In a wrongful discharge case brought by Larry Holland, there was evidence against his former employer, Schwan’s Home Service, that included the claim file of Schwan’s insurance carrier.
The claim adjuster’s file contained notes from Joan Kantor, a specialty risk services third-party administrator for Hartford Insurance Co. The notes contained summaries of conversations with Schwan’s agents and employees. Kantor did not testify at the trial. Schwan’s objected to the conclusion of the notes as evidence arguing that (1) the statements were inadmissible hearsay, (2) the documents were protected by attorney-client privilege and (3) the business records exception to the hearsay rule did not apply because the claim file was prepared in anticipation of litigation.
The jury in Benton, Ill., returned a verdict for Holland for $4,260,400, which included $3.6 million in punitive damages. Schwan’s Home Service appealed.
Illinois Appellate Court affirmed the ruling on the claim file, stating that:
(a) The statements by Schwan’s agents and employees that were documented by the claim adjuster, Kantor, were admissible as party admissions.
(b) A trial judge properly admitted Kantor’s notes about her statements to Schwan’s employees, to establish the defendant’s knowledge of her statements, “not as proof of any matter asserted by Kantor in her statements.”
(c) The attorney-client privilege did not apply because “there is no evidence in the record that supports the conclusion that the Hartford claim file contains communications that were made for the dominant purpose of transmitting it to an attorney for the protection of the interest of the insured.”
(d) There was no evidence in the record that the Hartford claim file was created in anticipation of litigation.
The appellate court stated that “hearsay evidence is an out-of-court statement offered to prove the truth of the matter asserted in court and is generally admissible unless it falls within a hearsay exception.” Roe v. State Bank of Lombard, 247 Ill.App.3d 686 (1993).
Illinois Supreme Court Rule 236(a) lays out the “business records” exception to the hearsay rule. The reasoning behind this exception and admissibility of business records is that they are kept routinely and are by design meant to be accurate records and that they are unlikely to falsify records kept in the ordinary course of business. People v. Virgin, 302 Ill.App.3d 438 (1998).
On Jan. 1, 2011, Illinois adopted Rule 805 of its Rules of Evidence, which provided that “hearsay included within hearsay are not excluded under the hearsay rule if each part of the combined statements conforms an exception to the hearsay rule provided in these rules.” That is to say that when a business record contains hearsay statements within the record, hearsay statements within the records must also be admissible as an exception to the hearsay rule.
In the Holland case, the trial court ordered that the claim file by redacted, except for the statements that were made by the insurance adjuster to Schwan’s employees and statements from Schwan’s employees to the insurance adjuster.
The statements made by Schwan’s employees were party admissions. A party admission is a statement made by an employee against the employer if the statement is made during the existence of the employment relationship and concerns matters within the scope of the employment. Vojas v. Kmart Corp., 312 Ill.App.3d 544 (2000).
Therefore, the statements made by Schwan’s agents and employees that were documented by Kantor in her file are admissible as party admissions.
As to the attorney-client privilege argument, the privilege extends to communications between an insured and its insurer. People v. Ryan, 30 Ill.2d 456 (1964). The basis for extending the privilege to an insurer is that the insured may properly assume that the communication is made to the insurer as an agent for the dominant purpose of transmitting it to an attorney for the protection of the interest of the insured.
In this case, the attorney-client privilege did not apply to exclude Hartford’s claim file. There was no evidence in the record that supported the conclusion that the Hartford claim file contained communications that were made “for the dominant purpose of transmitting it to an attorney for the protection of the interest of the insured.”
Schwan’s also argued that the claim file was inadmissible because it was made in anticipation of litigation. There was no evidence in this case that the Hartford claim file was created in anticipation of litigation as opposed to its regular course of business. In addition, “anticipation of litigation” rule does not apply where a report is sought to be admitted against the party who prepared it. Amos v. Norfolk & Western Ry Co., 191 Ill.App.3d 637 (1989).
Here, although Schwan’s did not prepare the claim file, it was nonetheless prepared by its adjuster in administering a worker’s compensation claim on behalf of Hartford and Schwan’s. There was no reason to question the motivation or credibility of Kantor with respect to statements that were unfavorable to Schwan’s that were contained in the Hartford claim file.
Accordingly, the appellate court affirmed the trial court’s order admitting the claim file into evidence and thus the jury’s verdict stands.
Holland v. Schwan’s Home Service, 2013 IL App. (5th) 110560 (May 30, 2013).
Kreisman Law Offices has been handling worker injuries, construction accident cases and elder abuse litigation for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 37 years in and around Chicago, Cook County, and its surrounding areas, including Des Plaines, Algonquin, Palatine, Schaumburg, Tinley Park, Joliet, Aurora, Romeoville, Chicago (Bridgeport), Chicago (Canaryville), Morton Grove and Park Forest, Ill.
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