Smithing Gold: Goldsmith Court Holds Automated Computer-Generated Evidence Is Admissible

Three areas of law affect insurance claims. They are (1) substantive law, which creates the legal right to make a claim such as creating the legal elements necessary to make a valid claim; (2) procedural law, which provides rules regarding how and when a claim must be be lawfully made; and finally (3) evidence law, which provides rules regarding how one must prove (or disprove) a claim or a defense.

A recent problem in evidence law has been whether computer-generated evidence may be admissible in court. Computer-generated evidence is often attacked for lacking foundation, that is, that the computer-generated information is not what it purports to be. If this attack fails, it is often attacked as inadmissible hearsay in that the computer record “an out-of-court statement offered to prove the truth of the matter asserted.”

A recent criminal infraction case made its way up from the California trial court’s appellate division to the District Court of Appeal addressing these issues. The Goldsmith court held that computer-created evidence is presumed admissible.

The holding is important because it has implications far beyond nailing red light runners who are caught on camera, which was what the case was about.

In Goldsmith, the defense argued that the computer-generated photos and video showing the car running the red light was inadmissible because there was no evidence that computer equipment used to capture the photos and videos were accurate or reliable–an attack on the foundational requirements to have evidence admitted. The court agreed that Evidence Code, § 1401(a) required authentication of photos or video before they may be received in evidence, but found that merely required the party offering the evidence to show that the photo or video is what it purported to be or the establishment of such facts by any other means provided by law as per Evidence Code, § 1400(b).

Evidence Code, §§ 1552 and 1552 establish a legal presumption that printed representations of computer information and of images stored on a video or digital medium are representations of the computer information and images that they purport to represent. Based on this, the court concluded that the images and information, such as the date, time, and location of the violation and how long the light had been red when each photo was taken and imprinted on the photographs were presumed to accurately represent the digital data in the computer. Thus, the court concluded that Evidence Code, § 604 required the trier of fact to assume the existence of these presumed facts.

That the images were accurate depictions of the data stored on the computer did not end the inquiry. To be admissible, the evidence still had to be accurate and reliable. As to this issue, the appellate court deferred to the California Supreme Court’s holding in People v. Martinez (2000) 22 Cal.4th 106, at 111-112, 119-120, and 132. In Martinez, the Supreme Court held that testimony regarding the acceptability, accuracy, maintenance, and reliability of computer hardware and software was not a prerequisite for the admission of data stored on a computer.

In substance, the Supreme Court in Martinez and the appellate court in People v. Goldsmith (2012), held that California courts presume that computer-generated data that is retrieved from a computer is accurate and reliable. This presumption could be rebutted however through cross-examination. Note that the Goldsmith court found that this presumption would not apply to data inputted by humans. It would be limited to situations where the computer were set to automatically record the evidence without human intervention.

Where the data automatically records the evidence, the evidence is presumed admissible. The party opposing such evidence must prove to the trial judge that the evidence is authentic authenticity, accuracy, and reliability, and usually trial courts will let this evidence and then allow it to be attacked by cross-examination, etc., i.e., these factors go to the weight of the evidence as opposed to its admissibility.

Next, the Goldsmith dealt with the hearsay problem, namely, that the computer-generated photos and video were offered to prove the matter asserted, namely, that Goldsmith ran the red light. The Goldsmith court found no hearsay problem by finding that the computer-generated data and the data printed on the photographs by the computer did not fall within California’s definition of hearsay (Evid. Code, § 1200), since the purported “statements” were not made by a “person” based on the California Evidence Code’s definition of what a “person” is. Instead, the court viewed the computer-generated information as “demonstrative evidence,” which is “not hearsay.”

The point? Let’s say a business automatically stores and records information on its computers. Goldsmith may require that this evidence is admitted, leaving the opponent of the evidence to attack on only how credit to give this evidence, as long as the data is not manipulated by or entered by people.

Imagine the possibilities. If an insured’s business tracks information about employees automatically, this computer-generated data is going to be admitted into evidence for better or worse, as long as it is relevant to some issue at trial. Trial counsel will only be able to attack the data’s credibility, not its admissibility. This will affect the settlement value of a claim, summary judgment/adjudication motions, settlement, and trial outcomes.

In sum, Goldsmith teaches that courts are catching up on technological advances. They are thus reluctant to waste valuable trial time arguing over why computer-generated information is reliable and accurate absent compelling proof in a particular case. The best way to avoid the evidentiary presumptions of admissibility would be to show that the data was entered by a person or likely was manipulated by a person entering or retrieving the data. Absent such proof of tampering, courts are going to find that computer-generated and stored information is admissible because it is automated and not subject to manipulation by people. Trial counsel will be limited to attacking the relevance of the evidence and its credibility. Goldsmith signals the end to most attacks on such evidence’s admissibility in the first instance, which is an issue of law subject to the trial court’s broad discretion.

Good Faith Claims Denial? Yes, Virginia, It Is Possible Even In California By Following These 6 Steps

Every time a claim is denied, there is always a concern that the claimant will sue for insurance bad faith. Claims denials should not be taken lightly. Even if it is clear to you that the claim is not covered, I suggest doing the following to make it difficult, if not impossible, for a claimant to prevail in a bad faith claim against your company following your denial. (I cannot say that the following will prevent a bad faith claim; if a monkey pays the requisite filing, that monkey can at least file suit in California. The goal here is to discourage reputable counsel from pursuing bad faith claims, and that’s worth avoiding.)

First, make sure you’ve looked at all the insured’s coverages with your company, not just the policy the insured tendered under. If the insured has other coverages with your company that may cover the claim, advise the insured in writing that the company is still evaluating the claim for coverage. Do not deny the claim out of hand. You are entitled to conduct a reasonable investigation before denying coverage. So conduct a reasonable investigation first.

Second, respond to the claim within 15 days of your receipt of the claim in writing to the insured. California Department of Insurance Regulations regarding liability carriers to advise the insured in writing within 15 days the status of the claims. (10 Calif. Code of Regs., § 10 CCR § 2695.5, subdivision (b).) You don’t have to accept or reject the claim within 15 days, just acknowledge you’ve received the claim and are evaluating. If the insured inquires about the status of the claim, you need to respond within 15 days with what you know about the claim and what you’re doing about, such as evaluating it, investigating, etc. The insurance regulation above notes that you can just make a note in your claims file when the claim came in, but it is a better practice to both note your file and tell the insured in writing that you are considering the claim. Why, because the insured has tendered and is wondering what, if anything, the insurer is doing with the claim, and will be much more patient knowing someone is working on the claim.

Third, provide the claimant any necessary forms, instructions, and reasonable assistance the claimant needs to properly make the claim, which includes telling the insured if there is missing information necessary to make a valid proof a claim. This also required under the same insurance regulation cited above at subdivision (e). Failing to tell the insured what the insured needed to do in order to submit a valid claim will not make the claim go away. It will most likely encourage the insured to get an insurance bad faith lawyer or encourage the insured to complain to the California Department of Insurance—results you are trying to avoid.

Fourth, investigate the claim. Some claimants won’t have counsel. Some claimants who have counsel don’t have legal counsel knowledgeable about insurance practices. You shouldn’t just rely on the insured’s tender to tell you everything you know about a claim. On receipt of a claim, you should verify with the insured that insured and insured’s counsel, if any, have provided you with all information relating to the claim, including copies of any pleadings or discovery. If you know who the attorney representing the party suing the insured, call that attorney and ask for information about the claim. You could also retain coverage counsel to assist with your investigation if necessary. The point is you want to document your file that you made reasonable efforts to gather information about the claim before denying it. In California, an insurer can be liable for insurance bad faith for failing to reasonably investigate a claim. Note too that the same California insurance regulation cited above also requires “any necessary investigation of the claim.” Here, “necessary” and “reasonable” are synonymous. What you want to avoid is having an empty claims file that shows little or no effort went into investigating the insured’s claim. If you deny without conducting a reasonable investigation, you are encouraging an insurance bad faith lawyer to take the claimant’s case.

Fifth, if its close to being a “close call” about whether coverage exists, get a second opinion. Even better two. Run the claim by a more experienced and knowledgeable adjuster at your company, and not your file that you did this. Get an opinion from coverage counsel too, and make sure you note that in your file.

Sixth, when denying the claim, carefully explain to the insured the coverages the insured had, what your understanding of the claim is, and what you did to investigate the claim. Then explain why there is not coverage under the policy for the claim that the insured submitted. Most insureds are not insurance experts and many lawyers do not practice insurance law. A well thought out, thoughtful, and professional denial letter is perhaps the best talisman to ward off bad faith claims. Why? Because the letter should should the good faith consideration the company undertook to evaluate the claim. It would be Exhibit “1” to your company’s defense. The importance of such a letter cannot be understated. If there is something you missed, or if your information is incomplete, you’ve not put the ball in the insured’s court to respond. Even in California, insurers are not liable for mistakes or even ordinary negligence in claims handling.

Following the above six steps creates an evidentiary record showing good faiths claims handling. It will help your defense counsel immensely if you followed these steps, and will both ward off potential bad faith claims or certainly make the resolution of such a claim more favorable for your company.