A district judge in Texas admitted the insurance expert’s testimony about the cost to repair or replace the damaged areas.
This is a commercial property insurance coverage dispute arising from hail and wind damage to Plaintiff’s property located at Midland, Texas. Landmark insured the Property under a commercial policy. Landmark received notice that the Property had sustained storm damage with the date of loss claimed as June 19, 2020.
On March 28, 2022, Landmark sent Plaintiff a letter explaining that investigation revealed that the roof was exposed to multiple hail events on April 16, 2017; on May 16, 2017; and/or on April 23, 2019, but did not support that a hail event occurred at the Property on or about June 19, 2020. Plaintiff subsequently filed suit against Landmark for alleged property damages with a date of loss of June 19, 2020.
Plaintiff designated Kevin Funsch, “a licensed public adjuster and owner of US Insurance Adjusters, LLC.” On March 22, 2024, Landmark filed a motion requesting that the Court exclude Plaintiff’s expert witness, Funsch’s testimony and strike his expert report.
Insurance Expert Witness
Kevin Funsch is a public adjuster and the owner of an insurance adjusting firm with a solid background in claims handling and estimating. He is experienced in adjusting property losses and performing appraisals.
Discussion by the Court
Landmark sought for Funsch’s report to be struck and his testimony excluded because: (1) Plaintiff’s expert designation and Funsch’s report did not comport with Federal Rule of Civil Procedure 26(a)(2); (2) Funsch’s report and opinions were unreliable; and (3) Funsch’s report and opinions were irrelevant.
Funch’s Compliance with Rule 26 and Rule 702
Defendant asserted that Funsch’s expert report is deficient for multiple reasons: (1) it “did not contain a complete statement of the basis and reasons for Funsch’s opinions as to the damages sustained to the property and the cost of repairs”; (2) Funsch did not “explain in his report how his experience as an insurance adjuster led him to reach his conclusions”; (3) the report “did not include any explanation as to the basis or reliability of the estimate”; (4) it “failed to demonstrate that Funsch’s opinions on the damages and necessary repairs are based on sufficient facts or data”; and (5) “that Funsch reliably applied those principles and methods in forming his estimate as required by Rule 702”.
After thoroughly scrutinizing Funsch’s report, the Court found it satisfied both Rule 26 and Rule 702. It added that Landmark’s reliance on its cited Rule 702’s advisory committee note was inapplicable to Funsch’s expert report in this case, as he stated that he relied on multiple other documents and conversations with Neil Hall in forming his opinions, rather than relying solely on experience as the advisory committee note contemplated.
The Court addressed Landmark’s arguments that Funsch failed to demonstrate his opinions on the damages and necessary repairs are based on sufficient facts or data, the product of reliable principles and methods; and that he reliably applied those principles and methods in forming his estimate as required. The Court noted that Plaintiff designated Funsch as his damages expert. Funsch is offered as an expert to provide opinion testimony only on the cost to repair or replace the damaged areas identified in the Hall Report.
Reliability of Kevin Funsch’s Opinions
Next, Landmark asserted Funsch’s “opinions regarding the costs of repairs are unreliable because he relied on unexplained assumptions about the Property that have no factual basis.” Landmark’s argument is premised on Funsch’s deposition testimony. In his deposition, Funsch stated most of the quantities and measurements in his estimate were copied over from the Berkley estimate. Then, because Hall’s report “only called for replacing some sections of the roof and the Berkeley estimate called for replacing all of them, Hall told Funsch to just use ‘about half’ of some of the Berkeley quantities.” Funsch admitted he “wasn’t able to verify every single one of the quantities.” Funsch concluded ‘these quantities, the number of items seems reasonable’ which Landmark asserted were “assumptions” by Funsch instead of “actual quantities” actually rendered the entirety of Funsch’s opinions unreliable.
The Court, citing Rule 703, found Funsch’s testimony and report reliable.
Relevancy of Kevin Funsch’s Opinions
Landmark argued Funsch’s opinions were irrelevant because: (1) his repair estimate was based on prices as of April 2023, when the Policy required valuation based on the date of loss; (2) his repair estimate was a replacement cost estimate, not an actual cash value estimate; and (3) his opinions were not tied to “covered causes of loss.”
His repair estimate was based on prices as of April 2023, when the Policy required valuation based on the date of loss
Defendant first asserted Funsch’s opinions were irrelevant and/or not helpful to the jury because his report contained prices from April 2023 instead of 2019, and the Policy’s valuation provision mandated the cost of repairs be in 2019 (the alleged date of loss).
The Court found that the date of Funsch’s damage estimate did not render it
completely irrelevant and unhelpful; rather the exact weight to be given to Funsch’s testimony and expert report was for the fact finder to determine.
His repair estimate was a replacement cost estimate, not an actual cash value estimate
Landmark argued Funsch’s opinions were irrelevant and/or not helpful to the jury because his report contained only a replacement cost estimate, and “[i]n order to receive Replacement Cost coverage, the Policy stated that Plaintiff must first ‘actually’ repair or replace the property.” However, “it was undisputed that Plaintiff did not make the necessary repairs and the very minor repairs Plaintiff did make were not made until over two and a half years later.”
The Court noted that whether Plaintiff could recover replacement cost value or actual cash value damages was a point of contention currently being litigated. Thus, without an order barring Plaintiff from recovering replacement cost damages, the Court found Funsch’s opinion as to replacement cost damages was relevant.
Funsch’s opinions are irrelevant and/or not helpful because his opinions are not tied to a covered loss
Landmark argued Funsch’s opinions are irrelevant and/or not helpful because his opinions are not tied to a covered loss. The Court emphasized that Plaintiff designated Funsch as his damages expert. Funsch is offered as an expert to provide opinion testimony only on the cost to repair or replace the damaged areas identified in the Hall Report.
Held
The Court denied Landmark’s motion to strike and exclude the testimony of Kevin Funsch.
Key Takeaways:
- It is not unusual in insurance coverage cases to have separate causation and damages experts, and to have the damages expert rely on causation opinions from the separate expert.
- Simply because Funsch relied on Hall’s opinion and his own analysis of photographs, does not render Funsch’s reliability below Rule 702’s threshold, as this is exactly the kind of facts and data experts in Funsch’s field reasonably rely on in forming their opinions.
Case Details:
| Case Caption: | William Douglas C/O The Havens Group, Inc. V. Landmark American Insurance Company |
| Docket Number: | 7:22cv167 |
| Court: | United States District Court, Texas Western |
| Order Date: | May 28, 2024 |
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