## Facts

- Hormel Foods Corporation (Hormel) contracted with Crystal Distribution Services, Inc. (Crystal) for cold-storage warehousing of Hormel’s food products under specified storage conditions.
- Crystal stored Hormel’s products on a low warehouse floor, contrary to the contract’s storage requirements.
- Flooding damaged Hormel’s stored products, and Hormel claimed roughly $4 million in losses.
- Hormel sued Crystal for breach of contract, alleging Crystal’s storage practices caused or contributed to the flood-related damage.
- Hormel’s insurers paid approximately $3 million toward Hormel’s claimed losses.
- As trial approached, Hormel filed a motion in limine seeking to exclude evidence and argument that Hormel’s insurers covered a large portion of the loss.

## Issues

1. In a breach-of-contract case seeking compensatory damages, may the defendant introduce evidence that the plaintiff’s insurers paid a substantial portion of the claimed loss, or does the collateral source rule (and Rules 401/403) require exclusion?

## Decision

- The court denied Hormel’s motion in limine to categorically exclude evidence that Hormel’s insurers paid a portion of the claimed damages.
- The court reasoned that, because the case sounded in contract and sought compensatory damages, the collateral source rule did not bar consideration of insurance payments where such payments could lead to recovery beyond the actual loss.
- The court indicated that any use of insurance evidence at trial remained subject to standard limits on relevance and unfair prejudice, including the risk of confusing the damages calculation or turning the trial into a dispute over insurance coverage.

## Legal Principles

- Contract damages are intended to compensate for the loss caused by the breach, not to provide a double recovery.
- The collateral source rule is most commonly applied in tort; it does not automatically prevent consideration of insurance payments in contract cases where those payments would allow recovery exceeding compensation.
- Evidence is admissible if it is relevant under Federal Rule of Evidence 401 and not excluded by Rule 403’s balancing of unfair prejudice, confusion, or delay against probative value.
- Motions in limine are tools for managing the presentation of proof at trial; courts may permit evidence in principle while reserving authority to limit how it is presented to the jury.

## Conclusion

Hormel sought to keep the jury from hearing that its insurers paid about $3 million of its claimed $4 million loss, but the court declined to impose a blanket exclusion. Because the case was a breach-of-contract action seeking compensatory damages, the collateral source rule did not require exclusion of insurance-payment evidence where it bore on whether Hormel would otherwise recover more than its actual loss, with admissibility still controlled by ordinary relevance and prejudice limits.


Hormel Foods Corp. v. Crystal Distribution Services, Inc., 2012 WL 1119885 (2012)