A judge’s decision to delay exhomeowners insurance expert witness filling out a formpert testimony until the second phase of a bifurcated trial was not an abuse of discretion in a suit brought by the insured homeowners against the insurer. The insured claimed breach of contract, failure to adjust claim, bad faith refusal to pay insureds under homeowners’ policy, and violations of Tennessee Consumer Protection Act (TCPA).

In this case, the jury sided with the insurance company in a coverage dispute with the property owners where the Homeowners claimed that strong winds caused significant damage to their property. However, the jury determined that landslides—an exclusion from the policy coverage—were the primary cause for the damage, as the insurance company had argued. As a part of the appeal, the Homeowners objected to the district court’s exclusion of their expert witness in the first phase of the trial.

After storms caused damages to the Homeowners’ property, the insurance company paid them $58,000 for damage caused by the wind—but denied coverage for all of the remaining damage because landslide damage was specifically excluded from coverage under the policy.

At trial, the insurance company moved to exclude the testimony of the Homeowners’ expert witness.

Although the trial judge did not rule on the motion in limine, the judge stated his intention at the beginning of the trial to defer the expert’s testimony until the second phase of the trial. The Homeowners objected to this, and on the sixth day of the trial of the first phase, breach-of-contract claim, they called the expert to the stand, despite the district judge’s previous statement.

The insurance company objected, insisting that this expert was the Homeowners’ bad-faith witness, and that his testimony would be irrelevant to the breach-of-contract phase of the trial. The trial court judge sustained the objection.

Given that the jury found that the insurance company had proved that the loss was primarily caused by landslides and not wind damage, there was no need for a second phase of the trial on the bad-faith claim.

The Homeowners appealed, contending that the district court erred by excluding testimony from their expert witness during the first phase of the bifurcated trial. They argued that even though the expert would have been their “bad-faith” expert witness had the trial proceeded in just one phase, they had instructed him not to testify about bad-faith issues during the breach-of-contract phase of the bifurcated trial. The expert, they argued, would have testified about whether the insurance company had met the applicable standards for adjusting the type of policy the Homeowners purchased. This testimony was necessary, they said, because the insurance company opened the door to the proper standard for adjusting insurance policies by eliciting testimony from its claim adjusters about how they typically viewed coverage during a claim adjustment.

The Homeowners’ expert would have challenged the insurance company’s claim adjusters’ views on coverage by showing that the industry standard for this type of policy is one of coverage where the burden is placed on the adjuster to determine if an exclusion applies.

U.S. Court of Appeals, Sixth Circuit, Circuit Judge Alice M. Batchelder wrote in her opinion that the report submitted by the expert to the court outlining his expert opinions was “littered with references to ‘bad-faith.’ ” Although the expert discussed the industry standards on claim adjustment in the report, she noted that these standards merely formed the basis for his conclusion that the insurance company acted in bad-faith throughout the claim adjustment process.

Judge Batchelder explained that the district court relegated all bad-faith arguments to the second phase of the trial, if that was needed. As a result, there was no error in postponing the testimony of the Homeowners’ bad-faith witness to the bad-faith phase—especially in light of the fact that the proposed, potentially relevant testimony about industry standards would not have been helpful to the jury.

With this, the decision of the district court was affirmed.