DuShuttle also testified that there was no regular
reporting routine; instead, he would generally just “go up to the Billing
Department [and] say what’s the status, what’s going on.”  Because of the casual
and discretionary nature of this process, we conclude that Dr. DuShuttle’s
                                   
37 See 1 Federal Rules of Evidence Manual, supra, at 558.
38 See id.  Examples of admissible office routines are:  always obtaining signed consent forms before administering
vaccines, see In re Swine Flu Immunization Products Liability Litigation, D.Colo., 533 F.Supp. 567, 574 (1980),
always sending a copy of a complete proposal to general contractors, see Envirex, Inc. v. Ecological Recovery
Assoc. Inc., M.D. Pa., 454 F.Supp. 1329, 1333 (1978), always informing patients of the risks of using a particular
drug, see Hall v. Arthur, 8th Cir., 141 F.3d 844, 849 (1998), and always using the same bus to go home from work,
see Howard v. Capital Transit Co., D.D.C., 97 F.Supp. 578 (1951).
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testimony about his office’s procedures is not admissible as evidence of a
“routine practice” under Rule 406.39
E.
Nonhearsay Use
Finally, Brown contends that Dr. DuShuttle’s notation is admissible if it is
offered for a nonhearsay purpose.  Under this theory, Brown would not offer the
statement to prove the truth of the contents of the statement (i.e., that Liberty
Mutual “would not approve the stellate ganglion blocks which Dr. Islam
recommended.”).  Instead, Brown would offer the notation for the nonhearsay
purpose of proving that Liberty Mutual had notice that pre-authorization was
required before Brown could receive the recommended treatment.
Although Dr. DuShuttle’s notation is evidence that his office contacted
Liberty Mutual about pre-approval for Brown’s treatment,40 the notation is not
evidence that Liberty Mutual was notified that Brown would not receive nerve
block treatments if Liberty Mutual denied pre-approval.  Indeed, nothing in Dr.
DuShuttle’s notation or in the medical records supports a reasonable inference
                                   
39  Even if Dr. DuShuttle’s office procedure were a “routine practice” under Rule 406, the evidence would be
admissible only to prove that the billing clerk called Liberty Mutual and that Liberty Mutual denied the pre-
authorization.  The office routine could not be used as evidence that the billing clerk told Liberty Mutual that pre-
authorization was required.
40  When considered together with evidence that Dr. DuShuttle’s records were transmitted to Liberty Mutual, the
notation is also evidence that Liberty Mutual was notified that Dr. DuShuttle believed that Liberty Mutual had
denied approval for Brown’s treatment.
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that the physician who was to perform the treatment required pre-authorization.41
At most, the notation indicates that Liberty Mutual had notice of Brown’s claim
for benefits and of Dr. DuShuttle’s belief that Liberty Mutual had denied pre-
approval for the claim.42  We find that the notation is not competent evidence that
Liberty Mutual had notice of the alleged pre-authorization requirement and is
therefore not admissible for the nonhearsay purpose proposed by Brown.
Decision to Grant Judgment as a Matter of Law
In ruling on Liberty Mutual’s motion for judgment as a matter of law, the
Superior Court found that
[T]here is no evidence from which this jury could
conclude that the defendant was put on notice, that
preapproval of the nerve block procedure was necessary
in order for the service to be provided . . . . [or] that
Liberty Mutual would not have paid for such a
procedure ultimately upon being submitted a bill for it.
                                   
41 Cf. Gannett Co., Inc. v. Kanaga, Del. Supr., 750 A.2d 1174, 1188 (2000) (“While the plaintiff is entitled to the
benefit of reasonable inferences from established facts, the jury cannot supply any omission by speculation or
conjecture.”); see also Mazda Motor Corp. v. Lindahl, Del. Supr., 706 A.2d 526, 530 (1998) (holding that, in
deciding a motion for summary judgment, the plaintiff is entitled to “all reasonable inferences that can be drawn
[from the evidence]”) (emphasis added).
42 See, e.g., Worsham v. A.H. Robins Co., 11th Cir., 734 F.2d 676, 687 (1984) (finding that complaints about a
product’s design were admissible for the nonhearsay purpose of proving that the manufacturer had notice of
potential defects in the design); Oberg v. Honda Motor Co., Ltd., Or. Supr., 851 P.2d 1084, 1087 (1993) (holding
that Consumer Product Safety Commission documents received by the manufacturer describing the dangers of all-
terrain vehicles were admissible to prove that the manufacturer “had knowledge of the potential dangerousness of
ATVs”), rev’d on other grounds, 512 U.S. 415 (1994); see also 2 McCormick on Evidence, supra, § 249, at 102 (“A
statement that D made a statement to X is not subject to attack as hearsay when its purpose is to establish the state of
mind thereby induced in X, such as receiving notice or having knowledge . . . .”).
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Brown argues that the Superior Court improperly granted Liberty Mutual’s
motion because the court ignored probative evidence that Liberty Mutual was
aware that pre-authorization was required to begin treatments and that, without
justification, Liberty Mutual refused to authorize the treatments.
This Court reviews de novo the Superior Court’s decision to grant
judgment as a matter of law.43  To grant judgment as a matter of law on a
particular issue, the Superior Court must find that “there is no legally sufficient
evidentiary basis for a reasonable jury to find for that party on that issue.”44  On
appeal, this Court must determine “‘whether the evidence and all reasonable
inferences that can be drawn therefrom, taken in a light most favorable to the
non-moving party, raise an issue of material fact.’”45
To survive Liberty Mutual’s motion for judgment as a matter of law on her
claim alleging a breach of the implied covenant of good faith and fair dealing,
Brown must present sufficient evidence from which a jury may reasonably infer
(1) that Liberty Mutual knew that pre-approval was required for the nerve block
                                   
43  See Trievel v. Sabo, Del. Supr., 714 A.2d 742, 744 (1998) (quoting Mazda Motor Corp., 706 A.2d at 530).
44  Super. Ct. Civ. R. 50(a).
45 Trievel, 714 A.2d at 744 (citations omitted).
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treatments and (2) that Liberty denied pre-authorization for the treatments (3)
without reasonable justification.46
Excluding Dr. DuShuttle’s notation and his supporting hearsay testimony,
the sum of Brown’s admissible evidence appears to be: (1) that Liberty Mutual
was aware of the RSD diagnosis and the accompanying recommendation of nerve
block treatments, (2) that Liberty Mutual was also aware of the rapid, predicted
deterioration of Brown’s condition in the absence of the nerve block treatments,
and (3) that doctors customarily require pre-authorization before proceeding.
On the notice issue, Brown raised a genuine issue of material fact
concerning the existence of a custom among doctors to require pre-approval
before proceeding with a new course of treatment.  Specifically, Dr. DuShuttle
agreed that it is “customary in the medical profession to get pre-authorization”
before conducting a procedure.  In contrast, a Liberty Mutual employee testified
that, with some limited exceptions, Liberty Mutual ordinarily does not pre-
authorize procedures over the telephone.  Resolving this dispute in a manner
most favorable to Brown, a reasonable jury could infer that it is a general custom
in the medical community to require such pre-authorization before treatment.
                                   
46  See Tackett v. State Farm Fire and Cas. Ins. Co., Del. Supr., 653 A.2d 254, 262 (1995) (“A plaintiff seeking to
establish a claim of bad faith in a first-party insured-insurer contractual relationship must show that the insurer
lacked reasonable justification in delaying or refusing payment of a claim.”).
- 23 -
Nevertheless, Brown has presented no competent evidence to support her
contention that Liberty Mutual was aware of this requirement or that the billing
clerk in Dr. DuShuttle’s office notified Liberty Mutual of the requirement.
Indeed, Brown did not even present evidence that Dr. Godfrey always requires
pre-approval before administering nerve block treatments.47  Brown suggests that
the jury could infer Liberty Mutual’s knowledge of the pre-authorization
requirement from the testimony of Liberty Mutual’s employees that Liberty
Mutual pre-authorizes expensive procedures in some situations.
Contrary to Brown’s contentions, however, we find that this testimony
does not support a reasonable inference that Liberty Mutual “normally” or
“routinely” requires pre-authorization or that it knew of a pre-authorization
requirement among physicians.  Absent evidence that Liberty Mutual knew that
Brown would not receive treatment because of its alleged denial of pre-approval,
Brown’s claim that Liberty Mutual unreasonably refused payment must fail as a
matter of law.48
                                   
47 As support for this assertion, Brown can point only to her testimony that she was not “able to get treated without
the preauthorization for insurance coverage.”  This testimony is insufficient to support an inference that Dr. Godfrey
always requires pre-authorization before treating a patient.
48 Brown contends that Dr. Sowa’s December 11, 1995 report provides evidence that Liberty Mutual denied pre-
authorization for the nerve blocks.  Dr. Sowa’s report states that “apparently the [nerve block treatment] was not
approved” by Brown’s insurer.  Although this statement is undoubtedly based upon the notation in Dr. DuShuttle’s
records, Liberty Mutual evidently failed to object to the introduction of this report.  Since Dr. Sowa noted only that
Liberty Mutual denied pre-authorization, however, his report does not provide evidence that Liberty Mutual was
aware that pre-authorization was required or that Liberty Mutual unreasonably denied pre-authorization.
- 24 -
As the Superior Court observed, there is also no evidence that Liberty
Mutual would have refused to pay (or unreasonably delayed payment) for the
nerve block treatments if it had been requested to do so.  Of course, as Brown
argues, an insurer’s denial of pre-authorization may well be the functional
equivalent of a refusal to pay the claim altogether if physicians are unwilling to
proceed without guaranteed payment.  Brown’s argument thus raises the question
whether an insurer may breach the implied covenant of good faith and fair
dealing by denying pre-approval for necessary treatment where pre-approval is
not required by the insurance contract but the insurer knows that pre-approval is
required before a doctor will administer the treatment.  Because we have
concluded that Brown has presented no evidence that Liberty Mutual was aware
that pre-approval was required, there is no need to decide this issue here.
Conclusion
We find that the notation in Brown’s medical records indicating that
Liberty Mutual had denied pre-authorization was not admissible, either as
nonhearsay or under a recognized hearsay exception.  Therefore, we conclude
that Brown has not presented sufficient evidence from which the jury could find
in her favor on the bad faith claim.  Accordingly, we affirm the judgment of the
Superior Court.