In November 2021, a fire caused severe damage to the home of Michael and Alexis Wright, located in Goldendale, Washington, a rural area about 70 miles from Yakima, Washington. The Wrights filed a claim with their insurer, State Farm, which immediately confirmed coverage.
In January 2022, the adjuster assigned to the Wrights’ file, Timothy Treat, finalized his initial estimate for the structural repair of the Wrights’ home. He used a software called Xactimate, which used data on labor and material costs to estimate total repair costs. Xactimate yielded an estimate for the Wrights’ home repair in the amount of $181,277.82.
According to the Wrights, because they lived in Goldendale, a rural location, it took them several months to find a contractor willing to perform the repair. By June 2022, they found a company willing to do the work for an estimated total cost of $259,244.61—nearly $80,000 above State Farm’s Xactimate estimate.
In November 2022, after extensive back-and-forth, the Wrights brought contractual and extracontractual claims against State Farm, alleging that State Farm failed to properly investigate and cover their losses.
Among other arguments, the Wrights asserted that State Farm uses Xactimate, which “is designed with input and pricing data primarily sourced from the insurance industry,” to intentionally achieve “cost containment.”
State Farm intended to offer opinion testimony from construction and repair expert Eugene Peterson “regarding [among other topics] the reasonableness of State Farm’s use of Xactimate to create repair estimates in this matter.”
Wrights argued that Peterson’s opinion testimony was unsubstantiated, speculative, lacked foundation, amounted to legal opinions, and otherwise did not comport with Fed. R. Evid. 702 and 703.
Construction Expert Witness
Eugene Peterson is a Past President of both the Utah Home Builders Association and the Greater Salt Lake Home Builders Association. He is the CEO of Advise And Consult, Inc., expert witnesses & consultants for restoration, personal property & construction related matters in both the United States and Canada. He has facilitated peer group meetings for Business Networks, Inc., and for several years was an advisor, consultant & certified trainer for Xactware, Inc. (construction estimating software). Peterson has worked with the Xactimate since 1991, including beta testing new iterations of the program, training contractors on how to use the software, and creating the first online Xactimate training syllabus.
He also actively participates in the insurance appraisal process as either an umpire or appraiser.
Discussion by the Court
While Peterson admitted that State Farm estimates are written using the price lists from Yakima, Washington, which is over 70 miles from the loss location in Goldendale, he stated that the adjuster chose and applied an option found in the Xactimate estimating software for rural settings to account for the rural location. He explained, “when this option is applied, the software automatically factors and applies additional dollars to each line item to account for the increased labor and materials costs and the difficulty of working in a rural setting.” Likewise, Peterson added that this “‘rural/remote’ setting factors in some of the difficulties of material accusation, by bumping pricing of materials so that purchase can be made locally.”
However, when Treat was asked during his deposition whether he was familiar with the “site access” drop-down feature, he testified, “I have not seen this.” Likewise, when Peterson was deposed in October 2024, he admitted that he “cannot say for certainty that Treat did use the “rural/remote” feature.”
State Farm has shown, by a preponderance of evidence, that Peterson’s opinions are relevant and reliable
The crux of the Wrights’ motion to exclude is that Peterson’s testimony was unreliable because he “based his opinion on a false premise, the premise that Treat knew of and used a critical feature of the software program which adjusts for remote sites such as the Wrights’ home.”
In their reply brief, the Wrights provided other, additional grounds on which to question the reliability and relevance of Peterson’s opinions. For example, they pointed to Peterson’s allegedly false assertion that “Plaintiff Michael Wright completed the painting of their home.” And they disputed the relevance and reliability of Peterson’s opinion “as to the value of Plaintiffs’ home.”
Because these later arguments were improperly raised in a reply brief, the Court declines to consider them.
The Court is not persuaded that his potential factual error about State Farm’s use of the “rural/remote” feature renders his entire opinion testimony unreliable
The core issue in this case is whether Peterson’s statements about State Farm’s use of the ‘rural/remote’ feature in the Xactimate software render his entire opinion testimony unreliable.
The Court held that Peterson easily clears the expertise threshold set by Daubert and Rule 702 because he has been working with Xactimate for over thirty years. Most of the opinions expressed in Peterson’s report are in fact unrelated to the “rural/remote” feature. To exclude such expert testimony would hinder objective factfinding and unduly prejudice State Farm.
The Court cannot conclude that Peterson’s assertion about Treat’s use of the “rural/remote” feature was indeed false. The Wrights cited Treat’s deposition, in which he allegedly stated that he had never seen the “rural/remote” feature. But the portion of the deposition transcript they cited was missing from their evidentiary filing.
Even assuming that Treat did express unfamiliarity with the “rural/remote” feature in his deposition—meaning Peterson was likely incorrect about its use here—the Court held that this error concerned the weight, not admissibility, of Peterson’s testimony.
In summation, the Wrights are free on cross-examination to ask Peterson, for example, whether he knows for certain that Treat used the “rural/remote” feature when estimating the Wrights’ home repair costs. And they are also free to ask him whether, hypothetically, failure to use this feature would lead to an underestimate of rural home repair costs. Such testimony might aid their case. But they have not presented grounds to exclude his testimony entirely.
Held
The Court found that State Farm has met its burden of proving by a preponderance of the evidence that the opinion testimony of its construction and repair expert, Eugene Peterson, is relevant and reliable. The Court denied the Wrights’ motion to exclude Peterson’s expert testimony.
Key Takeaway:
When the baseline requirement of reliability is met, the factual basis of an expert opinion goes to the credibility of the testimony, not the admissibility, and it is up to the opposing party to examine the factual basis for the opinion in cross-examination.
Peterson is well-versed with Xactimate and is clearly qualified to opine on State Farm’s use of the ‘rural/remote’ feature in the Xactimate software. Besides, most of the opinions expressed in Peterson’s report were in fact unrelated to the “rural/remote” feature. The Wrights are free to address their doubts during cross-examination.
Case Details:
| Case Caption: | Wright Et Al V. State Farm Fire & Casualty Company |
| Docket Number: | 2:23cv179 |
| Court: | United States District Court, Washington Western |
| Order Date: | January 21, 2025 |
Leave a Reply