Plaintiffs (collectively, Allied World) are insurance companies that denied coverage to Defendant MNS Ltd., a retailer, for liability stemming from MNS’s settlement of a separate class action lawsuit. In the present lawsuit, two sets of claims are teed up: first, whether Allied World owes MNS a duty of coverage under the relevant insurance policies, and second, whether Allied World acted in bad faith toward MNS. The first set of claims involve legal questions of contract interpretation while the second set of claims are less specific and potentially raise a host of factual questions about the behavior of the parties and their agents. And the latter bad-faith claims are likely to be narrowed—or at least crystallized—once the legal questions of contract interpretation have been resolved.
MNS disclosed the expert report of David A. Gauntlett, an insurance coverage attorney. His report touches on both the contract interpretation claims and the bad faith claims.
Allied World contended that Sections I, II, III, IV, and portions of Section VI of Gauntlett’s report should be stricken because they “appear to relate to Gauntlett’s coverage opinions, as opposed to his bad faith opinions.”
Allied World argued that the report “flagrantly violates the sacrosanct principle of law that ‘an expert cannot testify to a matter of law amounting to a legal conclusion.’”
Insurance Expert Witness
David A. Gauntlett is the principal of Gauntlett & Associates and a 1979 graduate of Boalt Hall School of Law, University of California at Berkeley. Gauntlett is an expert in insurance issues, including the proper construction, meaning, and application of insurance policies, insurer’s investigation and handling of insured’s claims, and insurer’s bad faith.
Discussion by the Court
In Section I, Gauntlett begins his report with the open acknowledgment that it contains “legal research and analysis.” Section II is entitled “Allied World’s Problematic ‘Exhaustion’ Position.” There, Gauntlett argued that Allied World’s first amended complaint “misconstrued” the policy, and contended that “as defined by the policy and interpreted by applicable case law,” the policy must be read in Gauntlett’s preferred manner. In Section III, Gauntlett argued that in light of his preferred reading of case law, the policy’s “First Publication exclusion” should be interpreted as limiting coverage in a manner he proposes. In Section IV, he argues that while there is a dearth of case law on a point of interpretation, one “Hawaii case” supports his preferred reading and “a number of other cases are in accord.” He therefore opines that “Hawaii law will not enforce Allied World’s ‘exhaustion’ claim.”
And, finally, in Section VI, Gauntlett opines that “under Hawaii law,” MNS should be able to recover attorney’s fees and is entitled to prejudgment interest.
Anticipating this objection, Gauntlett writes in his report that Federal Rule of Evidence 702—the rule governing the admissibility of expert testimony—”is satisfied” because “legal analysis is a critical component of claims analysis.”
The legal analysis in Gauntlett’s report cannot be viewed as merely laying the foundation for proper non-legal opinions
The argument appears to be that because an insurer must understand the law when conducting a “reasonable investigation,” an expert too must “understand those same cases” to “evaluate whether the insurer’s conduct deviates so far from industry customs and practices as to run afoul of that case authority.” And in its briefing, MNS elaborates on this contention, noting that “the Court has not yet ruled that the provisions at issue are unambiguous,” and therefore, “insurance custom and practice is relevant to the issue of coverage and such insurance custom and practice is necessarily informed by the applicable cases.”
It is true that when passing references to legal terms are used merely to lay the foundation for an expert’s non-legal opinions, those legal references will not necessarily render the expert’s opinions improper.
However, the legal analysis in Gauntlett’s report cannot be viewed as merely laying the foundation for proper non-legal opinions—such as opinions about industry custom or practice, the extent to which Allied World’s conduct may have deviated from them, or what participants in the insurance industry might typically understand policy provisions to mean. That is because nothing in any of the challenged sections of Gauntlett’s report—Sections I, II, III, IV, or VI—appears to actually offer any opinions of that non-legal variety. Accordingly, while it is sometimes appropriate for an expert to discuss legal materials to lay the groundwork for non-legal opinions about industry customs and practices, Gauntlett’s expert report cannot take refuge in that principle because his report—at least as far as coverage is concerned—merely discusses and critiques the case law and then simply stops there.
The Court must also more broadly assess whether it is appropriate, under Rule 702, to allow the challenged opinions
MNS rejoins that Gauntlett’s discussion of the case law would still be helpful to the Court in resolving the coverage issues—which MNS emphasizes are complex and not routinely encountered—and that the motion to strike may be denied for that reason alone. It is certainly true that a legal expert’s legal opinions often are helpful, which is why such experts file amicus briefs to express their legal views.
But Gauntlett does not merely wish to express his views here as an amicus. Instead, he has submitted an expert report under Federal Rule of Evidence 702. The question for the Court, therefore, is not merely whether Gauntlett’s expert’s opinions might be helpful. The Court must also more broadly assess whether it is appropriate, under Rule 702, to allow the challenged opinions. And when, as here, an expert offers nothing but legal opinions, the answer must be no.
MNS offers a few other defenses of the report, but none are availing
First, MNS argued that Gauntlett’s report “largely relates to bad faith issues,” and it points out that Allied World seeks only to strike the portions of the report concerning coverage issues. Although five of the report’s seven sections appear to contain largely legal discussions about coverage, MNS argues that “to support and explain his opinion that Allied acted unreasonably in denying coverage”—an issue that pertains to the bad faith claims—Gauntlett “necessarily must comment upon the allegations in the complaint, the terms and provisions of the Policy, and the relevant case law.” MNS’ argument offers a reason why the Court should leave the expert report in place for now insofar as the bad faith claims are concerned, but that reason does not support leaving the expert report in the record with respect to the coverage claims.
Second, MNS contended that Gauntlett has previously been allowed to testify as an expert in at least two cases. But as MNS itself acknowledges, Gauntlett’s testimony in those cases, although touching on case law and legal standards, ultimately concerned the industry standard of care and an insurer’s alleged “bad faith handling of a claim.” However, Allied World is not challenging, at least at this stage, the propriety of Gauntlett’s expert report as to those issues.
Third, and finally, MNS argued that there is no harm in allowing the expert report to remain in place because the Court will make its own decisions about the proper interpretation of the policy provisions, and it can consider Gauntlett’s report to whatever extent it thinks appropriate. But it would impose on Allied World the unwarranted cost of having to conduct a deposition of—and possibly additional discovery concerning—the expert, despite the impropriety of the expert’s legal opinions on coverage.
There is, therefore, no reason to wait to see what passages MNS might rely on in its summary judgment briefing; because none of the challenged sections move beyond legal opinions
When a motion to strike expert testimony is filed in advance of summary judgment motions and this far in advance of trial, it is often prudent to deny the motions as premature.
In this case, however, the Court concludes it is appropriate to grant the motion to strike now. For one thing, Allied World makes a properly tailored request: it does not seek to strike the entire report, but merely the specific sections that it believes concern the coverage issues. For another, the Court need not strike any parts of the report as to the currently-stayed bad faith claims.
Held
The Court granted Allied World’s motion to the extent it seeks to strike Sections I, II, III, IV, and portions of Section VI of David Gauntlett’s expert report in connection with the coverage claims that are currently being litigated. The Court does not, however, strike any aspect of David Gauntlett’s report as to the bad faith claims that are currently stayed. Whether Gauntlett’s report should be stricken in whole or part as to the bad faith claims is an issue that the Court need not—and, therefore, will not—resolve until the stay of the bad faith claims has been lifted. To the extent Allied World’s motion requested that this Court strike the challenged portions in connection with all claims, therefore, the Court denied that aspect of Allied World’s motion.
Key Takeaway:
Allied World does not seek to strike the entirety of Gauntlett’s report for both phases of the case, but only those aspects that appear to concern the contract interpretation or coverage claims that are currently being litigated. To that end, Allied World contends that Sections I, II, III, IV, and portions of Section VI of Gauntlett’s report should be stricken because they “appear to relate to Gauntlett’s coverage opinions, as opposed to his bad faith opinions.”
The legal analysis in Gauntlett’s report cannot be viewed as merely laying the foundation for proper non-legal opinions. Nothing in any of the challenged sections of Gauntlett’s report—Sections I, II, III, IV, or VI—appears to actually offer any opinions of that non-legal variety. Indeed, at the hearing on the motion, the Court directly asked MNS’s counsel whether he could identify any sentence in the challenged sections of Gauntlett’s report that did more than merely describe and critique case law. Counsel could not do so. Accordingly, while it is sometimes appropriate for an expert to discuss legal materials to lay the groundwork for non-legal opinions about industry customs and practices, Gauntlett’s expert report cannot take refuge in that principle because his report—at least as far as coverage is concerned—merely discusses and critiques the case law and then simply stops there.
Case Details:
| Case Caption: | Allied World National Assurance Company V. Nhc, Inc. |
| Docket Number: | 1:22cv469 |
| Court: | United States District Court, Hawaii |
| Order Date: | December 05, 2024 |
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