Plaintiffs Melissa Pitkin and Dan Grout own a home together in Healdsburg, California. They hold a homeowner’s insurance policy from State Farm, policy number 57-C4-6752-1 (the “Policy”), which covered certain losses to their home and all of its contents. The Policy included the “main policy form” (FP-7955, CA) as well as a “homeowners endorsement form” (FE-3422). Subject to the Policy’s terms, conditions, and exclusions, the Policy included “Coverage B – Personal Property” limits of $506,574, and other various special limits. Regarding settlement of Coverage B claims, the Policy provides for settlement of damaged personal property in several ways, including actual cash value (“ACV”), market value, and replacement cost (“RC”).
On August 20, 2020, the Walbridge Fire burned down the Plaintiffs’ home. Having lost their home and personal possessions, the Plaintiffs tendered a claim to State Farm for their losses under the Policy. State Farm accepted the claim and adjusted their losses pursuant to the Policy’s terms, which stated that the plaintiffs are entitled to recover ACV for their personal property losses. On December 16, 2022, and January 24, 2023, the Plaintiffs received partial payments from State Farm for their personal property contents losses. State Farm also sent the Plaintiffs “loss payment worksheets” that showed their ACV benefits for their personal property.
For all items of property where sales tax was applicable, State Farm depreciated sales tax in calculating ACV.
The Plaintiffs filed this class action, alleging that State Farm violates California law by depreciating sales tax as a component of RC when calculating ACV.
State Farm sought to exclude the opinions of Plaintiffs’ experts, Greg J. Regan, David Melzer and Eugene Peterson while Plaintiffs filed a motion to exclude the testimony of State Farm’s primary expert witness, Dr. Duane L. Steffey.
Accounting Expert Witness
Greg Joseph Regan is a partner in the Forensic Consulting Services Group of Hemming Morse, LLC, and is a licensed CPA in California.
Insurance Expert Witness
David Melzer has worked in the insurance industry since 2011 in various specialist capacities. He worked for Travelers Insurance from 2013 to 2020, where he held positions including adjuster, technical specialist, and claims manager.
After that, he started his own public adjusting firm, called Property Claims Consultant, Inc., where he handles first and third-party property claims, including personal property claims.
He has held the position of President of Property Claims Consultant, Inc. since he started the firm in November 2020. He has “significant experience in processing and analyzing personal property insurance claims” and “experience working with industry-standard software used to process and track personal property claims, including Xactimate or XactContents.”
Construction Expert Witness
Eugene Peterson built his first home in 1974 – and has been a home builder, remodeler, and restoration contractor for over 35 years.
He is a Past President of the Utah Home Builders Association and the Greater Salt Lake Home Builders Association. He is the CEO of Advise And Consult, Inc., an expert witness & consultant for restoration, personal property & construction related matters in the United States and Canada. Peterson has facilitated peer group meetings for Business Networks, Inc., and was an
advisor, consultant & certified trainer for Xactware, Inc. (construction estimating software) for several years. He also actively performs insurance appraisals as an umpire or appraiser.
Statistics Expert Witness
Dr. Duane Leon Steffey holds a Bachelor of Science in history and mathematics, a masters in statistics, and a Ph.D. in statistics from Carnegie Mellon University. He has served as a consulting statistician for over thirty years, with a “breadth of applications in engineering, health, environmental science, and civil justice.”
He is an elected Fellow of the American Statistical Association since 2009, as well as an Elected Member of the International Statistical Institute since 2015.
Discussion by the Court
1. Greg Regan
Regan indicated that he was “asked to provide a methodology to calculate available classwide damages.” State Farm produced an Excel file known as the “Combined Pitkin Dataset.”
If a claim “involves more than a few items or is not settled during a first contact” the claims personnel may “utilize the XactContents® tool to assist in valuing lost property for claim settlement purposes.” Third party entity Verisk owns the XactContents® tool.
To create the Combined Pitkin Dataset for this litigation, third-party Verisk first created a report containing data regarding personal property claims during the class period with an XactContents® actual cash value estimate.
Regan clarified that while his “methodology to calculate damages” was laid out in his initial report, the supplemental report was meant to apply the methodology to the Combined Pitkin Dataset. Regan then proposed two alternative “scenarios” for calculating damages. Under the first scenario, damages would equal the amount of Sales Tax Depreciation applied to a claim, capped by any RC benefits available under the policy. Under the second scenario, Regan allocated Sales Tax Depreciation proportionally by comparing the claimant’s remaining RC benefits to the total recoverable depreciation and then applying that percentage to the amount of Sales Tax Depreciation.
The crux of State Farm’s motion to exclude concerns the reliability of Regan’s opinions. Specifically, State Farm claimed Regan’s opinion hinges on (1) unreliable data, (2) unreliable identification of class members, and (3) incompatible and unreliable damages “scenarios.”
a. Reliability
State Farm first argued that Regan’s reliance on the Combined Pitkin Dataset lacked the “foundation” necessary to survive a Daubert motion.
State Farm’s challenge is best understood as an attack on the assumptions underlying Regan’s analysis—mainly, that XactContents® is an accurate tool for measuring damages in this case.
Regan indicated that he relied on State Farm’s own records, testimony from State Farm employees, “validation exercises,” “extensive testing,” and “adopting the more conservative input for purposes of measuring damages” when a disagreement in the data arose.
The Court concluded that Regan has established by a preponderance of the evidence that his opinion is reliable and admissible, subject to cross-examination and presentation of contrary expert testimony.
According to State Farm, Regan’s “three new groupings of purported class members (not reflected in the class definition or his prior opinions) produce unreliable and patently incorrect results.”
However, Regan “organized his damage calculations in three groups to reflect the different circumstances of those groups.” While each group may present different factual circumstances, Regan “applied the same methodology to calculate damages across all groups.”
State Farm finally challenged Regan’s two damages scenarios as unreliable and invalid. Regan sufficiently explained in his Report and Supplemental Report the reason for having two damages “scenarios,” how he reached those scenarios, and the methodological basis for each.
b. Untimely Opinions
State Farm argued in the alternative that Regan’s opinions in the Supplemental Report should be excluded as untimely and improper new opinions.
Regan’s Supplemental Report was disclosed two months after the Rule 26 disclosure deadline and less than one month before the rebuttal deadline. Because its own expert, Steffey, opined that the Supplemental Report “substantially revised Regan’s opinions,” State Farm urged that the Court find his “new” opinions as untimely under Rule 702. Plaintiffs responded by pointing out that the parties jointly agreed to extend fact discovery and adjust the pretrial schedule to allow for State Farm to produce the Combined Pitkin Dataset. As a result, Regan produced his Supplemental Report on September 25, 2025—a date agreed upon by the parties in their joint request to adjust the pretrial schedule.
2. David Melzer
a. Methodology
Melzer indicated that he was “hired to provide opinions on . . . the frequency of personal property claims with State Farm, the ascertainability of these claims through available databases, and whether the claims of Plaintiffs Pitkin and Grout fall within the proposed class.”
Melzer’s proposed methodology to estimate the total number of potential class members is as follows. To estimate the total volume of personal property replacement claims for State Farm in California from 2015 to the present, he analyzed the number of claims in a submarket: San Diego. He chose San Diego as a representative example because claims throughout California would “typically be consistent with personal property claims made in San Diego.”
Using that data, Melzer estimated the total number of insurance claims in San Diego across all insurers by dividing the number of Travelers’ claims by its 3.68% market share (a percentage market share that is available on the California Property and Casualty Market Share Report published by the California Department of Insurance).
He then consulted the California Property and Casualty Market Share Report (the “Market Report”) issued by the California Department of Insurance from 2015-2023 and determined that State Farm consistently has “over 8.5% of the Property and Casualty Insurance Market in California.”
Melzer goes on to explain that based on his familiarity with Xactimate and XactContents®, he believes that “given the detailed data that insurance companies maintain and given the flexibility and power of Xactimate/XactContents, it is [his] opinion that State Farm can create a report, or export the necessary data, that will allow for the identification of all personal property insurance claims where State Farm depreciated the taxes. From that report, Plaintiffs will be able to identify the members of the Class.”
b. Class Member Identification
State Farm maintained that the Court must exclude any class identification opinion from Melzer, as he “has not purported to identify class members” and instead “conjectures that someone else can.”
It similarly urged that Melzer’s “conjecture that someone else can reliably and feasibly identify specific class members based solely on the Combined Pitkin Dataset also lacks sufficient foundation, conflicts with Melzer’s other admissions, and is therefore inadmissible.”
Plaintiffs contended that Melzer did, in fact, “analyze the capabilities of the Combined Pitkin Dataset to ascertain the members of the class.”They highlighted that Melzer provided a “detailed analysis of the capabilities of XactWare products, including XactContents.”
“While State Farm may disagree” with this analysis, Plaintiffs concluded, “that is not a basis for the Court to exclude Melzer’s conclusions based on his extensive experience.” The Court agreed.
c. Depreciation Standard Industry Practices
State Farm similarly sought to exclude Melzer’s opinions on “sales tax depreciation practices for the insurance industry as a whole.”
Plaintiffs responded by highlighting Melzer’s “more than a decade of experience regarding the adjustment of insurance claims,” including working for Farmers, Travelers, and during his “nearly five years as a public adjuster working with multiple insurers from 2020 to the present.”
Much of that time was spent working with XactWare products, including XactContents®, which Plaintiffs believe render him qualified to “offer opinions as to the industry standard for adjustment of contents insurance claims.”
As with his other opinions, the Court found that it is more likely than not that Melzer meets the four requirements. While a fact finder may conclude that State Farm’s sales tax depreciation practices are not what Melzer claims them to be, that does not render his opinion and testimony inadmissible.
d. Rule 26 Testimony
Plaintiffs acknowledged that “they, and State Farm, are precluded from offering undisclosed expert opinions.” But they maintained that “Melzer’s opinions as to the typicality of insurers not depreciating sales tax were explicitly disclosed in his report.”
No party may offer undisclosed expert opinions at trial. The Court held that the example in the preceding paragraph was disclosed and will not be excluded.
3. Eugene Peterson
a. Methodology
Peterson concluded that “XactContents® software contains global and line-item settings that allow an insurance company to apply depreciation based on one of three methods: 1) percentage, 2) by a fixed dollar amount, and 3) by age with an adjusted condition.” He opined, “the software allows complete control over how depreciation is calculated, so each insurance company can set its policies for depreciation without needing to customize the software. From the software’s perspective, a user can determine what line items are to be depreciated and what is to be depreciated in each line item, e.g., sales tax.”
b. Opinions on XactContents® Data Extraction
State Farm “did not dispute Peterson’s ability to testify regarding what the XactContents® tool is and how it may be used.” Instead, it sought to exclude Peterson’s “feasibility opinion—that the Combined Pitkin Dataset in this matter can be used by someone else to reliably identify class members or calculate damages.”
The Court found that Peterson sought to offer a relatively narrow opinion with respect to the structure and abilities of XactContents® to assist Plaintiffs in calculating damages in this case. He has significant experience working with XactContents®.
4. Duane Steffey
Steffey was hired by State Farm to “evaluate the basis and foundation for Regan’s, Melzer’s, and Peterson’s opinions” at class certification. State Farm also disclosed Steffey as a rebuttal expert to Regan’s supplemental report.
a. Class Membership
Plaintiffs took issue with how Steffey criticized Regan’s identification of 41,153 class members in his Supplemental Report.
State Farm countered that Steffey’s rebuttal report criticizing Regan’s “new approach to identifying class members and calculating damages” was “based on his knowledge and education in statistics, previous experience, and the materials he reviewed.”
The Court agreed with State Farm that exclusion is not warranted. Steffey engaged in a thorough review of the materials provided to him, including all exemplar claims identified by Regan. He then identified at least one “exemplar” Plaintiff who potentially lacked injury and damages, thus raising questions about Regan’s methodology for identifying class members.
b. Damages Calculations
Plaintiffs also sought to exclude Steffey’s criticism that Regan’s damages “scenarios” are “unreliable.”
The Court found that Steffey raised important questions about Regan’s methodology that go to the heart of this dispute—questions regarding standing, injury, and how to identify class membership. His opinions are relevant. They can be tested. And they may assist the trier of fact in resolving the question of damages and standing in this case.
c. Data Fields Interpretation
Plaintiffs sought to exclude Steffey’s claim that some of Regan’s “descriptions of certain data fields in the Combined Pitkin Dataset ‘have not been corroborated by anyone with requisite knowledge.’”
The Court found that Steffey properly critiqued Regan’s assumptions in the Combined Pitkin Dataset, a topic which he, as a statistician, may opine. That Steffey recognized he cannot judge the accuracy of the fields is a different question than identifying Regan’s failure to corroborate the Dataset.
d. Substantial Revision Opinion
Plaintiffs finally sought to exclude Steffey’s opinion that Regan’s supplemental report represents a “substantial revision” to his analysis in the original report.
Credibility is always an issue for the jury to consider, and Steffey’s opinion about the “drastic” change “underscores the unreliability of Regan’s approach generally.”
State Farm is entitled to present this opinion as an attack on Regan’s credibility at trial. In sum, the Court will not exclude Steffey’s testimony.
Held
The Court denied the parties’ motions to exclude, as each request raises issues of credibility—a question reserved for the factfinder—instead of admissibility.
Key Takeaway
Plaintiffs must show it is more likely than not that: “(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert [has reliably applied] the principles and methods to the facts of the case.” Applying this standard, State Farm argues that Plaintiffs have not met their evidentiary burden.
Case Details:
| Case Caption: | Pitkin V. State Farm General Insurance Company |
| Docket Number: | 3:23cv924 |
| Court Name: | United States District Court, California Northern |
| Order Date: | June 30, 2026 |
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