Case Name: Wilford PACHECO, Plaintiff-Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Respondent
Court: Idaho Supreme Court
Jurisdiction: Idaho
Decision Date: 1989-07-21
Citations: 116 Idaho 794
Docket Number: No. 16993
Parties: Wilford PACHECO, Plaintiff-Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Respondent.
Judges: BAKES, C.J., and JOHNSON, J., concur.
Reporter: Idaho Reports
Volume: 116
Pages: 794–819

Head Matter:
780 P.2d 116
Wilford PACHECO, Plaintiff-Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Respondent.
No. 16993.
Supreme Court of Idaho.
July 21, 1989.
Rehearing Denied Oct. 18, 1989.
Webb, Burton, Carlson, Pedersen & Webb, Twin Falls, and John B. Kugler Law Offices, Pocatello, for plaintiff-appellant. John B. Kugler and Lloyd J. Webb argued.
Wood, Stephens & Telford, Idaho Falls, for defendant-respondent. Alan C. Stephens argued.
Dissenting opinion on denial of rehearing will be published.

Opinion:
HUNTLEY, Justice.
Pacheco filed suit against Safeco for bad faith denial of his claim for fire insurance proceeds. Safeco defended, contending that Pacheco was responsible for intentionally setting the fire. The jury found for Safeco. Pacheco filed a motion for judgment notwithstanding the verdict, which was denied by the court. Pacheco appeals on evidentiary and other grounds.
On January 2, 1986, at approximately 3:45 a.m. an arson fire caused over $200,-000 worth of damage to Wilford Benito Pacheco's dental office in American Falls, Idaho. On the day before the fire, Pacheco closed his office and removed several boxes of supplies and at least two paintings and took them home where he stored them in his family room. Pacheco treated a patient at his office that night and was in his office until 9:00 p.m.
Pacheco's truck was seen across the street from his dental office at about 1:30 or 2:00 a.m. on January 2, 1986. As noted, the fire occurred at 3:45 a.m. The authorities determined that the fire was caused by an arsonist who poured accelerant through a hole which had been cut from Pacheco's side of the building through the adjoining wall of the next door business offices. Gasoline and diesel fuel were found on the premises and gas cans matching the description of gas cans owned by Pacheco were found at the fire scene. After the fire, Pacheco filed an insurance claim with his fire insurance carrier, Safeco, which denied coverage.
Pacheco filed a complaint for recovery under the policy, for the loss, for other damages (including a bad faith refusal to insure, emotional distress and defamation), for attorney fees and for punitive damages. Safeco answered denying Pacheco's claims and raised the following affirmative defenses: since Pacheco had intentionally set the fire, Safeco had no contractual obligation to pay; or, in the alternative, public policy would estop Pacheco from obtaining payment under the circumstances. On January 5, 1987, the court granted Safeco's motion for summary judgment on Pacheco's claims for punitive damages and emotional distress. On February 13, 1987, the court granted Safeco's motion for summary judgment on Pacheco's claim for defamation but refused to grant summary judgment on the bad faith claim stating that White v. Unigard Mut. Ins. Co., 112 Idaho 94, 730 P.2d 1014 (1986) was applicable and based on that opinion it would consider Pacheco's claim of bad faith to be an issue for trial even though it would not amend its judgment dismissing punitive damages. The court noted that the threshold level of proof was somewhat less for bad faith than for punitive damages.
At trial, Pacheco presented testimony that his insurance coverage of $189,000 was less than the loss he sustained in the fire. A witness for Pacheco testified that Pacheco would not have set the fire himself because he had hanging in his office a painting of a fawn drinking from a stream that was given to him by a dying patient. That "sentimental painting" showed up in evidence in a photograph taken by police of the items discovered in the basement of Pacheco's house a few days after the fire.
Safeco presented testimony that Pacheco had been in financial straits prior to the fire. Safeco also presented evidence that the day after the fire Pacheco went to IB & T in American Falls and paid two delinquent IB & T loans with a check dated December 29th, but which had a numerical sequence number that followed the numbering on checks he had written on December 31, 1985.
John Olmsted, "senior investigator" for the Idaho Investigative Service Bureau, was the primary witness testifying in support of Safeco's defense that Pacheco set the fire. Over Pacheco's objection, the trial court permitted Olmsted to testify about his investigation of the fire and opinions he reached during that investigation. Ultimately, the court permitted Olmsted to testify that he considered the "chief suspects" in the arson investigation to be Pacheco and his wife. Pacheco moved for a mistrial and the trial court denied his motion. Olmsted then testified that it would be his duty to charge a person with arson if he believed that he had an adequate case against that person. At the time of the trial no one had been arrested or charged with any crime in connection with the fire. Safeco was also permitted to introduce evidence that Pacheco had sustained a fire loss in 1982. This evidence was received over strenuous objection.
After the parties presented their evidence, Pacheco requested that the trial court instruct the jury that each of the elements of Safeco's defense must be proven by clear and convincing evidence. The trial court did not adopt this requested instruction but instead instructed the jury that they need only find the elements of Safeco's defense by a preponderance of the evidence.
Pacheco also submitted two proposed instructions relating to circumstantial evidence. One instruction would have suggested to the jury that circumstantial evidence must be something more than that which casts a suspicion on the plaintiff. The other instruction would have suggested that Pacheco could not be found culpable if the circumstantial evidence was equally susceptible of the opposite conclusion. Ultimately, the court refused both proposals and instead used the standard IDJI instruction on the differences between direct and circumstantial evidence. The jury found for Safeco. Pacheco appeals claiming that the court erred in admitting the criminal investigator's testimony, evidence of the criminal investigation, evidence of a previous fire and Pacheco's financial status. Pacheco also alleges reversible error in the standard of proof utilized, jury instructions and juror misconduct.
I.
Admission of The Criminal Investigator's Testimony
Pacheco first claims that the trial court erred in allowing the criminal investigator to testify as to the identity of his prime suspects and as to his opinion that Pacheco set the fires. He argues that this testimony was irrelevant and highly prejudicial in that it created an improper implication of criminal guilt to permeate a civil trial (State v. Owens, 101 Idaho 632, 639, 619 P.2d 787, 794, (1980)); it was incompetent (Fowler-Barham Ford v. Indiana Lumbermens Mutual, 45 N.C.App. 625, 263 S.E.2d 825, 828-29 (1980); and that it permitted a witness to give a legal conclusion. Pacheco also argues that it was inappropriate for the trial court to permit the investigator to refer to a search warrant issued against Pacheco's residence in the course of the criminal investigation concerning the fire, arguing that the fact that Pacheco never was actually arrested did not lessen the impact of this improperly admitted evidence. Prior to addressing the issues raised by Pacheco, we discuss the standard of appellate review.
Pacheco is required to show more than error; he must show prejudicial error. Otherwise, any error below will be presumed harmless. Viehweg v. Thompson, 103 Idaho 265, 269, 647 P.2d 311, 315 (Ct.App.1982). Prejudice will not be presumed on appeal. See Boise Dodge Inc. v. Clark, 92 Idaho 902, 909, 453 P.2d 551, 558 (1969). Where the issue is the admission of improper evidence, such admission will be considered harmless if there is other competent evidence to the same effect upon which a jury could reach the same result. Idaho First National Bank v. Wells, 100 Idaho 256, 262, 596 P.2d 429, 435 (1979).
Here there was ample circumstantial and testimonial evidence, other than the criminal investigator's testimony, that had the same effect and could have led the jury to the same result. This evidence includes: (1) The hole in Pacheco's wall through which the accelerant was poured; (2) Pacheco's financial situation; (3) the discovery of his gas cans across the street from the smoldering remains of his office; (4) Pacheco's closing of his office the day before the fire; (5) Pacheco's removal of various valuable and sentimental items from his office the day before the fire; and, (6) the pre-dated check tendered after the fire.
In addition to there being no prejudicial error, admission of the investigator's testimony also complied with the requirements of Idaho Rules of Evidence 702, 703, 704 and 705 in that he carefully described the evidence relied upon when he stated his opinion as to the cause of the fire.
Furthermore, Olmsted's testimony was critical to the issue of whether Safeco acted in bad faith. The law defining "bad faith," in cases such as this was established in White v. Unigard Mut. Ins. Co., 112 Idaho 94, 730 P.2d 1014 (1986) which was decided about one-and-a-half months before the trial began. Therefore, when the case was tried, Safeco had to assume that the rule stated in White pertained. That rule is:
. the mere failing to immediately settle what later proves to be a valid claim does not of itself establish 'bad faith.' [t]he insured must show the insurer 'intentionally and unreasonably denies or delays payment____' (Citation omitted). An insurer does not act in bad faith when it challenges the validity of a 'fairly debatable' claim, or when its delay results from honest mistakes. (Citations omitted).
112 Idaho at 100, 730 P.2d at 1020.
Safeco's counsel foresaw the potential conflict that could arise by having to present evidence necessary to the issue of who set the fire and evidence necessary to the question of bad faith or punitive damages in the same trial. Therefore, on October 2, 1986, Safeco moved for bifurcation of the trial, asking that its affirmative defense be tried prior to and separate from the plaintiff's complaint. This would have prevented the jury from having the criminal investigator's testimony in the same case that Pacheco had to show the insurer "intentionally and unreasonably denied payment." The motion was resisted by Pacheco, and it was denied.
After the close of Pacheco's case in chief, Safeco moved for a directed verdict on the bad faith claim because Pacheco had not addressed the issue of whether Safeco's failure to pay was unreasonable under the circumstances. Pacheco objected to Safe-co's motion and the court denied the motion. Therefore, when Safeco defended, it had to show not only that Pacheco was responsible for the fire, but it also had to explain to the jury what information Safeco had (including the investigator's report) which caused Safeco to refuse payment of Pacheco's claim. As a result, even if the opinion evidence were inadmissible, it is actually Pacheco who was responsible for it going before the jury.
II.
Evidence of the Criminal Investigation
In addition to claiming that the court erred in admitting the criminal investigator's testimony, Pacheco also claims the court erred in admitting evidence of the criminal investigation. In particular, Pacheco claims the court erred when it admitted testimony pertaining to items of evidence which had been removed from Pacheco's office prior to the fire and were found in his basement in the course of a search pursuant to a warrant. Regarding the search warrant, it was Pacheco who originally introduced evidence of the search warrant and when Safeco later presented evidence of the search warrant Pacheco did not object. Pacheco did not request that the term "search warrant" and Pacheco's counsel's reference to the "search warrant" throughout the trial be stricken from the record. Hence, any possible error was invited and not preserved by objection.
III.
Evidence of the 1982 Fire at Pacheco's Prior Dental Office
Pacheco next argues that the trial court erred in admitting evidence of an arson investigation involving Pacheco following a fire in 1982. This evidence was admitted despite the fact that Pacheco's involvement in the other fire was never established. Pacheco argues that case law provides that evidence of other criminal conduct will not be received as indicative of the commission of a particular act charged, whether in the context of a criminal case, or of a civil case. See e.g., Curtis v. Western Reporting and Credit Co., 39 Idaho 784, 787, 230 P. 771, 774 (1924) (in an action on a promissory note, where usury is pleaded as evidence with respect to other alleged usurious transactions is not admissible). In a case upon a claim of fire loss, evidence of other fires will not be admitted unless it can be established that the claimant was connected with starting those other fires. Hawks v. Northwestern Mutual Ins. Co., 93 Idaho 381, 383-383, 461 P.2d 721, 723-723 (1969); Boise Association of Credit Men, Ltd. v. United States Fire Ins. Co., 44 Idaho 249, 259-261, 256 P. 523, 533-535 (1927).
We need not address Pacheco's analysis of the law because evidence of the 1982 fire was originally introduced by Pa checo in his case in chief. Later, Pacheco agreed that the evidence could come in under Safeco's defense to the bad faith claim. Once that evidence was introduced by Pacheco, then the prohibition of the rule of law in the cases cited by Pacheco did not apply. Therefore, the evidence was properly admitted. Safeco argues that this Court should change the law pertaining to this issue, as cited by Pacheco, and opt for the "better rule" as expressed by the court in Rutledge v. St. Paul Fire & Marine Ins. Co., 286 S.C. 360, 334 S.E.2d 131, 137 (App. 1985) in which the court stated:
Still, we think the better rule is that evidence of another fire and of settlement arising therefrom is relevant to the issues of the insured's intent, motive and knowledge irrespective of whether the other fire was incendiary.
Safeco argues that the courts should allow evidence of prior fires in .civil arson cases without requiring evidence that the insured set them. Safeco fails to present any compelling reason to change the law as it now exists in Idaho. The reasoning in St. Paul Fire & Marine Ins. Co. is unpersuasive. The point that evidence of a prior fire may be indicative of motive and/or intent in a later fire, regardless of whether it was even proven that the first fire was set by an arsonist, is particularly unpersuasive. We adhere to the opinion that such evidence is both legally and logically irrelevant.
IV.
Admission of Testimony That Pacheco Was in Debt
Pacheco argues that the financial circumstances of a party to an action are immaterial and irrelevant, Meagher v. Garvin, 391 P.2d 507, 511-512 (Nev.1964). He also argues that case law indicating that proof of insolvency can be relevant to motive in the fire insurance claim context runs contrary to this basic rule of evidence. Pacheco claims that he had a thriving practice and that he was, in fact, underinsured. Thus, the evidence of his alleged insolvency was incorrect, as well as being totally irrelevant and highly prejudicial. In cases such as this, where the insurance company refuses to pay an insurance claim on the ground that the claimant was an incendiary, the company has the burden of showing, by a preponderance of evidence, that the claimant set the fire. The claimant's financial status is highly relevant to the issue of motive. See Lawson v. State Farm Fire and Casualty Ins. Co., 41 Colo. App. 362, 585 P.2d 318 (1978). Therefore, the trial court did not err in admitting information concerning Pacheco's finances.
V.
The Standard of Proof Required for an Affirmative Defense on Refusal to Insure
Pacheco claims the trial court erred in instructing the jury that Safeco had to prove its affirmative defense (that Pacheco committed fraud) by a preponderance of the evidence rather than by clear and convincing evidence. Pacheco submitted appropriate instructions to the court for the application of the clear and convincing test, and asserts they were wrongly rejected. Pacheco cites Smith v. King, 100 Idaho 331, 334, 597 P.2d 217, 220 (1979) and Carpenter v. Union Ins. Co., 284 F.2d 155, 162 (4th Cir.1960) in support of this contention.
The majority rule is that an insurance company must prove its affirmative defense for refusal to pay a fire claim by a preponderance of the evidence. Godwin v. Farmers Ins. Co. of America, 129 Ariz. 416, 418-19, 631 P.2d 571, 573-74 (1981). The trial court chose to follow the majority rule; it did not err. It should also be noted that although the original complaint alleged fraud, and fraud must be proven by clear and convincing evidence, the amended complaint (upon which the case was tried) did not allege fraud. The case was actually tried on a breach of contract theory, and breach of contract is proven by a preponderance of the evidence, not by clear and convincing evidence. The terms of the policy stated that the insurance company would not pay if someone burned his own property; the policy language clearly includes the defenses of dis honest and criminal acts in addition to the defense of fraud. Finally, public policy would not allow recovery under a contract of insurance where the insured started his own fire. In this case, the jury determined that Pacheco set the fire.
VI.
Jury Instructions on Circumstantial Evidence
Pacheco claims the trial court erred by failing to instruct the jury on the use of circumstantial evidence because the evidence of Pacheco's involvement in the fire was purely circumstantial. Pacheco concedes that the requirement that the jury be instructed on circumstantial evidence where it is the only evidence presented, was established in the context of a criminal prosecution (see State v. Holder, 100 Idaho 129, 132-33, 594 P.2d 639, 642-43 (1979), and is limited to criminal cases. He attempts to overcome this obstacle by arguing that while this is a civil case, he was charged with criminal activity and so the doctrine set forth in Holder should apply.
Pacheco's attempt to bootstrap the rules of criminal law to this case is unpersuasive. Mere references to a collateral criminal investigation do not magically change this civil action into a criminal prosecution.
Further, contrary to Pacheco's claim, there was, in fact, an instruction on circumstantial evidence. In Instruction No. 7 the court provided the standard IDJI instruction with regard to explaining the differences between direct and circumstantial evidence. Since this was not a criminal case and since the criminal rules do not apply in civil cases, the court correctly followed the civil jury instruction provided in IDJI.
VII.
Contact Between Jurors and Witnesses
Finally, Pacheco claims that the fact that one of the prosecution's witnesses gave a juror a three block ride in his car so prejudiced the determination of this case as to demand a new trial.
When jury misconduct is alleged, there must be a showing of prejudice. Black v. Reynolds, 109 Idaho 277, 707 P.2d 388 (1985). Here, no testimony was presented that the juror and the witness discussed the case. In any event, when the complaining party or his counsel know of the alleged jury misconduct before the verdict is returned but keep silent, any right to claim misconduct is waived. Moore v. Adams, 273 Or. 576, 542 P.2d 490 (1975). In this case, Pacheco has failed to show prejudice and further, his counsel knew of the alleged misconduct prior to the verdict but kept silent. The trial court properly exercised its discretion in ruling that the alleged misconduct did not prejudice the trial.
The verdict and judgment and post-trial orders of the trial court are in all respects affirmed.
Costs to respondent, no attorney fees awarded on appeal.
BAKES, C.J., and JOHNSON, J., concur.
SHEPARD, J., sat but did not participate due to his untimely death.