This case arises out of a dispute over three separate, consecutive, nonrenewable Short Term Medical (“STM”) insurance plans underwritten by Defendant American Financial Security Life Insurance Company (“AFSLIC” or “American”). The type of STM insurance (also referred to as “short term limited duration insurance” or “STLDI”) at issue here is relatively new, first being authorized by changes to federal regulations in 2018 that expanded access to STM plans.
The insurance contracts at issue consist of a Group Short Term Medical Insurance Policy and three Certificates of Insurance issued thereunder to Susan Hanlon as insured and Nile Hanlon as an eligible covered dependent.
Plaintiffs asserted AFSLIC acted in bad faith because its third-party administrator: (a) closed several medical providers’ claims related to the treatment of Hanlon’s diverticulitis due to the providers’ failure to respond to multiple written requests for medical records; and (b) denied other providers’ claims based upon the Certificates’ preexisting condition exclusion. To support their position, Plaintiffs retained Susie Sullivan as a purported “bad faith” insurance claims handling expert.
Defendant filed a motion to exclude the testimony of Plaintiffs’ proposed expert, Susie Sullivan citing the Rule 702 standards.
Insurance Expert Witness
Susie Sullivan worked for the Oklahoma Department of Insurance from 1965 to 1995. From 1982 until 1995, she served as Assistant Insurance Commissioner in charge of Claims and Consumer Protection. Her duties consisted of reviewing disputed claims and evaluating claims handling practices of insurance companies licensed to transact business in the State of Oklahoma, scheduling market conduct examinations on insurance companies when she saw a pattern and practice of wrongful claims handling and conducting claims hearings to resolve coverage and liability issues through alternative dispute resolution and negotiated compliance problems.
Discussion by the Court
First, the Defendant challenged Sullivan’s qualifications. It contended that her qualifications did not encompass short-term medical insurance, short-term medical insurance claims handling, or industry standards relating to the same.
Defendant also argued that her “proffered opinion testimony was inadmissible because it was replete with thinly veiled legal conclusions and improper attempts to usurp the role of the Court.”
Qualifications
The Court held that this matter undoubtedly involved insurance claims submitted under a short-term medical insurance plan. Despite Sullivan lacking deep expertise on short-term medical insurance, it was not clear why such expertise was necessary here.
Defendant did not purport that investigation and claims handling for short-term insurance differed materially from investigation and claims handling in other insurance contexts. Nor did it allege that distinctive industry standards applied for investigating and handling claims under a short-term insurance plan.
Legal Conclusions
It is clear that while an expert may opine on the ultimate issue of fact, she may not give testimony stating ultimate legal conclusions based on those facts.
With these principles in mind, the Court excluded: (1) expert testimony on the legal parameters for bad faith under Oklahoma law, and (2) expert testimony artfully characterizing Defendant’s conduct with terms of legal significance. More specifically, Sullivan was not permitted “to opine regarding the duties an insurer owes to an insured, what conduct is reasonable by an insurer, whether Defendant’s actions were taken in good faith or in bad faith, whether Defendant’s investigation of Plaintiffs’ insurance claims was adequately thorough, whether Defendant’s conduct was reasonable, what courts have held regarding the duty of good faith and fair dealing, or what she otherwise believes the law to be.”
The Court barred Sullivan from discussing the Oklahoma Unfair Claims Settlement Practices Act (OUCSPA) or whether Defendant violated it.
The Court held that the OUCSPA did not establish standards of care or standards of conduct for measuring whether an insurer violated its duty of good faith and fair dealing. Nor did it function as an appropriate guide for a jury to determine bad faith.
The Court, however, permitted Sullivan to testify as to “the custom and practice of the industry in investigating and handling of claims” and “the considerations involved in evaluating an insured’s claim, based on industry custom and practice and/or her own experience.”
Held
The Court granted in part and denied in part the Defendant’s Motion to Exclude the Testimony of the Plaintiffs’ Proposed Expert Susie Sullivan.
The Court administratively terminated this action on March 18, 2024 without prejudice to the rights of the parties.
Key Takeaways:
- Qualifications: Despite Insurance Expert Witness Sullivan’s lack of deep expertise on short-term medical insurance, Defendant did not purport that investigation and claims handling for short-term insurance differed materially from investigation and claims handling in other insurance contexts.
- Legal Conclusions: It is clear that while an expert may opine on the ultimate issue of fact, they may not give testimony stating ultimate legal conclusions based on those facts.
Case Details:
| Case Caption: | Hanlon Et Al V. American Financial Security Life Insurance Company Et Al |
| Docket Number: | 5:22cv798 |
| Court: | United States District Court, Oklahoma Western |
| Order Date: | February 15, 2024 |
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