United States: Lost Policy Can be Proven by Oral Evidence

Dart Industries Inc. v. Commercial Union Insurance Company - 202 Cal LEXIS 5465

Rexall Drug Company, a predecessor in interest of Plaintiff, Dart Industries, Inc., ("Dart") manufactured and marketed the drug Diethylstilbestrol ("DES"), a synthetic estrogen used to prevent miscarriages in the 1940s to the late 1960s. Women who were exposed to DES in utero filed suit against Dart for damages caused by DES. Dart sought a defense and indemnification from the insurer, Commercial Union Insurance, Co., ("Commercial"). The applicable insurance policy was lost or destroyed. Dart brought a suit against Commercial for failure to defend. In an attempt to prove the existence and material facts of the policy, Dart provided testimony of Charles Pyne, the insurance agent/broker who had knowledge of the policy and its provisions. The Court of Appeal held that Dart had to prove the actual language of the lost policy to be entitled to coverage. The Supreme Court reversed.

Under common law, a lost document can be proven by secondary evidence if it is shown that a diligent search has been unsuccessfully made in the place that the document is most likely to be found and if the party shows that he has in good faith exhausted all sources of information and means of discovery accessible to him.

"Evidence Code section 1521, subdivision (a), provides that 'the content of a writing may be proven by otherwise admissible secondary ,'....... The admission of oral testimony regarding the contents of a writing is specifically governed by section 1523, which provides, in pertinent part, that such testimony is admissible 'if the proponent does not have possession or control of the original or a copy of the writing and: [P] . . . Neither the writing nor a copy of the writing was reasonably procurable by the proponent by use of the court's process or by other available means. . . .' (Cf. Fed. Rules Evid., rule 1004(1), 28 U.S.C.)"

In order to prove the contents of a lost insurance policy through secondary evidence, Dart was required to establish that it made a diligent search for the policy and that the policy was not lost or destroyed fraudulently. It was undisputed that neither Dart nor Commercial had a copy of the policy, that Dart made a reasonably diligent but unsuccessful search for the policy, and that there was a policy specifically written for Dart during the relevant time period. The court held that there was no reason why the lack of such "actual language" evidence should preclude Dart from obtaining the benefits of its policy. The court went on to state, "[w]hen, as here, it is undisputed that there was an insurance policy covering the relevant time period and that the policy was lost in good faith and not recovered after diligent search, there is no reason either in the law of contract or of evidence why secondary evidence that attests to the substance but not the precise language of an insurance policy should be insufficient as a matter of law to establish the insurer's contractual obligations." Based on this and the fact that there was no evidence of fraudulent conduct on the part of Dart or Commercial, secondary evidence could be used to show proof of the policy and its terms.

Dart had the burden of proving with secondary evidence that it was insured under the lost policy during the period at issue and the material terms of the policy essential for a claim for relief. Dart provided the testimony of Charles Pyne to establish the material terms of the policy.

The court found that the contents of the policy did not need to be proved verbatim. The court held that it did not expect a witness to recite the contents of a lost document word for word. The Supreme Court found that Charles Pyne's testimony provided enough detail to determine what injuries were covered under the policy. It was not necessary that Pyne's testimony be corroborated by documentary evidence or otherwise. The testimony of a single witness may be sufficient to support a judgment.

Thus, the Supreme Court reversed the Court of Appeal's decision and remanded the case back to the Court of Appeal.