An Alabama compounding pharmacy brought an action against their general liability insurer, asserting claims of breach of insurance contract, bad faith failure to investigate, and bad faith denial of a claim. All the claims arise from Defendant’s denial of coverage, including defense and indemnification, to Plaintiff’s underlying lawsuit. In that action, Plaintiff maintained that the issue was whether Defendant owed it a defense for the claims asserted in the underlying action.
U.S. District Judge William H. Steele in Alabama recently heard Plaintiffs’ Motion to Strike the Opinions of Defendant’s Experts. Defendant designated two attorneys as expert witnesses. One of whom was a Michigan lawyer who served as coverage counsel for Defendant on the claim and who authored the letter to Plaintiff denying all defense and indemnification coverage for the action.
Defendant didn’t submit a separate expert report for the legal expert but identified him as an expert witness in this matter and explained that his letters “regarding his coverage opinion … contain an outline of his opinions and the bases therefor.” It appeared that Defendant intended to call the legal expert at trial to testify as an expert to the opinions set forth in the denial-of-coverage letter he wrote to Plaintiff in his capacity as Defendant’s coverage counsel.
His “expert report” consisted of the denial-of-coverage letter he wrote to Plaintiff on Defendant’s behalf. That letter identified the expert as coverage counsel for Defendant, stated that Defendant “now denies all defense and indemnification coverage for this claim,” and set forth in some detail the grounds for that denial-of-coverage decision. The expert wasn’t retained by Defendant to offer a post hoc justification for the challenged coverage decision. Instead, Judge Steele explained that he was only the lawyer who worked with Defendant to make that coverage decision in the first place.
Viewed in its proper context, wrote the judge, the legal expert letter wasn’t an expert report at all, and the expert wasn’t testifying as an expert. Instead, the judge held that his statements regarding the contents of the letter and the reasons for Defendant’s denial of the claim were fact-witness testimony. Given the bad-faith denial of coverage claim by Plaintiff, issues for trial included not only what actions Defendant took, but why it took them. If the expert’s letter were excluded, and he were precluded from testifying about it, Defendant would be effectively prevented from explaining its coverage decision to the jury. Judge Steele held that Defendant must be allowed to tell its story at trial, and the legal expert was the proper fact witness to tell that story. He could explain the analytical steps Defendant took, the results it reached, and the reasons for those decisions. The attorney’s testimony was fact, not expert testimony that bore directly on Plaintiff’s bad faith claim.
Plaintiff also challenged the legal expert’s opinions as failing to satisfy Daubert reliability standards. Judge Steele found this argument unpersuasive because, as noted, the legal expert was testifying as a fact witness, not an expert witness. Nonetheless, even if the legal expert were testifying as an expert, the court held that the reliability objections posited by Plaintiff would go to the testimony’s weight rather than its admissibility.
Plaintiff argued that the legal expert acknowledged in his deposition that Alabama law and Eleventh Circuit law controlled, but his coverage letter failed to cite Alabama or Eleventh Circuit authority. That was not a fundamental contradiction, Judge Steele held, particularly if (as Defendant represented) the legal expert researched Alabama law in formulating the opinions expressed in that letter. Whatever else may be said about Plaintiff’s identified “contradictions,” the judge found that they didn’t render the legal expert’s opinions so unreliable as to warrant Daubert gatekeeping exclusion.
The Motion to Strike was denied.