ResinTech commenced this action against AIG and Odell arising from AIG’s denial of coverage for environmental liabilities asserted against ResinTech by the Camden County Municipal Utilities Authority (“CCMUA”) and the New Jersey Department of Environmental Protection (“NJDEP”).
ResinTech asserted claims against AIG for breach of contract and declaratory judgment and, in the alternative, asserted claims against Odell arising from Odell’s alleged failure to procure appropriate insurance coverage and advise ResinTech concerning its pollution-liability risks.
Odell sought to exclude the testimony of Plaintiff’s insurance-industry expert, Howard Tollin.
Law And Legal Expert Witness
Howard M. Tollin is an attorney, environmental risk consultant, and licensed property and casualty broker. Over the past 30 years, he has facilitated thousands of real estate, corporate M&A transactions and litigation and claims settlements.
Tollin is qualified to offer opinions concerning environmental insurance, pollution-liability coverage, insurance-broker practices, and industry customs. He has decades of experience as both an attorney and insurance broker specializing in environmental and pollution coverage. His report and deposition testimony demonstrate substantial experience placing pollution-liability policies, negotiating policy language, advising policyholders regarding environmental risks, and participating in the environmental-insurance marketplace. The Court is satisfied that his specialized knowledge will assist the trier of fact.
Odell’s principal criticisms concerned the basis for Tollin’s opinions rather than his qualifications. Odell argued that Tollin relied primarily on his professional experience rather than identified treatises, regulations, or formal industry standards. That argument is unavailing. Tollin reviewed the record and applied his experience to the facts of this case. To the extent Odell disputes his assumptions, methodology, or conclusions, those objections go to the weight of the testimony and may be explored through cross-examination and the presentation of contrary evidence.
The Court likewise rejected Odell’s contention that Tollin’s opinions are impermissibly speculative. Odell’s challenges largely concerned the factual premises underlying Tollin’s opinions and the conclusions he drew from the record.
The Court agreed, however, that Tollin may not offer legal conclusions or instruct the jury on the governing law. Accordingly, Tollin may testify regarding insurance-industry customs and practices, the availability and characteristics of environmental insurance products, the role and responsibilities commonly undertaken by brokers and risk-management advisors, and whether the conduct alleged in this case was consistent with those customs and practices. He may not opine that Odell was negligent, breached a legal duty, violated New Jersey law, or otherwise offered legal conclusions reserved for the Court and jury.
Held
The Court denied Odell’s motion to exclude the testimony of Howard Tollin subject to certain limitations.
Key Takeaway
Rule 702 expressly permits expert testimony grounded in specialized experience, and the absence of a particular treatise or published methodology does not render such testimony inadmissible.
Case Details:
Case Caption:
ResinTech, Inc. V. AIG Specialty Insurance Company
Docket Number:
1:21cv19843
Court Name:
United States District Court for the District of New Jersey
Plaintiffs are the estate and heirs of Timothy Hunt, who was killed in a grain engulfment accident. Defendant is the insurance company who insured the farm (Butts Farms) where the accident occurred. Defendant denied coverage for the accident under the policy. Butts Farms assigned its claims to Plaintiffs as part of an arbitration and non-execution agreement. Plaintiffs secured an arbitration award of approximately $12 million against Butts Farms and seeks to collect that from Defendant.
Plaintiffs designated Ronald Clifton as an expert on Defendant’s claims handling practices. Clifton’s report outlined the facts of the case, and in doing so concluded that the grain vacuum Hunt was using was attached to the trailer. He opined on the liability of Butts Farms, coverage of the loss under the policy, claims handling deficiencies by Defendant, Defendant’s conformance with its “Claims Best Practices” and the Kansas Unfair Claim Settlement Practices Act, and Defendant’s breach of fiduciary duty toward Butts Farms.
The Defendant filed a motion to exclude Plaintiffs’ expert Clifton.
Insurance Expert Witness
Ronald Clifton has over 37 years of claim handling experience. He has also served as an insurance claims litigation consultant for over 21 years.
Clifton’s opinion is “that a reasonable insurer would have settled this claim and paid the full available policy limits,” that Defendant acted negligently by failing to settle the claim for policy limits, and that Defendant failed to act in good faith in handling the claim.
The Court has reviewed Clifton’s report. It shared many of the concerns raised by Defendant. Clifton’s report includes an extensive discussion of policy provisions and a conclusion that the accident is covered under the policy.
Analysis
To begin with, Clifton concluded without elaboration that the grain vacuum was attached to the grain trailer. But that is a factual question the jury will be asked to decide—a fact question that does not require expert testimony. If a jury finds the grain vacuum was attached to the trailer (which can include being tied), coverage exists under the policy. It is not Clifton’s role to tell the jury how they should decide by simply declaring there is coverage based on the grain vacuum being attached.
To the Court’s knowledge, there are no disputes about any other provisions in the policy. Even to the extent there was an issue about the policy, it is not Clifton’s role to opine on what the policy says or does not say because that is a legal issue for the Court to decide.
Clifton’s report also repeated opinions of others, including a doctor’s opinion about Hunt’s cause of death. Clifton is not qualified to opine on that issue, nor is it proper for him to simply repeat what others have said. To the Court’s knowledge, Hunt’s cause of death is not an open issue in this case.
There are other opinions that do not seem to “fit” the case. For example, Clifton’s report included a series of opinions that Butts Farms had a duty to exercise reasonable care toward Hunt, and it breached that duty. To the Court’s knowledge, Butts Farms’ obligations toward Hunt are not an issue the jury will be asked to decide. Additionally, Clifton opined that Defendant breached its fiduciary duty to Butts Farms. This opinion is conclusory and veers into legal opinion.
Held
The Court granted in part and denied without prejudice in part the Defendant’s motion to exclude the testimony of Ronald Clifton.
Key Takeaway
The Court found that many of Clifton’s opinions are not relevant, would not aid the jury, or touch on legal matters or on matters beyond his expertise. However, Clifton did have some expertise that qualifies him to offer opinions about insurance industry standards and practices. What those opinions are and the basis for them are not clear from the report, however. Accordingly, the Court will voir dire Clifton before the trial.
Case Details:
Case Caption:
Hodges V. Farm Bureau Property & Casualty Insurance Company
On May 19, 2023, Plaintiff John Gianacopoulos filed this action against Defendants Acuity, a mutual insurance company (“Acuity”), and Joyce Jackman & Bell, LLC (“JJB”), concerning a fire that occurred on September 12, 2022, at 1124 Saint Ann Street in Scranton, Pennsylvania (the “Scranton Property”).
According to Plaintiff’s expert witness, James Stevenson, JJB breached its professional duty of care by failing to procure the correct policy for John Gianacopoulos and by failing to explain the differences in coverage between a homeowners’ insurance policy and a dwelling fire insurance policy.
JJB has moved to exclude Stevenson’s expert report and testimony, arguing that they are inadmissible because it lacked the requisite reliability and application to the specific facts of this case in violation of Rule 702.
Insurance Expert Witness
James W. Stevenson is an underwriter, consultant, and broker with over thirty years of experience in the insurance field.
Stevenson’s opinion is supported by his “education, training, experience and expertise in the property and liability insurance industry over the past [thirty-seven] years,” and, moreover, his opinion concerned facts pertinent to this case. He stated in his report that JJB should have been aware of the Plaintiff’s changed residence and that “once [JJB] was made aware that John Gianacopoulos had purchased a new home and was making it his residence, [JJB] was or should have been aware that the [Scranton Property] was no longer [his] residence.” As a result, the Court found that Stevenson has satisfied both contested prongs of Rule 702.
He further opined that JJB breached its duty by failing to procure the correct policy for the Plaintiff’s Scranton Property—a dwelling fire insurance policy—that would have provided property coverage for the fire loss at the property. Stevenson also explained in his deposition that “it’s up to the agent, being the trained expert they are in the insurance industry, to recommend or explain the coverages available and the policies available to the insured/prospect,” and that JJB had an obligation to advise the Plaintiff in this action because “[y]ou can’t have two homeowners’ policies with primary residences.”
Held
The Court denied JJB’s motion to exclude the testimony of James Stevenson.
Key Takeaway
The expert’s testimony must be relevant to the purpose of the case and must assist the trier of fact. Stevenson’s opinion, as expressed in his report and at his deposition, created a genuine dispute of material fact as to the duty that JJB owed the Plaintiff, which must be determined by the factfinder.
Church Mutual renewed an insurance policy issued to Chabad of New Mexico on June 2, 2022, which covered certain real property owned by Chabad in Rio Rancho, New Mexico. The policy includes a vacancy condition providing that if a building has been vacant for more than 60 consecutive days before a loss, coverage is limited. The policy eliminates coverage entirely for losses caused by vandalism, even though vandalism would otherwise be a covered cause of loss, and any otherwise covered loss is subject to a 15% reduction. A building is considered vacant when it lacks sufficient personal property to conduct customary operations.
On December 28, 2022, there was an act of arson committed on a building covered by the Policy. On March 5, 2023, there was a second act of arson committed on the same building. Chabad submitted claims under the Policy to Church Mutual for both fires.
On January 29, 2024, Church Mutual instituted this diversity action, seeking a declaratory judgment that it owes no duty to cover Chabad’s claims because the property was “vacant” for more than sixty consecutive days before the acts of arson, and therefore no coverage is owed pursuant to the Policy’s “Vacancy” loss condition.
Chabad sought to introduce expert testimony “regarding insurance industry standards, customs and practices and about how Church Mutual Insurance Company deviated from those standards in its handling of the property damage claims.”
In this regard, Chabad has hired Stuart Setcavage who purports to be “an expert in the field of insurance industry claim handling, policy interpretation and coverage analysis.” Church Mutual filed a motion to exclude Setcavage’s testimony.
Insurance Expert Witness
Stuart S. Setcavage has considerable experience in the handling and management of third-party, contractual and extracontractual lawsuits. He has learned industry claim handling standards based on personal learning, training, research, and industry experience for over three decades. His adjuster’s licenses in Texas, Florida, and West Virginia enjoy reciprocal agreements with most every state that requires licensing.
He is a past president of the Pennsylvania Defense Institute and also served as chairman of its Coverage and Claims Practices committee. Throughout his career he has attended professional seminars and continuing legal education seminars related to insurance industry claims practices and procedure, auto law, policy, and coverage bad faith. He has given many presentations to both claims and law groups on insurance and claims-related topics, and served as faculty for the Pennsylvania Association for Justice, the Pennsylvania Bar Institute, the West Virginia Association for Justice, the Florida Justice Association, and the Kentucky Justice Association.
Church Mutual initially argued that Setcavage is unqualified to offer expert opinions in this case because he lacks sufficient knowledge of property insurance policy language and property insurance adjusting to offer reliable opinions regarding the subject property.
Church Mutual noted that Setcavage’s background is primarily in handling and supervising automobile insurance claims and most of the cases for which he has provided expert testimony involved automobile insurance claims.
But Church Mutual did not articulate any difference between industry standards applying to claims handling under automobile insurance policies and property insurance policies that would render Setcavage’s knowledge, experience, education, and training as to the former irrelevant to the latter.
As a result, the Court found that Setcavage is qualified by knowledge, skill, experience, training, and/or education to render an opinion on insurance practices and standards and whether Church Mutual deviated from those standards in its handling of Chabad’s claims and in renewing Chabad’s Policy in 2022 with the “Vacancy” loss provision.
b) Usurping the role of the Court
Church Mutual next argued that Setcavage’s interpretation of the Policy’s terms are legal conclusions that usurp the role of the Court. The Court agreed with Church Mutual that the interpretation and construction of an insurance policy is a question of law for the Court.
The motion did not specify which of Setcavage’s opinions Church Mutual believes are legal conclusions. However, it appeared to object to Setcavage’s opinion that the plain language of the Policy’s “Vacancy” provision applies, rather than Church Mutual’s position that “vacancy” means “unused.”
c) Reliability
Church Mutual next argued that Setcavage’s opinion is unreliable because “no discernible methodology exists to guide Setcavage’s interpretation of the Policy.”
The Court first found that Church Mutual’s argument is largely moot because it takes issue primarily with Setcavage’s interpretation of the Policy’s “Vacancy” loss condition, and the Court has already interpreted that provision and found that it does not preclude coverage. Thus, Setcavage’s interpretation of the Policy’s “Vacancy” loss condition will be relevant only to whether Church Mutual’s interpretation of the Policy’s “Vacancy” loss condition was frivolous, unfounded, or otherwise violative of the duty of good faith and fair dealing.
He further stated that “claim professionals are trained to know that the plain meaning of an insurance policy will prevail unless its terms somehow violate public policy” and that “Church Mutual is attempting to redefine ‘vacancy’ to include factors not set forth in the policy it had underwritten and sold to this policyholder.”
As to valuation, Setcavage stated that “claims professionals are trained to know that the plain meaning of an insurance policy will prevail unless its terms somehow violate public policy. Like ignoring policy definitions relative to coverage, calculating the loss differently than what the policy promises to pay violates industry standards.”
It is unclear what more of an explanation Church Mutual believes is necessary in this context.
d) Assist the jury
Finally, Church Mutual argued that Setcavage’s testimony will not assist the jury because there is nothing about Church Mutual’s claim handling procedures or the principles of bad faith that would require any real expert opinion.
Here, Setcavage has offered opinions that may assist the jury in deciding whether Church Mutual has engaged in bad faith insurance conduct. For example, he opines that Church Mutual’s handling of Chabad’s claims was “unfair” and “falls well below industry standards.” He further stated that “the purported investigation in this matter was woefully inadequate as is evidenced by the claim notes. In fact, the claim handling or investigation is indicia of a pre-determination to deny payment for these claims.”
These opinions (and others) may assist the jury in determining whether Church Mutual engaged in bad faith insurance conduct under New Mexico law.
Held
The Court denied Church Mutual Insurance Company’s motion to exclude the testimony of Stuart S. Setcavage
Key Takeaway
District courts evaluating the reliability of non-scientific expert testimony do not have to focus on whether the expert employed an objective standard or methodology and can instead focus on the reliability of the expert’s personal knowledge or experience.
Setcavage’s personal knowledge and experience permits him to offer an expert opinion regarding insurance industry standards, customs and practices and about how Church Mutual deviated from those standards in its handling of Chabad’s claims.
Case Details:
Case Caption:
Church Mutual Insurance Company, S.I. V. Chabad Of New Mexico
In this commercial property damage insurance case, Plaintiff Prairie Walk Condominium Association sought to recover millions of dollars in benefits to repair damage to approximately fifteen buildings at its condominium complex resulting from a July 16, 2018, hailstorm, as well as treble damages for alleged unreasonable delay/denial of insurance benefits.
Plaintiff disclosed as a retained expert Greg Z. Gerganoff of Rocky Mountain Safety Consulting, Inc., to provide opinions about construction safety standards for the restoration project.
Defendant filed a motion to strike certain opinions of Plaintiff’s expert Gerganoff. The Court previously denied the Defendant’s motion to strike as moot. However, the motion did not persuade the Court that any of Gerganoff’s opinions should be stricken under either Rule 702 or Rule 403.
Safety Expert Witness
Greg Zdravko Gerganoff is a board-certified safety professional and the owner of Rocky Mountain Safety Consulting, Inc. He provides safety consulting to various industry clients including mining, oil and gas, construction, manufacturing, residential property managers, and insurance companies.
Defendant asserted that Gerganoff’s incorporation of Occupational Safety and Health Administration guidance into his opinions is a “stunning admission” that his “opinions are nothing more than the very type of ipse dixit that the U.S. Supreme Court mandates be rejected under Rule 702.” However, the Court held that Gerganoff’s opinions are supported by a reliable methodology, will be helpful to a jury determining the necessary cost of repairs, and do not present an appreciable risk of confusion. Basically, forming an opinion about safety standards based on guidance from a federal administration is far from ipse dixit—to the contrary, such an opinion has clear grounding beyond the expert’s mere “say-so.”
Defendant also quibbled with Gerganoff’s interpretation of certain OSHA regulations. However, the fact that the technical language of these guidelines may not encompass his specific suggestions did not render them inherently unreliable or unhelpful in this case, particularly since Gerganoff did not opine that his recommendations carry the force of law.
Defendant argued that Gerganoff’s opinions are irrelevant because the insurance policy only entitles Plaintiff to “the amount actually and necessarily needed to repair or replace covered property damage.” While there is potentially some merit to this argument, what exactly the insurance policy means by “necessary”—and whether that term connotes bare legal necessity as defined by OSHA or some higher level of necessity as defined by the prevailing industry standards—is ultimately a question on which the parties have the burden of convincing the jury.
Finally, Defendant argued that Gerganoff’s opinions should be excluded because they are overly prejudicial and misleading. Given that obscure construction safety standards are not within the realm of common knowledge, the Court held that any such potential risk did not substantially outweigh the potential helpfulness of Gerganoff’s opinions.
Held
The Court denied the Defendant’s motion to strike certain opinions of Plaintiff’s expert Greg Z. Gerganoff.
Key Takeaway:
Forming an opinion about safety standards based on guidance from a federal administration is far from ipse dixit—to the contrary, such an opinion has clear grounding beyond the expert’s mere “say-so.” This does not run afoul of the oft-quoted axiom that an expert’s opinion must be “based on actual knowledge, not subjective belief or unsupported speculation.”
Case Details:
Case Caption:
Prairie Walk Condominium Association V. American Insurance Company
Defendants 1536 Blue Jay Way, LLC and Michael Herman (collectively, Blue Jay Way) have brought claims against Defendant LMID, Inc. and others for negligence and negligence per se related to the renovation of a high-end home.
Plaintiff Travelers has been defending its insured, Defendant LMID, Inc. (LMID), in state court since June 2020.
Travelers has brought this action seeking: (1) a declaration that it has no duty to defend LMID in the state court action; (2) a declaration that it has no duty to indemnify LMID; and (3) reimbursement for defense costs incurred.
LMID’s expert, Joseph Oliva, is an attorney whose practice focuses on insurance coverage disputes. Oliva was asked to provide an opinion on “whether the allegations [in] the complaint and/or extrinsic evidence (discovery) . . . constitutes an occurrence under California insurance industry standards and whether the claims against [LMID] fall within the scope of the definition of property damage.” In his report, he concludes that the claims against LMID fell within the terms of the policy and that Travelers is obligated to defend and indemnify in the underlying action. Blue Jay Way’s expert, Peter Schulz, is also an attorney with experience in insurance coverage matters. Schulz’s opinions relied on Oliva’s analysis and his review of Oliva’s report.
However, Travelers filed a motion to exclude Oliva’s and Schulz’s testimony.
Insurance Expert Witnesses
Joseph Oliva is an attorney licensed and admitted to practice before all courts of the states of California, Texas, Arizona, and Nevada. He is a shareholder of the law firm of Joseph Oliva & Associates, P.C.
Oliva has been retained as an expert on sixteen matters, provided testimony on four matters, three of which were California arbitrations and one Arizona State Court action.
Peter Schulz is an attorney at law, duly licensed and admitted to practice before all courts of the states of California. He is the sole shareholder of the law firm of Schulz Brick & Rogaski, APC.
Schulz has taught in seminars attended by attorneys, brokers, and insurance claims adjusters in California. In 2023, he was a lecturer in a program sponsored by The Seminar Group entitled “Insurance in the Construction Industry,” where he presented on Cumis/Civil Code Section 2860 – Practical considerations for policy holders and for carriers.
Travelers moved to exclude Oliva’s and Schulz’s testimony on two grounds. First, it argued that the experts are not qualified to testify about insurance industry standards because they are attorneys who have never worked in the insurance industry itself. Second, Travelers contended that the experts’ opinions are improper legal conclusions. While the reports refer to “insurance industry standards” and “insurance industry practices,” Travelers contends that the experts’ opinions are in fact legal conclusions that rely on legal analysis.
As an initial matter, the Court rejected Travelers’ overbroad argument that Oliva and Schulz are unqualified to opine on insurance industry standards because they are insurance lawyers.
The fact that Oliva and Schulz are attorneys does not mean that they could not have acquired the requisite expertise to testify about insurance industry standards.
But this motion is less about qualifications and more about the subject of the proffered opinions. Oliva and Schulz did not offer opinions on insurance industry standards that would assist the trier of fact; rather, they attempted to present legal opinions disguised as industry standards—much of it amounting to little more than legal briefing.
Nowhere in the reports do the experts explain how their conclusions are based on their experiences or specialized knowledge from litigating insurance cases. Though the reports refer to some nonlegal materials—e.g., insurance bulletins and pamphlets—the Court held that those references appear to be intertwined with the experts’ legal analysis.
It is unclear how the experts would be able to excise any legal analysis from their testimony, or how any nonlegal opinions would be based on their specialized knowledge from litigating insurance cases.
Held
The Court granted Plaintiff Travelers Casualty Insurance Company of America’s motion to exclude the testimony of experts Joseph Oliva and Peter Schulz.
Key Takeaway:
Basically, Oliva’s and Schulz’s reports engage in legal analysis, assessing cases and industry materials and applying the law to the facts of this case. In doing so, Defendants have not demonstrated that is it more likely than not that the experts’ knowledge “will help the [Court] to understand the evidence or to determine a fact in issue.”
Case Details:
Case Caption:
Travelers Casualty Insurance Company Of America V. Lmid, Inc. Et Al
Puerto Rico Telephone Company (“Plaintiff” or “Claro”) brought this suit against the Municipality of Aguada, Hon. Christian Cortés-Feliciano, in his capacity as Mayor of the Municipality of Aguada, and Wesley Vega, in his capacity as Planning Director of the Municipality of Aguada (“Defendants” or “the Municipality”), for alleged violations of Federal Telecommunications Act of 1996 (“TCA”) based on Defendants’ denial of an application to install fiber optic cables and poles in the Municipality of Aguada in Puerto Rico.
Ricardo Matos-Acosta concentrated his practice in the following areas: electrical engineering, design, optimization, and planning of radio frequency (“RF”) wireless networks for voice, data, video and internet.
He completed a Master’s in Electrical Engineering at the Polytechnic University of Puerto Rico.
Initially, the Defendants argued that Eng. Matos-Acosta’s report did not have any citation to “relevant scientific authorities that validate or otherwise support the methodology being employed” in the report, thus alleging a violation of Federal Rule of Evidence 702. Specifically, Matos-Acosta was hired to conduct an analysis of the current wireless service coverage in the Municipality of Aguada around a site that Claro identifies as “AGD1622,” where there is an existing tower.
Furthermore, the purpose of his report was to identify the existence of a coverage gap and the alternatives to addressing it. In his defense, Matos-Acosta stated in his sworn affidavit accompanying the report that he utilized his twenty-nine years of experience in electrical engineering, design, optimization, and planning of radio frequency (“RF”) wireless networks, in particular, his work experience in wireless systems for Claro since 1995, in preparing said report.
Analysis
To begin with, Eng. Matos-Acosta collected data from Claro’s Element and Network Management Server (the “ENM Server”) during a one-week period in October of 2023 to assess the RF wireless coverage and user experience in Aguada’s Río Grande sector. Moreover, Eng. Matos-Acosta explains each industry term used or relied on in his report. Finally, he provided numerous maps which demonstrated that signal levels in the subject area failed to meet Claro’s service-level standards, thereby supporting his opinion that said levels are insufficient to serve their customers in the area.
Upon review, a reading of his report makes clear that he gathered data, conducted various tests, and evaluated the findings using his experience in the telecommunications industry to determine whether a coverage gap exists and what options are available to address said gap. In contrast, the Municipality has not provided any testimony or expert opinion to rebut Claro’s showing that a significant gap in coverage exists. Most significantly, the Court held that the Municipality’s Daubert challenge did not point to specific parts of the report that were insufficient or articulate what about Eng. Matos-Acosta’s methodology is not in conformance with widely accepted industry methodologies, practices, and parameters. Instead, it attacks it broadly as unsupported by citations.
Held
The Court denied the Defendants’ Daubert motion to exclude Plaintiff’s expert Ricardo Matos-Acosta.
Key Takeaway:
Ricardo Matos-Acosta provided numerous maps which demonstrated that signal levels in the subject area failed to meet Claro’s service-level standards to support his opinion that said levels are insufficient to serve their customers in the area. Thus, a reading of his report makes clear that he gathered data, conducted various tests, and evaluated the findings using his experience in the telecommunications industry to determine whether a coverage gap existed and what options were available to address said gap.
Case Details:
Case Caption:
Puerto Rico Telephone Company V. Municipality Of Aguada Et Al
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
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.
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.
This case stems from a dispute over a provision of a ground lease between Stewart Development, LLC and 111 Veterans Boulevard, LLC. Stewart owned Heritage Plaza, a Class A office building in Metairie, Louisiana but leases the land on which it sits pursuant to a ground lease. 111 Veterans took over this ground lease in 2017. A few years later, in 2022, Stewart listed Heritage Plaza for sale, and 111 Veterans expressed interest in purchasing the building. However, purchase negotiations ultimately fell through. The next year, on March 16, 2023, 111 Veterans defaulted Stewart for allegedly violating the ground lease. In the default letter sent to Stewart, 111 Veterans explained Stewart breached the ground lease for failing to maintain $110,700,000 of casualty insurance, the amount equal to the replacement cost of the building (less depreciation of 10%) with a $10,000 or less deductible.
About three months after this letter was sent, Stewart filed this lawsuit seeking a declaratory judgment and alleging claims for breach of contract and Louisiana Unfair Trade Practice and Consumer Protection Act (“LUTPA”) violations. Stewart argues inter alia that 111 Veterans’ mandated amount of insurance coverage is not reasonably obtainable, that Stewart’s failure to obtain such coverage was not a violation of the ground lease, and that 111 Veterans breached the lease by placing Stewart in default. 111 Veterans argues inter alia that its required coverage is reasonably obtainable, and that Stewart did in fact breach the ground lease for failing to maintain such coverage.
Timothy Gold began his insurance career in 2005 and joined Hartwig Moss Insurance Agency in 2013. Gold holds both property and casualty as well as life, health and accident licenses.
In his report, Gold provided the following opinions:
There were no indicators from the commercial insurance market of pending issues acquiring property or flood coverage in southeast Louisiana prior to landfall of Hurricane Katrina on August 29, 2005;
For the coverage periods of 2021- 2024, it has been possible to obtain replacement cost, special form property insurance coverage excluding coverage for the peril of windstorm, for a significant property risk with an insured value in excess of $100,000,000 at a reasonable market cost;
For the coverage periods of 2021-2024 it has been possible to obtain property insurance coverage for the peril of windstorm for a building with insured values in excess of $100,000,000 with coverage limits in excess of $10,000,000 at a market cost;
And the cell captive program and parametric insurance policy Stewart Development, LLC utilized do not comply with paragraph 3(g) of the Fourth Amendment of the Ground Lease agreement.
Analysis
Stewart advanced numerous arguments in support of excluding Gold’s testimony. Specifically, Stewart argued that Gold’s testimony on Stewart’s parametric wind policy should be excluded because Gold did not read Stewart’s policy. Stewart claimed that Gold’s testimony on Stewart’s captive cell policy should be excluded because it is a legal conclusion. Plaintiff alleged that Gold’s opinions on the local insurance market before and after Hurricane Katrina in 2005 are speculative and warrant exclusion because Gold did not work in the insurance industry until 2006.
Moreover, Stewart claimed that Gold’s reliance on conversations with other industry brokers constitutes unreliable methodology for his opinions on insurance availability from 2021-2024. And Stewart asserted that Gold’s testimony is undermined by his failure to read the testimony of Eric Lowenstein, 111 Veterans’ corporate representative, and his misreading of key facts from the testimony of Jason Provenzano, 111 Veterans’ insurance broker, and Andrew Schutzman, president and owner of AMS Risk Management and Consulting, Inc.
111 Veterans opposed Stewart’s motion. Basically, 111 Veterans argued that Gold’s opinions meet the requirements of Rule 702, Rule 703, and Daubert, and that Stewart’s concerns constitute fodder for cross examination, not reasons for exclusion under Rule 702. Defendants further argued that, because this is a bench trial, Stewart’s concerns can be explored during trial with the judge as the gatekeeper and trier of fact.
The Court agreed with 111 Veterans. The purpose of a Daubert motion is “to ensure that only reliable and relevant expert testimony is presented to the jury.”
Held
The Court denied Stewart’s motion to exclude Timothy Gold’s opinions and testimony.
Key Takeaway:
The Court is “capable of assessing the probative value of the evidence and the weight [the expert’s] testimony should be given.” Moreover, as 111 Veterans points out, cross examination is the proper vehicle for Stewart’s concerns. In conclusion, vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.
Case Details:
Case Caption:
Stewart Development, LLC V. 111 Veterans Boulevard, LLC
