Insurance Claims and Bad Faith Law Blog

Expert Witnesses Testifying on Reasonable Conduct, Other Financial/Law Issues.

    Do you pay your Expert Witnesses $1,000 an hour?  Summaries in the newspapers of recent studies reflect that Expert Witnesses often charge that much.  Here is a handy link here.  This report uses many of the studies as resources.

    It is interesting that in 1 out of 3 lawsuits, Expert Witnesses testify at Trial in Federal Court about the "reasonableness of a party's actions" and other "business/law/financial" issues, as reported by studies of Federal Civil Trials and surveys of Federal Trial Judges across the nation.  More such issues are likely to be presented as the financial crisis deepens.

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Attorneys at Issue in Bad Faith Cases.

     The past two years have seen two new cases that have shaken Florida Insurance Law.  Neither case has been cited by other Courts -- yet.  This is the time to tell you about them.

     In Barry v. GEICO General Insurance Co., 938 So. 2d 613, 615-17 (Fla. 4th DCA 2006)(subscription required), an Attorney-Expert Witness testified to opinions that GEICO did not act in Bad Faith when it failed to settle the claim in that case, that the injured claimant "made it clear that she was not intending to settle", and that the actions of the Plaintiff and her Counsel "were inconsistent with a willingness to settle."  Here is the official Opinion released by the Florida Appellate Court.  The quoted summary of the Attorney-Expert's testimony appears on page 3 of the attached; see also pp. 5-7:  Download Barry_v. GEICO General Insurance Co. (Fla. 4th DCA Case No. 4D05.206 Opinion Filed Oct. 4, 2006).pdf.

     The U.S. District Court for the Middle District of Florida has expanded Barry's holding.  The District Court denied Plaintiffs' motions "to exclude evidence, argument, and references regarding the motives or conduct" of the claimants' attorney and the attorney's paralegal.  The Federal Court held in yet another Florida Bad Faith failure-to-settle case "that evidence and argument regarding the motives or conduct" of the claimants' attorney and the attorney's paralegal "is relevant and should not be prohibited."  Mendez v. Unitrin Direct Property & Casualty Insurance Co., 2007 WL 2696795 *3-*4 (M.D. Fla. Opinion Filed Sept. 12, 2007)(subscription required).  Here is the Middle District's official Opinion.  Its quoted holding will be found on pages 5-6 of the attached:  Download Mendez_v. Unitrin Direct Property & Casualty Insurance Co. (M.D. Fla. Case No. 8.06.CV.563, Opinion Filed Sept. 12, 2007).pdf.  The Mendez case has an interesting further history.  The case went to Trial which resulted in a Judgment for the Plaintiffs.  Thereafter, the Court's Online Docket shows that the case was settled.  The Federal lawsuit was then dismissed without prejudice in February, 2008.

     As I wrote at the beginning, Barry and Mendez have not been cited by other Courts as yet.  The only case known to include a cite to Barry is Mendez.  No known Court has cited to Mendez -- yet.

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Bad Faith Expert Not Reimbursable in Sixth Circuit, Court Holds.

      Acuity Insurance wanted to be reimbursed for the money it paid to its Expert Witness to defend a Bad Faith Claim in Federal Court.  "This amount included charges for telephone calls, document review, drafting the expert report, preparing for the deposition, and time spent during the actual deposition."  In a recently reported decision, the Sixth Circuit Court of Appeals said absolutely not.  L and W Supply_Corp. v. Acuity (6th Cir. Case No. 05.6845, Opinion Filed Jan. 23, 2007).pdf.  This is a link to the publicly available official web site.  Access to this reported decision is also available by subscription for example to Westlaw, or 475 F.3d 737.

      The Sixth Circuit applied settled Federal law.  "Prevailing parties may recover certain allowable, reasonable, and necessary costs, pursuant to Federal Rule of Civil Procedure 54(d).  The prevailing party may recover fees for witnesses under 28 U.S.C. § 1920(3).  Available witness expenses only include attendance, travel, and subsistence fees as specified in 28 U.S.C. § 1821."  First paragraph in Section III of official Sixth Circuit opinion; 475 F.3d at 738.

     "[W]e hold that expert witness fees may not be taxed as costs at a court's discretion under Rule 54(d) because § 1920 does not provide for them.  Therefore, Acuity is not entitled to recover expert witness fees (i.e., the hourly rate charged for the expert's time and services).  It is, however, entitled as a matter of course to recover the witness costs provided for in § 1821, which are largely compensatory in nature."  Final paragraph of Section III of the Sixth Circuit's official opinion; 475 F.3d at 741.

     Careful attention should be paid to the bases for the Sixth Circuit's holding and the bases on which the Insurance Company requested reimbursement for its Expert Witness' hourly rate charges in this case.

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Don't Let Your Babies Grow Up To Be Experts.

     Experts retained by Insurance Companies do not necessarily provide the Insurance Company with a shield of Good Faith or a brand of Bad Faith, by themselves.   A Federal Judge in Ohio has recently held:  "Ohio law does not provide that simply employing and relying on an expert shields an insurer from a bad faith claim....  Reliance on the expert must be reasonable and must provide reasonable justification for a denial of coverage."  See page 13 of the Official Opinion in Ullman_v. Auto-Owners Mutual Insurance Co. (S.D. Ohio Case No. 2.05.CV.1000, Opinion Filed June 11, 2007).pdf.

     In that recent Bad Faith decision, the Federal Court wrote that the Defendant Insurance Company's Motion for Summary Judgment would be denied on the record of that particular case:

It is a close call, but ... the Court must recognize that Plaintiffs have produced evidence that creates a genuine issue of material fact as to whether Defendant reasonably relied on the opinion of its expert in good faith in conducting a full and fair investigation.  There must be an appropriate and careful investigation to conclude that Defendant reached its conclusion as a result of the weighing of probabilities in a fair and honest way.  The claim was not fairly debatable if Defendant hastily relied on an expert who failed to conduct an adequate investigation in shaping his opinion.

Id. at 14.  [Emphasis added.]  In that case, clearly, the expert retained by the Insurance Company became part of the Insurance Company's investigation.  Thus, the expert necessarily became part of the answer to the question of whether that investigation was "full and fair" and part of a "fair and honest" process that resulted in the Insurance Company's conclusion to deny the Insureds' roof and wall collapse claim under a "commercial insurance policy" in that case.

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Expert Witnesses-Lawyers Testify On Insurance Issues.

In last month's Seminar at the Orange County Bar Association in Orlando, Florida, "Survey of Insurance Issues EVERYONE Should Know," one of my topics was an Overview and Recent Cases.  Two recent cases in particular, one Federal and one State, decided issues concerning the admissibility of Expert Testimony from Lawyers on Insurance topics and both were cases involving claims of Good Faith - Bad Faith.

 IN THIS NEW FEDERAL CASE, THE LAWYER-EXPERT WAS PROFERRED ON THE ISSUE OF LIABILITY POLICY LIMITS THAT WERE REDUCED AS ATTORNEY'S FEES AND COSTS WERE INCURRRED:  In Pueblo Country Club v. AXA Corporate Solutions Insurance Co., 2007 WL 951790 *5 (D. Colo. March 28, 2007), the Federal Court held that a jury is "entitled" to hear the testimony of a lawyer-Expert Witness presented by the policyholder that the insurance company defendant knew "that attorneys' fees and costs were reducing the available policy limits," even though the policyholder allegedly was exposed to a judgment in excess of the same policy limits which were being reduced by the insurance company's instructions to defense counsel that resulted in incurring the fees and costs.

STATES ALSO ALLOW EXPERT WITNESSES-LAWYERS TO TESTIFY ON INSURANCE ISSUES

Similarly, in Johnson v. Tennessee Farmers Mutual Insurance Co., 205 S.W.3d 365, 371-72 (Tenn.  2006), an Attorney-Expert testified to opinions that the  insurance company "failed to adequately evaluate the case, that it should have settled the case, and that its failure to do so was in bad faith."

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"The Lawyer as an Insurance Claims Expert" Witness.

I recently came across an article that was published online last month by the International Risk Management Institute ("IRMI").  I thought that you would like to know about it.  The Defense Research Institute published a longer version awhile ago.  Here is a link to the current IRMI article:  B. Zalma, "The Lawyer as an Insurance Claims Expert" (IRMI, May 2007), http://www.irmi.com/Expert/Articles/2007/Zalma05.aspx .

The author observes that lawyers frequently testify at trial as Experts on Insurance Bad Faith among other Insurance issues.  As he reads the case law, the author reflects upon writing both of these articles, that the Courts prefer allowing lawyers to testify as Experts on Insurance issues who have experience in advising Insurance companies about Insurance Coverage and Good Faith, compared to lawyers who are clearly also highly qualified but whose only Insurance experience is in suing Insurance companies.

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Partial Payment of Claims ... UPDATED!

     This post updates the post here on January 12, 2007 regarding:

Punitive Damages, Katrina and the Insurance Contract:  Lessons Revisited and a Tale Told in Pieces or in Parts.

   

     On January 31, 2007 Federal Judge L.T. Senter, Jr. entered an Order reducing the Punitive Damages Assessment in the Broussard case.  The Federal Judge reduced the Punitive Damages assessment in that case to 40% of what the Jury assessed, reducing the assessment from $2,500,000.00 to $1,000,000.00.  Here is a link to the Order:  Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Case No. 1.06CV6, Order entered January 31, 2007) .  For another report on this same decision, go to the February 1, 2007 post on Insurance Claims And Issues.     

     The Federal Court's ruling on January 31, 2007 adds to the facts coming in about the bases for this lawsuit, about the Bad Faith allegations in it, and about the reasons behind the Jury's finding of entitlement to Punitive Damages under Mississippi law.

     The Homeowner's Policy involved in the Broussard case was "an 'all perils' policy in the case of the dwelling and a 'named peril' policy as to contents, i.e., windstorm."

     Second, the initial investigation by the Homeowner's Insurance Company showed clearly that the Policyholders' home "was reduced to a slab by Hurricane Katrina" and that the damage was caused more by flood than by wind, the Federal Judge wrote.

     The Insurance Company "did not obtain any expert opinion on this particular loss."

     Rather than obtaining any expert opinion, as the Federal Court noted, the Insurance Company instead established a procedure for homes reduced to nothing remaining except the slab, a procedure which it applied in the Broussard case.  The subject procedure was to use "the debris line" and declare that in the instance of only a slab remaining, all damage would be presumed to be caused by FLOOD which was NOT a covered loss, thereby leaving it to the Policyholders to bear the burden of proving damages caused by a covered loss such as WIND.

     Although not repeated at any length in the January 31, 2007 Order, the Federal Court had PREVIOUSLY RULED in that same case that the burden of proof was INSTEAD on the Insurance Company to prove at Trial in Court that all or part of the damages claimed by the Policyholders were EXCLUDED.

     The Homeowner's Insurance Company "relied on its flood exclusion to totally deny the claim."

     The Federal Judge held that there was clear and convincing evidence in the Broussard case supporting a finding by the Jury of entitlement to Punitive Damages.  There was in other words clear and convincing evidence, the Federal Judge wrote, "that Defendant acted in such a grossly negligent way as to evince willful, wanton, or reckless disregard for the rights of the Plaintiffs."

     That ruling affirmed the issue of Mr. and Mrs. Broussards' entitlement to Punitive Damages under the facts of this case.  As to the amount of Punitive Damages, to $1,000,000.00, the Mississippi Federal Court reduced them as noted, doing so both under Mississippi State law and under "due process considerations under the United States Constitution."

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No Expert Invites Bad Faith Claim, You Make The Call.

     In a Hurricane Katrina - related First-Party Bad Faith Case, a Federal Judge recently directed a verdict on Insurance Coverage and awarded the full Policy Limits as Compensatory Damages.  The case is Norman J. Broussard and Genevieve Broussard v. State Farm Fire and Casualty Company (S.D. Miss. Civil Action No. 1.06CV6).   The Federal Court then let a Jury decide the issues of entitlement to Punitive Damages and amount of Punitive Damages.  The Jury assessed $2,500,000.00 in Punitive Damages.  More facts of this case, reported and coaxed from the available reporting and the Court file online, were discussed at length in a post here on January 15, 2007.

     As of January 31, 2007, the Federal Judge reported more facts in an Order entered that day.  In it, the Federal Court reduced the Punitive Damages assessment to $1,000,000.00, or 40% of what the Jury assessed.  Here is a link to the January 31, 2007 Order:  Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Civil Action No. 1.06CV6, Order entered January 31, 2007).

    In denying all Coverage and before the Bad Faith Claim against it, the Insurance Company's investigation concluded that Mr. and Mrs. Broussard's "home (which was reduced to a slab by Hurricane Katrina) 'was more damaged by flood than wind.'"  (Page 2 of Order.)  In other words, wind caused some of the damage, but not all.  Yet, as the Federal Court pointed out, the Insurance Company denied all Coverage and among other things:

The Defendant did not obtain any expert evaluation on this particular loss.  Defendant used the debris line as its sole investigative guide in spite of the probability (as assessed initially) that some damage occurred from a cause other than flood.

Id.  [Emphasis added.]  The lesson is easy to state, but perhaps it is not so easy to learn.  Even if the result is not going to be different, the chances of defeating a Bad Faith Claim are greatly increased if the Coverage determination is supported by independent testimony of an Expert in the first place.
 

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Experts Need to Qualify, and with Demonstrably Reliable Opinon Testimony ....

                                    ....  On the Relevant Issue.

    A recent decision by the Federal Tenth Circuit Court of Appeals clarifies and applies both of the twin universal requirements that in order to testify as an Expert Witness, the witness must be shown to be qualified as an Expert on that particular issue and that the witness's Opinion will be reliable.  The illuminating ruling came in the non-Insurance case of 103 Investors I, L.P. v. Square D Co. (10th Cir. Case No. 05-3385, Opinion Filed December 12, 2006).

    In 103 Investors, the plaintiff business suffered a fire loss.  The defendant manufactured a product which the plaintiff alleged was the cause of the fire loss.  The Plaintiff, 103 Investors, proferred the  Opinion Testimony of a Witness as an Expert on the issue of whether the  Defendant's product in essence caused or contributed to the loss.  (10th Circuit Slipsheet Opinion at 9-10.)  The Witness was a fire investigator and the District Court "did not question [his] general qualifications as a fire investigator."  (Slipsheet at 9.)  As such, he was qualified to testify as to the origin of the fire.  (Id.)

    Nonetheless, the District Court excluded the Witness's testimony on the main issue because, the District Court determined, the Plaintiff "had not established that [the witness] had any expertise that was relevant to the question," and the Tenth Circuit affirmed.  (Id. at 9-10.)

    The legal bases of the Tenth Circuit's affirmance in this regard are (1) that the Trial Court is required by Federal Rule of Evidence 702 to make a determination of each Expert's Qualifications to render an Opinion, and (2) that the Trial Court is also required by the United States Supreme Court's  Daubert ruling to make a determination of each Expert Opinion's reliability, before any Expert Witness may testify as such in Federal Court.  (Id. at 8-11.)  Those twin determinations were made by the Trial Court (District Court) in 103 Investors and the Federal Appeals Court now affirms.

    This ruling in a non-Insurance case of course applies to Insurance Cases as well, and it is highly instructive.  As the Tenth Circuit held in this case:  "The district court did not abuse its discretion in excluding [the witness's] testimony on this issue."

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Expert Law: Sources and Resources.

    An outstanding new newspaper Commentary analyzes the development of Expert Opinion Evidence in the Courts from Frye (1923) to Daubert (1993) to today in "When Questions of Science Come to a Courtroom, Truth Has Many Faces", by Cornelia Dean and published by The New York Times, Tuesday, December 5, 2006 (page D3, Col. 1).

    This outstanding source cites to two very good resources on the subject of Expert Opinion Evidence generally.  One is Prof. David L. Faigman of the University of California Hastings College of Law.  With other law professors, Prof. Faigman offers a Blog displaying many articles and analyses of noteworthy issues concerning evidence of Expert Witnesses allowed or rejected in lawsuits.  Here is a link to this informative Blog:   Science & Law Blog. 

    The New York Times Commentary also cites to a recognized empirical evidence proponent including for all scientific Experts, Prof. Sheila Sen Jasanoff.  No Blog has been located yet for Dr. Jasanoff, but here is a link to the Web Site posted for her by Harvard:  Dr. Sheila Sen Jasanoff Harvard Web Site Home Page.

    Here is another source with resources regarding Experts, although not yet including Insurance Expert Witnesses it appears:  http://www.daubertontheweb.com/.  This highly useful site regarding Expert Witnesses in general, contains previously posted articles of and from Dr. Sheila Jasanoff, among others.

    For specific case law and experience references to Experts in Insurance Cases, see for example Dennis J. Wall, "Experts, Gatekeepers, and Insurance Issues in Federal Cases" (Daubert Online, 2006) and Dennis J. Wall, "Insurance Expert Witnesses:  When is Their Opinion Testimony Admissible and When is it Desirable?" (Coverage, published by the American Bar Association, 2004).

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.