There were severe storms across the plains recently. “Residents of Wellington, Texas are sharing pictures of extremely large, baseball-sized hail on social media.” For those of us in the East, we are skeptical of such claims. If a baseball falls out of the sky and hits you, it can kill you. Exactly. Photographic evidence lays the skeptic to rest.
We know climate change is implicated in the retreat of the glaciers, rising sea levels, and increased severity and frequency of storms. Is it the culprit with respect to baseball-sized hail too? The science is still out. Dr. Andy Prein of the National Center for Atmospheric Research in Boulder, Colorado can help here: “From our observations of recorded hail, there are no clear trends up or down in the last 30 years.” But, Dr. Prein notes, climate science predicts greater atmospheric instability, which includes two essential ingredients in the formation of hail: atmospheric buoyancy (how easily air can rise) and vertical winds (differences in wind speed at varying altitudes). Both of those should be increased by man-made temperature increases. Hence, it would not be surprising if hail is larger in the future as the climate changes.
So what is there to know about hail and insurance coverage? A cautionary tale, State Auto. Mut. Ins. Co. v. Freehold Mgmt., Inc. (N.D. Tex. Mar. 31, 2019), blew out of the Northern District of Texas at the end of March. In April 2014 a severe storm with high winds and hail damaged a shopping center in Denton, Texas. An insurance claim was filed, but the insured was not satisfied with the insurer’s response. A declaratory judgment action was served. The case was strongly contested. What concerns us here are the contests concerning experts. Motions to exclude were filed with respect to eight. The Court waded through 3,000 pages of materials. Ultimately, the Court excluded 5 and permitted the testimony of 3.
In the interests of brevity, we won’t go into all the details but the Court’s analysis regarding two experts bears further discussion. The first, Phelps, an engineer, although qualified was excluded because he didn’t link his opinions to the facts. The second, Grimm, a ‘bad faith’ expert, fell afoul of compliance with scheduling orders and straying outside permissible expert opinion.
Linkage is Required
In a hail damage case, much of the damage will be obvious. But what about a roof that looks fine, but has such extensive damage to the underlying decking that the roof must be replaced. Such was Phelps’s opinion, which the insurer rejected.
The insurer made numerous challenges. Phelps was not qualified. Not so, said the Court. His licensing as an engineer in 19 states, his certification as a Windstorm Engineer, his membership in the Texas Department of Insurance’s Forensic Working Group, and his teaching of certified classes on forensic investigations “provide[d] him with needed insight in determining the cause of the Property damage.” Phelps’s methodology was flawed. The Court rejected this too: “Phelps states in his declaration that [his] methodology is regularly used by engineers and roofing consultants in Texas in performing forensic investigations of storms” and he applied that methodology. Plaintiff complained: Phelps’s report was not peer reviewed and there was no error rate. The Court responded: an expert report doesn’t have to be peer reviewed; all that is needed is that the “theory or technique” be peer reviewed, which it was. And it doesn’t make sense to calculate an error rate for qualitative assessments such as visual inspections and comparisons.
Notwithstanding appropriate qualifications and appropriate methodology, Phelps made a fatal mistake: “Phelps's description of the data and information collected and the steps he took in assessing the damage to the Property roofs in his report and declaration is fairly detailed; however, he does not explain why this data, information, his observations, or his investigation support his opinion and the various conclusions included in his report and declaration.”
There is an understandable tendency to hedge and be vague in an expert report. Such an approach makes it easier to pivot when new information surfaces or unanticipated attacks are advanced. But, as the Northern District of Texas makes plain, such an approach has its perils. If the expert doesn’t tie the facts into his conclusions, it may all be for naught.
You should read State Automobile for the extensive discussion of the admission of expert testimony. But you should also read it for the structure. Foreshadowing is what was taught in high school English. The Court gets A’s in that regard. In a sentence that ostensibly is just setting out the procedural posture of the case, the Court in fact is identifying the motion dispositive circumstances: “Some of the case deadlines, including the discovery completion deadline, were extended by agreement of the parties without court intervention or official imprimatur of the court and were not included in any of the scheduling orders entered in this case.”
Lawyers like to resolve their issues without the court’s involvement; they may think that they are saving the court time and being efficient. What is left out of that calculus, however, is a fundamental feature of the court – its ability to control its docket. This is made express in Rule 29 of the Federal Rules of Civil Procedure: “a stipulation extending the time for any form of discovery must have court approval if it would interfere with the time set for completing discovery, for hearing a motion, or for trial." Fed. R. Civ. P. 29(b).
Here the Defendants met neither the deadline for Grimm’s expert disclosures in their affirmative case (where they had the burden of proof, such as bad faith), nor the deadline for defense disclosures. No request to the Court was made to extend the deadlines. The Defendants then supplemented their late report, again without a request to the Court. The Court left no doubt of its displeasure: “Defendants knowingly disregarded the court-imposed expert disclosure deadlines, and they were fully aware that they would not be able to meet the earlier or amended expert disclosure deadlines.” Yet they did not seek Court approval.
Defendants sought to avoid preclusion as the result of their untimeliness by asserting the importance of Grimm’s opinions and the lack of prejudice to the Plaintiff because it was able to depose Grimm. The Court did not agree. “Even important expert testimony cannot ‘singularly override the enforcement of local rules and scheduling orders,’ and the importance of any proposed expert testimony underscores why it is always critical for the proponent of the testimony ‘to have timely designated’ the expert witness.” As for prejudice, “ it is not incumbent on the opposing party to investigate or ferret out [the opinions and bases for same] as best as it can through deposition or other means of discovery at the expense of its client. … To accept Defendants' argument that inadequate, untimely, and last-minute disclosures are harmless whenever the opposing party has the opportunity to later depose the expert defeats the purpose of the rule and turns it on its head by shifting the burden to the opposing party to discover the expert's opinions and the bases for those opinions.”
Stay in Your Lane
Coupled with the failure to abide by the deadlines set by the Court, the Defendants also failed to ensure Grimm’s disclosures and opinions met requirements. A disclosure that “’Grimm may testify about [Plaintiff’s] duties under the [Defendants’] insurance policy and duties of good faith and fair dealing under Texas law’ fails to disclose any opinion or the bases for an opinion.” Further, an expert has no business opining “as to what Texas law or the Texas Insurance Code requires insurers to disclose in a reservation of rights or claim denial letter [because it] is a legal issue and, thus, not an appropriate topic to which an expert may testify.” Nor can the expert reach the ultimate issue that certain acts constitute bad faith if that “will invade the province of jurors whose role it is to decide fact issues based on the evidence presented in a case.” In the case, “it [was] not an expert's role to opine whether [the insurer] acted in bad faith or breached its duty of good faith and fair dealing.”
Thus, both Phelps and Grimm were barred. There are lots of lessons here. 1. Write out your chain of causation from the basic facts through the ultimate opinion. Is each step documented and then logically connected to the next? If anything might be labeled ipse dixit, go back and fix it. 2. Recognize that the court’s deadlines are not hortatory or advisory. The original meaning of deadline was “a line drawn within or around a prison that a prisoner passes at the risk of being shot.” Don’t give the court reason to adopt that metaphor. 3. Remember the role of the expert – it is to assist the finder of fact. Stated differently, it is not to say the law (that is for the court), and it is not to resolve the case (that is for the jury or the court). All of the above apply to any case involving experts, not just cases about baseball-sized hail. But for those who are looking ahead to their next hail case, State Automobile, provides valuable information about specific discovery, specific theories and specific experts. Keep it all in mind.