BAD FAITH EXPERT PERMITTED TO TESTIFY, WITHIN CERTAIN LIMITATIONS (Western District)

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The court permitted plaintiff’s insurance bad faith expert to testify, within certain limitations as to what may be discussed or disclosed.

The case involved a first party property loss, arising out of fire damage to a commercial greenhouse sterilization system (the “ozone system”). The insured alleged the carrier (1) “wrongly denied coverage to replace the entire ozone system; (2) … wrongly denied coverage for crops that were damaged by ozone exposure caused by a mechanical breakdown of the ozone system; and (3) [the insured] was forced out of business as a result of the Defendant’s conduct.” The insured sued for breach of contract and bad faith.

The insured sought to use three experts, including a bad faith expert. The bad faith expert was an attorney and had over 20 years of experience as a claim adjuster. He was proffered “as a bad faith expert to offer opinions regarding: (1) insurance industry standards and practices; (2) Defendant’s handling of the insurance claim at issue; (3) Defendant’s compliance with insurance statutes and regulations; and (4) the interpretation of Defendant’s policy issued to Plaintiff.”

The insurer brought a Daubert motion to preclude the bad faith expert’s proposed testimony. The carrier argued that the expert attorney’s legal conclusions would not help a jury, and that at a minimum the expert “be precluded from testifying as to: (1) whether or not the Defendant violated statutes or regulations; and (2) the interpretation of Plaintiff’s insurance policy.”

The court observed “that the admissibility of expert testimony hinges on a ‘trilogy of restrictions’: qualification, reliability, and fit.” The testimony here hinged on fit. Federal Rule 702 the “expert testimony must ‘help the trier of fact to understand the evidence or to determine a fact in issue.’” “The standard for fit is ‘not that high,’ although it is ‘higher than bare relevance.’” The insurer argued that the bad faith expert’s “testimony does not ‘fit’ the claim at issue: bad faith is a legal concept of general application,  which does not require scientific, technical, or specialized knowledge to be presented to assist the jury.”

The Court thought otherwise. It found, with certain limitations, that the bad faith expert’s testimony would “assist the jury in determining what constitutes reasonable conduct when handling an insurance claim. In the Court’s estimation, [the expert’s] twenty-six (26) years of experience as a claims adjuster will be quintessentially helpful in providing the jury with guideposts as to what constitutes reasonable adjusting and claims handling conduct and will be substantially more useful than asking the jury to in essence ‘wing it’ as to reasonableness in this out-of-the-ordinary situation.”

This expert was “permitted to testify as to best practices in handling insurance claims of the type involved here. [He] may not discuss his legal training or experience. And he is not permitted to testify as to whether or not the Defendant violated statutes or regulations (but he is not barred from testifying as to what constitutes best practices regarding the handling of insurance claims, even if the genesis of such practices are statutes or regulations, which he cannot talk about).”

Date of Decision: January 27, 2020

Three Rivers Hydroponics, LLC v. Florists’ Mutual Insurance Co., U. S. District Court Western District of Pennsylvania No. 2:15-cv-809, 2020 U.S. Dist. LEXIS 12644 (W.D. Pa. Jan. 27, 2020) (Hornak, J.)

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