Attorney Expert May Present Limited Opinions
Insurance claims handling experts opine about the custom and practice of insurance claims handlers and whether the insurer involved in litigation has failed to act fairly and in accordance with the custom and practice of the industry.
In Adams Craig Acquisitions LLC, et al. v. Atain Specialty Insurance Company, et al., No. CV-18-00817-PHX-GMS, United States District Court for the District of Arizona (August 2, 2019) the presentation of a lawyer, as an expert, who has never acted as an insurance claims person nor ever worked for an insurer, was allowed to testify as a claims handling expert under strict limitations.
Plaintiff Adams Craig Technology (“ACT”), a Nevada LLC, contracted for the construction of a residence in Paradise Valley, Arizona in 2014. In August 2016, the homeowners noticed a leak in the garage of the home, which ultimately led to the discovery of problems with the construction. Defendant Atain determined that it would cover $36,416 in costs associated with work undertaken by Plaintiff Adams Craig Acquisitions, LLC (“ACA”) to resolve the issues in the home. Atain, however, denied coverage for $42,900 in property damage. Atain similarly declined to cover ACA’s management and overhead costs associated with the repairs. ACA was dissatisfied with that outcome and filed suit.
Federal Rule of Evidence 702 governs the admissibility of expert testimony, and permits the presentation of “scientific, technical, or other specialized knowledge” by a qualified expert if it will “assist the trier of fact to understand the evidence or to determine a fact in issue,” it is “based on sufficient facts or data,” it is “the product of reliable principles and methods,” and “the expert has reliably applied the principles and methods to the facts of the case.”
The test is not the correctness of the expert’s conclusions but the soundness of his methodology. Other criteria may include how often the methodology produces erroneous results and whether the testimony is based on legitimate, preexisting research unrelated to the litigation. However, these factors are neither exhaustive nor applicable to every case. Trial courts have broad discretion in performing the gatekeeping function required by . Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589 (1993). .
Atain asserts that ACT’s expert, Kirk Hays, is not qualified to offer testimony. Hays is an attorney with experience in legal fields related to “construction-related insurance claims.” He has represented clients in proceedings regarding insurance coverage for construction-related claims; the adequacy of insurance coverage and coverage decisions by insurance carriers; and subrogation cases that included insurance investigations. Although he has never actually worked for an insurance company, Hays’ experience with the insurance industry in the context of construction is sufficient to meet the minimal foundation of knowledge, skill, and experience required in order to give “expert” testimony on the practices and norms of insurance companies in the context of a bad faith claim.
As part of his opinion regarding the reasonableness of Atain’s coverage and the adequacy of its investigation, Hays discusses the source and cause of the water damage at the property. That discussion is necessary to his ultimate opinion on the topic, which is that Atain unreasonably denied coverage for certain areas of damage.
Atain argues that Hays was not retained as a construction expert, and that any opinions he gives regarding the cause of the water damage exceed the scope of the opinions identified at the beginning of his report. But Hays’ discussion of the water damage is necessary to support his conclusion that Atain did not adequately investigate the claim and unreasonably denied coverage. For that reason, his discussion of the cause of water damage fits within the scope of the disclosed topics for his expert testimony. And in any event, Hays’ opinions regarding the cause of water damage were disclosed in the report.
The same logic applies to Hays’ discussion of voluntary payments and management expenses. Hays’ report only discusses those topics in order to support his conclusion that Atain behaved unreasonably by denying coverage.
Hays’ Testimony Is Sufficiently Reliable under Daubert.
When non-scientific expert testimony is being offered, the factors required by the . Daubert v. Merrell Dow Pharms., Inc. (peer review, publication, potential error rate, etc.) simply are not applicable to this kind of testimony, whose reliability depends heavily on the knowledge and experience of the expert, rather than the methodology or theory behind it. While the Supreme Court requires the trial court to act as gatekeeper and assess the reliability of the expert’s evidence, the relevant reliability concerns focus upon personal knowledge or experience.
Hays’ report does not present too great an analytical gap between the data and the opinion proffered. Though Atain remains free to disagree with the conclusions reached in the report and to probe Hays’ conclusions on cross-examination, the report sufficiently discloses how Hays reached his conclusions.
Hays Does Not Improperly Opine on Ultimate Legal Conclusions.
It is well established that expert testimony concerning an ultimate issue is not per se improper but expert witnesses cannot give opinions as to their legal conclusion, i.e., an opinion on the ultimate issue of law.
Hays’ report does not give his opinion on the ultimate issue in this case—whether Atain acted in bad faith. Rather, the issues on which he opines are subsidiary questions that will help a finder of fact to make that ultimate conclusion. Should Hays attempt to inappropriately opine on legal conclusions at trial or attempt to usurp the court’s role in instructing the jury as to the law applicable to this case, such opinions will be excluded.
Hays’ proffered expert testimony passes muster under Rule 702. Since Atain has requested wholesale exclusion of Hays’ testimony, the motion is denied. Atain remains free, of course, to probe his conclusions, qualifications, and methodology on cross examination, and to object to any specific portions of his testimony at trial.
The Arizona USDC provides the lawyer expert the ability to testify to the work of an insurance claims person and how that claims person makes decisions with regard to claims even though he has never acted as a claims person. In California Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal.App3d 1, 54 (1985) the California Court of Appeal refused to allow an experienced lawyer to testify as an expert because, “in no sense was [the lawyer] qualified as an expert to testify about the subject on which he purported to testify. There is no question both on the record and as a matter of repute at the bar, but that he is a highly qualified trial attorney, and a particularly aggressive advocate of plaintiffs’ cases against insurance companies. However, no foundation whatsoever was laid to demonstrate that [the lawyer] had any special knowledge, skill, experience, training or education such as would qualify him as an expert on insurance company practices. Apparently the USDC felt Hays had the qualifications that the lawyer in California Shoppers did not.
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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