Why it matters: As a good reminder concerning the boundaries for admissibility of expert opinions, a federal court in Texas recently granted a policyholder’s motion to strike an insurer’s proposed expert report. The insurer had designated as an expert an attorney with substantial insurance coverage experience, but no claims handling experience. The insurer’s primary coverage defenses were based on the policy’s “claims made” requirement and prior knowledge exclusion and the attorney purported to opine on custom and practice in the industry. In the report, the lawyer testified to insurance company practice with regard to notice, the legal standard for denying coverage in bad faith, application of the “eight corners” rule to the terms of the policy, and the relevance of extrinsic evidence. The court excluded the testimony based on the fact that the lawyer was merely an advocate, never having been employed as claims adjustor testifying about his actual experience. Thus, his opinions were based on legal analysis rather than from experiences in the insurance industry. The court concluded that the report improperly invaded the province of the jury and the court.
Detailed discussion: In 2012, Atrium Medical Center was sued in Texas state court by a married couple asserting that the husband suffered injuries and faces a terminal illness due to the failure to advise him of the results of a CT scan performed at Atrium.
Atrium notified its insurer Homeland Insurance Company (HIC) of the lawsuit and requested coverage. HIC denied coverage, arguing that it was not first made against Atrium during the relevant policy period and was excluded by the policy’s prior knowledge provision. Atrium then sued HIC in a declaratory action seeking an order that coverage was owed, and that the insurer’s denial of coverage constituted bad faith.
HIC designated Michael W. Huddleston, an experienced insurance coverage attorney as an expert witness in the case.
After his expert report was filed, Atrium moved to strike the report. Atrium contended that Huddleston’s report was full of inadmissible conclusions of law thereby usurping the roles of both the court and the jury.
HIC countered that Huddleston was an attorney with 30 years of experience in the insurance industry and that his opinions went solely to the issue of whether HIC’s decision to deny Atrium’s claim for coverage was reasonable, addressing mixed questions of fact and law.
Sitting in the role of gatekeeper, as instructed by the U.S. Supreme Court in Daubert v. Merrell Dow Pharmaceuticals (509 U.S. 579 (1993)), the court agreed with the policyholder.
“After considering the report of Huddleston, the Court finds that his report invades on the province of both the Court, in instructing the jury on the applicable law, and the jury in determining the facts to be applied to the law,” the court ruled. “To the extent Huddleston purports to offer expert testimony regarding customs and practices in the insurance industry, the Court finds that his expert report does not do that. Huddleston is an experienced insurance coverage attorney and advocate, and is not a claims adjustor or former claims adjustor. His report is clearly legally-based, and his opinions are not formed from his experiences in the insurance industry, but are formed from a legal analysis of his opinion of the applicable law.”
After striking the portions of the expert report as inadmissible “there is nothing remaining in Huddleston’s report that would assist the finder of fact in understanding the evidence or determining an issue of fact,” the court concluded, ordering the report struck in its entirety.
To read the order in Corinth Investor Holdings, LLC v. Evanston Insurance Co., click here.