TAYLOR v. STATE FARM FIRE AND CASUALTY COMPANY (1986)

Defendant State Farm appeals from a judgment entered upon a jury verdict which awarded plaintiff Skip Taylor $576,000 in compensatory damages and $2,000,000 in punitive damages.

A few pertinent paragraphs from the opening statement of Taylor's trial counsel explains this litigation and its basic issues.   We quote:

“In November of 1978, Skip Taylor on two different occasions called his State Farm insurance agent's office and asked that the fire insurance policy limit on his house be increased from $100,000 to $200,000.”

“On each occasion, written telephone messages were made of the calls indicating the nature and purpose of the call, but the messages were passed from one secretary in the office to another secretary in the office.   The instructions were misunderstood, and the secretary forgot to notify State Farm's regional office that the request had been made.”

“Several weeks later, the house caught on fire and it was totally destroyed.   The secretary who had forgotten to notify the regional office wrote a letter saying that the insurance policy limit was $200,000;  that it should have been done several weeks earlier when the calls were made and that the mistake was hers.

“State Farm didn't want to pay the claim.   Instead, they wanted to do an investigation.   But instead of conducting a fair and honest investigation, the investigators and the people involved at State Farm destroyed evidence that was favorable to Skip Taylor.   They created phony evidence to support and justify their denial of the claim and on that basis denied the claim.

“So the basic issue in this case is whether State Farm conducted a fair and honest investigation of this claim or whether destroying evidence and creating phony evidence to justify their denial constitutes an act of bad faith by the insurance company.”  (Emphasis added.)

To clarify the quoted excerpts and the discussion which follows, we note that the reference in the first paragraph of the excerpt “․ Taylor on two different occasions called his State Farm insurance agent's office ․” refers to Dwayne Catalina who was his broker-agent ¹ and was also the insurance agent of State Farm.   Thus, Catalina had a fiduciary relationship with each party.   The secretaries referred to herein, Cindy Hallack and Patty Albus, were employees of Catalina.   Hallack was in charge of Taylor's account during Catalina's absence from the office.

And to clarify the thrust of this lawsuit, to wit, the soundness of Taylor's claim for punitive damages, we call attention to the mistake referred to in the third paragraph of the above excerpts, i.e., “Several weeks later ․ the secretary ․ wrote a letter ․ it should have been done ․ earlier when the calls were made and that ․ mistake was hers.”   The secretary involved was Hallack.

State Farm's position is substantially as follows:

1. Its investigation of Taylor's claim was promptly commenced and closed within approximately 6 months.   Its investigation was complete, fair and honest, free from any taint as charged or otherwise.   State Farm asserts its investigation, an assertion borne out by the present record, provided a fertile source of evidence that all mistakes made by the respective agents of the parties (only two of which are set forth in Taylor's opening statement) were generated by Taylor's misconduct, be it negligent or calculated.

2. Taylor knew his assertion that he had a $200,000 policy with State Farm was fraudulent.   And State Farm was ready to pay a claim based upon a $100,000 policy.

3. Taylor's credibility is the thrust of this lawsuit.   Citing People v. Castro (1985) 38 Cal.3d 301, 211 Cal.Rptr. 719, 696 P.2d 111, State Farm urges the trial court's rejection of State Farm's offer of competent evidence to impeach Taylor based upon his conviction of the felony of possession of cocaine for sale was error.   As we will explain later, this ruling was prejudicial error resulting in a miscarriage of justice so that reversal of the judgment is necessary to permit a retrial.

The record makes clear the issue before us is one of fact.   Taylor insists the basic legal principle applicable is well settled and bromidic.   He argues the jury determined the facts;  such determination supports the judgment;  and the facts are therefore immunized from appellate review.  (Witkin, Calif.Proc., (2d ed. 1971) § 245, pp. 4236–4251.)   We disagree.

There are well settled constitutional and statutory exceptions among which is the erroneous exclusion of evidence which results in a miscarriage of justice.  (Clifton v. Ulis (1976) 17 Cal.3d 99, 130 Cal.Rptr. 155, 549 P.2d 1251.)

Thus, Article VI, Section 13 of our Constitution provides:

“No judgment shall be set aside, or new trial granted, in any cause, on the ground of misdirection of the jury, or of the improper admission or rejection of evidence, ․ unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.”  (Emphasis added.)  (See also Code Civ.Proc., § 475.)

Clifton holds:

“Whether the trial court's error constitutes grounds for a reversal depends on whether the error resulted in a miscarriage of justice.  (Cal. Const., art. VI, § 13;  Evid.Code, § 354.)   In People v. Watson (1956) 46 Cal.2d 818 [299 P.2d 243] * * *, we stated that ‘a “miscarriage of justice” should be declared only when the court, “after an examination of the entire cause, including the evidence,” is of the “opinion” that it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.’  (Id., at p. 836 [299 P.2d 243].)”  (Clifton v. Ulis, 17 Cal.3d at pp. 105–106, 130 Cal.Rptr. 155, 549 P.2d 1251.)   (Emphasis added.)

We have, for countless hours, studied and analyzed the entire cause, all the events preceding and succeeding the fire, and Taylor's tactics before and after the fire.

The record is prolix and confusing.   The evidence to support Taylor's primary claim for a $200,000 insurance policy is waffled, ambiguous and tenuous.   His testimony alone was laconic and delivered in a hit and run fashion against a background of admitted facts and/or uncontradicted testimony such that his testimony on the basic proof of his claim was waffled, tenuous, illusive and inherently improbable.   Other than on a rare occasion of little relevance, no witness ever is present who could hear what he says he said.   Taylor is truly a will-o'-the wisp witness and plaintiff.

We find no truly probative evidence State Farm committed felonious and/or any misconduct in its investigation of Taylor's $200,000 claim.   Such misconduct, as is relied upon by Taylor, rests upon gossamer-thin inferences which cannot withstand analysis.   Predicated upon this general statement, we could dispose of this litigation merely the ipse dixit that we are satisfied “․ it is quite probable that a result more favorable to [State Farm] would have been reached in the absence of the trial court's error” (Clifton, supra, 17 Cal.3d 99, 130 Cal.Rptr. 155, 549 P.2d 1251) in not permitting State Farm to impeach Taylor with his second felony conviction.

Taylor engages in that precise conduct of relying upon ipse dixits.   His brief proceeds on the theory the implicit findings of the jury on the evidence submitted are unassailable.   He argues this court must accept the jury's verdict and then proceeds to justify the jury verdict and its implicit presumptions with no serious presentation of anything in the record to support the findings this court has the power to, and does, reject.   Thus, he predicates his defense on his ipse dixit that the jury verdict is immune from scrutiny.

Taylor knew it was possible or even probable an appellate court would exercise its power of review, as permitted by the law we have cited, but nonetheless made an election to defend the appeal on the presumptions traditionally inherent in a jury verdict because he could not add anything from the record to support them.

We have concluded there have been three too many ipse dixits in this litigation:  Taylor's laconic ipse dixit with respect to the several instructions embraced in his November 1978 phone calls to his insurance agent, the jury's ipse dixit in the form of its verdict recognizing such as conclusive, and Taylor's ipse dixit on appeal to the effect the jury verdict finally settles the matter.   Our analysis as to why we think the judgment before us is a miscarriage of justice is, we think, a model of specificity as compared to Taylor's reliance on a presumption as sufficient reason to affirm the judgment.   Sensitive to the fact this court's judgment is also subject to review, we will proceed to consume several thousand words in explaining our decision.

Any evaluation of Taylor's $200,000 claim, its solidity and validity must be commenced with an understanding of the origin and nature of his insurance policies, their sequential history, the relationship of the adversary parties, and the effort to settle before this lawsuit was filed.   From time to time, we will anticipate evidence in our chronological discussion of events to assist the reasoning of our ultimate disposition.

In 1972, Taylor purchased a home in Laurel Canyon which he personally occupied continuously from that date to a few months prior to the fire on December 7, 1978.   In 1972, Taylor's insurance agent, Ted O'Neil, had applied to State Farm for a $50,000 all risk policy.   The home was in a “designated brush area” and State Farm could not provide comprehensive fire insurance.   O'Neil then obtained a “bare-bones” $50,000 policy from California Fair Plan Association (“Fair Plan”).   Fair Plan's fire policy was limited to the actual cash value of losses in event of various perils, including fire.   To supplement Fair Plan's policy, Taylor, through O'Neil, purchased from State Farm a $50,000 homeowners “wraparound” policy which embraced fire protection for risks not covered by the Fair Plan policy.   Both of the two policies should always be for the same amount because the homeowner obtains credit against the premium due to State Farm for the amount he had paid for the Fair Plan premium.   Significantly, although Taylor obtained two $50,000 policies from separate carriers (State Farm and Fair Plan), he could not stack the coverage.   That is, Taylor had $50,000 worth of fire coverage, not $100,000.   Each insurance company billed Taylor separately for respective premiums on their several policies.

In a wraparound policy, Fair Plan, the primary insurer, fixes the maximum fire liability of the wraparound insurers.   Fair Plan by its policy absorbs the bare-bones risk limited to actual cash value of the house.²  Thus, as Taylor's broker-agent, Catalina had the responsibility of first submitting to Fair Plan any increase in insurance desired by Taylor.   If accepted by Fair Plan, State Farm was obligated to meet it.   This was the only manner in which an increase could be perfected.

In 1975, Taylor contacted Dwayne Catalina, a State Farm insurance agent whom he had substituted for Tom O'Neil as his broker-agent sometime after 1972, and asked for an increase to $100,000.   Catalina, however, was not authorized to increase Fair Plan's fire policy liability beyond the $50,000 originally fixed until a request was first made to and approved by Fair Plan with a concurrent tender of payment of premium to cover the requested increase.

In contrast, as State Farm's insurance agent, Catalina had the authority to initiate issuance of policies on its behalf and to increase to a designated figure the original liability of policies already issued.   In the case at bench, in regard to the State Farm policy taken out by Taylor in 1972, Catalina's authority to increase was limited to $200,000.

In 1975, Catalina submitted Taylor's request to Fair Plan, presumably with the added premium payment.   The request was granted.   Catalina, by a mistake conceded by each of the adversary parties, forgot to process a similar request with State Farm.   Fair Plan's policy and State Farm's policy provide the single wraparound insurance package;  both policies should always be issued for the same amount.   Thus, because of Catalina's mistake, State Farm's coverage remained on its books at $50,000.   Taylor was aware of the error but nonetheless chose not to bring it to anyone's attention.   During the following three years, Taylor continued to be billed and he paid premiums to State Farm on the $50,000 fire liability of State Farm as originally issued.   And during that period, Taylor continued to be separately billed for, and presumably paid, increased premiums to Fair Plan for its proportionate share of a $100,000 liability.

This mistake was crucial.   It was the first of a series of mistakes, some of which were made by Catalina and some by Taylor personally, but all of which involved Taylor's conduct and are together the prime source of the ambiguous circumstances created by the two November 1978 phone calls testified to by Taylor.

Significantly, the record demonstrates Taylor personally avoided mention of the 1975 mistake and State Farm did not discover the 1975 mistake until after Taylor presented his claim of $200,000 to State Farm after the December 1978 fire.

As noted earlier, the crux of this lawsuit is Taylor's claim he telephoned Catalina's office in November 1978 to increase his coverage to $200,000.   But Taylor knew when he made those November phone calls, the wraparound policy limited its fire coverage of destroyed contents to owner residents.   It did not cover rented property.   Taylor had moved from his residence some months before November 1978 and had consummated a lease and accepted the first and last month's rent.   We mention Taylor's personal mistakes out of chronological order as they are pertinent and relevant to a sound evaluation of Taylor's credibility.   Significantly, State Farm never used them in this litigation as bargaining points to persuade Taylor to abandon his insistence on payment of his $200,000 claim.

Nothing pertinent occurred relevant to an evaluation of the evidence and the record before us until September 30, 1978.   On that day, State Farm mailed notice to Taylor that if the unpaid premium due was not paid on or prior to November 13 his policy would be cancelled.   It was not paid.   The policy was cancelled but subsequently reinstated on or about December 4, 1978 (discussed infra ).

Sometime between the months of September and before November 7, 1978, negotiations had been commenced by Taylor upon the advice of his business manager, Craig Wald, to obtain a $75,000 second mortgage on his residence from Property Mortgage Company (PMC), the president of which was Jeffrey Fine.   Fine was a friend of both Wald and Taylor.

In a meeting held between Taylor and Wald some days prior to November 7, 1978, to discuss the consummation of that loan, Taylor told Wald his coverage was for $100,000.   Wald advised Taylor to increase the policy limit to $200,000.   Although Taylor's testimony establishes it was Wald's responsibility to handle his insurance affairs, in this specific instance, Wald testified he was told by Taylor that he, Taylor, knew Catalina and would make the call.   Taylor testified he made it.

On November 7, 1978, Catalina was in Texas and had been for some days prior thereto and immediately thereafter.   He left his two secretaries, Cindy Hallack and Patty Albus in charge.   Each of them was on duty during business hours.   Each deny there was such a call from Taylor.

On or about November 13, 1978, Taylor was notified his State Farm policy had been cancelled.

Some observations with respect to the events which occurred between 1975 and to and including November 7, 1978, will be helpful.

1. Taylor knew before he made the November 7 call he had been paying a premium to State Farm on a $50,000 fire coverage for over a period of six continuous years, and when he allegedly asked State Farm for an increase of his fire liability on that date he was in reality requesting an increase from $50,000 to $200,000.

2. Taylor knew that the September 1978 premium due to State Farm had not been paid even though a check for the amount thereof had been written on September 30, 1978 and never sent.   He had notice his policy with State Farm would be cancelled on November 13, 1978.   Is it fair to assume Taylor agreed with Wald to personally make the call to increase to $200,000 because he knew he was in default not only on the $50,000 but also because he knew that during the entire six years of the policy's existence he had paid a premium on only a $50,000 fire liability policy and desired to adjust those matters personally with Catalina, the person he had retained as his insurance agent and with whom he had been dealing for several years?   We think it is.

3. The purported November 7 phone call was generated as a consequence of discussions had in regard to the loan of $75,000 to be secured by a second mortgage.

4. Taylor did not fix the time of day or the place from which he called or whether he had read the transmitted message from a memo he had prepared.   In his trial testimony the message was brief.   In answer to a question, he stated that he “․ asked that the fire insurance ․ be increased from $100,000 to $200,000.”   Then in response to a leading question by his counsel, “Did you tell her the house was rented?” he replied, “Yes, I did.”   However, in the “Sworn Statement in Proof of Loss” Taylor submitted to State Farm in March 1979, Taylor claimed he had notified Catalina of the rental status of the house on November 27.   But the transcribed telephone call of November 27 contains no such notice (see discussion, infra ).

5. There is significance too in what Taylor did not do in regard to the November 7 call.   Why did he fail to follow it with a written letter confirming the conversation?   He made the call because he wanted to talk to Catalina.   Why would Taylor entrust the consummation of a matter so important to him to a secretary whose name he did not ask for?

Taylor did not testify that he asked the person who allegedly received his call whether she was making a note of his request or to read it back or to confirm it in writing.

6. Taylor produced no witness who heard him make the call.   The only corroboration of the November 7 call is Wald's unobjected to hearsay statement to the effect Taylor had told him that he (Taylor) had made the call.   Why the call was not immediately made at the time it was agreed between Taylor and Wald has never been explained.   Actually, in Taylor's trial testimony there was no conversation.   He just told the individual who answered the phone to raise the policy from $100,000 to $200,000 and when prompted by his counsel, he added he had also advised her he had rented his residence.  (See fn. 7, infra.)

It will be remembered that when Taylor called Catalina in 1975 to raise his insurance contract from $50,000 to $100,000 he received immediate confirmation from Fair Plan but none from State Farm for the conceded reason State Farm was never informed of it and in fact never learned about it until weeks after the December 1978 fire.   In marked contrast to what happened in 1975, Taylor's trial counsel concedes and the record shows neither State Farm nor Fair Plan had any notice from Catalina or anyone else that the November 7 call was made until “several weeks” after the fire.

We resume the sequence of events.   Several weeks later, Taylor called Catalina's office on November 27, 1978, during the lunch hour.   He left his message on the telephone recorder.   Albus subsequently transcribed the message as follows:  “FROM:  Skip Tayor [sic] phone number 650–1003 “MESSAGE:  $100,000 increase dwelling call—Pro Mort on Wilshire for address Jeff Vine [sic].”  A second message, also transcribed by Albus, read:  “2nd Mort/Property Mort. Co./ 8912 Olympic Blvd. B.H. 90211/$100,000.”   The existence and receipt of these calls were introduced into evidence at trial.

Taylor testified that he made the November 27 call to follow up his November 7 call of which he had not received any confirmation.   It is difficult to digest this statement.   Why would he think about a confirmation with a check for the $75,000 in his pocket when he did not seem to care about confirmation 20 days earlier when he had been made aware by Wald he had to increase his insurance to $200,000?   If the November 27 call merely implemented the alleged conversation of November 7 would not the message either have commenced with “As per my request of November 7” or some similar remark referencing his earlier alleged conversation on November 7?   Additionally, although in response to a leading question by counsel, Taylor testified that in the November 7 call he had informed Catalina's office that he was now renting the house to third parties, why did the November 27 transcribed message make no reference to that circumstance?   In any event, Albus did deliver the two messages to Hallack.

When Hallack retrieved Taylor's file after receipt from Albus of the two messages, she noted, for reasons explained earlier, Taylor's coverage with State Farm indicated a coverage of only $50,000 and that the policy had in fact been cancelled two weeks earlier because of non-payment of premium.   Hallack called the phone number on the transcribed message but there was no answer;  she put the two messages in Taylor's file and did nothing further.   Her testimony was never denied.

On that same day, November 27, PMC mailed Catalina a letter notifying him of its desire to be included as a loss payee on Taylor's policy because it now held the second mortgage.

The letter was received on or about November 29.   Hallack then called PMC to inform it that the State Farm insurance had lapsed for non-payment of premium.   This testimony was never denied.

Yet on November 27, 1978, it is clear from the record the escrow between Taylor and PMC had closed.   Taylor apparently, at or about the noon hour, went from the escrow company to the home of his girlfriend with the check for the $75,000 second mortgage loan in his pocket.   Concurrently, he claims to have called Catalina's office and to have left a recorded message:  “$100,000 INCREASE DWELLING CALL—PRO MORT ․” He admitted he left the following morning for Colorado.   We pause to point out when Taylor left on the morning of November 28 he knew his $50,000 policy had lapsed on November 13 and had not been reinstated.   There is no evidence of any contact Taylor had with Wald or anyone else between noon of November 27 and the morning of December 8 pertaining to his November 7 or November 27 calls or the cancelled policy, its reinstatement, or anything pertaining to his State Farm policy.   It taxes one's imagination to believe Taylor made no inquiry on any of these subjects until the morning of December 8 when he was informed for the first time about the fire and the reinstatement of his policy on December 4.

On December 1, 1978, Wald, before the opening of the Catalina office, caused an envelope to be slipped under its door.   It contained a check, dated November 27, to pay for the reinstatement of Taylor's lapsed $50,000 policy.   Hallack opened it and contacted State Farm's Regional Office.   Permission to reinstate was granted if there were no pending claims.   There were none.   Premium payment on the original $50,000 policy was then accepted and on December 4 the same $50,000 policy originally issued to Taylor was reinstated as of November 27, 1978.   The date of November 27 was selected by Hallack because it was both the date of the check and the date of PMC's written request to be added as a loss payee.   This testimony was never denied.

As a consequence of the foregoing events, Hallack, on December 6, 1978, first sent a memo-gram to Fair Plan requesting that PMC be added as a loss payee on its policy.   The December 6 memo-gram bears a date stamp indicating Fair Plan received it on December 8.³  On that same date, December 6, Hallack forwarded to State Farm a request that PMC be added to its policy and that the policy limits be increased from $50,000 to $100,000.   This was done because:  (1) Hallack had interpreted the November 27 phone messages from Taylor as being a request to reinstate his State Farm policy and to increase its coverage from $50,000 to $100,000;  (2) she had received a reinstatement premium from Taylor on a $50,000 policy;  and (3) she had been given permission on December 4 from the Regional Office to reinstate Taylor's $50,000 policy.

On December 7, an unidentified woman called Catalina's office and told Hallack about the fire.   Taylor took no part direct or indirect so far as the record shows, in any of the conversations which followed.

On December 8, however, Wald called the Catalina office and spoke to Hallack several times.   When informed Taylor's coverage was for $100,000, Wald became rude, obnoxious and threatening.   Wald insisted Taylor's coverage was for $200,000 and that Hallack had made a mistake.   The use of Wald may be construed in the following way.   It will be remembered Taylor and Wald had had a conversation immediately before the November 7 phone call when he (Taylor) had insisted on calling Catalina.   In that conversation, Taylor had told Wald he was insured for $100,000.   Assuming Wald believed Taylor, and we are making no assumption to the contrary, Wald was the person who could sincerely assert to Catalina or Hallack that Taylor did already have a $100,000 policy so that any increase was from $100,000 to $200,000.

In any event, as a result of Wald's insistent and abusive manner, Hallack became convinced she had erred.⁴  She panicked from the pressure and later that day (December 8) prepared an additional memo-gram addressed to Fair Plan.   It states:  “Please be advised that because of our error we failed to request an increase in Dwelling Coverage of $100,000.   Making the new total amount $200,000.   This increase should reflect an effective date of $[sic] 11–27–78.”   Hallack, to cover up what she then believed had been her mistake and in her zeal to help her boss's (Catalina's) client Taylor obtain $200,000 “worth of coverage,” was impelled to backdate the memo-gram to December 6.   The inherent logic of this analysis is demonstrated by the fact the memo-gram bears a receipt date stamp of December 11 whereas the memo-gram which was actually sent on December 6 bears a receipt date stamp of December 8.

Hallack also on the same day sent a Revised Endorsement request to State Farm for an increase in coverage from $100,000 to $200,000.   In the remarks section, she wrote:  “Because of our error, this increase should have been requested along with our request of 12–6–78.  [¶] Attached is the copy of our request to [Fair Plan].”

Several weeks later, Hallack formally reported the fire to State Farm's regional office and asserted Taylor had $200,000 coverage.

After receiving notice of the fire and Taylor's informal claim of $200,000, State Farm and Fair Plan each commenced its own investigation.

The adjuster hired by Fair Plan, Richard Watkins, submitted his report within three weeks of the fire.   Concluding that Taylor's claim exceeded the limits of the Fair Plan policy in terms of the value of both the burnt home and destroyed contents, Watkins recommenced to Fair Plan that it pay the policy limits of $100,000 for structural fire loss and $35,000 for loss of contents.⁵  Fair Plan accepted this recommendation in March 1979.   In May and October of 1979, Taylor submitted “Proof of Loss” to Fair Plan and by November 1979, Fair Plan had satisfied all of Taylor's claim.   Fair Plan was in contact with State Farm during its investigation.

During Watkins's investigation, Taylor told Watkins that the alleged increase in coverage to $200,000 had been handled by his (Taylor's) escrow company during the second trust deed transactions.   This admission is significant as it contradicts all of Taylor's testimony given during discovery and trial that he had personally made the request for an increase to $200,000.  (See fn. 7, infra.)

While Fair Plan was pursuing its case, State Farm was probing the issue of the limits of its policy issued to Taylor.   Its investigation began in late December 1978 and was concluded six months later when State Farm decided in July 1979 that Taylor's policy had a $100,000 limit.   State Farm was advised by its independent adjuster that it (State Farm) could disallow all of Taylor's claim for destroyed contents because of Taylor's failure to make the necessary changes when he began renting out the property.   State Farm disregarded the advice and paid it.

Moreover, State Farm did not make any issue of the fact that from 1975–1978, Taylor had only been paying premiums for a $50,000 policy.   Instead, State Farm apparently concluded any mistake in that regard was caused by the conduct of its agent Catalina.   If the authorized agent of an insurance company consents to changes in a policy and promises to thereafter make the necessary changes but fails to do so through mistake, oversight, or neglect, the insurer will be bound.  (Walker v. Home Indemnity Co. (1956) 145 Cal.App.2d 318, 324, 302 P.2d 361.)   As such State Farm was bound to a $100,000 policy because Hallack had processed an increase to that amount on December 6, 1978.

State Farm paid Taylor his money by June 1980;  any delay in that regard was primarily caused by Taylor's failure to furnish proper documentation of lost property and its cost.   State Farm, concluding its policy had $100,000 limits, paid Taylor approximately $36,000—$15,000 for destroyed contents, $19,000 for living expenses;  $1,500 for appurtenant structures, and $800 for landscaping.   Taylor agreed to accept the money while reserving his right to bring the present lawsuit.

During its investigation and settlement negotiations, the contours of which we glean from the present record, State Farm received no suggestion from Taylor or anyone else Taylor was considering pursuing a lawsuit against it for bad faith based upon violation of its statutory duties or for any other reason.   Indeed when Taylor ultimately did file suit, none of his unverified pleadings ever mentioned any misconduct which, if true, constituted the crimes of destruction of evidence, manufacturing of evidence, and suborning of perjury although such was his theory at trial.   To the contrary, Taylor's complaint cited Insurance Code section 790.03 and asserted solely State Farm's misconduct its denial of his $200,000 claim and its refusal to communicate and settle with him.

Significantly, subdivision (h) of Insurance Code section 790.03 only proscribes “knowingly committing or performing with such frequency as to indicate a general business practice any of [15 specifically defined] unfair claims settlement practices.”  (Emphasis added.)   Nowhere in his complaint or at trial did Taylor even begin to allege that the complained of conduct by State Farm was committed “with such frequency as to indicate a general business practice.” ⁶

These circumstances are further evidence of what we believe was Taylor's fraudulent scheme to hold a well operated and honest insurance company hostage behind general and vague allegations of misconduct in the hopes of reaping a windfall by convincing the jury to return a large punitive damages award.

We believe the genesis of this action arises from the following:

After the fire, Taylor had an appraisal conducted which concluded that it would cost approximately $165,000 to rebuild his home.   Thus, his only hope in getting the additional $65,000 to reconstruct a dwelling lay in alleging he had $200,000 coverage with State Farm, a coverage which had been created when Catalina's employee(s) supposedly assented to Taylor's telephone request to raise his State Farm policy to $200,000.   Catalina's relationship with State Farm was such that assent by him (or one of his duly authorized employees such as Hallack) could immediately bind State Farm;  this is in marked distinction to Catalina's relationship with Fair Plan where he was not Fair Plan's agent but merely a broker who forwarded requests to Fair Plan.  (See Marsh & McLennan of Cal., Inc. v. City of Los Angeles (1976) 62 Cal.App.3d 108, 117–120, 132 Cal.Rptr. 796.)   With only a $100,000 policy, State Farm had no liability to Taylor for the structural fire loss.

Hence, if Taylor could prevail in establishing a $200,000 policy with State Farm, State Farm would owe him the $65,000 difference between the $100,000 actual cash value paid by Fair Plan and the $165,000 needed to rebuild his house.

Additionally, if Taylor had a $200,000 policy with State Farm he could potentially recover more money for destroyed contents.   Both policies offered actual cash value, not replacement cost in this regard.   Fair Plan's policy was for $35,000 on that point.   Because Fair Plan's investigation concluded that Taylor's loss in that regard exceeded said amount, Fair Plan paid him $35,000.

As to State Farm's coverage, its policy should have provided Taylor the identical amount for contents, to wit, $35,000.   But for a reason no one could explain, it did not.   Instead, Taylor had $50,000 worth of coverage with State Farm for contents.   State Farm paid Taylor $15,000, the difference between the two amounts, although, as noted earlier it could have disallowed the claim because Taylor had rented out the premises.

The relationship between State Farm and Fair Plan is neither explored nor explained in the present record, but it appears Fair Plan was as responsible as Catalina for State Farm's failure to learn of the 1975 increase in coverage from $50,000 to $100,000.   Fair Plan was the primary insurer to whom any request for an increase first had to be submitted.   But as a pragmatic matter, the increase could not become effective in terms of providing the total package of coverage to the insured unless and until State Farm had knowledge of the record.   As such, Fair Plan was in the best position to inform State Farm, the wraparound insurer, of those increases in coverage once it (Fair Plan) had approved them.

Significantly, if Taylor did have a $200,000 policy with State Farm, he would then have had $100,000 of coverage for contents due to the fire.   Taylor had valued the destroyed contents at $85,000 whereas State Farm asserted a worth of $58,000.   In any event, if Taylor had $100,000 worth of contents coverage, he would have received more money from State Farm.

In sum then, if Taylor had a $200,000 policy with State Farm, State Farm, assuming it accepted Taylor's valuation of the home and his personalty, would have been obligated to pay him $65,000 for the house and $35,000 for contents.   Taylor would have one believe that State Farm's “bad faith” failure to pay these sums was what led to his lawsuit.

We are of the view the real impetus for this action developed when Taylor realized he could not stack the two policies.   At that point he realized only if he claimed he had telephonically increased his coverage to $200,000 would he be able to secure extra money.   This perspective finds the following support in the record.⁷

In June 1979, while State Farm was investigating the issue of the limits of Taylor's coverage, Taylor called a State Farm investigator, Mike Wilt, and informed him he had documentation to prove he was entitled to $200,000 in coverage.   But in fact, all Taylor could establish was that he had a $100,000 policy with Fair Plan and a $100,000 policy with State Farm.   From this, Taylor argued to Wilt, “[I]f I have $100,000 with State Farm and I have $100,000 with FAIR Plan, I have a total of $200,000 worth of coverage.”   After Wilt explained the policies did not stack, Taylor changed his story with Wilt to then claim that he had $200,000 coverage with each insurer.

Subsequently, Taylor repeated this claim in a meeting attended by Wald, Wilt, and Daniel Snyder, the Claims Manager for State Farm's Los Angeles office and Wilt's supervisor.   Snyder testified that only after it was explained to Taylor that his policy limits did not stack, did the question of whether Taylor had ever requested $200,000 in coverage “take on much of a drive.”

At this point, we feel compelled to note that Taylor's role in this drama is somewhat akin to a jack-in-the-box in that he pops up at some crucial point in the events, then disappears, only to reappear again.   According to his own testimony, his only direct involvement before the fire was to make the phone calls on November 7 and 27.   He then apparently plays no active part until almost six months later.   This type of selective involvement in the case inures to his advantage in that he is thus able to immunize himself from cross-examination on all points other than those for which he provided direct testimony.   And even on those issues, he is unable or unwilling to offer any corroboration thereof.

As noted earlier, as put in issue by Taylor's unverified pleadings, the only misconduct asserted against State Farm was its refusal to honor and settle his $200,000 claim.   However, by the time of trial, Taylor had shifted his focus although he never moved to conform his complaint to his “proof.”   On this appeal, he essentially advances a two-pronged argument to support his claim State Farm had engaged in intentional misconduct such as to warrant the imposition of punitive damages and concedes that absent proof thereof, “State Farm's argument that the evidence did not support an award of punitive damages would have some merit.” ⁸

The first was State Farm had pressured Hallack into falsely testifying she had backdated the December 6 memo-gram to Fair Plan requesting an increase in Taylor's insurance coverage from $100,000 to $200,000.   Taylor claims she really did send the memo on December 6 but in response to pressure exerted by State Farm, she fabricated the assertion she had backdated it.

Taylor's statement is significant.   He concedes there is no direct evidence to support his claim.   Instead, he urges the jury could infer she was lying when she testified she had backdated the memo;  from that the jury could further infer a State Farm employee had pressured her into making that statement;  and lastly, the jury could draw the final and requisite inference this misconduct had been ratified by a managing agent of State Farm so punitive damages could be imposed upon the corporate defendant.

As such, the issue of credibility becomes paramount.   That is, does the jury believe Hallack when she testified Taylor never called before the fire to increase his insurance so that she was therefore telling the truth when she stated she had backdated the memo-gram?   Or instead, does the jury credit Taylor's testimony he made the calls and therefore conclude Hallack is lying when she claims she backdated the memo-gram?

Taylor's inflammatory charge of suborning perjury is not supported by the record.

At trial, Hallack testified under oath she had backdated the subject memo-gram.   She stated she had panicked because of Wald's constant badgering and hence had backdated the memo to give the impression that before the fire, Taylor had made the request to increase his insurance but in fact he really had not done so.   Her candor on this point stands in stark relief to the shifting and conflicting accounts of the events Taylor has given.  (See fn. 7, supra.)

Hallack's trial testimony was corroborated by State Farm's investigator, Larry Sprogis.   He testified that approximately three weeks after the fire, he went to Catalina's office to review Taylor's file and to speak with Hallack.   At that point, before anyone could have had any inkling of the instant lawsuit, Hallack told Sprogis she had backdated the memo in a misguided attempt to smooth over the situation.   We accord great weight to the fact she so early in the investigation admitted her mistake.   And from that version of the events Hallack did not waver during the ensuing legal melee, including giving testimony under oath.

Finally, the records demonstrate State Farm per se had no knowledge of anything that occurred between the Catalina office and Taylor with reference to his policy from November 27 to and including December 26 (other than to agree to its reinstatement on December 4);  nor does Taylor even contend State Farm did anything unfair or dishonest prior to the time it started its investigation on or about that date.

Significantly, Taylor has never suggested who pressured Hallack and when and how the corporate entity of State Farm first became aware of that misfeasance and subsequently ratified it.

The difference between the testimony offered by Hallack and that given by Taylor is great.   Hallack, under oath, confessed she had made a mistake in December 1978 when she backdated the memo-gram.   This testimony was corroborated by Sprogis who interviewed her long before she would have had any reason to do anything other than to tell the truth.   Taylor has never shown Hallack's concession about that mistake was in any way ever prompted by either Sprogis or her boss, Catalina, or any State Farm employee.   In fact, Taylor never has urged, and he could not urge, that there was anything improper in having Sprogis interview her inasmuch as State Farm's records demonstrated a conflict about the amount of coverage offered to Taylor.   Simply stated, Hallack had no motive to fabricate and in fact potentially jeopardize her nascent career in the insurance industry when she admitted she had panicked and backdated the memo-gram in an effort to protect herself and the insured.

Taylor, on the other hand, clearly had much to gain by fabricating his testimony.   For Taylor, this was an opportunity to gamble.   At the least, he would attempt to recover damages based upon a $200,000 policy for which he had never paid one premium, and at the most he had a lottery ticket to pay off the jackpot prize of $10 million.   But Taylor had already lied under oath when in a pretrial deposition he had testified he had never been convicted of a felony when in reality he had suffered two such convictions based upon his guilty pleas!   At trial, Taylor attempted to explain away this earlier perjury by asserting he had been “embarrassed.”   However, to us, this is but another example of his duplicity.

The other key prong of Taylor's claim for punitive damages was the assertion there had been a written message of his November 7 phone call but that the message was destroyed by State Farm in the course of its investigation in an effort to defeat his claim.

Initially, we note there was absolutely no direct evidence the message ever existed.   Taylor never testified either that he saw it or that Hallack, during the course of the alleged November 7 phone conversation, told him she was writing anything down.   Taylor's claim is solely based on enigmatic references to Sprogis's cryptic deposition testimony as to what he saw in Taylor's file when he went to Catalina's office in late December 1978.

This allegation of destruction of evidence did not surface until shortly before trial began when Taylor was told there was no written message.   At no point during the extensive pretrial discovery did Taylor ever raise the point State Farm had destroyed the alleged message.   As a matter of fact, at an undesignated time prior to September 1980, State Farm's lawyer had instructed Catalina's office to maintain all existing copies of telephone messages from 1978.   And except for Sprogis's one visit to Catalina's office to review the file, there is no evidence of any other time in which State Farm had control or possession of Catalina's file.   Nonetheless, throughout argument, Taylor's counsel continually hammered at the point that State Farm had maliciously destroyed evidence favorable to Taylor.   The argument ignores, of course, the fact that even were one to believe such a message ever existed clearly only someone in Catalina's office could have destroyed it as the file was always there.   But if Catalina or one of his employees did the purported misdeed, State Farm could only be liable if it ratified such conduct (Civ.Code, § 3294, subd. (b)) as even Taylor conceded Catalina was not a managing agent.⁹  But Taylor presented absolutely no evidence about any such ratification.

In sum, Taylor's claim of destruction of evidence is sorely lacking both in evidentiary support and logic.

Prior to commencement of trial, a hearing was conducted to determine whether State Farm would be permitted to impeach Taylor through the use of two felony convictions.

In 1982, Taylor had pleaded guilty to attempting to bribe a police officer (Pen.Code, § 671/212) and possession of cocaine for purposes of sale (Health & Saf. Code, § 11351).

The trial court ruled that the bribery conviction could be introduced for impeachment purposes but that proof of the offense of possession of a controlled substance for purposes of sale would be barred as the crime did not involve truth or honesty.   In the latter portion of that ruling, we find prejudicial error.

Evidence Code section 788 states:  “[f]or the purpose of attacking the credibility of a witness, it may be shown ․ that he has been convicted of a felony ․” And in People v. Castro (1985) 38 Cal.3d 301, 211 Cal.Rptr. 719, 696 P.2d 111, our Supreme Court held the offense of possession of a controlled substance for purposes of sale involves moral turpitude as it is inherent with the intent to corrupt others (id., at p. 317, 211 Cal.Rptr. 719, 696 P.2d 111) and thus conviction of such offense is a proper basis upon which to impeach.   Therefore, the trial court erred in barring State Farm from impeaching Taylor with the second conviction.

Up to this point, we have set forth and commented upon the evidence without any reference to the proffered impeachment other than our early statement that it was one of State Farm's appellate contentions.   This omission has been deliberate.   We live comfortably with the principle that a felon has a right to consummate an insurance contract equal to that of any person not so unfortunate.

But now we must now address the question of the effect of that erroneous ruling.

Our arduous analysis of the record demonstrates Taylor's case was supported solely by elusive, tenuous and ambiguous evidence.   Taylor's self-serving testimony merely provides gossamer-thin corroboration for his claim.

We were convinced by an initial examination of the entire record it was imperative to discover which of the adversary parties was telling the truth.   State Farm's opening brief made that crystal clear by its presentation and analysis.   In addition, State Farm insisted Taylor's testimony should have been screened by the formal impeachment evidence offered and rejected.   Such rejection, State Farm asserts, was prejudicial.

Taylor, in his brief, relying on the permissive presumption generated by a jury verdict, urges the jury accepted his version and thus proceeds on the theory that the jury verdict settled the question of credibility.   However, as we stated at the outset, such permissive presumption does not immunize a jury verdict from appellate review.   Accepting it, Taylor avoids a review of all the events which preceded and followed the two November calls and the December 6 and/or December 8 memo-grams.   Because review and analysis of all of those events inherently affect credibility, we have spent several thousand words doing so.

Predicated on the same reasoning, Taylor sloughs off any serious discussion of the rejected formal impeachment evidence offered and argues it was frivolous, the jury had one felony impeachment anyway, and the second which was rejected would add nothing, and finally, the court in the exercise of its discretion properly rejected it.

The primary and decisive issue is, as heavily reframed by Taylor, who “lied?”   Was it Taylor or was it Hallack?

We stated at the outset the prime issue was factual and the credibility of Taylor was the key to the proper disposition of this litigation.   We singled out Taylor because he was the plaintiff with a heavy interest and he was the only witness who testified at the trial against whom formal impeachment evidence was used half of which was accepted and other half rejected.

Taylor's case is replete with logical gaps.   Thus, although Taylor testified it was Craig Wald's responsibility to take care of insurance matters, Taylor asserted he had personally placed the phone calls to increase his insurance coverage to $200,000.   Of key significance is the fact that this claim is not corroborated.¹⁰  If Taylor had placed either of those two November phone calls, why had neither State Farm nor Fair Plan received any documentation in that regard prior to the fire?   As his agent, it was not only Catalina's responsibility to take such steps (see Marsh & McLennan of Cal., Inc. v. City of Los Angeles, supra, 62 Cal.App.3d 108, 117, 132 Cal.Rptr. 796) but Catalina testified it would have been in his financial benefit to have done so.   It may be reasonably assumed that if either of those requests had been made, Fair Plan and/or State Farm would have accepted.   After all, when the 1975 request was made to Fair Plan, it accepted.   And in fact, Taylor never testified that when he made either alleged request in November 1978 that he accompanied such with the requisite premium as required by Fair Plan or that he was ready to produce such premium upon demand.

Another striking example of Taylor's inability to furnish corroboration is embraced in his claim that in a meeting he attended within a year of the fire with State Farm representatives, an individual allegedly conceded State Farm's liability was $200,000.   Not only was Taylor unable to identify this person in any way at trial (e.g., personal appearance, name, etc.) but Taylor claimed Craig Wald attended the meeting.   Yet Taylor never sought to elicit any corroborating testimony from Wald on the point.   And to reiterate a point made earlier, in a July 1979 meeting, both Taylor and Wald had expressed the erroneous belief that Taylor should have had $200,000 worth of coverage because he should have been able to stack each $100,000 policy.

Furthermore, Taylor's presentation of the events contradicts his claim State Farm acted in bad faith.   For several years, Taylor knowingly took advantage of Catalina's mistake in only billing him for a $50,000 policy after the increase to $100,000 had gone through.   State Farm never requested and Taylor never tendered premiums to make up for that mistake.   Notwithstanding, State Farm agreed to fix its liability at $100,000 even though Taylor had let the policy lapse and thereafter only reinstated with a check to pay the premium for a $50,000 policy.   And State Farm did not rely upon any of these facts to deny coverage for $200,000.   It arrived at its conclusion after conducting an investigation of all of the relevant events.

Taylor knew from the beginning his case depended upon his credibility.   Trial counsel injected Taylor's character in this case in his opening statement.¹¹  Taylor's testimony was the only direct evidence he had ever sought to increase his policy to $200,000 before the fire occurred.   Quite apart from the fact that since the time of the fire he had given conflicting accounts of to whom he had spoken, both Hallack and Albus, the only individuals who could have received the phone calls, contradicted Taylor on this.¹²  To find in Taylor's favor and to award him $2 million punitive damages because State Farm allegedly destroyed evidence of the early November phone call, the jury would have had to have credited Taylor's testimony.

Furthermore, Taylor's testimony was critical on the issue of compensatory damages and the claim he had suffered emotional distress because of State Farm's conduct.   Taylor avers State Farm's denial of a $200,000 policy resulted in loss of his home through foreclosure.   At that time, his first mortgage was for $44,000 and the second trust deed represented $75,000.   Is Taylor's claim that he was unable to pay off those two obligations believable in view of his conceded receipt of $135,000 from Fair Plan and approximately $35,000 from State Farm, not to mention the $75,000 generated by the second trust deed?

We have reviewed and analyzed a prolific and irritating record to expose the pertinent evidence with which the adversary parties were confronted when Taylor, as one, and State Farm, as the other, took different positions on the solidity of Taylor's claim for $200,000.   Taylor admits, as indeed the record shows, State Farm did nothing prior to the commencement of investigation which he or anyone could characterize as misconduct.   Our review and analysis of the mechanics of the investigation and settlement show no mention or suggestion of the specific felonious conduct imputed to State Farm at the trial;  on the contrary, it shows that at the most when Taylor accepted a settlement of his separate homeowner's policy with State Farm but reserved the right to sue, the only misconduct he then had in mind was denial of his claim of $200,000 coverage.

In view of all of these circumstances the jury should have been given all legally relevant information to which it was entitled to assist it in its difficult task of deciding the truth.   The conviction of possession of cocaine for sale was probative of his veracity as a witness testifying under oath in a courtroom;  his intent to sell the contraband showed a willingness to pursue quick financial gain by dishonesty, which is what State Farm had a right to contend was the basis of his testimony.   However, the trial court's ruling kept from the jury the very important fact Taylor, who had initially denied in deposition he had ever been convicted of a felony, had been convicted of the second felony.   That evidence was not cumulative to the first conviction because letting the jury only know about his conviction for attempting to bribe a police officer may had led them to think that he had foolishly attempted to avoid a traffic ticket or had nobly tried to help a friend who was in trouble.   But permitting the jury to know Taylor had suffered two felony convictions in one year could paint a very different picture.   Then the jury could have well decided that Taylor was a person who consistently flouted society's rules whenever he felt it to his benefit to do so.¹³  The fact that Taylor was willing to commit two serious crimes within such a short period would tend to show his dishonest streak was not a mere momentary lapse of character.   Given the pivotal significance of Taylor's credibility, State Farm should have been permitted to prove and argue this point.

We must therefore conclude that the trial court's ruling barring impeachment through the second felony conviction resulted in a miscarriage of justice.   On the record before us, we have serious doubts as to whether Taylor discharged his obligation of establishing all elements of his case by a preponderance of the evidence.   We have analyzed the case at length because we must weigh the evidence to determine whether in our opinion a result more favorable to State Farm would have been reached in absence of the ruling limiting the impeachment of Taylor.  (Aldable v. Aldabe (1962) 209 Cal.App.2d 453, 457, 26 Cal.Rptr. 208.)   In view of the weak evidence advanced in support of Taylor's claim, we conclude it is reasonably probable a result more favorable to State Farm would have been reached in absence of the error in that upon learning of the second conviction, the jury could well have disregarded Taylor's testimony and returned a verdict in favor of State Farm.  (See Clifton v. Ulis, supra, 17 Cal.3d 99, 105–106, 130 Cal.Rptr. 155, 549 P.2d 1251.)   Therefore the judgment will be reversed to permit a retrial and full fleshing out of all the issues.

We therefore do not decide the second contention advanced by State Farm, i.e., insufficiency of the evidence to sustain a verdict for the claimed damages flowing from denial of a $200,000 policy and/or for the punitive damages.   Whether Taylor is or is not entitled to punitive damages, there is no doubt Taylor is entitled to recover comepnsatory damages to the extent he proves them whether he has been convicted of two, six, or ten felonies.   As to the punitive damages facet of the lawsuit, we do not decide the question although practically speaking, it is the primary thrust of Taylor's claim.   Based on the record now before us, the punitive damages claim appears to be inevitably and inextricably intertwined with Taylor's proof of his $200,000 insurance claim but we do not know what the record will be on a retrial.

Suffice it to note, that regardless of his status as twice-convicted felon, Taylor will have the opportunity at a second trial to attempt to recover damages.   Absent proof he caused the fire, he stands in the same position as does any insured.   On retrial, Taylor can and must marshal all the evidence in his favor.   Inextricably interwoven in that presentation must be facts that prove State Farm's alleged misfeasance and thus excuse Taylor's inability to make the proof of his case clearer.   And in that retrial, the trier of fact will be required to review, analyze, and accept or reject Taylor's testimony in whole or in part, in the context of knowing he has suffered two felony convictions.

The judgment is reversed and the cause is remanded for a retrial.   State Farm is to recover its costs on appeal (Rule 26, California Rules of Court).

FOOTNOTES

1.   Throughout his testimony, Taylor referred to Catalina as his “State Farm agent.”

2.   Actual cash value is defined as the cost of replacing the realty, minus depreciation for age.   The State Farm policy pays for replacement cost which will probably always be a greater amount than actual cash value.   Thus, State Farm would pay the homeowner the difference between the (lower figure of) actual cash value and the (higher sum of) replacement cost so long as the amounts received from Fair Plan and State Farm together do not exceed the $50,000 limits (on the policy as originally paid).   Also, the State Farm policy would pay for losses to items not even covered by Fair Plan such as trees, swimming pool, appurtenant structures and living expenses.

3.   The memo-gram was meaningless to Fair Plan except as to PMC's request to be named a payee as Fair Plan had in 1975 increased its fire insurance liability from $50,000 to $100,000.   Fair Plan had no knowledge of any of the events which took place as between Catalina's office and Taylor between November 7 and after the fire any more than did State Farm.   The December 6 memo-gram is of significance as it does reveal Hallack's state of mind with respect to the status of Taylor's insurance with State Farm.

4.   Wald, on the other hand, testified when he spoke with Hallack on December 8, she admitted she had failed to process the increase with State Farm but averred she had already so notified Fair Plan.

5.   It is undisputed Taylor had only a $100,000 policy with Fair Plan, having increased it from $50,000 to $100,000 in 1975 and having paid premiums thereon.   Although there was a controversy as to whether Catalina's office sent Fair Plan the request to increase coverage from $100,000 to $200,000 on December 6 or December 8, it is conceded said request was not received until December 11.   Pursuant to Fair Plan's underwriting rules, no increase in coverage could be effective until at least five (5) days after receipt of the request.   This is because Fair Plan, unlike State Farm, has no agents.   Nothing Catalina did or did not do could bind it (Fair Plan) unless and until Fair Plan itself accepted the request for increase.   Thus at best, Taylor's request to increase with Fair Plan could not have been effective until December 16, nine days after the fire, so it would have been of no help to Taylor.   This, then, is probably the reason Taylor never pursued any claim with Fair Plan that he had $200,000 worth of coverage with it.

6.   Immediately before trial, Taylor dismissed the two causes of action founded in breach of contract and negligence.   And before the matter went to the jury, the court announced, pursuant to counsel's instructions, that Catalina was no longer a defendant in the lawsuit.

7.   The necessity to fabricate the telephone conversation of November 7 no doubt explains why Taylor has given conflicting accounts both of it and of the person to whom he spoke on November 7.   At trial, Taylor first cryptically testified that he had spoken with “one of the secretaries.”   When pressed, he was unable to recall whether it had been Albus or Hallack.   But apparently shortly after the fire when he had been interviewed by a State Farm investigator, he had claimed he had spoken with Albus but in an answer made in September 1980 to an interrogatory propounded by State Farm, Taylor averred he had “asked for Dwayne [Catalina], and Cindy [Hallack] answered” and that he then relayed his request to her.   And in a deposition conducted in August 1983 Taylor testified he “believed” he had spoken with Hallack.   But, as noted earlier, within six months after the fire, Taylor had told the Fair Plan investigator that Property Mortgage Company had taken care of the alleged increase in his State Farm coverage.

8.   At trial much of Taylor's averment about misconduct centered on the investigation supervised by State Farm employee Mike Wilt;  Taylor claimed the investigation was incomplete, ignored evidence favorable to him, and presented a misleading picture to State Farm.   In that respect on this appeal, State Farm now concedes:“While there were certainly errors and omissions in the investigators' reports as well as in Wilt's Claim Committee Report, they were understandable in light of the scrambled condition of Taylor's file and the contradictory stories emanating from Catalina's office and from Taylor himself.   The errors made by State Farm's investigators evidence nothing more than negligence.”Thus we need not belabor those points.   The real issue, as contained in Taylor's above quoted concession, is whether anything more than mere negligence occurred.

9.   State Farm has assumed throughout this litigation it is bound by and responsible for any such mistakes made by Catalina within the scope of Catalina's authority.   But Taylor's trial counsel admitted, in chambers, prior to his closing argument and immediately after he had dismissed this action as to Catalina:“What I said was that I don't contend that Dwayne Catalina was a managing agent.   It may be that his acts were authorized or ratified by a managing agent, but it would be the act of the managing agent which lays the basis for punitive damages as opposed to any individual act by Dwayne Catalina apart from any ratification which occurred thereafter.“Is that clear?   I'm not going to argue that.   I don't even know why I said that.   You heard my argument.   I'm not going to touch the subject again.”

10.   The ambiguous transcribed November 27 phone messages do not corroborate Taylor.   They are clearly susceptible of the interpretation that now that Taylor had secured a second mortgage, he no longer wished to take advantage of Catalina's mistake in billing him for only $50,000 coverage but wanted to make sure that his State Farm policy was billed for and explicitly included $100,000 coverage.

11.   To illustrate, trial counsel in his opening statement said:“Skip Taylor, the plaintiff, is 41 years old.   He's divorced.   He lives with his only child, a 14-year old daughter, Amy, and he has sole custody of her.  [¶ ] In the early ‘60s he graduated from Columbia University.   After he graduated, he started a career in the record business, not as an artist but as a personal manager of different groups and different recording artists, and you will hear more about it.”Taylor immediately followed as a witness and he testified he then had custody of his 14-year old daughter;  however, is it reasonable that an individual as itinerant as Taylor would be awarded custody of his child?   And although Taylor testified he graduated from Columbia University, our review of his answers to State Farm's interrogatories indicates he merely ultimately graduated from that school after having attending four different (!) universities.

12.   We are aware Wald testified that subsequent to November 7, he called Catalina's office and was told the increase to $200,000 had been processed.   We accord little weight to this testimony as Wald stated he had spoken to Albus but Albus's uncontradicted testimony was that she would not have handled any calls in regard to Taylor as Hallack was in charge of his file.

13.   Clearly, Taylor is an individual who flouted the rules at trial in an effort to help his counsel to sell his pitch to the jury.   For instance, during direct examination he volunteered the following speech:  “And we hear the expression of ‘like a good neighbor, State Farm is there.’   They haven't been here, I can tell you that, and hopefully anybody else who has a fire insurance policy will check theirs closely because they haven't paid me.”  And later in cross-examination, he represented that State Farm's counsel had wrongly withheld from him a copy of his deposition testimony.   The claim was both factually false and a misstatement of the law.   He was reprimanded by the trial court.  (See Code Civ.Proc., § 2019, subd. (e).)  We recite these acts to illustrate Taylor was not a shy, confused business man or a shrinking violet victimized by a corporation wearing an oversized crow black Stetson hat in the form of State Farm nor was he one who was awed by a superior court judge representing the sovereign power of the State of California, presiding over an ongoing trial.And indeed, he had plenty of reason to believe he could get away with his cagey tactics.   He had testified under oath he lied when asked in his deposition whether he had committed a felony and admitted he did so because he was embarrassed.   Nothing had happened or was about to happen because of that incident.   All he had to do was to await the outcome of the trial for a jury verdict on whether he would get $10 million or $2 million.   He confessed and concluded that cured it and ended the situation.   But we are not satisfied with his explanation.   We do not think he was even embarrassed.   Taylor as must be abundantly clear from the record, was something of a court wise-guy.   He knew his counsel was going to make a motion to rule out both felonies as means of impeachment and was secure in the feeling the motion would be granted.   Unfortunately, he was only fifty percent correct.   He therefore thought he had little to lose.   There is little doubt in our mind that any person who thinks that way simply could not pass up an opportunity to present to himself a lottery ticket for $10 million by merely filing an unverified complaint based on an inflated claim supported by his testimony alone.

ROTH, Presiding Justice.

COMPTON, J., concurs. GATES, J., concurs in the judgment.