Application of the Business Records Exception to the Hearsay Rule
Hearsay (an out-of-court statement offered at trial for the truth of the matter asserted) is inadmissible at trial. But, there are exceptions to this exclusionary hearsay rule to allow such evidence / testimony to be admissible at trial.
Previously, I wrote about one exception known as the business records exception contained in Florida Statute s. 90.803. The business records exception is commonly relied on in business disputes in order to admit business records as evidence.
What if there is an appeal concerning the admissibility of evidence introduced at trial under an exception to the hearsay rule?
Standard of Appellate Review
Whether evidence is admissible under an exception to the hearsay rule, such as the business records exception, is subject to a de novo standard of appellate review. See Browne v. State, 132 So.3d 312, 316 (Fla. 4th DCA 2014).
Application of Business Records Exception
Landmark American Insurance Company v. Pin-Pon Corp., 2015 WL 71849 (Fla. 4th DCA 2015) is recent a case where the appellate court remanded the dispute back to the trial court for a new trial as to damages because the trial court improperly allowed evidence to fall within the business records exception to the hearsay rule. The evidence should have been deemed hearsay and should not have been admissible under the business records exception.
This case involved an insurance coverage dispute over damages a hotel sustained from a hurricane. After trial, the hotel received a judgment against its insurer. The insurer appealed and an issue on appeal concerned whether the trial court erred in admitting the hotel’s repair (damages) estimate.
The hotel, to support its repair damages, introduced into evidence a composite exhibit through its architect. The exhibit contained the architect’s repair scope of work (to repair the damage stemming from the hurricane). The exhibit also contained cost information (pricing the architect’s repair scope of work) that was not prepared by the architect. Rather, the cost information was prepared by the hotel’s general contractor with subcontractor invoices and proposals as the supporting back-up.
Because documents within the composite exhibit (such as the cost information) were not prepared by the architect and, thus, would ordinarily constitute hearsay, the hotel tried to establish that the cost information generated by the contractor and subcontractors would be admissible under the business records exception to the hearsay rule.
The architect testified that in its normal course of business it prepared a repair scope of work (drawings) to address the hurricane damage. This repair scope of work was given to the hotel’s contractor to cost / price. The contractor then submitted the cost / pricing information to the architect for review. The architect testified that these were the types of records it would ordinarily maintain in its ordinary course of business. Based on this testimony, the trial court ruled that the business records exception applied (since the cost information would be hearsay) and allowed this composite exhibit to be introduced as evidence.
The appellate court, in a detailed discussion about the business records exception to the hearsay rule, explained:
“For a record to be admissible under the business records exception, the proponent must show that (1) the record was made at or near the time of the event; (2) was made by or from information transmitted by a person with knowledge; (3) was kept in the ordinary course of a regularly conducted business activity; and (4) that it was a regular practice of that business to make such a record. However, the fact that a witness employed all the “magic words” of the exception does not necessarily mean that the document is admissible as a business record.
To lay a foundation for the admission of a business record, it is not necessary for the proponent of the evidence to call the person who actually prepared the business records. The records custodian or any qualified witness who has the necessary knowledge to testify as to how the record was made can lay the necessary foundation. Stated another way, the witness just need be well enough acquainted with the activity to provide testimony. To the extent the individual making the record does not have personal knowledge of the information contained therein, the second prong of the predicate requires the information to have been supplied by an individual who does have personal knowledge of the information and who was acting in the course of a regularly conducted business activity.
Nonetheless, the fact that a document is incorporated into a business’s records does not automatically bring the document within the business records exception to the hearsay rule. Otherwise, every letter which plaintiff’s employer received in connection with the operation of his business and which was subsequently retained as part of his business records ipso facto would be fully competent to prove the truth of its contents.”
Pin-Pon Corp., 2015 WL at *7 (internal quotations and citations omitted).
The appellate court held that the architect did not properly lay the foundation for the cost documentation within the composite exhibit to establish that the documentation fell within the business records exception to the hearsay rule. In particular, the architect could not show: (i) the documentation was made by or from information transmitted by a person with knowledge, (ii) the documentation was made at or near the time of the event since the architect had no knowledge when the documentation was made, and (iii) whether the preparer of the documents had knowledge or received information from a person with knowledge.
Because this documentation should have been deemed inadmissible, the appellate court remanded the case back to the trial court for a new trial on damages since there was a reasonable possibility that the error in admitting this evidence contributed to the jury’s verdict (i.e., the error in admitting this evidence was not a harmless error).
This case demonstrates the importance in properly laying the foundation so that documents are properly admitted into evidence. As mentioned above, business disputes generally involve parties admitting evidence under the business records exception to the hearsay rule. Thus, knowing how to properly lay the foundation for such evidence is important because if that evidence is improperly admitted there is a good chance that error in admitting the evidence will not constitute a harmless error.
Please contact David Adelstein at email@example.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.