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This COVID-19 coverage case, involving an All-Risk business policy, had been allowed to proceed under a reasonable expectations theory.  The insured obtained an expert report concerning reasonable expectations, which the insurer moved to preclude; and the parties both moved for summary judgment.  We briefly address the court’s decision on the motion to preclude the expert report, as having some relevance to Pennsylvania bad faith law.

Eastern District Judge Marston observed that “an expert may not opine on legal standards or the ultimate conclusion of law.” The insured’s expert, a renowned law professor, provided a report going directly to ultimate legal conclusions, i.e., whether the insured reasonably expected the COVID-19 closure orders to be covered under the policy.  The report addressed the historical context of the reasonable expectations doctrine and All-Risk business policies, concluding that the insured’s expectation of coverage was reasonable.

The report itself was “rife with citations to case law, go[ing] into great detail on how Pennsylvania courts and the Third Circuit have applied the reasonable expectations doctrine, and applies the law to the case at hand to reach the ultimate legal conclusion. … These conclusions and analyses are exactly the subject matter courts in the Third Circuit have found to be impermissible conclusions of law.”

Of particular significant to bad faith litigators, Judge Marston cites the Third Circuit’s 2016 Shaffer decision, summarized here, “affirming the district court’s decision to preclude the expert’s report on whether the insurer acted in bad faith where the expert report provided ‘a legal conclusion without adding any additional facts’”; and the 2006  Western District opinion in Gallatin Fuels, which can be found here, stating that experts “may not give an opinion as to the ultimate legal conclusions that an insurer acted in ‘bad faith’ in violation of applicable law.”

Date of Decision:  March 4, 2022

Humans & Resources, LLC v. Firstline National Insurance Company, U.S. District Court Eastern District of Pennsylvania No. CV 20-2152-KSM, 2022 WL 657067 (E.D. Pa. Mar. 4, 2022) (Marston, J.)