On November 10, 2022, Kenneth and Phyllis Zerr perished in a house fire. Plaintiffs—the Zerrs’ children and Kenneth Zerr’s estate—alleged that the fire was caused by a defective dehumidifier produced by Gree.
Defendants sought to call an insurance adjuster, Steven Weitz, to testify as to the value of the home, and its contents, before and after the fire. Plaintiffs filed a motion to exclude his testimony.
Insurance Expert Witness
Steve Mark Weitz is a Licensed Independent Adjuster licensed in California with over 30 years of experience in analyzing loss claims, with a focus on residential fire losses.
Plaintiffs did not challenge Weitz’s credentials. Rather, they argued that Weitz’s opinion should be excluded because he evaluated the “actual cash value” of the home and its contents, where Missouri law requires damages to be assessed using the “fair market value” of the property before and after the fire.
The question before the Court, then, is whether Defendants have shown that that it is more likely than not that Weitz’s “replacement cost less depreciation” testimony would “help the trier of fact to determine” the property’s “fair market value.”
Missouri Approved Jury Instruction (MAI) 16.02 defines “fair market value” as “the price that the property in question would bring when offered for sale by one willing but not obliged to sell it and when bought by one willing or desirous to purchase it but who is not compelled to do so.”
It is the Defendants’ burden to show that Weitz’s testimony is more likely than not admissible under Rule 702. However, Defendants produced no statute, jury instruction, or case law suggesting that testimony about “replacement cost less depreciation” would help the jury determine “fair market value” as defined in MAI 16.02. Instead, they cited cases from distinctly different contexts, in which courts interpreted “actual cash value” as “fair market value,” not cases in which courts allowed parties to establish “fair market value” by presenting evidence of “replacement cost less depreciation,” as Defendants propose. Moreover, they made the specious claim that Weitz “employed the same standard” as MAI 16.02, citing two parts of his report that relate to his valuation of the contents of the Zerrs’ home, not the structure.
Held
The Court granted Plaintiffs’ motion to exclude the testimony of Steven Weitz.
Key Takeaway
Defendants have failed to establish the admissibility of Weitz’s testimony under Rule 702 by a preponderance of the evidence because mischaracterization of the expert’s report is not a strong foundation for an argument.
Please refer to the blog previously published about this case:
Plaintiff Ram Krishana Inc., a Louisiana business owned by Mukesh and Kailash Zaveri, operated as Motel 6 (“Hotel Property”) at 2022 Ruth Street, Sulphur, Louisiana. ANK Holdings, LLC, a Louisiana limited liability company with the same Mukesh and Kailash Zaveri as its only members, owned a restaurant (“Restaurant Property”) at an adjoining address.
Defendant Mt. Hawley Insurance Company issued Ram Krishana an insurance policy covering both the Hotel and Restaurant Properties for the period from June 27, 2020, to June 27, 2021.
This case involves an insurance claim relating to alleged damages to Plaintiff’s hotel complex resulting from Hurricanes Laura and Delta, which occurred in August and October 2020, respectively.
On July 12, 2024, Mt. Hawley filed a Daubertmotion to exclude Plaintiff’s insurance adjuster expert witness, Jeffrey Major, from testifying on causation and amount of loss.
Insurance Adjuster Expert Witness
Jeffrey S. Major is a licensed public insurance adjuster in over 40 states and territories including being a licensed public adjuster and registered appraiser in the State of Louisiana and a licensed public adjuster in New York.
He has been adjusting, substantiating and estimating property damage claims to repair and replace property for Reserve, Actual Cash Value (ACV), and Replacement Cost Value (RCV) purposes for over 30 years.
He has estimated using the property damage estimating program Xactimate for over 18 years.
In his expert report, Major provided his estimate of damage to the Properties. He opined that Mt. Hawley improperly estimated damages, undervalued the claim, and failed to make proper actual cash value payments in a timely manner. Major estimated the actual cash value of the loss is $1,342,605.08. His expert report relied in part on estimates calculated in a software program called Xactimate.
Xactimate supplies default prices, but users can, as Major did here, input prices themselves.
Mt. Hawley’s Arguments
Mt. Hawley did not challenge Major’s qualifications. The Court reviewed Major’s training and experience and concluded that Major was qualified to testify about replacement cost valuation and insurance adjustment considering he has adjusted numerous insurance claims arising from hurricanes in the Louisiana area.
Rather, Mt. Hawley argued that Major’s opinions were unsupported and unreliable based on the price inputs underlying his cost estimates using Xactimate. Mt. Hawley did not argue that Xactimate is an unreliable tool for cost estimation in the insurance industry and Ram Krishana cited several cases approving the use of this common software program. Instead, Mt. Hawley claimed that Major’s opinions are unreliable because the cost information that he purportedly entered into the Xactimate tool for some prices was based only on his general experience and no documentation or objective substantiation for those estimates was provided.
Major had gathered prices from “actual builders who did the work in this event,” “invoices from contractors and their estimates,” invoices he reviewed, and interviews with contractors, as well as work he did as an adjuster on similar claims during the relevant period.
Numerous courts have considered Daubert challenges to experts who used Xactimate, but deviated from the default prices or otherwise purportedly erred, and have found that such challenges go to the weight to give an expert’s opinions, not the admissibility of their testimony.
In that case, which involved a jury trial, the Court excluded the testimony of an expert who used Xactimate. Like Major, that expert input at least some of his own costs. However, the expert in La Gorce could not describe the methodology he relied on for calculating input values, did not explain an intelligible process for identifying which damages he deemed to preexist the hurricane nor even identify the damages he excluded on this basis, and could not provide any measurements associated with his estimated costs. The Court also questioned how the expert determined the cost of repair for such a large property over just two days.
In the present case, however, Major identified the particular prices that he independently input into Xactimate. He explained that the costs came from builders who did work in the storm that damaged Plaintiff’s property and his own experience in adjusting similar claims. While Major apparently did not have any documentation to support his estimates, deficiencies in his methodology for gathering prices did not reach the level of the methodological deficiencies in La Gorce, in which the expert could not explain how he gathered data or formed his damage estimations. Also, the expert testimony in La Gorce would have been presented to a jury rather than to the Court in a bench trial, as here.
Analysis
Hawley may well have strong cross-examination fodder based on the fact that Major has not produced records or written substantiation of the estimates that he included that were based on his expertise and experience. Such critiques will be closely scrutinized by the Court in determining the weight, if any, to afford Major’s opinions.
Given that this case is set to be tried to the bench, unless the disputed evidence is wholly irrelevant or so speculative as to have no probative value, it is appropriate for the Court to take in the evidence freely and separate helpful conclusions from ones that are not grounded in reliable methodology.
Held
The Court denied Mt. Hawley’s Daubert motion to exclude the testimony of Plaintiff’s insurance adjuster expert witness, Jeffrey Major.
Key Takeaway:
The Court held that Major sufficiently explained his methodology and established its reliability, despite the apparent lack of documentation to support his estimates. Major identified the particular prices that he independently input into Xactimate and explained that the costs came from builders who did work in the storm that damaged Plaintiff’s property and his own experience in adjusting similar claims.
Major did not produce records or written substantiation of the estimates that he included but the Court still refused to entirely exclude Major’s testimony.
Case Details:
Case caption:
Ram Krishana Inc. v. Mt. Hawley Ins. Co.
Docket Number:
1:22cv3803
Court:
United States District Court for the Southern District of New York
