Insurance Claims And Issues

FINAL FOUR-TEEN FOR THE EXPERTS: EXPERTS IN INSURANCE CASES ....

... THE LAST OF THE BUNCH.  FOURTEENTH AND FINAL CASE.

(FOR NOW.)

   On the Defendant Insurance Company's Motion for Partial Summary Judgment in a Hurricane Wilma Property Damage case, a United States Magistrate Judge in South Florida now allowed an Expert Report where there is evidence of Hurricane Wilma Damage.  The Defendant's motion was denied on this ground, i.e., on the ground that there was insufficient evidence in the record that Hurricane Wilma caused the Damages which it was claimed to cause under the Property Policy at bar because the Plaintiff's Expert's Report was not stricken although it could have been stricken and it, the Plaintiff's Expert's Report, provided "evidence of its [Kendall Lakes'] damages and summary judgment cannot be granted on this ground."  Kendall Lakes Towers Condominium Association v. Pacific Insurance Co., 2012 WL 266438 *1 (S.D. Fla. January 30, 2012; Goodman, USMJ), Download Kendall Lakes Towers Condominium Assn v. Pacific Ins. Co. (S.D. Fla. Case No. 10.24310, Order of USMJ Filed Jan. 30, 2012) PUBLIC ACCESS.

   The Court's previous and unique ruling refusing to entirely exclude the Testimony of the Plaintiff's Expert in question, and allowing the Plaintiff to make certain payments if it elected to use the Testimony of that Expert, was previously posted here, on February 22, 2012 .  PACER, the online docket of the Federal Courts, reveals that the parties filed a joint stipulation for dismissal on March 6, 2012.  The next day, the Court entered an Order granting the stipulation for dismissal. 

   The Defendant's Motion for Partial Summary Judgment on the different ground of Late Notice was also denied.  Whether there is prejudice from Late Notice in this case is a question of fact, the Court ruled.  Id. at *5 - *7.  However, the Court in this case first ruled that the Notice given to the Insurance Company was in fact late.  Id. at *2 - *5.

   The thing that saved the Plaintiff from suffering the entry of Summary Judgment on Late Notice was the Court's ruling that Kendall Lakes, the Plaintiff, could rely on Pacific's "own expert reports" to rebut the rebuttable presumption of Late Notice under Florida law here:  "But Kendall Lakes may nevertheless rely on evidence produced by Pacific, including its own expert reports, to sustain its burden of rebutting the presumption of prejudice, as it has attempted to do here."  Id. at *5.

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FOURTEEN FOR THE EXPERTS: NEW INSURANCE CASES THAT MAKE EXPERT WITNESS LAW ....

.... The Twelfth Case.

    In a change-of-pace, Insurance Claims and Bad Faith Law Blog and Insurance Claims and Issues Weblog have been trading consecutive posts addressing a single common theme:  Court rulings on Expert Witness Testimony and Reports in recent Insurance Cases.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

 

Hurricane Wilma Professional Engineer Expert Disallowed.

        In the case of Banta Properties, Inc. v. Arch Specialty Insurance Co.,  2011 WL 7118542 (S.D. Fla. December 23, 2011), Download Banta Props, Inc. v. Arch Specialty Ins. Co. (S.D. Fla. Case No. 10.61485, Order Granting Daubert Motion for Exclusion, Filed Dec. 23, 2011) PUBLIC ACCESS, the District Court disallowed a Plaintiff Property Management Company's proffered Expert.  The Expert in question is a Professional Engineer.  She was proffered to testify to her Opinions "that Hurricane Wilma damaged windows and doors at Plaintiff's properties and as a result needed replacement."  Id. at *1.  The Defendant Insurance Company requested the Court to exclude her Expert Testimony on a number of different grounds.

        In pertinent part, the Professional Engineer Expert could not satisfactorily attribute the Plaintiffs' claimed Damages to their claimed cause, Hurricane Wilma.  The Court "agrees that Mellinger was unable to attribute damage to Hurricane Wilma with any degree of certainty and that she used an unreliable methodology.  Therefore, the Court shall exclude her expert opinions."  Id. at *2.

        If an Expert is proffered on Damages, she should also offer acceptable Opinion Testimony as to what caused those Damages, or suffer the risk of not testifying at all, as in this case.

      Parenthetically, the exclusion of this Expert's Testimony does not appear to have harmed the Plaintiff''s case very much.  PACER, the online docket of the Federal Courts, reflects that the Jury returned a Verdict for the Plaintiff on January 30, 2012.  The Verdict includes the Jury's finding that $4,000,000.00 or $4 Million is the amount of the Plaintiff's covered Damages resulting from Hurricane Wilma.  On February 27, 2012, the Plaintiff filed a motion for entry of final judgment.

Part of a Series.  To be continued ....

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FOURTEEN FOR THE EXPERTS: NEW INSURANCE CASES THAT MAKE EXPERT WITNESS LAW ....

.... TWO MORE.

    In a change-of-pace, Insurance Claims and Bad Faith Law Blog and Insurance Claims and Issues Weblog will carry consecutive posts addressing a single common theme:  Court rulings on Expert Witness Testimony and Reports in recent Insurance Cases.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

What Will be Done With Late-Filed Expert Witness Affidavits and Reports?

           In the case of House of Clean, Inc. v. St. Paul Fire & Marine Insurance Co., 2011 WL 2118633 (D. Mass. May 27, 2011), Download House of Clean, Inc. v. St. Paul Fire & Marine Insurance Co. (D. Mass. Case No. 07.10839, Memorandum and Order Filed May 27, 2011) PUBLIC ACCESS, a Federal District Judge's solution was not to consider Plaintiff's late-filed Expert's Affidavit on Defendant's Motion for Summary Judgment.  The Affidavit (or the Expert's Testimony live) would be considered at Trial in this Declaratory Judgment Action involving issues of Insurance Coverage for Pollution, and the Sudden and Accidental Exception, the District Judge in that case ruled.   Id. at *12.

     Parenthetically, the Online Docket of this Federal Case on PACER reflects that the parties settled the case, and the Court granted the parties' joint motion to dismiss because of the settlement, on August 16, 2011.

What Will be Done With Very Long Expert Witness Affidavits and Reports?

            In some Insurance Cases, as in Curatolo v. Allstate Insurance Co., 2011 WL 2116459 (N.D. Ohio 2011), Download Curatolo v. Allstate Insurance Co. (N.D. Ohio Case No. 5.10CV607, Memorandum of Opinion and Order Filed May 27, 2011) PUBLIC ACCESS, the Court may not read Expert Witness Affidavits that are just too long and are not even referenced in pertinent part in the Motions and Memorandums which they are filed to support.  In Curatolo, the Expert's Affidavit in question was 63 pages long.  The Affidavit was offered in the context of a theft claim followed by a vehicle claim and then by a sewer backup claim, denial of all Coverage for all claims on various grounds, and a Complaint in Federal Court for alleged Breach of Contract, Declaratory Judgment, alleged Bad Faith, and alleged Intentional Infliction of Emotional Distress.  Id. at *1.

          The Federal Judge in that case ordered the Defendant as the proffering party to brief the issue(s) for which the Expert's Affidavit was proffered, if they want the Court to consider the Expert's Affidavit which they filed in support of their Motion for Summary Judgment on various grounds.  See id. at *4 - *10.

     Parenthetically, PACER relects that this case was dismissed with prejudice based on the parties' settlement agreement, on June 10, 2011.

To be continued ....

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FOURTEEN FOR THE EXPERTS: NEW INSURANCE CASES THAT MAKE EXPERT WITNESS LAW ....

 

.... TWO MORE.

    In a change-of-pace, Insurance Claims and Bad Faith Law Blog and Insurance Claims and Issues Weblog will carry consecutive posts addressing a single common theme:  Court rulings on Expert Witness Testimony and Reports in recent Insurance Cases.  For the previously developed rules of law and judicial decisions on these issues, see generally as to Liability Insurance Cases, volume 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 8:17 (West Publishing 3d ed. 2011; 2012 Supplement in process), and see generally as to all types of First-Party Insurance Cases, volume 2 id. § 12:18.

 

 Expert Witness Testimony:  Reliability is Required.

    Many criteria are generally accepted as measurements of the reliability of scientific testimony.  Even when the criteria are different from Court to Court, including between Federal Courts and State Courts, there are generally accepted measurements of the reliability of scientific testimony when it is offered at Trial.

   In "the area of non-scientific, experience-based testimony, while these same criteria may be used to evaluate its reliability, sometimes other factors may prove more useful."  Clena Investments, Inc. v. XL Specialty Insurance Co., 2012 WL 266422 *8 (S.D. Fla. January 30, 2012)(Rosenbaum, USMJ), Download Clena Investments, Inc. v. XL Specialty Insurance Co. (S.D. Fla. Case No. 10.62028, Order of USMJ Filed Jan. 30, 2012) PUBLIC ACCESS.  What those factors may be in a given case, will vary from case to case in which "non-scientific, experience-based testimony" is offered from  Expert Witnesses.

   For example, in the Clena case itself, one Calitu testified that his analysis of Hurricane Wilma Damage sustained by Plaintiff Clena Investments, Inc. depended in part on a "six-factor chart".  The Court held that the chart was unreliable evidence and struck Mr. Calitu's Opinion in his Report to the extent that he relied on that chart in reaching his Opinion.  Id. at *10.

   However, Mr. Calitu also based his Opinion on "his training, experience, and inspection of the Property to opine that it is more likely that Hurricane Wilma imposed the Property damage than that any prior hurricane did."  To that extent, based on his own "training, experience, and inspection of the Property," Mr. Calitu's Opinion that the Plaintiff sustained damage from Hurricane Wilma was held admissible in that case.  Id. at *10.

 

When Reliability is Not Enough:  Disclosure Deadlines Must Be Met or There May Not Be Any Expert Testimony.

   In another case another United States Magistrate Judge in the Southern District of Florida faced a request to allow an Expert to testify even though the Expert was not timely disclosed, his Report was untimely provided, and he could not in any stretch of the Court's imagination be deemed a "rebuttal" Expert in this case.  Kendall Lakes Towers Condominium Ass'n v. Pacific Insurance Co., 2011 WL 63272198 * 1 (S.D. Fla. December 20, 2011)(Goodman, USMJ:  "This is an insurance coverage dispute concerning the issue of whether there is coverage for property damage allegedly arising from Hurricane Wilma on or about October 24, 2005."), Download Kendall Lakes Towers Condominium Assn v. Pacific Ins. Co. (S.D. Fla. Case No. 10.24310, Order of USMJ Filed Dec. 20, 2011) PUBLIC ACCESS.  The Defendant understandably was not amused and requested that the Expert be precluded from testifying.

  The Court set the scene by laying down the law:

Evaluating a preclusion request involves an analysis of several factors, including the history of the litigation, the proponent's need for the challenged evidence, the justification (if any) for the late disclosure and the opponent's ability to overcome its adverse effects (i.e., the degree of prejudice and whether it can be cured or ameliorated.

Id. at *3.

   These things factor into a standard of discretion, said the Magistrate Judge.  The Expert was allowed, with restrictions.  These are the restrictions, reasonably tied, it certainly appears, to being allowed to present the Expert's Opinion Testimony in this case under these circumstances:

1. If Plaintiff intends to use the Expert in question at Trial, then within 7 days of the Court's Order the Plaintiff was required to submit to the Defendant Insurance Company "an amended or supplemental expert report, in compliance with all the disclosure requirements."
2. The Defendant could take the Expert's Deposition within 1 month after this decision.
3. If the Defendant took this Expert's Deposition, the Plaintiff would pay the Expert's fee for this Deposition, and the Court Reporter fees, and the attorney's fees and costs incurred by the Defendant "in preparing and taking" this Deposition.
4. If the Defendant chose to obtain a Rebuttal Expert in response to this particular Plaintiff's Expert, it was allowed 1 month and 10 days, or a total of 41 days, after this decision to do so.
5. Finally, in part here pertinent, if the Plaintiff wished to depose the Defendant's Rebuttal Expert in question, then the Plaintiff could do so within 1 month and 20 days, or a total of 52 days, after this decision provided that  the Plaintiff would bear "the typical costs" and pay the Defendant's Rebuttal Expert's fee both for Deposition time and for time spent in preparing for this Deposition.

Id. at *5.

   Clearly, Expert Witness Testimony must be reliable -- and timely disclosed in accordance with applicable Court Orders and Rules.

 

Part of  a Series.  To be continued ....

 

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Title Insurance Lawyer's Legal Conclusions Not Admissible Expert Opinions.

   In an opinion nearly as long as the Texas Panhandle, a Federal Magistrate Judge in Texas held that a Title Insurance Lawyer could not testify to legal conclusions, not even as an Expert Witness offering 'Opinion' testimony.  Fidelity Nat'l Title Insurance Co. v. Doubletree Ptrs., L.P., 2011 WL 4715174 *6-*7 (E.D. Tex. October 5, 2011), Download Fidelity Nat'l Title Insurance Co. v. Doubletree Ptrs., L.P. (E.D. Tex. Case No. 4.08 CV 243, Memorandum Opinion and Order Filed October 5, 2011) PUBLIC ACCESS.  This holding is consistent with the overwhelming majority, perhaps universal view, that an Expert Witness is not permitted to testify to legal conclusions.

   Another consistent holding in this case came after a finding (or holding) of no Insurance Coverage.  Under Texas law, there could be no actionable breach of the implied Duty of Good Faith and Fair Dealing without a breach of the Insurance Contract.  Id. at *18.

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Motions in Limine Running Wild: Focus on Experts, Computer Simulations.

   In the case of Royal & Sun Alliance Insurance PLC v. UPS Supply Chain Solutions, Inc., 2011 WL 3874878 (S.D.N.Y. August 31, 2011), the Plaintiff, a Liability Insurance Company, and one of the defendants filed more than 9 motions in limine between them.  (Previously filed motions in limine were not counted by the District Judge in this decision.)

   Six of the motions in limine focused on Expert Witnesses and computer simulations.  One of the defendant's proffered Experts, an accident reconstructionist, produced various computer simulations "using the PC Crash computer software" to reconstruct the automobile accident at issue and whether in effect it was, in this instance, negligence per se on the part of the subject defendant, as Royal Sun alleged.  Royal Sun contended in one of its motions in limine that the accident reconstructionist's testimony would be "unreliable" and should thus be excluded because of 'GIGO,' or 'Garbage In, Garbage Out':  Royal Sun alleged that the Expert "used flawed factual inputs to run the program."  Id. at *7.

   The defendant which proffered this Expert's Opinion Testimony including regarding the computer simulation in question, also submitted a "declaration" from him in opposition to Royal Sun's motion in limine to exclude the Expert's testimony about any of his computer simulations.  Id. at *8.

   The Federal Court considered the record and found that the Expert's methodology was reliable enough for his Expert Testimony to be admissible.  "Royal Sun will have the opportunity to question [him] about his methodology at trial, including why he selected certain inputs for PC Crash and why he decided not to run more than ten scenarios in conducting his analysis."  Id. at *9.

   Royal Sun's motions in limine fared better with the Federal Judge in this case when they directed attention to two of the accident reconstructionist's computer simulations, with the contention that both of the two simulations were disclosed "late" in violation of Federal Rule of Civil Procedure 26(a)(2)(B) and thus they, and testimony about them, should be excluded under Federal Rule 37(c)(1).

   One of the subject computer simulations is called the "Avoidance Simulation," and the other is called the "Fogarty Simulation".  The Court found that the defendant disclosed the Expert's Avoidance Simulation six business days after the applicable deadline.  The Fogarty Simulation, in contrast, was not "formally disclosed" even at the time the Court wrote the subject opinion.  However, the Federal Court was willing to "grant [the defendant] one final opportunity to fulfill its Rule 26 obligations."  Id. at *11.  If that defendant intends to use the subject Expert's testimony about the two of his computer simulations in question, then that defendant must make the Expert available for deposition about them:

We will not limit [the Expert's] testimony concerning the initial eight to ten PC Crash scenarios he conducted.  With respect to the Avoidance and Fogarty Simulations only, [his] testimony will be precluded unless [the defendant proffering his Expert Testimony in this particular case] provides the additional discovery outlined above.

Id.

   In this case, once the Federal Court was convinced of the proffering party's failure to comply with the disclosure requirements of Federal Rule 26, the proffering party had a decision to make.  It could belatedly comply with those requirements or it could do without the Expert's Testimony at trial in that case.  The Federal Court in this case, like the Courts in many other cases previously decided on the same or similar issues, could instead have offered no choice at all and excluded the Expert Witness's Testimony entirely in regard to the untimely disclosed two computer simulations at issue there.

   It appears, moreover, that as the proffering party's alleged failure to disclose could not be cured by cross-examination (unless the Expert is made available for deposition), the Court did not treat the alleged failures of his methodology, which could clearly be cured by cross-examination, in anything like the same way.

Admissibility of Expert Testimony in Insurance Coverage and Insurance Bad Faith Cases is the focus of § 8:17 (Third-Party Cases) and § 12:18 of Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (West Publishing Co. Third Edition 2011).

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Three Cases For The Experts: Disclosure, Deadlines and "Fit" Testimony.

   Rules requiring disclosure of Expert Testimony are important.  Compliance with them can be crucial.  In Federal Court, Federal Rule of Civil Procedure 26(a) provides for certain requirements and deadlines governing disclosure concerning Expert Witnesses and their testimony expected to be offered at Trial.  Failure to comply with Rule 26(a) can result in the imposition of a number of sanctions under Federal Rule 37.  If the failure to comply is "neither substantially justified nor harmless," the party offering the Expert Testimony may be barred from using them in the Federal Court action "as an expert witness to supply evidence on a motion, at a hearing, or at trial," as happened to the Plaintiff Condominium Association in the case of La Gorce Palace Condominium Ass'n v. QBE Insurance Corp., 2011 WL 1522566 *4 (S.D. Fla. February 28, 2011)(authorized subscription required).

   Even where disclosure is arguably "late," it may nonetheless be substantially justified or the Court's resolution of the opposing party's challenge to the Expert disclosure may render the "lateness" of the disclosure harmless, as in Perez v. First American Title Insurance Co., 2011 WL 3861677 *1 (D. Ariz. September 1, 2011)(authorized password required to access Westlaw).  In the First American Title Insurance case, a District Judge held that a supplemental Expert report was "substantially justified" because the Court itself had previously held that electronic discovery would be allowed after the original deadlines had passed for disclosure concerning Experts, including deadlines for Rebuttal Reports.

   When timely or substantially justified, or harmless, even allowable Expert Testimony depends on the issue for which the Expert Testimony is offered.  Further, Expert 'qualifications' do not require an academic degree; experience is often the appropriate answer as to whether the proffered Expert Testimony is a good fit for the issue on hand, as  a third U.S. District Judge ruled in Metlife Auto & Home v. Broan-Nutone, LLC, 2011 WL 3736550 *3-*4 (N.D.N.Y. August 24, 2011)(authorized Westlaw password required).

Issues surrounding Expert Witnesses in Insurance Cases are addressed in Sections 8.17 (Third-Party) and 12.18 (First-Party) by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (West Publishing Co. Third Edition 2011).

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EXPERTS, INSURANCE, REPORTS AND RULE 26.

   The Eleventh Circuit Court of Appeals has affirmed a Trial Court striking six (6) Experts from testifying at Trial.  Walter Int'l Prod's, Inc. v. Salinas, 2011 WL 3667597 *5-*7 (11th Cir. August 23, 2011).   None of the Experts submitted a Report as required by Federal Rule of Civil Procedure 26.

   The panel in this case followed established law concerning the specific requirements of Rule 26.  More specifically, the requirements of Federal Rule of Civil Procedure 26 must be satisfied in any Federal Civil Case before a United States District Court may allow the admission of testimony from an Expert Witness.  The panel in this case followed the rule established in the Eleventh Circuit on this issue:

    "Each witness must provide a written report containing a complete statement of all opinions to be expressed and the basis and reasons therefor, as well as information about the data considered, the witness' qualifications, the compensation earned, and any other recent cases in which he or she offered testimony. Any party that without substantial justification fails to disclose this information is not permitted to use the witness as evidence at trial unless such failure is harmless."

                                 

Id. at *7.

   In this case, the six (6) Experts in question were retained by Plaintiffs the Bart Group in their suit against the Defendant Mercado.  In relevant part, Mercado counterclaimed in four Counts for alleged Breach of Contract (two Claims), Breach of Fiduciary Duty, and Declaratory Judgment.  The Bart Group pursued the subject Appeal from the Trial Court's denial of their Motion for a New Trial on Damages:

    The Bart Group contends that it is entitled to a new trial on damages because the district court abused its discretion by striking the Bart Group's six proposed expert witnesses. Five of those witnesses would have been offered as experts in the following areas: (1) intellectual property transactions under Puerto Rican law; (2) forensic accounting and valuation; (3) the United States marketing industry; (4) international telecom, television, and SMS industry; and (5) Mexican marketing and artist representation. The sixth proposed expert the court struck was described as a “responsive expert.” The reason the court would not allow testimony from those witnesses is that the Bart Group had failed to comply with the disclosures required under Fed.R.Civ.P. 26(a), and the failure to do so was not substantially justified or harmless.

Id. at *5.

   Failure to comply with the requirements set forth in Rule 26 resulted in the testimony of each of the six Bart Group Experts in this case being held inadmissible at Trial.  That decision was affirmed on appeal in these words:

    The Bart Group's failure to provide Mercado with expert reports within the meaning of Rule 26(a) violated that rule and the court's orders. The violation was not “substantially justified,” Fed.R.Civ.P. 37(c)(1); indeed, there was no justification for it. Nor was the violation “harmless.” Id. The reason for requiring that an expert report be provided before a deposition is taken is so the opposing party can use the report to examine the expert at the deposition. As the district court pointed out, it is harmful to deprive opposing counsel of the expert's report before his deposition. The district court did not abuse its discretion when it excluded the testimony of Cusano and the Bart Group's other experts.

 Id. at *8.  [Emphasis added.]

   These rules are similarly applied, without an exception, to Insurance Experts including in Bad Faith Cases in Federal Court.

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Insurance Expert, Custom and Trade Usage of Insurance Policy Terms.

   Two Insurance Companies faced off on many issues in Download Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co. (E.D. Pa. Jan. 20, 2011 Opinion on MIL re Expert), PUBLIC ACCESS, also published as 2011 WL 204619 (E.D. Pa. Jan. 20, 2011)(authorized password required to access Westlaw).  One of the many issues in contention was Commonwealth Land Title Insurance Company's use of an Expert Witness to testify about the background of terms and provisions used in Commonwealth's Insurance Policy.

   Commonwealth issued a Title Insurance Policy to Nationwide.  There came a time when Nationwide made a Claim on that Policy and Commonwealth denied the Claim.  Nationwide sued for Coverage.  Commonwealth listed an Expert Witness to testify about its Title Insurance Policy.  Nationwide objected and moved to strike the Expert as a Witness.

   Three of Nationwide's mostly unsuccessful arguments will receive focus here.  First, Nationwide argued that the Commonwealth Policy language was clear and so no Expert Testimony was required.  Under Pennsylvania law which governed the proceedings, "[t]he court must, however, also consider evidence of industry custom and practice."  Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co., 2011 WL 204619 at *7.  In fact, "the Pennsylvania Supreme Court has held that trade usage must always be considered in interpreting a contract, regardless of whether a phrase is ambiguous."  Id.  [Emphasis by the Court.]  The Court rejected this prong of Nationwide's argument accordingly.

   Nationwide also argued that the particular Expert Witness at issue, based the Opinions he expressed in his Report "solely on subjective belief and unsupported opinion."  Id. at *8.  For some reason, Nationwide also criticized what it perceived as "no methodology" for this Expert's Opinions.  The Federal Court rejected this argument, beginning with a long list of this Expert's experience.  In sum, this Expert is a lawyer who has dealt with Title Insurance issues.  He was regional claims counsel, and was employed at two Title Insurance Companies, wrote a book about Title Insurance, and edited a newsletter about Title Insurance Law.  "Such an extensive background in the land title insurance industry," wrote the Court while rejecting Nationwide's contentions to the contrary, "unequivocally puts [this Expert] in the particular class of persons who could testify as to the custom and trade of certain terms used within title insurance policies.  No further 'methodology' for his opinions is necessary."  Id.

   Last, Nationwide won half a loaf with the argument that this Expert could not testify about legal conclusions, and that arguably all of the Opinions he expressed in his Report are legal conclusions.  The Federal Court agreed that no Expert can testify to legal conclusions.  Those portions of his report "will be stricken" and the Court refused to consider them in passing upon the parties' motions for summary judgment.  Id. at *15.  There was a "but" coming:  The Expert Witness in question could offer Opinions about "title insurance industry practice and customs" including regarding the terms and provisions at issue in the Commonwealth Title Insurance Policy.  Id.

   The Federal Judge in this case recently granted leave to file an Interlocutory Appeal on the scope of Coverage under the Commonwealth Title Insurance Policy. Download Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co. (E.D. Pa. Memorandum Opinion Filed March 23, 2011), PUBLIC ACCESS, also published as 2011 WL 1044864 *4 (E.D. Pa. March 23, 2011).

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California Bad Faith Stampede: First-Party, Third-Party Summary Judgment ...

... in Same Case.

   In Download Gaylord v. Nationwide Mut. Ins. Co. (E.D. Cal. Case No. 1.10.CV.620, Order on Defendants' Motion for Summary Judgment Filed March 4, 2011) PUBLIC ACCESS, also published as 2011 WL 836459 (E.D. Cal. March 4, 2011) (authorized password required to access Westlaw), the Court was confronted with claims both for First-Party Bad Faith and for Third-Party Bad Faith.   The Court granted the Insurance Companies' motion for summary judgment on all the Bad Faith Claims.

   The Federal Court listed many hornbook rules of law in a lengthy opinion, including these rules of California Insurer Bad Faith law:

 If a loss is not covered and no benefits are due, there can be no tort liability for breach of the implied covenant, even if the investigation was negligent. Benavides v. State Farm General Ins. Co., 136 Cal.App.4th 1241, 1250-51 (2006). The “ultimate test” in bad faith liability claims is whether the insurer's denial/conduct was unreasonable. See Nieto, 181 Cal.App.4th at 86. Where there is a “genuine issue” or “genuine dispute” as to the “insurer's liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute.”

Id. at *17.  Most if not all Courts in other jurisdictions also apply these rules to Insurer Bad Faith claims; however, while "reasonableness" is a hallmark of First-Party Bad Faith exposure, Third-Party Bad Faith does not depend on "reasonableness" for its "ultimate test".  The Federal Court apparently applied these rules to both sets of claims in this case, those based on assertions of First-Party Bad Faith and those involving alleged Third-Party Bad Faith.

   It is also significant to Insurer Bad Faith Law that this case involved reliance on Expert opinions which the Insurance Companies received in connection with their denial of a First-Party Claim and in connection with their refusal to defend a Third-Party Claim against the insured.  In this case, their reliance was reasonable in the eyes of the Federal Court, in fact, so reasonable that it was part of the reason that the Court granted the motion for summary judgment.

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Payment for Preparation: Taking Expert Witness Depositions.

   In a case involving the issue of pre-payment charges by Expert Witnesses for taking their depositions, a Federal Magistrate-Judge also had something to say about "preparation time" charges by Expert Witnesses.  Most Courts hold that an Expert Witness is entitled to payment by the interrogating attorneys for the Expert's time spent in preparing for a deposition.  Download Bartram, LLC v. Landmark American Insurance Co. (N.D. Fla. Case No. 1.10.28, Order of USMJ Filed February 16, 2011) PUBLIC ACCESS, at n.2.  (This case involves substantive issues of builder's risk Insurance Coverage for construction defects, under Florida substantive law.)

   While the Rule [Federal Rule of Civil Procedure 26(b)(4)(E), which has many State Court counterparts] does not expressly state whether an expert's time preparing for a deposition is "time spent in responding to discovery" the clear trend is that expert witnesses may be entitled to at least some compensation for time spent in preparation for a deposition, particularly if the expert is testifying in a complex case.

Id.

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Prepayment for Expert Witnesses Not Required Before Deposing Them.

   In a First-Party Insurance Coverage case, a universal holding was rendered under the Federal Rules of Civil Procedure.  Plainly stated, a party does not have to pay in advance for the privilege, as it were, of deposing another party's Expert Witness.  Download Bartram, LLC v. Landmark American Insurance Co. (N.D. Fla. Case No. 1.10.28, Order of USMJ Filed February 16, 2011) PUBLIC ACCESS.

   The U.S. Magistrate-Judge's holding in this case came under Federal Rule of Civil Procedure 26(b)(4)(E), a Rule of Civil Procedure which deals with Experts and which has many counterparts in State Court Rules of Civil Procedure.  Despite very little case law addressing the issue, this Court announced that it was following the holdings reached in every other case found by the Court:

The Rule provides that the party deposing the expert must reimburse the expert for the "time spent" in responding to discovery.  The Rule thus contemplates payment for services that have occurred and not for services that will take place -- absent of course a situation which would result in manifest injustice.  As such, the Rule contemplates payment after the services have been incurred.  Indeed, that is the only way the Rule would make sense.

Id. at unnumbered third paragraph of attached opinion.

   While this holding was reached in a First-Party Insurance Coverage case, it is clearly not confined to that category of cases.  It arguably applies to all cases in which one party's Experts impermissibly [or, illegally] attempt to condition their deposition testimony on advance payment.

Discovery from Expert Witnesses in First-Party Insurance Cases, including both Coverage and Bad Faith Cases, is the subject of §12:18 in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement, Third Edition in progress for publication in Spring, 2011).

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Work Product, EMails, Construction Defects: Insurance Consultant, Fact Witness or Expert?

   In Download Bartram, LLC v. Landmark American Insurance Co. (N.D. Fla. Case No. 1.10.28, Order of USMJ Filed January 24, 2011) PUBLIC ACCESS,  also published as 2011 WL 284448 (N.D. Fla. Order of Magistrate Judge January 24, 2011)(authorized password required to access Westlaw), a Policyholder under Builder's Risk Insurance Policies claimed Coverage for Damages which resulted from Construction Defects.  "This case is a first-party insurance coverage dispute in which Plaintiff seeks a declaration that the damages suffered to its apartment project are covered by each of the builder's risk policies issued by Defendants."  Id. at *2.

   The Policyholder-Plaintiff was apparently the Builder-Owner of the apartment complex.  It engaged the Foram Group, Inc. to manage the apartment project, and it consulted with one Margaret Spence of Douglas Claims & Risk Consultants, Inc. about its Coverage Questions and Claims, eventually retaining Ms. Spence for her services.

   Ms. Spence was "formally retained" by the Plaintiff in September, 2009.  The Federal Magistrate Judge wrote the outlines of Work Product Qualified Immunity for certain EMails she wrote to, and received from Foram, between August 29, 2009 and September, 2009:

 During the time period prior to her retention Ms. Spence was assisting Plaintiff with understanding its rights under the insurance policies issued by the Defendants. Ms. Spence's involvement prior to her retention as an expert in the claims submission process on Plaintiff's behalf was in her role of assisting Plaintiff in its business of submitting claims and not in the role of a retained expert assisting in preparing for litigation. Once Ms. Spence was formally retained, she became a non-testifying expert and her communications with Plaintiff after that date were protected.

Id. at *3.

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Insurance Agents, Expert Witnesses, and Standard of Care.

   In many jurisdictions, such as Iowa, the standard of care for Insurance Agents is established by Statute concerning the procurement of Insurance.  The parties will also be given an opportunity to present Evidence of their particular contractual relationship in the given case.  See Download Langwith v. American Nat'l Gen. Insurance Co. (Iowa, Opinion Filed December 30, 2010) PUBLIC ACCESS, also published as 2010 WL 5393493 (Iowa, December 30, 2010)(authorized password required to access Westlaw).

   Expert Witnesses, however, are not permitted to establish the Insurance Agents' standard of care in such jurisdictions.  This is the case at the very least in lawsuits filed against Insurance Agents for their alleged conduct in the procurement of Insurance.  Instead, Expert Witness Testimony is allowed in Evidence to address the scope of the Legal Duty.   Langwith v. American National General Insurance Co., 2010 WL 5393493 at *5 - *6.

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Expert's Post-Report Affidavit Evidences Florida Property Damage Inaccessible Manifestation.

   Held:  Insurance Company's Motion for Summary Judgment Denied.

   The case of United Nat'l Insurance Co. v. Best Truss Co., Download United Nat'l Insurance Co. v. Best Truss Co. (S.D. Fla. Case No. 09.22897, Order Filed December 3, 2010) PUBLIC ACCESS, also published as 2010 WL 5014012 (S.D. Fla. December 3, 2010)(authorized Westlaw password required to access Westlaw) has presented an Order which is important to both Federal Evidence and Florida Insurance Law.

   First, the Federal Court held that it was proper to consider an Affidavit of the Policyholder's Expert Witness which was filed after the Expert's Report.  In the Affidavit, the Expert "clarifies his position regarding the manifestation of the damage," a key issue in the quest to determine whether there was Insurance Coverage for alleged Property Damage because of trusses that were used in the construction of a new bank building.  See United Nat'l Insurance Co. v. Best Truss Co., 2010 WL 5014012 at *1, *5.

   The Federal Court considered the Expert's post-Report Affidavit in that Case because the Affidavit and the Report "are not inconsistent."  Id.  Nor was the Affidavit a "sham.  The Court can properly consider the Affidavit in the disposition of the Motion."  Id.

   Second, the Affidavit evidenced manifestation of Property Damage within the Policy Period of at least one of the Insurance Policies issued by United to Best Truss.  The Policies required an "Occurrence" which results in "Property Damage" during the policy term, in pertinent part.  As the Federal Court put it:

In Florida, the accident or injury triggering coverage is deemed to have occurred "when property damage manifests itself, not when the negligent act or omission giving rise to the damage occurs."  [Citations omitted.]  However, proof of discovery of the damage is not required to trigger coverage if the damage was visible and capable of being discovered.

Id. at *4.  [Emphasis added.]

   The Expert's Affidavit provided evidence of manifestation during the policy term.  However, the Property Damage addressed by the Expert's Affidavit Testimony was not readily visible.  Instead, it was physically obstructed.  It was capable of being discovered if a drop ceiling were removed.  The Federal Court held that this was admissible evidence of Property Damage manifestation:

Contrary to United's assertion, visibility from within the enclosed and inaccessible attic does constitute manifestation.

Id. at *5.  [Emphasis added.]

   Parenthetically, the Online Docket of this Case on Pacer, the electronic docket of the Federal Courts, reflects that the Case was dismissed without prejudice on December 13, 2010 by an Order of Court entered upon a Joint Stipulation for Dismissal Without Prejudice which was filed the same day.

   With these two holdings in this Order, the Federal Court provided important rulings for both Federal Evidence and Florida Insurance Law.

The Federal Court in this Case explicitly did not, however, address "whether the duty to defend is implicated" nor did the Court draw any distinctions between the Insurance Company's Duty to Defend and its Duty if any to Indemnify.  Considerations particular to determining a Liability Insurance Company's Duty to Defend in Cases involving Insurance Policies similar to those in the United National Insurance Co. v. Best Truss Co. Case are addressed in Section 3:48 by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement).

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More From the CPCU Annual Meeting: More Insurance Knowledge Shared.

   This post comes from observations at this week's CPCU Society Annual Meeting in Orlando, Florida.

   One of the many speakers at this annual CPCU Conference was an insurance expert witness.  He made a good observation.  He said that it would probably take an experienced person 10 to 15 minutes to go over each listed item of expense in a 200-line Income Statement submitted on a Business Interruption Claim, and say, "This is excludable, this is not."

   Sometimes experience has no useful substitute.  It is almost always far less expensive in investigating and evaluating Claims than any other reasonable alternative.

   These and similar Insurance Questions including the many benefits of consultation with Expert Witnesses, have in general terms been addressed by many Courts, in many decided Cases.  Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  An experienced Expert Witness in Insurance Cases himself, Mr. Wall will speak on Business Interruption Insurance Coverage Issues including those arising out of the BP Oil Spill Catastrophe, on November 17, 2010, at a Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will also speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The author has been advised by the American Conference Institute that the ACI is continuing to offer its discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

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Insurance Expert Witness Testimony Revisited, Excluded Again.

   In the Insurance Coverage and Insurance Bad Faith Case of Keten v. State Farm Fire & Cas. Co., Download Keten v. State Farm Fire and Casualty Co. (N.D. Ind. Case No. 2006.CV.341, Opinion and Order Filed March 29, 2010) PUBLIC ACCESS, also published as 2010 WL 1258198 (N.D. Ind. March 29, 2010)(Westlaw subscription required to access Westlaw), a Federal Court reviewed the earlier decision of a Magistrate Judge to exclude the testimony of an Insurance Expert Witness.  The result was the same as the District Judge affirmed the Magistrate Judge's Order Excluding the Expert Testimony.

   In that case, the Magistrate Judge found "that Plaintiffs did not have a substantial justification for their failure to meet the deadline [for "expert disclosure" which apparently included exchanging Expert Reports] in violation of Federal Rule of Civil Procedure 37(c)(1), and that the failure was harmful to Defendant."   Keten v. State Farm Fire & Cas. Co.,  2010 WL 1258198 at *6.  "Not only were the expert disclosures deficient, the Plaintiffs' proffered excuses for delay were scheduling conflicts with the expert and a lack of funds.  On these facts, the magistrate judge's order is not clearly erroneous and is not contrary to law; therefore, the order is affirmed."  Id.

   The lesson of this decision is clear for all parties to Insurance Cases:  If you are going to retain Insurance Expert Witnesses, be sure to meet and talk with them and, above all, be sure to pay them.  Failure to do these things will not excuse failure to meet deadlines set by Court Orders.

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Expert Witness Fees: California Court Also Refuses Taxable Costs.

   In a post here on Friday, August 13, 2010, a recent decision of a Federal Court under Federal Statutes and Rules was explored under the title of "Expert Witness Fees:  Federal Court Refuses Taxable Costs".  This post explores the same issue addressed by a recent decision of a California Court of Appeal.

 Out of a total of $103,227.07 requested by a prevailing Plaintiff in a lawsuit filed against a Catholic Bishop for negligent retention of a sexually predatory Priest, the Plaintiff requested $9,400.00 in Expert Witness Fees.  The Bishop settled with the injured Plaintiff after Judgment against the Bishop.  As a part of their settlement, the injured Plaintiff and the Bishop sued American, one of the Bishop's Liability Insurance Companies.  Their complaint against American contained causes of action for Mr. Howard to recover on the underlying Judgment against the Bishop and also containing alleged causes of action for "bad faith failure to defend, settle, and indemnify." American argued that under California law Expert Witness Fees are recoverable only when the Expert is appointed by the Court.  Howard v. American Nat'l Fire Insurance Co., Download Howard v. American National Fire Insurance Co. (Cal.1st DCA Case No. A123187, Opinion Filed August 11, 2010) PUBLIC ACCESS also published as 2010 WL 3156851 at *28 (Cal. 1st DCA August 11, 2010)(Westlaw subscription required to access Westlaw).

   The Trial Court, apparently for that reason but without explanation, reduced the Plaintiffs' cost award by the amount representing Expert Witness Fees, or by $9,400.00.  The Appellate Court accordingly found from what it described as a "clear record" in this case that the Trial Court had not awarded Expert Witness Fees as costs, and held that the appeal from the costs award was moot on that ground.  "No expert fees were awarded."  Id.

Taxable Costs in Insurance Cases are addressed in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 13.10 (Shepard's/McGraw-Hill First Edition; West Publishing Co. Second Edition and 2010 Supplement).

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Expert Witness Fees: Federal Court Refuses Taxable Costs.

   A Federal Court has held that Expert Witness Fees submitted as taxable Costs following Trial would not be taxed in a Federal Case as Costs under Federal Law, nor under Florida's Offer of Judgment Statute, Fla. Stat. § 768.79.  Kearney v. Auto-Owners Insurance Co., Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Case No. 8.06cv00595, Order Denying Supplemental Costs Filed August 4, 2010) also published as 2010 WL 3062420 (M.D. Fla. August 4, 2010)(Westlaw subscription required to access Westlaw).

   The Federal Court also discussed an Eleventh Circuit Court of Appeals decision disallowing Expert Witness Fees as taxable costs under Fla. Stat. § 627.428 as well, in a Federal Case.  Kearney v. Auto-Owners Insurance Co., 2010 WL 3062420 at *2.

   The "expert trial witness" fees in question were for former Florida Supreme Court Justice Charles Wells.  Moreover, the Online Docket of this Case on Pacer reflects that a Notice of Appeal was previously filed by the Plaintiff.

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In Camera Inspection by U.S. Magistrate Judge: Held, All Documents Privileged.

   The case of Carter v. Ozoeneh, Download Carter v. Ozoeneh (W.D.N.C. Case No. 3.2008cv614, Memorandum and Opinion Filed July 22, 2010) FREE ACCESS TO THIS OFFICIAL REPORT also published as 2010 WL 2889582 (W.D.N.C. July 22, 2010)(Westlaw subscription required to access Westlaw) is unique.  At least, it is not in the garden variety of most Federal Cases that is certain.

   Plaintiff Ronald Carter sued over a patent.  He claimed to be the sole inventor of certain technology involved in the patent.  He and his corporation sued his lawyers, the Clements Walker Law Firm, and various persons (apparently almost all but not quite all of whom are lawyers who represented him regarding the patent), for alleged malpractice in connection with the patent.  It is confusing, but apparently there is another Defendant, one Emmanuel Ozoeneh, who may have been "either the sole inventor or co-inventor of the invention."  It is clear, however, that Lawyers Mutual Liability Insurance Company of North Carolina issued a Professional Liability Insurance Policy to the Defendant Law Firm and a separate such Policy to one of the individual Defendants (not Mr. Ozoeneh).  Carter v. Ozoeneh, 2010 WL 2889582 at *1.

   Mr. Ozoeneh had a difficult time obtaining defense counsel.  Lawyers Mutual undertook to pay Mr. Ozoeneh's legal fees "through summary judgment".  Id.  When Plaintiffs found out about this arrangement, they filed an Amended Complaint "asserting state law claims against Lawyers Mutual for tortious interference with contract, maintenance, and unfair and deceptive trade practices.  Plaintiffs also allege bad faith, malice, and officious intermeddling by Lawyers Mutual."  Id. at *2.

   Thereafter, the Plaintiffs propounded Interrogatories and Requests for Production, the nature of which is not entirely clear from the Magistrate Judge's Opinion, and the Defendant Lawyers Mutual responded and produced privilege logs as to certain withheld materials, the identity or description of which is not entirely clear, either.  However, it is clear that at least some of the withheld materials were delivered to the Magistrate Judge for an In Camera Inspection.   Id. at *2-*3.  The Magistrate Judge held that all of the materials inspected In Camera are privileged from discovery and do not need to be made available to the Plaintiffs.  Some of the items are protected by the Attorney-Client Privilege, and two items -- one an attached Memorandum and the other an Expert Witness's Invoice -- are protected from discovery as Work Product, the Court held.  Id. at *3.

The results in decided cases with reported In Camera Inspections of contested discovery materials are addressed by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" throughout Chapter 8, "Discovery From Insurers Concerning Their Handling of Third-Party Claims," and Chapter 12 concerning "Discovery From Insurers" in First Party Cases (Shepard's/McGraw-Hill First Edition, West Publishing Company Second Edition and 2010 Supplement).

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Textbook Appeal: Plaintiff's Verdict on Negligence Claims -- Except No Experts?

   The appeal on behalf of Colonia Girls Softball League is close to my heart.  I have been a Volunteer Softball Umpire for a local Little League since Moses was a baby.  The appeal in the case of St. George v. Colonia Girls Softball League, OFFICIALLY UNPUBLISHED OPINION but published as 2010 WL 2795330 (N.J. Super. App. Div. July 16, 2010)(Westlaw subscription required to access Westlaw) also offers a textbook example of how to appeal a Plaintiff's Verdict on Negligence Claims -- except no Experts were proferred for the Defendant in the Trial Court, which adversely (from the Girl Softball League's point-of-view) affected the outcome of the appeal.

   Ms. Dori St. George was walking her dog when she slipped and fell on a rock on a sidewalk in or near a construction area.  She sued Colonia Girls Softball League on account of her resulting injuries.  Ms. St. George advanced two theories of Negligence:  (1) the rock she slipped on was a hazardous condition and (2) construction tape was removed from the area and construction was not yet completed there.  St. George v. Colonia Girls Softball League, 2010 WL 2795330 at *7.

   As to Ms. St. George's first theory of Negligence liability, "[a]n essential element to imposition of liability on a possessor for a hazardous condition of its property is that it had notice of the hazardous condition."  Id. at *8.

   Although the Plaintiff testified that she slipped on a rock, neither she nor her Expert Witness, one Saxon, could say how the rock actually got there.  At the time of her accident, Ms. St. George was on premises occupied by the Girls Softball League for practices and games.

   One Teddy Markou was "the League volunteer in charge of construction and preparing the fields for softball games," id. at *1, and "Markou testified at trial that he spent fifteen to thirty hours per week volunteering for the League."  He was in charge of constructing a pavilion for concessions at the site, and the pavilion was 85% completed on the day of Ms. St. George's accident.  "None of the work to be done involved the use of rocks.  Most of the work was done on Saturdays, and before any work was done, they would put garbage cans in the grass and put up caution tape.  Nothing was ever left up overnight;" including the caution tape and barricade.  Id. at *3.

   Specifically regarding rocks on the sidewalk, the only occasion over the years to see them, Markou testified, was when "[t]he younger siblings of softball players would pick up rocks from the grass and parking lot, and they could have thrown them on the sidewalk.  The League always cleaned up and broom swept everything after a game."  Id.

   Moreover, none of the witnesses who testified, except Ms. St. George, testified that they saw any rocks on the sidewalk on the day of Ms. St. George's accident -- and neither she nor her Expert Witness could testify where rocks might have come from or why the Girls Softball League should be responsible for them, specifically, how or when the Girls Softball League had notice of the alleged hazardous condition.  "As a result," the Appellate Court held, "the issue should not have been submitted to the jury."  Id. at *8.

   However, the Girls Softball League chose not to put on an Expert Witness of its own at Trial.  Mr. Saxon, the Plaintiff's Expert Witness, testified without contradiction that a "causation" of Ms. St. George's injury was premature removal of caution tape at a construction site where construction had not been completed.  Id. at  *2.  Therefore, there was sufficient evidence in the record to uphold the Plaintiff's verdict on this theory.  However, the Appellate Court held, "[b]ecause we do not know whether the jury found liability based on the alleged failure to remove the rocks or on the League's alleged failure to maintain the construction tape until all construction was completed, the issue of liability must be retried with the proofs limited to the latter theory."  Id. at *8.  [Emphasis added.]

    The appeal on the "hazardous condition" theory of Negligence liability was textbook, given the record of this case at Trial.  However, that same record revealed the complete absence of any rebuttal Expert Witness Testimony, for whatever reason, on the Plaintiff's other theory of Negligence Liability, which involved the premature removal of the caution tape.  With the only Expert Witness Testimony on that issue coming from one side of the case, the outcome on appeal was affected -- as it often is in even more complex cases such as those in which Claims of Bad Faith are presented.

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Federal Court Refuses All Testimony From Lawyer-Expert on Coverage.

   A Federal Court held that proposed Expert testimony from a lawyer that does nothing more than tell the Court how to rule on Insurance Coverage is inadmissible.  American Home Assurance Co. v. Cat Tech, LLC, Download American Home Assurance Co. v. Cat Tech, L.L.C. (S.D. Tex. Case No. H.08.03692, Opinion Filed June 9, 2010) also published as 2010 WL 2331395 (S.D. Tex. June 9, 2010)(Westlaw subscription required to accesss Westlaw).  In this same decision, the Federal Court ruled in favor of American Home's position on the merits and the Pacer Online Docket of this case reflects that on June 28, 2010 American Home filed an Unopposed Motion for Entry of Final Judgment in its favor.  American Home achieved this result apparently despite the fact that one of its Experts was held to offer no admissible testimony in this case.

   In the American Home Assurance Company case, a lawyer retained as an Expert Witness by American Home, filed a "Rule 26 report" which "primarily addresses how this court should interpret the insurance policies."    American Home, 2010 WL 2331395 at *8.  The Court in this case held that this was not admissible testimony.

   Following rules accepted throughout jurisdictions in the United States, the Federal Court held:

   To the extent Martin's report addresses contract interpretation, it is inadmissible.  Expert testimony on the proper interpretation of contract terms may be admissible when the meaning depends on trade or industry practice.  [Citations omitted.]  But such expert testimony is admissible only if the contract language is ambiguous or involves a specialized term of art, science, or trade.  [Citations omitted.]  In the present case, no party argues that the relevant policy terms are ambiguous.  The specialized insurance terms are defined within the policy.  There is no need for expert testimony to explain the meaning of the insurance policies.

Id. at *8.  [Emphasis added.]

   Further following settled rules on the admissibility of Expert Witness Testimony in Insurance Cases, the Court in this case also pointed out that the lawyer-Expert's Testimony might have been admissible if it had dealt with Bad Faith and Claims Handling issues.  In that case, the Court held that there were Counterclaims "for bad faith and violation of the Texas Insurance Code" on which such Expert Testimony might have been admissible.  Id.  However, the proposed lawyer-Expert's Expert Witness Report under Rule 26 did not address any of those issues.  "Because the only issues addressed in this opinion relate only to coverage, however, none of Martin's testimony is considered."  Id.  [Emphasis added.]

   The Court in this decision did not make any new rules of evidence or procedure about Expert Witness Testimony in Insurance Cases.  Instead, the Court summarized well-known rules that have existed for a long time before this decision was written.

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Expert Witnesses For The Defense: Daubert Them at Trial Time.

   Concerning Expert Witness Testimony in Insurance Cases:  One approach is to evaluate the admissibility of expert opinion testimony at trial.  See Holmes v. National Union Fire Ins. Co., Download Holmes v. National Union Fire Insurance Co. (S.D. Miss. Case No. 3.06cv00546 Opinion Filed March 25, 2010) also published as 2010 WL 1233417 *3 (S.D. Miss. March 25, 2010)(Westlaw subscription required to access Westlaw).

Admissibility of Expert Witness Testimony in litigated cases, Lawyers' arguments about putting on Expert Witness Testimony, and the approaches taken by testifying Expert Witnesses themselves, are all examined in Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 8:17 and 12:18 (Shepard's/McGraw-Hill First Edition; West Publishing Company Second Edition and 2010 Supplement in process). 

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Expert Witness Testimony on Property Insurance Claims Handling Issues.

  I have been fortunate in having two articles released for publication at the same time.  I previously made one of them available to you, and with this post I am making the other one available to you as well, "Expert Witnesses on the Handling of Property Insurance Claims," published in the April, 2010 issue of The Briefs.  Here is your copy:  Download Expert Witnesses on the Handling of Property Insurance Claims.OCBA Briefs.0410.  (Copyright Dennis J. Wall 2010.  All rights reserved.  No Reproduction or any other use of this material may be made for commercial purposes.)

   I hope that you will find this to be useful and productive.

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Good Faith Insurance Experts: Opinions Allowed and Inadmissible ,,,

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   ,,, It is the difference between an Admissible Conclusion of Fact and an Inadmissible Legal Conclusion, in Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Opinion Filed November 5, 2009), also published as Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 (M.D. Fla. November 5, 2009)(Westlaw subscription required to access Westlaw).

   You and I will recall this as the case with 14 total motions in limine, 7 from the Policyholder-Plaintiff and 7 from the UM Excess Carrier-Defendant.  This was a First-Party Statutory Bad Faith Case under Florida Law.  The Court allowed Opinions which were not legal conclusions, but conclusions of Fact, from the Expert Witnesses in this case.  For example, one of the Defendant's Expert Witnesses intended "to testify," as the Court put it, that the Defendant "paid the limits of the umbrella policy when, under all the circumstances, it could and should have done so."   Holding that this proffered Expert Opinion was not an inadmissible legal conclusion, the Court wrote that this Opinion was instead "a factual conclusion -- ... not a legal conclusion."  Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 *6 (M.D. Fla. November 5, 2009).

   On the other hand, the Expert had other Opinions to proffer, one of which was that the Defendant did not violate a Florida Statute, § 624.155, "in the handling of [its Policyholder's] claim."  The Court expressly agreed with the Policyholder that this was an inadmissible legal conclusion, not if you will, an admissible non-legal conclusion.  The many motions in limine filed in this case were thus granted "to the extent that the Court finds that [the Expert] cannot testify as to this conclusion."  Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 *6 (M.D. Fla. November 5, 2009).

   Again, when Expert Opinion Testimony is offered to prove or disprove the Insurance Company's compliance with an objective standard of behavior by its provable conduct, then in such cases the Expert Opinion Testimony has ordinarily been held admissible by the Federal Courts -- and by the State Courts too.  However, when Expert Opinion Testimony is offered to prove or disprove an ultimate fact in the Bad Faith Case, such as the Defendant's violation or not of Florida's Bad Faith Statute, then such Opinions are ordinarily excluded on many grounds, the most common of which is that such Opinions are inadmissible legal conclusions.  The cases are examined in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 8:17 and 11:18 (Second Edition Shepard's/McGraw-Hill, 2009 Supplement West Publishing Company).

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Expert Witness Insurance Lawyers, Inadmissible Legal Conclusions? Nope. Same ...

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...  As Nonlawyer Expert Witnesses.

   I am spending part of my time writing a new Supplement right now for my Book, "Litigation and Prevention of Insurer Bad Faith".  I have come across a Federal Court decision under Florida Insurer Good Faith-Bad Faith Law in which the Policyholder and the Insurance Company Defendant filed 14 motions in limine between them, seven motions apiece. The Federal Judge's rulings on those motions provide a lot of interesting material to write about.  Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Opinion Filed November 5, 2009), also published as Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 (M.D. Fla. November 5, 2009)(subscription required to access Westlaw).

   One of the Policyholder's motions asked the Court to exclude the Opinion Testimony of one of Defendant's Lawyer-Expert Witnesses, to the effect that the Defendant in that case "acted fairly and honestly toward [the Policyholder, and] with due regard for his interest."  This is the language of a Florida Standard Jury Instruction at the time presenting the Jury with the issues of Good Faith-Bad Faith for them to determine, and this language was and is also found in Florida's Bad Faith Statute, Fla. Stat. § 624.155(1)(b)1.

   The Policyholder argued to the Federal Court that this Opinion "is an inadmissible legal conclusion".   The Court disagreed.  The Opinion was allowed.  While the Expert whose particular Opinion was attacked was a former Florida Supreme Court Justice, it will be seen that the Court applied the same standard of admissibility to all Experts in that case whose Opinions were challenged as 'inadmissible legal conclusions'.  Besides, parenthetically the Defendant's attorneys were not allowed to refer to this Witness by his title, but only by calling him "Mr."  The fact of his former occupation could only be elicited on direct examination when he was asked about his previous employment.

   The Court's ruling is instructive on this challenged Opinion, rejecting the contention that it is an "inadmissible legal conclusion" to testify to an Opinion that the Defendant Insurance Company  "acted fairly and honestly toward [its Policyholder, and] with due regard for his interests":

While [the Expert's] opinion overlaps the language of the statute, [the Expert] is providing a factual conclusion -- that [the Defendant Insurance Company] acted fairly and honestly, and that it acted after giving due regard to [its Policyholder's] interests -- not a legal conclusion.

Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Opinion Filed November 5, 2009), also published as Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 *5 (M.D. Fla. November 5, 2009).  [Emphasis added.]  In other words, the Court held, an Opinion that the Defendant Insurance Company's behavior met a standard of conduct was admissible, "not a legal conclusion."

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Expert Witness Testimony Legally "Warranted" on "Insurance Claims Handling".

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   In Download Kearney v. Auto-Owners Insurance Co. (M.D. Fla. Opinion Filed November 5, 2009), also published as Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 (M.D. Fla. November 5, 2009), an Excess Uninsured Motorist Carrier was sued for alleged Bad Faith in its claim handling.  The UM Excess Carrier proffered and was permitted to introduce the Opinion Testimony of several Attorneys as its Expert Witnesses on various issues.  However, the Carrier moved to exclude the testimony of its Policyholder's six (6) Expert Witnesses.

   In part, the Carrier argued that "the facts at issue are not so complex as to warrant expert testimony".  Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 *10 (M.D. Fla. November 5, 2009).  The Federal Judge disagreed:

The lay person is not necessarily familiar with insurance claims handling, and as such, the Court rejects [the Carrier's} arguments that the subject matter that they will testify to does not warrant expert testimony.

Kearney v. Auto-Owners Insurance Co., 2009 WL 3712343 *10 (M.D. Fla. November 5, 2009).  In holding that this is an area that legally "warrants" the Opinion testimony of Expert Witnesses, including Attorneys as Expert Witnesses, the Court in this case was solidly in accord with Florida Insurance Law.  The cases are collected in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 5:17, 8:17 and 11:18 (Second Edition Shepard's/McGraw-Hill, 2009 Supplement West Publishing Company).

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No Legal Conclusions, No "Uncanny Resemblance to Complaint," No Opinions.

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   In the case of Download Goodby's Creek, LLC v. Arch Insurance Co. (M.D. Fla. Case No. 3.07cv947, Opinion Filed April 27, 2009)(Snyder, Magistrate Judge), also published as Goodby's Creek, LLC v. Arch Insurance Co., 2009 WL 1139575 (M.D. Fla. Opinion Filed April 27, 2009), United States Magistrate Judge Howard T. Snyder granted an insurance company defendant's motion to strike Expert Witness Disclosures and Preclude Testimony as to one of two proffered Experts, a person named Petitta.

   Magistrate Judge Snyder, a person not given to exaggeration, wrote of the Expert's report that "[h]is brief rendition consists primarily of legal conclusions."  Further, the report of that Expert "bears an uncanny resemblance to portions of the Complaint".  Goodby's Creek, LLC v. Arch Insurance Co., 2009 WL 1139575 *2 (M.D. Fla. Opinion Filed April 27, 2009).  This was a situation, as the Court described it,  involving more than a permissible passing reference to a legal principle or assumption in an effort to place his opinions in context.  For this and other reasons, the motion was granted to the extent the particular report was stricken and the Expert who submitted it "is precluded 'from providing expert testimony or supplying evidence on any motion, or at any hearing or trial in this action.'"  Goodby's Creek, LLC v. Arch Insurance Co., 2009 WL 1139575 *5 (M.D. Fla. Opinion Filed April 27, 2009).

   In footnote 1, the Court advised that "this Order is available electronically.  It is not otherwise intended for publication or to serve as precedent."  So much for limiting publication.  It is equally unlikely that the persuasive effect of this ruling, and of the reasoning behind the ruling, will successfully be limited at least outside of the Middle District of Florida.

There is an interesting post which features Expert Witnesses in Insurance Cases on Insurance Claims Bad Faith Law Blog on March 25, 2010.

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More on Expert Witnesses in Presenting Property Insurance Claims.

    **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**

   See the previous post here on February 10, 2010, "Expert Witnesses on the Handling of Property Insurance Claims".

   In a recent ruling, a United States District Judge applied settled Federal Law to permit the Opinion Testimony of an Expert Witness "regarding damage to and replacement of windows and sliding glass doors" in Download Vision I Homeowners Ass'n v. Aspen Specialty Ins. Co. (S.D. Fla. Case No. 08-81211, Opinion Filed December 28, 2009), attached Official Slipsheet Opinion at 4.  In reaching this ruling, the Federal Judge reviewed the Federal Law surrounding the admissibility of Expert Witness Opinion Testimony and held that it "is reliable and relevant, and thus admissible, when: (1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable; and (3) the testimony will assist the trier of fact."  Download Vision I Homeowners Ass'n v. Aspen Specialty Ins. Co. (S.D. Fla. Case No. 08-81211, Opinion Filed December 28, 2009), at 2-3.

   The admissibility and use of Expert Witness Opinion Testimony in all kinds of cases, including Insurance Cases, are addressed in both §§ 8:17 and 12:18 by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Second Edition Shepard's/McGraw-Hill; 2009 Supplement Thomson/West Publishing Company).

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Expert Witnesses on the Handling of Property Insurance Claims.

**Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any advertising of any kind on any list or post.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**

   There is an interesting and informative web log entitled, "Property Insurance Coverage Law Blog".  It is published by Merlin Law Group located in Tampa, Florida.  They are a Firm of Policyholder/Plaintiff Attorneys and, as I wrote above, their blog is interesting and informative.  In a recent post, they asked me to comment on Expert Witness Testimony in Insurance Cases.  I cannot do better than what I wrote and updated recently about "Claim Handling Issues," in "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company)(COPYRIGHTED.  ALL RIGHTS RESERVED,  NO REPRODUCTION OR ANY OTHER USE OF THIS MATERIAL MAY BE MADE FOR COMMERCIAL PURPOSES.):

Asterisks (***) indicate material omitted for ease of reference:

John K. DiMugno, Steven Plit, Dennis J. Wall

Chapter 2. Claim Handling Issues

by Dennis J. Wall, Esquire

§ 2:1.Introduction and interpretation

* * *

Courts often follow the claim adjustment process in reaching their decisions in noncatastrophe cases, although not necessarily in the same order in which insurance companies actually adjust claims.[1] There is every reason to think that courts will follow the same process when they are confronted with catastrophe claims.[2]

* * * On the other hand, hurricanes and other catastrophes are often predicted to follow the crippling lead of hurricanes such as Charley, Frances, Ivan, and Jeanne in 2004 and of Hurricanes Katrina, Rita, and Wilma in 2005. The effect of catastrophic events like these, and the reason for this book, are very well described by a federal judge in Mississippi who has been flooded (you should pardon the expression) with catastrophe claims in the two years that have followed Hurricane Katrina and Hurricane Rita to date. The author of this Chapter inputs the following lengthy passage with some trembling in his fingers on the keyboard. Long quotations are not a substitute for analysis. Further, long quotations are often boring to a lot of readers. For the first time, perhaps in recorded history, the author of this Chapter nonetheless offers the following long quotation in this text. The federal judge who wrote it originally cannot legitimately be accused of a want of analysis, and the following observations are certainly not boring to most people concerned with catastrophes, in any case:

In the wake of an insured's catastrophic loss of his dwelling and possessions in an event such as a hurricane, an event that poses two different risks (flood damage and wind damage), it is not unreasonable for the insured to seek to collect all his available insurance coverages, and it is not unreasonable or otherwise improper, when he does not know and cannot readily ascertain the actual cause of his losses, for the insured to assert that all of his losses may be payable under either policy. Faced with uncertainty, the insured may turn to any of his coverages for indemnity. In this situation it would be unrealistic and unfair to impose a burden on the insured to segregate his damages between wind and water losses at the peril of losing his insurance coverage if he errs in this endeavor. It is far more reasonable in these circumstances to allow the insured to make a claim for all his losses under both flood coverage and wind coverage if the damages cannot be readily segregated or if the source of the damage is uncertain. The question whether the insured's damages are recoverable, and, if so, under which policy, must ultimately be resolved through either negotiation or litigation.[4]

 

[FN1] See Smith v. Westfield Ins. Co., 2007 WL 1740816 (E.D. Pa. June 15, 2007), in which the court's decision reflects the identical steps ordinarily taken by insurance companies in adjusting first-party property insurance claims, though not necessarily in the same sequence. With regard to the initial step, confirming coverage, in the court's eyes a coverage determination itself involves four distinct steps:

   The determination of coverage here involves four steps. The first step is whether there has been a loss …. The second  step is whether the loss falls within a policy exclusion …. The third step is whether the ensuing loss is itself excluded by a specific policy provision …. The fourth step is whether there is an exception to the mold exclusion.

Smith v. Westfield Ins. Co., 2007 WL 1740816 *2 (E.D. Pa. June 15, 2007) [Emphasis by the Court.] See generally DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:5 (2d Edition Thomson/West Publishing).

 

[FN2] See, e.g., Schmermund v. Nationwide Mut. Ins. Co., 2008 WL 5169396 *2 (S.D. Miss. 2008) (case involved Hurricane Katrina claim): “There are too many unanswered questions with respect to the manner in which this claim was handled and the decisions that were made.”

 

* * *

 

FN4] Robichaux v. Nationwide Mut. Ins. Co., 2007 WL 2783325 *2 (S.D. Miss. 2007). This does not mean that policyholders should ever obtain double recoveries, i.e., that insureds should ever recover twice for the same element of damage, even as part of a catastrophe claim:

A payment under an insurance policy, whether it is a flood policy or a homeowners policy, offsets, dollar for dollar, the total losses the insured has experienced. The insured's total loss constitutes an upper limit on his recovery from all his insurance policies, and this upper limit is reduced, dollar for dollar, by the payment and acceptance of insurance benefits. This prevents any double recovery, i.e., any recovery of two insurance payments for a single loss.

   But the payment and acceptance of insurance benefits does no more than that, and the assertion of a right to recovery, in the face of legitimate doubt or uncertainty as to the risk that caused the loss, does not estop an insured from claiming and collecting other insurance benefits that prove to be covered by a separate policy.

Robichaux, 2007 WL 2783325 at *2–*3. The date of this decision, September 21, 2007, is 22 days after the date of the decision of a panel of the Fifth Circuit Court of Appeals in the case of Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419 (5th Cir. 2007), cert. denied, 128 S. Ct. 1873 (U.S. April 14, 2008). The federal district judge took this occasion to write the above-quoted remarks in the context of an order denying a motion for reconsideration of an order of remand, not usually the occasion for an opinion at all, but certainly the occasion for an opinion under the circumstances extant on that date. In Leonard, the appellate panel affirmed a judgment entered by the same federal trial judge in a Mississippi case but in which the panel wrote a long opinion stating its authors' disagreement with the Mississippi federal trial judge's reasoning which would have invalidated an anticoncurrent cause clause under Mississippi law. The three members of the Fifth Circuit panel in Leonard are Texas lawyers. In basic terms, an anticoncurrent cause clause such as Nationwide's clause sought out and embraced by the appellate panel in Leonard, would force an insured to segregate her, his or its damages between wind and water losses at the peril of losing his insurance coverage for damages caused by wind if she, he or it errs in this endeavor. See § 7:5, infra.

 

From Dennis J. Wall, "Claim Handling Issues," § 2:1, from Chapter 2 in "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" published by West, a Thomson Reuters business, and UPDATED.

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