Fair Trials and Deep Pockets
By: Rob Hickey
The jury’s role in the trial of a negligence claim is to decide whether the defendant was negligent and, if so, to determine the amount of money that will reasonably compensate the plaintiff for the damages caused by the negligence. Sympathy for, or hostility to, either side of a lawsuit has no place in jury deliberations (or anywhere else in the civil justice system). Juries should not become distracted or misled by considering a defendant’s financial ability to pay damages. The comparative wealth or poverty of the parties simply does not matter. A wise judge long ago explained why it is improper to refer to the financial condition of the parties during a trial:
There is no law applicable to the poor that is not likewise applicable to the rich, nor is any law applicable to the rich that is not likewise applicable to the poor, and an endeavor on the part of an attorney or litigant to inflame the minds of the jury by referring to the financial status of either of the parties is improper.
Walden v. Jones, 289 Ky. 395, 158 S.W.2d 609, 612 (1942).
It is for this reason that juries in personal injury trials do not, and should not, consider a defendant’s insurance coverage or a plaintiff’s collateral source benefits. After all, verdicts should be based on genuine issues of liability and damages rather than redistribution of assets. Also for this reason, juries should be barred from considering the respondeat superior liability of a defendant’s employer.
- Liability Insurance and Collateral Source Benefits.
It is well-established that a jury should not hear about a defendant’s liability insurance coverage: “Evidence that a person was or was not insured against liability is not admissible upon the issue of whether the person acted negligently or otherwise wrongfully.” KRE 411. Inappropriate references to insurance coverage are a leading cause of mistrials and reversals on appeal. A jury’s attention should not be directed to the fact that an individual defendant would be indemnified by a large corporation for its award of damages. The effect on a defendant of bearing the financial burden of a verdict is irrelevant to liability and damages – the only issues a jury decides.
The natural tendency of jurors to redistribute wealth irrespective of legal merit is well-documented and directly contravenes to the purpose and mission of our civil justice system. Sand Hill Energy, Inc. v. Ford Motor Co., 83 S.W.3d 483, 501 (Ky. 2002) (Cooper, J., dissenting). A jury’s task is difficult, even under the best of circumstances. The prejudicial effect of directing the jury’s attention to the relative financial condition of the parties substantially outweighs any possible probative value of the information. A time-honored legal maxim holds that a jury should base its decision on the merits of the law and evidence, not on whether the burden of its verdict would be borne by the rich, the poor, a corporation, or an individual:
Citation of authority is scarcely necessary to support the universal concept of justice that a case should be tried on its merits without reference to a fact or suggestion of fact that the defendant will be indemnified by an insurance company or without the injection of any other factor calculated to create unfairness or incite prejudice, whether it be social, racial, political or financial.
Kaufman-Straus Co. v. Short, 311 Ky. 78, 223 S.W.2d 367, 368 (1949).
Providing a jury with information regarding the source of the money used to pay a verdict or a defendant’s financial ability to pay a verdict distorts the jury’s decision-making process and is likely to result in an unfair trial. That is why evidence, argument, or implication of a defendant’s wealth and insurance coverage is strictly prohibited from tort liability trials.
Similarly, Kentucky law does not allow juries to consider the fact that a personal injury plaintiff’s damages may have been paid by a collateral source, such as the plaintiff’s employer or insurer, before the trial. O’Bryan v. Hedgespeth, 892 S.W.2d 571 (Ky. 1995). Evidence of such payments is considered irrelevant, as “such payments have no bearing on the issue to be judicially decided, the amount of damages the plaintiff has incurred and is entitled to recover from the wrongdoer in the civil action.” Id. at 576. Thus, a plaintiff may seek monetary damages for medical bills, wage losses and the like without the jury ever knowing that the plaintiff never actually incurred those losses.
- Respondeat Superior
Despite excluding evidence of a defendant’s wealth and insurance coverage and a plaintiff’s collateral source benefits, Kentucky courts routinely allow juries to consider the fact that a plaintiff’s damages will be paid after trial by a different collateral source, the defendant’s employer. This seeming paradox persists under judicial application of the rule of respondeat superior liability.
The employer liability doctrine of respondeat superior originated centuries ago, long before liability insurance was common. See, e.g., Foster v. President, 17 Mass. 479, 509 (1821); Hern v. Nichols, 1 Salk 289, 91 E.R. 256 (1708). To prevail against an individual defendant’s employer under this doctrine, the plaintiff must establish a claim against the individual defendant – demonstrating that the individual defendant was negligent and that her actions caused an injury to the plaintiff – and must also show that the individual defendant was acting within the course and scope of her employment when she was negligent. Establishing these facts will trigger the legal conclusion that the employer is vicariously (jointly and severally) liable for the negligence of its employee.
One of the historical rationales for the doctrine was to find “deep pockets” to increase the likelihood that an injured individual would be compensated for his losses. Patterson v. Blair, 172 S.W.3d 361, 364 (Ky. 2005). A plausible argument can be made that, in a society with prevalent liability insurance, respondeat superior should be discarded as an outmoded relic of 19th century life in the United States. That argument will not be made here, however. Not only is it a good idea for injured people to be fairly compensated, there is another public policy reason to hold employers legally responsible for the on-the-job acts of their employees. The very nature of the employment relationship requires employers to exercise some degree of control over employees. As a matter of public policy, employers should have an incentive to hire wisely, promote safety, and motivate their employees to exercise reasonable care for the safety of others while carrying out their duties. The most effective way to implement that public policy is to have employers jointly and severally liable for the harm caused when an employee acts negligently in the course and scope of her duties. The legal doctrine of respondeat superior accomplishes just that. Kentucky’s highest court explained, “The doctrine of respondeat superior is at best a harsh rule, dictated by considerations of public policy and the necessity for holding a responsible person liable for the acts done by others in the prosecution of his business, as well as for placing on employers an incentive to hire only careful employees.” Johnson v. Brewer, 266 Ky. 314, 317 (1936).
In a personal injury trial where respondeat superior principles have been invoked, the jury is, as usual, called upon to determine factual issues of negligence and damages. As with any other personal injury trial, the admissible evidence is limited to information relevant to those issues, and any mention of the plaintiff’s collateral source benefits, the defendant’s financial resources and liability insurance coverage is prohibited. Likewise, if the plaintiff was on the job at the time of the accident, information regarding his workers compensation benefits is carefully screened from the jury to protect the plaintiff from prejudicial considerations that have nothing to do with liability or damages. By contrast, however, if it was the defendant who was on the job when the accident occurred, the jury is inexplicably informed that the employer’s assets are available to satisfy the plaintiff’s damages verdict.
If evidence that a plaintiff’s employer or insurer is legally obligated to pay the damages is inadmissible, and if evidence that a defendant’s insurer is legally obligated to pay the damages is also inadmissible, it seems obvious that evidence that a defendant’s employer is legally obligated to pay the damages would be inadmissible as well. To the fact-finder in a negligence trial, respondeat superior liability is no more relevant than a defendant’s wealth or either party’s insurance coverage. But, in practice, it’s not so obvious. The legal basis for the practice is nonexistent, and the usual justification for allowing such evidence is a classic logical fallacy: “That’s just the way we usually do it.”
Of course, in those rare instances when an employer disputes its vicarious liability or a jury is called upon to decide a related factual issue, evidence of the employment relationship is necessarily put before the jury. Unless the jury is provided with evidence and argument concerning the employer’s existence and relationship with the employee, it could not decide those particular factual questions placed at issue by the parties. Similarly, when an insurance company disputes coverage, evidence of its existence and obligations may become necessary and proper. Under those circumstances, the probative value of evidence necessary to decide a disputed factual issue outweighs its prejudicial effect.
A very different scenario arises, however, when an employer’s vicarious liability is not disputed. When a defendant employer admits that an individual defendant was acting within the course and scope of her employment at the time of the allegedly negligent acts, there is no factual issue to decide and no legitimate reason for the jury to consider the employer’s role. The employer has effectively conceded, as a matter of law, that it is jointly and severally liable to the full extent of its employee’s liability. Just as the individual defendant’s financial status and insurance coverage are irrelevant and prejudicial, so, too, is the employer’s legal obligation for its employee’s negligence. A jury should not be led to believe – by evidence, argument, or implication – that the financial assets of an employer would be available to satisfy any award of damages in its verdict.
During the trial of a negligence claim, the jury’s attention should be directed to the issues of liability and damages rather than the source of the money that might pay its verdict. Evidence and argument of respondeat superior liability is not relevant to those issues and is just as prejudicial as evidence and argument of insurance coverage. To paraphrase Kentucky Rule of Evidence 411: “Evidence that a person was or was not [employed] is not admissible upon the issue whether the person acted negligently or otherwise wrongfully.”
There is seldom a legitimate reason to identify a defendant’s employer to the jury in the trial of a negligence action. The primary effect of doing so is to enable argument or inference that a corporation will provide the funds to pay the verdict. When a jury is informed of the relative financial resources of the parties, it is likely to base its decision on that information. If we preclude evidence of collateral source payments before the trial to avoid undue prejudice to plaintiffs, the scales of justice can only be balanced if we preclude evidence of collateral source payments after the trial to avoid undue prejudice to defendants. What is fair for plaintiffs is fair for defendants.