Insurance Expert WitnessesIn a dispute over an insurance claim, a defendant argued that the plaintiff’s expert wasn’t qualified to offer testimony. 

In 2014, Plaintiff, a Nevada LLC, contracted for the construction of a residence in Paradise Valley, Arizona.

In 2016, the homeowners noticed a leak in the garage of the home. This led to the discovery of problems with the construction.

Defendant Insurance Company determined that it would cover $36,416 in costs associated with work undertaken by  Plaintiff to resolve the issues in the home.

However, it denied coverage for $42,900 in property damage.

Defendant similarly declined to cover Plaintiff‘s management and overhead costs associated with the repairs.

A few months after the initial coverage decision, Defendant readjusted the amount it was willing to pay downward to $27,362.97.

Plaintiff was dissatisfied with that outcome and filed suit. 

Defendant first asserted that Plaintiff‘s expert wasn’t qualified to offer testimony.  

Chief United States District Judge G. Murray Snow found that Plaintiff’s insurance expert was an attorney with experience in legal fields related to “construction-related insurance claims.”

He 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.

Plaintiff’s expert also stated that he participated in site inspections, construction investigations, and insurance investigations, during which he has apparently worked closely with claims adjusters regarding coverage decisions.  

While the expert has never actually worked for an insurance company, the Chief Judge said that, Plaintiff’s expert‘ 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,” quoting a Ninth Circuit decision (emphasis by the court). 

Defendant argued  that Plaintiff’s expert‘ opinions exceed the scope identified by Plaintiff in its expert witness disclosure.

Under the Federal Rule of Civil Procedure 26(a)(2)(A), parties must disclose to the other parties the identity of any witness it may use at trial to present [expert] evidence.

Parties must also accompany their expert disclosures with written reports from the expert witness. Judge Snow explained that evidence beyond the scope of the opinions identified in the disclosure and expert report is subject to exclusion under Federal Rule of Civil Procedure 37(c)(1). 

The disclosure provided by Plaintiff for its expert states that he was retained to opine on (1) the reasonableness of insurance coverage positions taken by Defendant; (2) the adequacy of the investigation undertaken by Defendant; (3) the claims of prejudice made by Defendant; (4) the timeliness of Defendant‘s investigation; and (5) prejudice to Plaintiff caused by Defendant‘s actions.

The insurance experts report explained his qualifications, set forth the materials on which he based his opinions, and discussed his opinions.

As part of his opinion on the reasonableness of Defendant‘s coverage and the adequacy of its investigation, Plaintiff’s expert discussed the source and cause of the water damage at the property.

That discussion was necessary to his ultimate opinion on the topic, which was that Defendant unreasonably denied coverage for certain areas of damage. 

Defendant argued that Plaintiff’s expert wasn’t retained as a construction expert and that any opinions he gave on the cause of the water damage exceeded the scope of the opinions identified at the beginning of his report.

However, Judge Snow found that Plaintiff’s experts discussion of the water damage was necessary to support his conclusion that Defendant failed to adequately investigate the claim and unreasonably denied coverage.

For that reason, his discussion of the cause of water damage fit within the scope of the disclosed topics for his expert testimony, the chief judge held.

And in any event, Plaintiff’s expert‘ opinions regarding the cause of water damage were disclosed in the report. 

The judge said that the same logic applied to Plaintiff’s expert‘ discussion of voluntary payments and management expenses.

The insurance experts report only discussed those topics to support his conclusion that Defendant behaved unreasonably by denying coverage. That fit within the first identified topic for his opinions: “[t]he reasonableness of insurance coverage positions taken by Defendant.” 

Judge Snow explained that when non-scientific expert testimony is being offered, the Daubert factors of peer review, publication, potential error rate, etc. aren’t 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,” quoting a Ninth Circuit decision. 

Plaintiff’s expert‘ report didn’t present “too great an analytical gap between the data and the  opinion proffered, Judge Snow held.

The insurance experts report cited the materials he reviewed in preparing his report—both materials from the case itself and legal materials regarding insurance claims.

He also noted that he attended a site inspection of the property.

In the opinions given in the report, Plaintiff’s expert discussed the reasons for his conclusions.

Contrary to Defendant‘s assertions, the chief judge found that the report wasn’t lacking the “how” and “why.”

Instead, the report explained why the expert stated that Defendant‘s denial of the claim was unreasonable—after explaining that Defendant failed to correctly identify the source of the leak itself but was subsequently informed of the source, Plaintiff’s expert then provided his conclusion: “[g]iven that Defendant‘s own inspector identified the area behind the siding as suffering from water intrusion resulting from parapet wall cap leaks, it was both unreasonable and reckless to deny this portion of the claim.”  

The rest of the report followed a similar pattern, Judge Snow said.

While Defendant was free to disagree with the conclusions reached in the report and to probe Plaintiff’s expert‘ conclusions on cross-examination, the report was held to sufficiently disclose how the insurance expert reached his conclusions. 

Defendant’s Motion to Preclude Expert Testimony was denied.