Jury should not have learned that defendant would be indemnified

Mollie Pawlosky Iowa Real Estate & Land Use Dickinson Law Des Moines Iowa

Posted on 03/15/2016 at 12:00 AM by Mollie Pawlosky

The Iowa Court of Appeals in Buhr v. Mayer’s Digging Co. and Mark Wagner ordered a new trial because the jury had heard evidence and argument regarding the defendants’ indemnification by a third party.

Mayer’s Digging and Mark Wagner appealed, following a jury verdict in favor of Buhr regarding a claim of trespass. Mayer’s and Wagner had contracted with Jim Koenigs to clear brush and trees from a boundary line shared with Buhr. Wagner believed that Buhr had agreed to the clearing, but Wagner later learned that Buhr had not agreed.

At trial, evidence was introduced regarding Koenigs’ agreement to satisfy any judgment entered against the defendants. Buhr first addressed indemnification during Wagner’s direct examination. The trial court overruled an objection to relevance, and Wagner admitted Koenigs had agreed to pay any verdict. The same evidence was elicited by Buhr’s counsel during Koenigs’ cross-examination. Buhr’s counsel also highlighted the indemnification evidence during his closing argument.

The Court of Appeals began with the basic question as to whether the evidence was relevant. Buhr argued the indemnification evidence was relevant to prove Koenigs instructed Mayer’s Digging to destroy the tree and fence line intentionally, Mayer’s Digging was acting in conformity with that instruction, and Koenigs ratified Mayer’s Digging’s actions upon learning what had occurred. The Court of Appeals, however, disagreed. The only jury issue was the amount of Buhr’s damages. The defendants admitted that Buhr owned the property, that the defendants intentionally went onto Buhr’s property, and that defendants did not have permission to enter the property. The jury was instructed that those elements of the trespass claim were satisfied. The Court held that, at most, Buhr would have reason to show that Koenigs hired the defendants, in order to show that the defendants went onto Buhr’s property, but there was no reason to show that Koenigs paid for defendants’ attorney or that Koenigs had offered to pay any damages awarded to Buhr.

The Court of Appeals then analyzed whether the indemnification evidence prejudiced the defendants. The Court noted that raising liability insurance before a jury is generally improper, and the same reasoning applied with regard to indemnification. The Court was concerned that such evidence could cause a jury to enter a verdict against a defendant on insufficient evidence, or to enter a larger verdict than the evidence supported.

Moreover, the trial court had refused to give the jury any limiting instruction, such as telling the jury not to consider the evidence of indemnification, to mitigate potential prejudice.  Considering the record as a whole, the Court of Appeals could not hold that the introduction of the indemnification evidence lacked prejudice. Thus, the Court of Appeals reversed the trial court’s ruling on the defendants’ motion for a new trial, and remanded the case for a new trial.

For questions regarding Buhr v. Mayer’s Digging Co. and Mark Wagner or commercial litigation, contact Mollie Pawlosky.

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