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Court bumbles hearsay rule in tossing employee's garnishment action against insurer.

Leesa Kamen obtained a $500,000.00 default judgment against her employer, Spectrum HR, LLC.  She attempted to collect it by filing a garnishment action against Lexington Insurance Company, the insurer who provided Spectrum coverage against employment and discharge claims.  Lexington defended by arguing that since Spectrum never sought coverage for the claim, it was not obligated to honor the garnishment.  In an incredible evidentiary blunder, two judges of the Court of Appeals ruled that the hearsay rule did not apply to statements of an unknown individual who was quoted in the insurance agent's file.

As Judge Elizabeth Gleicher clearly explained in her separate concurring opinion (she agreed with part of the majority's decision but disagreed with the hearsay analysis), when a third-party's statement is contained within a business record, both the record and the separate included statement must satisfy the admissibility tests for hearsay evidence.  Hearsay evidence (that is, "he said" evidence) is only admitted, when it is offered to "prove the truth of the matter asserted," if a proper foundation of reliability is met.  When a statement is contained within another statement, both statements must meet this standard, independently.  This is called, in evidence texts, "hearsay within hearsay" and it is a commonly-addressed problem, particularly within medical records and business records.  Judge Gleicher's opinion offered several examples of prior cases where Michigan courts have applied this standard to exclude a statement contained within a business record.

Business records, themselves, are admissible if the entries are made contemporaneously, by someone with knowledge, and confirmed by the records custodian.  Still, third party statements within the records must also meet this foundation requirement, and the statement at issue in Kamen's case was this:  "I have been informed [that] our client, Spectrum HR, did not intend for this matter to be submitted as a claim..."

Judges Kirsten Kelly and Patrick Meter, over-eager to please the defendant insurer apparently, held that this statement was admissible, even though no one could even identify the "informant," let along document that his statement was reliable, or contemporaneous or made with first-hand knowledge.  These two judges suggested that the statement wasn't admitted "to prove the truth of the matter asserted," however, as Judge Gleicher pointed out, this was the ONLY evidence admitted to support the claim that Spectrum never informed its insurer of the subject claim.  This is what happens when activist, result-oriented judges are more interested in assuring that a particular party wins than they are in seeing that justice is served.

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