Opinion ID: 1143911
Heading Depth: 1
Heading Rank: 5

Heading: Substantive Evidence of State Farm's Arguable Reason for Refusal to Pay the Coopers' Claim

Text: Independent of the foregoing, the evidence at issue was admissible regarding State Farm's defense of the Coopers' bad faith refusal claim wherein the Coopers demanded punitive damages. On September 26, 1986, the Coopers filed their amended complaint, asserting their bad faith refusal claim. State Farm thereafter moved for summary judgment on the issue of punitive damages. The Circuit Court never ruled on the motion and, in fact, the issue was legally alive at the time Brown, Lomenick and McClain testified. It is certainly true that the parties spent little time on the bad faith/punitive damages claim at trial, yet the claim had not been removed from the case. [5] Had the Coopers offered substantial evidence in support of that claim, and had it been excluded, we would reverse. By the same token, State Farm was entitled to offer proof in defense that it had an arguable reason for denying the Coopers' claim. The testimony of Brown, Lomenick, and McClain regarding the statements made by Susie Arnett were admissible on the issue of whether State Farm had an arguable reason to deny the Coopers' claim. See Cossitt v. Federated Guaranty Mutual Insurance Co., 541 So.2d 436, 443 (Miss. 1989); Pioneer Life Insurance Co. of Illinois v. Moss, 513 So.2d 927, 929 (Miss. 1987). In this context the testimony of Brown, Lomenick and McClain was not hearsay. Rule 801(c), Miss.R.Ev. provides: Hearsay is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted. But this testimony was not offered to that end, only to show the fact of the call and State Farm's state of mind. If the significance of a statement is simply that it was made and there is no issue about the truth of the matter asserted, then, the statement is not hearsay. Comment 801, Miss.R.Ev. McCormick on Evidence, 3d ed. § 249, declares: The hearsay rule forbids evidence of out-of-court assertions to prove the facts asserted in them. If a statement is not an assertion or is not offered to prove the facts asserted, it is not hearsay. Utterances and writings offered to show effect on hearer or reader, when it is proved that D made a statement to X for the purpose of showing the probable state of mind thereby induced in X, such as being put on notice or having knowledge or motive or to show the information which X had, has bearing on the reasonableness or good faith or voluntariness of subsequent conduct of X or anxiety, the evidence is not subject to attack as hearsay... . In our present context, the truth of Arnett's statement is unimportant, but her statement may be seen to have an effect on the state of mind of those hearing it little short of enormous. The statement could be completely false, but the fact that someone told State Farm this makes its actions understandable, its refusal to pay the Coopers arguable. In State Farm Fire and Cas. Co. v. Simpson, 477 So.2d 242, 251 (Miss. 1985) this court sensibly said that hearsay could be considered by an insurance company in denying a claim, although it would not be admissible at trial to prove the arson. I see nothing in the Mississippi Rules of Evidence that alters this view. American Mfrs. Mut. Ins. Co. v. Cupstid, 673 F. Supp. 186 (S.D.Miss. 1987) followed Simpson, [6] holding that, although the statements in the case were not admissible on the issue of whether the Cupstids were responsible for the fire ..., [the insurance company] could ... consider it in deciding whether to pay the claim. Cupstid, 673 F. Supp. at 190 n. 3. I find unassailable the logic of Cupstid and the authority of Simpson. A call such as that received by Brown and Lomenick  coupled with the evidence of an incendiary fire  more than gave State Farm an arguable reason for refusing the Coopers' claim. General rules of evidence allow such testimony to show the fact that the call was made, if not to prove the truth of what was stated. The Circuit Court was correct in overruling the Coopers' objections. III. I find no error in the proceedings below. I would affirm the judgment of the Circuit Court. Because the majority holds otherwise, I respectfully dissent. PRATHER and ANDERSON, JJ., join in this dissent.