In a recent decision of a federal district court, frequent policyholder expert Robert Hughes’ opinions regarding the terms and conditions of a missing policy were flatly rejected as “bald speculation,” resulting in summary judgment for an insurer.  (See, attached Canal Ins. Co. v. Montello, Inc., 2012 U.S. Dist. LEXIS 148119.)  

In an instructive case that has potentially broad application to a common issue in complex insurance coverage litigation--proof of the terms and conditions of a missing policy--the Court rejected as speculation Mr. Hughes’s opinions, notwithstanding his long C.V. reflecting 50 years of experience in the insurance industry. Similar to many missing policy cases, in Montello there was secondary evidence to establish that a policy had been issued and what its limits were.  However, the actual terms and conditions were not available or known.  In an effort to bridge this evidentiary shortcoming, the policyholder retained Mr. Hughes, who proffered an opinion on the most likely terms and conditions of the missing policy.  Consistent with well-established case law concerning the admissibility of expert opinion, the Court excluded Mr. Hughes’ testimony as to the terms and conditions of the missing policy.  Further, the Court held that, even if the available secondary evidence was admissible, it was insufficient to create a triable issue of fact as to the terms and conditions of the missing insurance policy.  Thus, the Court granted summary judgment in favor of the insurer on its missing policy defense. 

The Court observed that the specific terms and conditions of an insurance policy are the cornerstone to any coverage determination and must be proven by the policyholder.  In the context of this asbestos insurance coverage case, the Court emphasized the importance of the terms, conditions and endorsements, including whether the policy was written on a “per accident” or “per occurrence” basis.  The Court further observed that “apportionment of liability in this case may very well hinge on the intricacies of the required notice to the insurer.” (at 20-21)  In other words, simply proving that a policy was issued, its limit and attachment point is not sufficient proof of a lost policy; the terms, conditions and endorsements must also be proven. 

Utilizing straightforward evidentiary rules applicable to expert testimony, the Court found that “Hughes’ methodology in determining the terms and conditions of the alleged policies is not based on facts which would enable him to express a reasonably accurate conclusion as required by Daubert and its progeny.  This dearth of facts creates an unacceptable analytical gap between the evidence considered by Hughes and his ultimate conclusion, connected only by the ipse dixit of Hughes himself.” (at 22)  

This case underscores a common theme in missing policy cases: the terms and conditions require actual proof, and the speculation of even someone who has spent a career in the insurance industry is not sufficient proof.  Often, a policyholder offers nothing more that the opinion of an expert, as was the case in Montello.  Instructive in other missing policy cases, Montello emphasizes the need to carefully evaluate the specific facts supporting an experts opinion and a rigorous cross examination of a policyholder’s expert to expose the lack of support for his or her opinions on the specific terms and conditions of the alleged but missing policy.  In many cases, what lies behind the opinion is little more than speculation and result-driven analysis.