Insurance Litigation: Leveraging Daubert/Frye Admissibility - - PowerPoint PPT Presentation

Insurance Litigation: Leveraging Daubert/Frye Admissibility Standards for Expert Testimony in State and Federal Court

Distinguishing Daubert vs. Frye Standards, Challenging Expert Reliance

• n Hearsay Articles, Using Daubert/Frye Motions

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WEDNESDAY, SEPTEMBER 17, 2014

Presenting a live 90-minute webinar with interactive Q&A Natalie Lefkowitz, Member, Herzfeld & Rubin, New York Maureen Doerner Fogel, Member, Herzfeld & Rubin, New York Anna P . Engh, Partner, Covington & Burling, Washington, D.C.

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INSURANCE LITIGATION: LEVERAGING DAUBERT/FRYE ADMISSIBILITY STANDARDS FOR EXPERT TESTIMONY IN STATE AND FEDERAL COURT

SEPTEMBER 17, 2014

Natalie M. Lefkowitz Herzfeld & Rubin, P.C. New York. NY (212) 471-8544 NLefkowitz@herzfeld-rubin.com

OVERVIEW OF DAUBERT AND FRYE STANDARDS FOR ADMISSIBILITY OF EXPERT WITNESSES

6

Natural / Social Sciences and Technology in 1923

 The governor of Oklahoma outlawed the theory of

evolution in public school textbooks purchased by the state.

 The U.S. Supreme Court analyzed what constitutes a

“white person” within the context of the U.S. Naturalization Act and held that a Punjabi immigrant is not eligible for naturalization. U.S. v. Bhagat Singh Thind, 261 U.S. 204 (1923)

 John Baird would not give the first demonstration of a

crude working television system for another three years.

7

Frye v. United States, 293 F. 1013 (D.C. Cir. 1923) Case Facts

 Defendant in federal murder trial sought to introduce

evidence from a systolic blood pressure deception test (a precursor to the polygraph machine).

 Scientist who administered the exam to the defendant

sought to testify as to the results. Excluded by trial court.

 Defendant sought to take exam before the jury.

Excluded by trial court.

 Defendant convicted of Murder in the Second Degree.

8

Frye v. United States, 293 F. 1013 (D.C. Cir. 1923)

D.C. Circuit Court Decision

 “Just when a scientific principle or discovery crosses the line

between the experimental and the demonstrable stages is difficult to define. Somewhere in this twilight zone the evidential force of the principle must be recognized, and while courts will go a long way in admitting expert testimony deduced from a well-recognized scientific principle or discovery, the thing from which the deduction is made must be sufficiently established to have gained general acceptance in the particular field to which it belongs.”

 Trial court’s rulings are affirmed.

9

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) Case Facts

 Plaintiffs claim Bendectin, a medication for the relief of

morning sickness, caused limb reduction birth defects.

 Plaintiff sought to introduce statistical evidence through

scientific experts offering:

 Epidemiological (human statistical) studies of the drug’s effects  Opinion that the drug causes birth defects in humans because it

did so in laboratory animals

 Testimony that the drug’s chemical structure was similar to other

drugs causing birth defects

10

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) Case Facts

 The proffered opinions did not reflect a consensus in the

scientific community.

 In fact, every published study concluded that Bendectin

was not a teratogen (cause of birth defects).

11

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) U.S. Supreme Court Decision

 Frye “general acceptance” test for determining

admissibility of novel scientific evidence is superceded by F.R.E. 702

 Trial judge must ensure that scientific expert testimony is

“not only relevant, but reliable.” Trial judge becomes “gatekeeper.”

12

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) Daubert’s “Big 4” Non-Exclusive Screening Factors

 Has the theory or technique been tested?

 “ ’[t]he criterion of the scientific status of a theory is its falsifiability, or refutability,

• r testability.’ ”

 Has it been subjected to peer review and publication?

 “submission to the scrutiny of the scientific community is a component of ‘good

science,’ in part because it increases the likelihood that substantive flaws in methodology will be detected.”

 What is the known or potential rate of error?  General acceptance in the relevant scientific community?

 “widespread acceptance can be an important factor in ruling particular evidence

admissible, and ‘a known technique which has been able to attract only minimal support within the community,’ may properly be viewed with skepticism.”

13

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)

Daubert’s Non-Exclusive Screening Factor: Testing

 Courts should screen out proffers of untestable concepts. Proposed

alternative designs are a frequent target.



See, e.g. Brooks v. Outboard Marine Corp., 234 F.3d 89 (2d Cir. 2000) (expert never attempted to reconstruct boating accident and test his theory); Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000) (expert’s failure to test hypothesis or calculate force inflicted on truck by guardrail); Jaurequi v. Carter Mfg. Co., 173 F.3d 1076 (8th Cir. 1999) (opinions are unabashed speculation and flunk Daubert's reliability test); Dancy v. Hyster Co., 127 F.3d 649 (8th Cir. 1997), cert. denied, 523 U.S. 1004 (1998) (design of safer alternative guard not attempted; practical effects upon effective and safe operation of truck not considered); Peitzmeier v. Hennessy Indus., 97 F.3d 293 (8th Cir. 1996), cert. denied, 520 U.S. (1997) (proposed safety alternative consisted

• f series of rough sketches never adapted into engineering drawings or prototypes;

injury reduction capability “wholly speculative”); Pestel v. Vermeer Mfg. Co., 64 F.3d 382 (8th Cir. 1995)(expert cobbled together a guard as alternative design for stump cutter but did not consult or test to see how the proposal would work in the field); Stanczyk v. Black & Decker, Inc., 836 F.Supp. 565 (N.D. Ill. 1993) (expert offered no testable design to support his concept; history of engineering and science filled with finely conceived ideas unworkable in practice); Allen v. Minnstar, Inc., 8 F.3d 1470 (10th

• Cir. 1993)(proposed alternative design rejected; mere existence of prototypes does not
• bligate manufacturers to implement).

14

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)

Daubert’s Non-Exclusive Screening Factor: Testing

 Experts employing flawed testing should be excluded.

 See, e.g. Bogosian v. Mercedes-Benz of No. America, Inc., 104 F.3d 472 (1st Cir.

1997)(expert’s test evidence flawed for various reasons, including no attempt to replicate known facts of accident, test conditions different from what evidence showed and expert’s test approach assumed facts contradicted by testimony of plaintiff he supported); DePaepe v. General Motors Corp., 141 F.3d 715 (7th Cir. 1998)(shortcomings in expert’s test evidence assigned to trial judge after retrial required for other reasons); Samuel v. Ford Motor Co., 96 F.Supp. 2d 491 (D.

• Md. 2000)(rollover avoidance maneuver test program by claimant’s expert flawed

and unreliable as it could not produce the same or similar results when run under the same conditions, the inputs exceeded angles and rates of steering reasonably to be expected from nonprofessional drivers performing emergency avoidance maneuvers, and it was “born in litigation.”)

15

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)

Daubert’s Non-Exclusive Screening Factor: Peer Review and Publication

 Expert testimony not subject to peer review and publication should be

excluded.



See, e.g. Cabrera v. Gordis Corp., 945 F.Supp. 209 (D. Nev. 1996)(expert's opinion based on use of a blood test, the reliability of which had not been reviewed by peers, was rejected by the court); Black v. Food Lion, Inc., 171 F.3d 308 (5th Cir. 1999)(expert's theory, which had not been verified by testing or subjected to peer review, should not have been admitted); Demaree v. Toyota Motor Corp., 37 F. Supp. 2d 959 (W.D. Ky. 1999)(expert did not publish any paper on his theory or give any presentation to scientific, engineering or safety groups. Theory had not been subjected to peer review and was therefore inadmissible); Lauzon v. Senco Products, Inc., 123 F.Supp. 2d 510 (D. Minn. 2000)(articles presented by plaintiff's expert that discussed the product in general are not the type of peer-reviewed literature contemplated by Daubert); Wheat v. Pfizer, Inc., 31 F.3d 340 (5th Cir. 1994)(expert’s theory regarding causation lacked an empirical foundation and had not been subjected to peer review); Mannix v. Chrysler Corp., 2001 U.S. Dist. LEXIS 4641 (E.D.N.Y. 2001)(expert testimony rejected where expert had not published any technical articles).

16

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) Daubert’s Non-Exclusive Screening Factor: Rate of Error

 Expert methodology with unknown or unknowable rate of error

should be excluded.

 See, e.g., Brown v. Southeastern Pennsylvania Transportation Authority, 35 F.3d

717 (3d Cir. 1994)(expert’s recalculation of exposure to PCBs rejected where methodology used was likely to lead to erroneous results); Samuel v. Ford Motor Co., 96 F.Supp. 2d 491 (D. Md. 2000)(videotape of testing offered to prove vehicle's propensity to roll over excluded where input from drivers could "dramatically influence the outcome of the test." The test was unreliable in that it was not expected to produce the same or substantially similar results when run under the same conditions).

17

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)

Daubert’s Non-Exclusive Screening Factor: General Acceptance

 General acceptance in the relevant scientific community is still a

consideration.



See, e.g., Hamilton v. Emerson Electric Co., 133 F. Supp. 2d 360 (M.D. Pa. 2001)(expert testimony rejected where expert failed to offer any evidence that his methodology was generally accepted or that it featured any standards that controlled its operation); Elcock v. Kmart Corp., 233 F.3d 734 (3d Cir. 2000)(expert testimony inadmissible for failing to establish that his methodology was generally accepted or that it related to methods that had been established as reliable); Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000)(expert testimony properly excluded because expert conducted no tests, there was nothing to submit to peer review, and it was impossible to ascertain a rate of error for the expert's assumptions, so “no standards control his analysis, and no ‘gatekeeper’ can assess the relationship of [the expert's] method to

• ther methods known to be reliable and non-judicial uses to which it has been put”);

Lennon v. Norfolk & Western Railway Co., 123 F.Supp. 2d 1143 (N.D. Inc. 2000)(rejection of expert testimony which asserted a causal link between trauma and the onset or exacerbation of multiple sclerosis, contrary to the overwhelming weight of medical authority); Brown v. Southeastern Pennsylvania Transportation Authority, 35 F.3d 717 (3d Cir. 1994)(animal studies should have been admitted as some evidence

• f causation because they are generally accepted as reliable in the scientific

community).

18

General Electric Co. v. Joiner, 522 U.S. 136 (1997) Standard of Review

 Exercise of discretion by a federal trial court when performing its

Daubert gatekeeping function is subject to review by federal courts pursuant to an abuse of discretion standard.

19

Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) Expands and Strengthens Daubert

 Federal trial courts’ gatekeeping function applies not only to

scientific expertise, but also to technical and other specialized knowledge.

 Daubert screening factors can be used to evaluate the reliability of

nonscientific expert proof, including experience-based testimony.

 For example, the court can ask how often an expert’s experience-based

methodology has produced erroneous results, or whether that method is generally accepted in the relevant engineering community.

 The point of Daubert gatekeeping is not only to ensure relevance

and reliability, but “to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that categorizes the practice of an expert in the relevant field.”

20

Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999)

Expands and Strengthens Daubert

 Gatekeeping means tuning into signals of unreliability and probing

why they are unsettling.



For example, the court found flaws in the reasonableness of the expert’s method, not in general, but as applied to the matter at hand (i.e., the cause of this tire’s separation). The tenuousness of his testimony about key factors, such as the miles traveled by the tire, the subjectiveness of his method of analysis and his inspection of the tire for the first time on the morning of his deposition, were suspicious.



The broad discretion given to trial judges does not mean “discretion to abandon the gatekeeping function … [nor] to perform the function inadequately.” Rather, it is the discretion “to choose among reasonable means of excluding expertise that is fausse and science that is junky.” Kumho concurring opinion by J. Scalia



Though the Daubert screening factors are not holy writ, in a particular case the failure to apply

• ne or another of them may be unreasonable, and hence an abuse of discretion.” Id.

21

Weisgram v. Marley Co., 528 U.S. 440 (2000) Appropriate Relief

 If the trial court has allowed an expert to testify but the appellate

court determines the expert should have been Daubertized, and if the proffering party’s proofs are thereby rendered inadequate as a matter of law, the appellate court can order entry of judgment.

 “Since Daubert … parties relying on expert evidence have had notice of the

exacting standards of reliability such evidence must meet. It is implausible to suggest, post-Daubert, that parties will initially present less than their best expert evidence in the expectation of a second chance should their first try fail.”

22

STANDARDS IN STATES WHERE DAUBERT DOES NOT CONTROL

Beyond Daubert

Approaches Aside From Daubert

 18 jurisdictions* do not adhere to Daubert.

 Some are Frye jurisdictions  Some consider one or more of Daubert’s Big 4 screening factors, but emphasize

the court’s broad discretion in how it determines reliability of expert evidence. That is where it is helpful to consider the factors in this section.

 If you are in a jurisdiction that strictly adheres to Daubert, consider

the following factors while performing a Daubert analysis. Remember, the Big 4 factors are non-exclusive.

* AL, CA, CO, DC, HI, IL, KS, MD, MN, MO, NC, NV, NY, ND, PA, SC, VA and WA

24

Beyond Daubert

Representative Approaches of Non-Daubert Jurisdictions

 Colorodo  CRE 702 governs the trial court’s determination as to whether scientific or

• ther expert testimony is admissible. “Such an inquiry should focus on the

reliability and relevance of the proffered evidence and requires a determination as to (1) the reliability of the scientific principles, (2) the qualifications of the witness, and (3) the usefulness of the testimony to the jury.” People v. Shreck, 22 P.3d 68 (Colo. 2001)

 “We also hold that when a trial court applies CRE 702 to determine the

reliability of scientific evidence, its inquiry should be broad in nature and consider the totality of circumstances of each specific case. In doing so, a trial court may consider a wide range of factors pertinent to the case at bar. The factors mentioned in [Daubert] and by other courts may not be pertinent, and thus are not necessary to every CRE 702 inquiry.” Id.

25

Beyond Daubert

Representative Approaches of Non-Daubert Jurisdictions

 North Dakota

 “This Court has a formal process for adopting procedural rules after appropriate

study and recommendation by the Joint Procedure Committee, and we decline Hernandez's invitation to adopt Daubert by judicial decision. ” State v. Hernandez, 707 N.W.2d 449 (N.D. 2005)

 Under North Dakota law, the admission of expert testimony is governed by

N.D.R.Ev. 702, which provides: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or

• therwise.” Id.

26

Beyond Daubert

Representative Approaches of Non-Daubert Jurisdictions

 Washington



The trial court must exclude expert testimony involving scientific evidence unless the testimony satisfies both Frye and E.R. 702. State v. Copeland, 130 Wn.2d 244, 922 P.2d 1304 (1996).



To admit evidence under Frye, the trial court must find that the underlying scientific theory and the “’techniques, experiments, or studies utilizing that theory’” are generally accepted in the relevant scientific community and capable of producing reliable results. Anderson v. Akzo Nobel Coatings, Inc., 172 Wn.2d 593, 260 P.3d 857 (2011)(quoting State v. Riker, 123 Wn.2d 351, 869 P.2d 43 (1991)).



To admit expert testimony under E.R. 702, the trial court must determine that the witness qualifies as an expert and the testimony will assist the trier of fact. State v. Cauthron, 120 Wn.2d 879, 846 P.2d 502 (1993). Unreliable testimony does not assist the trier of fact. See, Anderson.



Frye and E.R. 702 work together to regulate expert testimony: Frye excludes testimony based on novel scientific methodology until a scientific consensus decides the methodology is reliable; E.R. 702 excludes testimony where the expert fails to adhere to that reliable methodology.” Lakey v. Puget Sound Energy, Inc., 176 Wn.2d 909 (Wash. 2013) 27

Beyond Daubert

Representative Approaches of Non-Daubert Jurisdictions

 New York

 When novel scientific evidence is involved, Frye applies, requiring that the

expert’s opinions or methodology be generally accepted as reliable by the relevant scientific community. People v. Wesley, 83 N.Y.2d 417 (1994)

 Frye does not seem to apply to nonscientific or experience-based testimony.  New York does not have a written code of evidence to guide the courts on how to

judge the reliability of nonscientific or experience-based expert evidence.

28

Factors Beyond Daubert’s Big 4

What screening factors are considered by the courts as they go beyond Daubert’s Big 4 factors of testing, peer review, rate of error, general acceptance?

29

Factors Beyond Daubert’s Big 4

Beyond Daubert: Unsupported Speculation

 The courts are particularly watchful for speculative expert testimony.

 See, e.g., Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000)(expert excluded

for failing to test his hypothesis or even attempt to calculate the force inflicted on the truck by the guardrail. “Although there may be some circumstances where

• ne's training and experience will provide an adequate foundation to admit an
• pinion and furnish the necessary reliability to allow a jury to consider it, this is

not such a case"); Schmaltz v. Norfolk & Western Railway Co., 878 F.Supp. 1119 (N.D. Ill. 1995)(excluded testimony of expert who knew of no documented cases to support his hypothesis, and believed there was evidence to suggest causation but conceded it was "not terribly strong"); Moore v. Ashland Chemical, Inc., 151 F.3d 269 (5th Cir. 1998) (medical opinion regarding causation is excluded absent some "objective, independent validation of the expert's methodology." Proponent

• f expert testimony need not prove that expert's testimony is correct but

must prove that the testimony is reliable); (continued)

30

Factor’s Beyond Daubert’s Big 4 Beyond Daubert: Unsupported Speculation

(continued)

 Turner v. Iowa Fire Equipment Co., 229 F.3d 1202 (8th Cir. 2000)(expert more

concerned with identifying and treating plaintiff's condition than identifying the cause); Donnelly v. Ford Motor Co., 80 F.Supp.2d 45 (E.D.N.Y. 1999)(fuel ignition expert precluded from testifying because of inability to explain methodology and ipse dixit nature of the opinion); McMahon v. Bunn-O-Matic, 150 F.3d 651 (7th Cir. 1998)(“an expert who supplies nothing but a bottom line supplies nothing of value to the judicial process”).

31

Factors Beyond Daubert’s Big 4

Beyond Daubert: Subjective Belief



Consider how much of expert opinion is based upon the expert’s subjective interpretation of the data.



See, e.g., Pries v. Honda Motor Co., 31 F.3d 543 (7th Cir. 1994)(expert testimony regarding forces that would have caused seat belt to open excluded in light of testimony that "he did not know" if these forces were commonly achieved in a crash); Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000)(because the expert “conducted no tests and failed to attempt to calculate any of the forces on Oddi or the truck during this accident, he used little, if any, methodology beyond his own intuition”); Brooks v. Outboard Marine Corp., 234 F.3d 89 (2d Cir. 2000)(expert opinion rejected where expert had not seen the subject boat or motor in person or in photographs, never spoke to the boys involved in the accident, was unaware of the dimensions of the boat and the placement of the seats in relation to the motor, did not know where the boys were positioned and never attempted to reconstruct the accident and test his theory); Rosen v. Ciba-Geigy Corp., 78 F.3d 316 (7th Cir. 1996)(although expert cardiologist expressed what may have been an "insightful, even an inspired, hunch concerning the cause of the heart attack," it lacked "scientific rigor." Expert failed to

• ffer a reason to believe that wearing a nicotine patch for three days could precipitate

a heart attack or any experimental, statistical or scientific data from which such determination could be made).

32

Factor’s Beyond Daubert’s Big 4

Beyond Daubert: Cumulative Testimony



The exclusion of expert testimony on the ground it is cumulative prevents delay of the trial and overwhelming the jury.



See, e.g., Falise v. American Tobacco Co., 107 F.Supp.2d 200 (E.D.N.Y. 2000)(expert testimony regarding financial impact of defendant's conduct precluded as unnecessary, where the relied-upon documents can be used in arguments by counsel); Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 2000 U.S.

• Dist. LEXIS 19587 (E.D.N.Y. 2000)(expert testimony that will be covered by another expert is excluded as

cumulative); Roback v. V.I.P. Transport, Inc., 1994 U.S. Dist. LEXIS 14054 (N.D. Ill. 1994)(proposed opinion by human factors expert that driver was confronted with significant distraction is excluded. The issue is not beyond the ken of an average person. Court considered that the expert "was hired to be nothing more than a pleasant looking, white-haired, hired advocate whose purpose is to confuse the issues"); Persinger v. Norfolk & Western Railway Co., 920 F.2d 1185 (4th Cir. 1990)(human factors expert did no more than state the

• bvious, i.e. that it is more difficult to lift an object from a seated position); Christopher v. Madison Hotel

Corp., 875 F.2d 314 (4th Cir. 1989)(expert precluded from explaining friction tests on bathroom floor because "it is common knowledge that shiny bathroom floors are slippery"); United States v. Affleck, 776 F.2d 1451 (10th Cir. 1985)(“memory expert” properly excluded because “the average person is able to understand that people forget”). 33

Factors Beyond Daubert’s Big 4 Beyond Daubert: Unfair Prejudice or Confusion

 Even reliable evidence can be precluded if confusion or prejudice

• utweighs probative value.

 See, e.g., Brown v. Southeastern Pennsylvania Transportation Authority, 35 F.3d

717 (3d Cir. 1994)(reliance on animal studies is no more prejudicial than reliance

• n other scientific studies, so animal study should have been admitted); Samuel
• v. Ford Motor Co., 96 F.Supp. 2d 491 (D. Md. 2000)(videotape of test runs

showing vehicle's propensity to tip over excluded as unreliable because "[t]he image of the test vehicles tipping dramatically . . prevented from rolling over only by the presence of the outriggers, would leave an indelible image in the minds of the jury which no limiting instruction could offset").

34

Factors Beyond Daubert’s Big 4 Beyond Daubert: Hearsay Data

 Consider the hearsay data being relied upon by the expert.

 For example, a Ph.D. pharmacologist is precluded from testifying as to whether a

sleep aid medication caused a drastic change in plaintiff’s behavior because her analysis was premised on hearsay anecdotal case reports and Spontaneous Reporting Systems, i.e. data submitted to the FDA by consumers, which has not been verified as to cause and effect. Haggerty v. Upjohn Co., 950 F. Supp. 1160 (S.D. Fla. 1996), aff’d without op., 158 F.3d 588 (11th Cir. 1998).

35

Factors Beyond Daubert’s Big 4

Beyond Daubert: Absence of Scientific Foundation in Literature

 Failure to offer supporting studies or literature is a basis for

exclusion.



See, e.g., Allen v. Pennsylvania Engineering Corp., 102 F.3d 194 (5th Cir. 1996)(expert precluded from testifying as to link between exposure to chemical and cancer, given absence

• f epidemiological study showing a statistically significant link, and because animal studies

were inconclusive); Black v. Food Lion, Inc., 171 F.3d 308 (5th Cir. 1999)(theory of causation rejected as untested not borne out by epidemiological studies. Expert concedes medical science does not know “if the cause of the condition is muscle, nerve, or hormone damage”); Demaree v. Toyota Motor Corp., 37 F.Supp. 2d 959 (W.D. Ky. 1999)(testimony rejected for lack of literature, published or unpublished, to advocate an air bag threshold deployment of 20 to 25 mph); Gross v. King David Bistro, Inc., 83 F.Supp. 2d 597 (D. Md. 2000)(claim that fibromyalgia was caused by tainted tuna, based on temporal relationship between illness and tuna consumption rejected because medical literature acknowledged that causes of fibromyalgia are unknown); Lennon v. Norfolk & Western Railway Co., 123 F.Supp. 2d 1143 (N.D. Ind. 2000)(testimony excluded where it ran counter to scientific studies conducted in the field); Siharath v. Sandoz Pharmaceuticals Corp., 131 F.Supp. 2d 1347 (N.D. Ga. 2001)(epidemiological studies failed to show a statistically significant association between defendant's product and plaintiff's stroke; case reports are no substitute for scientific studies); Erickson v. Baxter Healthcare, Inc., 131 F.Supp. 2d 995 (N.D. Ill. 2001)(general reference to multiple identified sources, without page citations, is insufficient foundation for expert testimony).

36

Factors Beyond Daubert’s Big 4

Beyond Daubert: Absence of Foundation in Fact

 Failure to offer a reliable foundation in fact is a frequent basis for

exclusion.



See, e.g., Bogosian v. Mercedes-Benz of North America, Inc, 104 F.3d 472 (1st Cir. 1997)(expert testimony was without foundation where opinion was premised on assumption that gear lever was not in proper position. Moreover, expert inspected vehicle more than 18 months after the accident and failed to verify that the vehicle was in the same condition as at the time of the accident); Jaurequi v. Carter Manufacturing Co., 173 F.3d 1076 (8th Cir. 1999)(expert testimony regarding warnings rejected because expert did not read the warnings actually provided by the manufacturer and was unaware of their content, he did not know what kind of warning was given to the plaintiff by his coworkers; he did not evaluate the plaintiff's behavior; and he did not know the realm of plaintiff’s knowledge); Clark v. Takata Corp., 192 F.3d 750 (7th Cir. 1999)(expert testimony regarding failure of seat belt rejected because he assumed that the belt, though previously secure, became unlatched during the accident); Falise v. American Tobacco Co., 107 F.Supp. 2d 200 (E.D.N.Y. 2000)(testimony regarding future rate of illness precluded for lack of a sufficiently secure base from which to extrapolate the rate); Roback v. VLP Transport, Inc., 1194 U.S. Dist. LEXIS 14054 (N.D. Ill. 1994)(expert claimed that speedometer malfunctioned due to the electric system, but could not determine precisely what malfunctioned or where in the system it was); Hamilton v. Emerson Electric Co., 133 F. Supp.2d 360 (M.D. Pa. 2001)(rejecting expert who assumed [1] because brake did not work at times after the accident, it did not work at the time of the accident and [2] malfunction was caused by defect).

37

Factors Beyond Daubert’s Big 4

Beyond Daubert: Validity of Methodology

 Determine whether the expert employed a methodology widely

accepted as valid.



See, e.g., O'Conner v. Commonwealth Edison Co., 13 F.3d 1090 (7th Cir. 1994)(physician's claim that he could determine plaintiff's cataracts were radiation-induced by mere observation was contrary to methodology prescribed in literature on which expert relied, which required looking at records of exposure and other radiation-induced biological changes and ruling out

• ther possible causes); Brown v. Southeastern Pennsylvania Transportation Authority, 35

F.3d 717 (3d Cir. 1994)(rejected medical opinion regarding causation as unsupported by appropriate diagnostic tests; court rejected the few standard diagnostic techniques offered); Schmaltz v. Norfolk & Western Railway Co., 878 F.Supp. 1119 (N.D. Ill. 1995)(expert testimony based on “temporal congruity” between plaintiff's exposure and onset of his symptoms is insufficient); Braun v. Lorillard, Inc., 84 F.3d 230 (7th Cir. 1996)(excluded expert testimony where expert “really didn't have any knowledge of the methodology that should be employed, and he still doesn't have any information regarding the methodology that should be employed with respect to lung tissue.” Held that where an “expert proposes to depart from the generally accepted methodology of his field and embark on a sea of uncertainty, the court may appropriately insist that he ground his departure in demonstrable and scrupulous adherence to the scientist's creed of meticulous and objective inquiry. To forsake the accepted methods without even inquiring why they are the accepted methods-in this case why specialists in testing human tissues for asbestos fibers have never used the familiar high temperature ashing method-and without even knowing what the accepted methods are, strikes us, as it struck [the trial judge], as irresponsible.”)

38

Factors Beyond Daubert’s Big 4

Beyond Daubert: Reliability of Methodology

 Determine whether the methodology employed by the expert is

reliable.



See, e.g., Dennis v. Pertec Computer Corp., 927 F.Supp. 156 (D.N.J. 1996)(expert excluded due to his failure to follow appropriate methodology in testing the product, including ensuring the test keyboard was representative of subject keyboards, probing repair history of the test keyboard, or removing the cover to inspect the keys); Bogosian v. Mercedes-Benz of North America, Inc., 104 F.3d 472 (1st Cir 1997)(expert excluded because the vehicle was examined away from the accident site, the wheel was raised in the test but not at the accident site, the lever was shifted rapidly from drive to park by the expert without evidence concerning plaintiff's speed in shifting, and expert assumed the lever was in a position different from the “latched park” position plaintiff testified to); DePaepe v. General Motors Corp., 141 F.3d 715 (7th Cir. 1998)(expert’s testimony regarding product design is subject to challenge upon a retrial because his testing methodology was “interesting but not scientific”); Mancuso v. Consolidated Edison Co., 2000 U.S. App. LEXIS 12487 (2d Cir. 2000)(expert excluded due to unreliable methodology used to establish causation); Roback v. V.I.P. Transport, Inc., 1994 U.S. Dist. LEXIS 14054 (N.D. Ill. 1994)(expert's data recordation and analysis methods used a microcomputer and program he had designed but which had never undergone any meaningful peer review or scrutiny); Hamilton v. Emerson Electric Co., 133 F.Supp2d 360 (M.D. Pa. 2001)(expert did not use “any discernible methodology to determine that the miter saw contained a defect”); Siharath v. Sandoz Pharmaceuticals Corp., 131 F.

• Supp. 2d 1346 (N.D. Ga. 2001)(methodology used by doctors in the practice of medicine

does not satisfy the Daubert requirement that testimony be supported by scientific methodology).

39

Factors Beyond Daubert’s Big 4

Beyond Daubert: Lack of Qualification

 Even if the expert is well qualified in the relevant field, examine

whether such qualification extends to the opinion proffered.



See, e.g., Porter v. Whitehall Laboratories, Inc., 9 F.3d 607 (7th Cir. 1993)(observation of five similar cases insufficient to validate medical opinion regarding causation); O'Conner v. Commonwealth Edison Co., 13 F.3d 1090 (7th Cir. 1994)(treating disease five times over lengthy career does not provide proper foundation for opinion); Pries v. Honda Motor Co., 31 F.3d 543 (7th Cir. 1994)(expert with master's degree in industrial design not qualified to testify as to injuries that would have been avoided with different design of seat belt); Braun v. Lorillard, Inc., 84 F.3d 230 (7th Cir. 1996) (“[m]odern science is highly specialized. An expert in the detection of asbestos in building materials cannot be assumed to be an expert in the detection of asbestos in human tissues”); Cabrera v. Cordis Corp., 945 F.Supp. 209 (D. Nev. 1996)(rejected testimony of doctor whose theories were developed in breast implant litigation, but was not an expert on design or manufacture of brain shunts); Watkins v. Telsmith, Inc., 121 F.3d 984 (5th Cir. 1997)(civil engineer not qualified to testify regarding alleged defective design; mechanical engineer required); Demaree v. Toyota Motor Corp., 37 F. Supp. 2d 959 (W.D. Ky. 1999)(expert who had never published any engineering paper on automotive safety matters or air bag design was precluded); Lauzon v. Senco Products, Inc., 123 F.Supp.2d 510 (D. Minn. 2000), rev’d, 270 F.3d 681 (8th Cir. 2001)(qualifications questioned where “for the past 19 years, [plaintiff's expert] had derived 90% to 95% of his income from expert legal work”).

40

Factors Beyond Daubert’s Big 4 Beyond Daubert: Failure to Follow Own Methodology

 Where expert is found not employing the methodology admittedly

appropriate for the resulting opinion.

 For example, expert testimony linking one-time use of Halcion to the plaintiff’s

injury is rejected where the expert admitted the only way to determine causation was to conduct large-scale epidemiological studies with a defined population, yet the expert did not conduct such studies nor did she study the clinical or epidemiological studies done by others. Haggerty v. Upjohn Co., 950 F.Supp. 1160 (S.D. Fla. 1996)

 For another example, a differential diagnosis offered by plaintiff's expert was one

traditionally used by the medical community to determine which of two or more conditions a patient is suffering from. It was admittedly not the correct methodology for determining causation. Turner v. Iowa Fire Equipment Co. , 229 F.3d 1202 (8th Cir. 2000)

41

Factors Beyond Daubert’s Big 4 Beyond Daubert: Greater Scrutiny For Litigation Opinion

 Opinion prepared for the purpose of litigation is subject to extra

scrutiny.

 As addressed in Daubert:

“ [o]ne very significant factor to be considered is whether the experts are proposing to testify about matters growing naturally and directly out of research they have conducted independent of the litigation, or whether they have developed their

• pinions expressly for the purposes of testifying. That an expert testifies for money

does not necessarily cast doubt on the reliability of his testimony, as few experts appear in court merely as an eleemosynary gesture. But in determining whether proposed expert testimony amounts to good science, we may not ignore the fact that a scientist's normal workplace is the lab or the field, not the courtroom or the lawyer's office.”

42

Factors Beyond Daubert’s Big 4

Beyond Daubert: Greater Scrutiny For Litigation Opinion

(continued)

 See, e.g., Perry v. United States, 755 F.2d 888 (11th Cir. 1985)(expert who “as

formed an opinion as to the answer he is going to find before he even begins his research may be less objective than he needs to be in order to produce reliable scientific results”); Rosen v. Ciba-Geigy Corp., 78 F.3d 316 (7th Cir. 1996)(excluded untested opinion by cardiologist, although the cardiologist's conjecture is worthy of careful attention, the courtroom “is not the place for scientific guesswork, even of the inspired sort. Law lags science; it does not lead to it”); Samuel v. Ford Motor Co., 96 F.Supp. 2d 491 (D. Md. 2000)(rollover avoidance maneuver program was “born in litigation” and therefore was not reliable); Kaufman v. Motorola, Inc., 2000 U.S. Dist. LEXIS 235 (N.D. Ill. 2000)(use of proportional trading model rejected by court as untested outside the

• courtroom. Scientific controversy must be settled by methods of science rather

than methods of litigation).

43

Factors Beyond Daubert’s Big 4 Beyond Daubert: Failure to Rule Out Other Causes

 Failure to rule out other causes can be the basis to exclude expert

• pinion.



See, e.g., Brown v. Southeastern Pennsylvania Transportation Authority, 35 F.3d 717 (3d Cir. 1994)(doctor's failure to rule out other possible causes required that opinion regarding causation be rejected); Lauzon v. Senco Products, Inc., 123 F. Supp. 2d 510 (D. Minn. 2000), rev’d, 270 F.3d 681 (8th Cir. 2001)(district court precluded plaintiff's expert from testifying where he was unable to rule out other accident theories, except for ruling out a manufacturing defect. Circuit court reversed, finding that ruling out a manufacturing defect simultaneously ruled in a design defect and that an accurate interpretation of the expert's testimony illustrated that all other theories were ruled out, including accidental ones); Wheat v. Pfizer, Inc., 31 F.3d 340 (5th Cir. 1994)(plaintiff's expert excluded where expert could not rule out other possible causes. Hypothesis that a combination of drugs had caused liver damage lacked empirical foundation and had not been subjected to peer review); Rudd v. General Motors Corp., 127 F.Supp. 2d 1330 (M.D. Ala. 2001)(court admitted testimony by plaintiff's expert, finding that the expert's “method for settling on a cause for the fatigue fracture through a process of eliminating alternative possible causes is, by a preponderance of the evidence, a reliable one. Inference chains built upon such circumstantial evidence are a well- established feature of admissible expert testimony”).

44

Factors Beyond Daubert’s Big 4 Beyond Daubert: Improper Interpretation of Standards

 Improper interpretation of government standards is a basis to

exclude expert.



See, e.g., Bammerlin v. Navistar International Transportation Corp., 30 F.3d 898 (7th

• Cir. 1994)(expert testimony that seat-belt mechanism did not comply with federal

safety standard should have been excluded by the court); DePaepe v. General Motors Corp., 141 F.3d 715 (7th Cir. 1998)(court's determination deeming a federal design standard invalid and refusing to charge jury on that issue, coupled with the misinterpretation of the standard presented to the jury by the plaintiff's experts, required reversal as a matter of law. "A manufacturer is entitled to inform a jury that its vehicles pass muster and to invite the jury to conclude that a vehicle that complies with all federal rules is safe enough to be on the road"); Siharath v. Sandoz Pharmaceuticals Corp., 131 F.Supp. 2d 1347 (N.D. Ga. 2001)(plaintiff's reliance on FDA findings that Bromocriptine may cause hypertension or seizures was misplaced. Plaintiff failed to consider the lower standard of proof for agency determinations than the standard of proof required for the imposition of tort liability. “The agencies' threshold of proof is reasonably lower than that appropriate in tort law, which traditionally makes more particularized inquiries into cause and effect and requires a plaintiff to prove that it is more likely than not that another individual has caused him or her harm”).

45

Factors Beyond Daubert’s Big 4 Beyond Daubert: Speculation About Corporate Motives

 Expert testimony regarding corporate motives can be reversible

error.

 See, e.g., DePaepe v. General Motors Corp., 141 F.3d 715 (7th Cir.

1998)(reversible error for court to permit plaintiff's expert to testify as to corporate

• motives. Trial courts must be careful to keep experts within their proper scope,
• therwise apparently scientific testimony can carry more weight with the jury than

it deserves. Plaintiff's expert “lacked any scientific basis for an opinion about the motives of [defendant's] designers”); Chapman v. Mazda Motor of America, Inc., 7 F.Supp. 2d 1123 (D. Mont. 1998)(expert testimony to the effect that “Mazda's failure to provide all the appropriate documents and drawings requested has prevented plaintiff from determining whether this vehicle was even built to Mazda's own specifications” was stricken. The court found that the quality of discovery is not a proper subject for expert testimony, noting that “expert opinions

• n the quality of discovery is off limits and out of order”).

46

Factors Beyond Daubert’s Big 4

Beyond Daubert: Speculation About Alternative Warnings

 Speculation about alternative warnings is also grounds for

exclusion.

 For example, in Shepherd v. Michelin Tire Corp., expert testimony regarding

insufficiency of warnings was excluded. The court observed that research regarding warnings generally concludes that warnings are not particularly effective behavior modifiers and that no empirical data supported expert's opinion that any particular sidewall warning would make tires safer because there was "no testing, jurying, or test marketing of any particular sidewall warnings.“ The court found that defendant's expert actually tested plaintiff's proposed warnings in the real world where personnel at 11 out of 12 service stations ignored the

• warnings. Finally, the expert could not state with any degree of certainty that his

proposed warning system would "probably" have prevented the accident. "In

• ther words, [expert's] testimony does not meet the preponderance test on

proximate causation even if he were allowed to testify." There is a big gap between the notion that "it could have made a difference" as opposed to "it is highly probable that it would have made a difference.” 6 F. Supp. 2d 1307 (N.D.

• Ala. 1997).

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Case Law on Admissibility of Expert Witnesses in Insurance Litigation

Anna Engh Partner Covington & Burling LLP 202.662.5221 aengh@cov.com September 17, 2014

General Themes of Case Law On Insurance Experts

• Expert testimony about the customs and practices of

the insurance business

– Typically admissible

• Expert testimony that directly guides the jury on what

the law is and how to apply the law

– Typically inadmissible – Cannot usurp the role of the court in instructing the jury on the law

• The line is not clear between what is improper expert

testimony about what the law is and proper expert testimony about standard industry practice.

93

Standards Applied in Cases

• Federal Rule of Evidence 702 - “Helpfulness”

Standard

– Expert testimony generally permitted if four criteria are met, including “if the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue.” Applicable to insurance experts?

• Yes: “The fields of knowledge … are not limited merely to the

‘scientific’ and ‘technical’ but extend to all ‘specialized’ knowledge.” (Advisory Committee note)

• “Similarly the expert is viewed, not in a narrow sense, but as a

person qualified by ‘knowledge, skill, experience, training, or education.’” (Advisory Committee note)

94

Standards Applied in Cases

• Federal Rule of Evidence 702 - “Helpfulness”

Standard

– Standard: Will the testimony be helpful to the trier of fact?

• “Where opinions are excluded, it is because they are unhelpful

and therefore superfluous and a waste of time.” (citing 7 Wigmore § 1918) (Advisory Committee note)

95

Standards Applied in Cases

• Federal Rule of Evidence 702 - “Helpfulness”

Standard

– Can an expert go beyond testifying about her expertise and apply that expertise to the facts of the case?

• “It will continue to be permissible for the experts to take the

further step of suggesting the inference which should be drawn from applying the specialized knowledge to the facts.” (Advisory Committee note)

96

Standards Applied in Cases

• Federal Rule of Evidence 704 - “Opinion on Ultimate

Issue”

– Rule 704(a) did away with common law rule prohibiting expert testimony that resolved an “ultimate issue of fact.” – Under Rule 704(a), “An opinion is not objectionable just because it embraces an ultimate issue.” – However, testimony must meet Rule 702’s helpfulness requirement.

97

Standards Applied in Cases

• Federal Rule of Evidence 704 - “Opinion on Ultimate

Issue”

– Testimony must also comply with Rule 403: “The court may exclude relevant evidence if its probative value is substantially outweighed by the danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” – “These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach …” (Advisory Committee note, Rule 704)

98

Expert Testimony Regarding Bad Faith Conduct

Examples of cases where expert testimony was admissible:

• Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d

998 (9th Cir. 2004)

– Insurer claimed that the insured was ineligible for disability benefits because she was not totally disabled and was earning income. – Insured’s expert testified that the insurer deviated from industry practice in discontinuing insurance payments, challenging the insurer’s assertion that it had acted in good faith.

99

Expert Testimony Regarding Bad Faith Conduct

• Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d

998 (9th Cir. 2004) (con’t)

– The insurer argued that this expert testimony “inappropriately reached legal conclusions on the issue of bad faith and improperly instructed the jury on the applicable law.” – The court disagreed, focusing on the expert’s analysis of industry custom: “While [the expert’s] testimony that Defendants deviated from industry standards supported a finding that they acted in bad faith, [he] never testified that he had reached a legal conclusion that Defendants actually acted in bad faith (i.e., an ultimate issue of law).”

100

Expert Testimony Regarding Bad Faith Conduct

• Ford v. Allied Mutual Insurance Co., 72 F.3d 836

(10th Cir. 1996)

– Expert for insurance company was permitted to testify to the issue of bad faith in uninsured motorist case by showing that the insurer relied on industry practice in the standard used for computing payment under the policy.

101

Expert Testimony Regarding Bad Faith Conduct

• Hanson v. Mutual of Omaha Ins. Co., 2003 WL

26093254 (D.S.D. Apr. 29, 2003)

– Court admitted expert testimony of insurance attorney, finding that his “extensive experience with insurance companies” and his “knowledge of insurance industry standards” rendered his testimony reliable and relevant in “assist[ing] the jury in assessing whether Mutual of Omaha had acted in bad faith.” – Court reasoned that “[b]ecause juries are unfamiliar with standards within the insurance industry,” the expert’s testimony would “provide an understanding of those standards and a determination of whether Mutual of Omaha met its standard of care under the law.”

102

Expert Testimony Regarding Bad Faith Conduct

• Hanson v. Mutual of Omaha Ins. Co., 2003 WL

26093254 (D.S.D. Apr. 29, 2003) (con’t)

– Court pointed out that “Mutual of Omaha can challenge [the insured’s expert’s] explanation of industry standards with contrary evidence.” – Court permitted most of expert’s testimony, but precluded him from testifying on matters that were not supported by industry standards, but based only on “unsubstantiated theories.”

• E.g., Opinion that insurer should reissue policy if applicable law

changes.

• E.g., Opinion that insurer should have a computer system in

place to determine which claims are denied.

103

Expert Testimony Regarding Bad Faith Conduct

• First Financial Ins. Co. v. Jetco Contracting Corp.,

202 F. Supp. 2d 13 (S.D.N.Y. 2001)

– Insurer and insured were both permitted to call at trial experts in insurance practices to testify on the issue of whether the insurance company had taken an unreasonable amount of time, under the customs and practices of the industry, to deny coverage for a liability claim.

104

Expert Testimony Regarding Bad Faith Conduct

• Campbell v. State Farm Mutual Aut. Ins. Co., 65 P.3d

1134 (Utah 2001), rev’d on other grounds, 538 U.S. 408 (2003)

– Insurer faced a punitive damage claim for taking a case to trial, rather than settling for payment of plaintiff’s policy limit. – Insured argued that the insurer’s decision was a result of a nationwide plan to cap payouts on the company’s insurance claims (the alleged “Performance, Planning and Review” policy). – Insurer argued that it was unaware of the likelihood of the judgment against the insured, and resisted settlement in good faith.

105

Expert Testimony Regarding Bad Faith Conduct

• Campbell v. State Farm Mutual Aut. Ins. Co., 65 P.3d

1134 (Utah 2001), rev’d on other grounds, 538 U.S. 408 (2003) (con’t)

– The insured introduced expert testimony regarding State Farm’s business practices to rebut the insurer’s “honest mistake” defense. The testimony focused on State Farm’s PP&R policy and its far-reaching effects. The expert discussed the company’s use of an excess liability handbook, its failure to maintain statistics on excess verdicts, and the profits derived from improper claims.

106

Expert Testimony Regarding Bad Faith Conduct

• Campbell v. State Farm Mutual Aut. Ins. Co., 65 P.3d

1134 (Utah 2001), rev’d on other grounds, 538 U.S. 408 (2003) (con’t)

– The court rejected the insurer’s challenge to this expert testimony: “Most of State Farm’s objections address [expert] testimony concerning industry standards. In several instances [the expert] described ‘duties’ and ‘standards’ of behavior or of ‘care’ that should dictate the practice of insurance companies generally.”

107

Expert Testimony Regarding Bad Faith Conduct

• Campbell v. State Farm Mutual Aut. Ins. Co., 65 P.3d

1134 (Utah 2001), rev’d on other grounds, 538 U.S. 408 (2003) (con’t)

– The court found no danger of the expert usurping the role of the judge, as “[i]n every instance … it was made very clear … that the witness was testifying only to prevailing standards

• f conduct in the industry, and not to legal standards or rules
• f law.”

– The court noted its own ability to provide a limiting instruction

• n consideration of expert testimony - the jury may rely only
• n the judge for an explanation of the law.

108

Expert Testimony Regarding Bad Faith Conduct

• Camacho v. Nationwide Mut. Ins. Co., 2014 WL

1396427 (N.D. Ga. Mar. 31, 2014)

– Insured proffered an expert to testify that the insurer rejected a settlement offer, placed its own interest ahead of the insured, and hid its conduct from the insured. – The court allowed much of the expert’s testimony, noting the narrow line between admissible and inadmissible expert testimony.

• “Several courts have found that because the average juror is

not likely to be familiar with the practices and procedures involved in insurance claim handling, expert testimony on these matters is admissible to assist the trier of fact.”

109

Expert Testimony Regarding Bad Faith Conduct

• Camacho v. Nationwide Mut. Ins. Co., 2014 WL

1396427 (N.D. Ga. Mar. 31, 2014) (con’t)

• “When ‘the substance of the expert’s testimony concerns
• rdinary practices and customs which are helpful to the fact-

finder’s evaluation of the parties’ conduct against the standards

• f ordinary practice in the insurance industry, his passing

reference to a legal principle or assumption in an effort to place his opinions in some sort of context will not justify the outright exclusion of the expert’s [testimony] in its entirety.’”

110

Expert Testimony Regarding Bad Faith Conduct

Limits on expert testimony on bad faith

• Transcontinental Co. v. Lemons, 2007 WL 4856868

(W.D. Okla. Apr. 24, 2007)

– Insured’s expert witness was asked to summarize the claim handling standards for the Oklahoma insurance industry. – This testimony was relevant to the question of whether the insurer denied the insured’s claims without adequate review

• f the policy, and acted in bad faith.

111

Expert Testimony Regarding Bad Faith Conduct

• Transcontinental Co. v. Lemons, 2007 WL 4856868

(W.D. Okla. Apr. 24, 2007) (con’t)

– The court recognized that this testimony potentially disguised a legal conclusion:

“Dawson will not be permitted to define for the jury what is legally required of an insurance company when handling a claim for benefits or adduce other rules of law. Nor may he attempt to apply those rules to the facts of this case to direct the jury that a verdict for [the insured] is required.” “But he may, staying on the safe side of the line between ultimate facts and ultimate questions of law, explain his view of [the insurer’s] actions based on his familiarity with insurance industry practices and having rendered coverage opinions himself.”

112

Expert Testimony Regarding Bad Faith Conduct

• Baumann v. American Family Mut. Ins. Co., 836 F.
• Supp. 2d 1196 (D. Colo. 2011)

– Insured proffered a lawyer as an expert concerning insurance industry standards and claim handling, such as the insurer’s duties in specific instances and the scope of the insurer’s investigation. – The court held that the expert’s opinion that the insurance company “should” pay that portion of the claim over which there is no dispute and had a “duty” to pay such amount usurped the function of the trial judge.

• The court suggested that the expert “could have opined that it

is an insurance industry standard to pay undisputed portions of claims while adjusting the disputed portions.” Testimony regarding ordinary practice is admissible to enable the jury to evaluate the conduct of the parties.

113

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Harbor Insurance v. Continental Bank Corp., 1991

WL 222260 (N.D. Ill. Oct. 25, 1991)

– At a first trial, the district court found that the insurer was not liable for defense costs in a shareholder securities fraud case. – The Seventh Circuit reversed and remanded, ruling certain expert testimony inadmissible. The insurer had introduced an attorney-expert to testify on the meaning of “indemnity” in the company’s charter. – The Seventh Circuit found that the expert’s legal opinion on a contractual term usurped the court’s role of instructing the jury on the law. Harbor Ins. Co. v. Cont’l Bank Corp., 922 F.2d 357 (7th Cir. 1990).

114

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Harbor Insurance v. Continental Bank Corp., 1991

WL 222260 (N.D. Ill. Oct. 25, 1991) (con’t)

– On remand, the district court considered the insurer’s motion to bar the testimony of the insured’s expert, a Delaware

• lawyer. The expert was called to testify as to whether the

insurer was permitted or required to indemnify its officers and directors after a settlement. – Using the Seventh Circuit decision as a template, the trial court clarified the test for admitting the expert testimony:

• “A lawyer experienced in indemnification matters could be a

proper witness to opine on the charter’s probable meaning … . A legal expert may explain the ordinary practices of other corporations who deal with similar indemnification terms in their charter.”

115

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Harbor Insurance v. Continental Bank Corp., 1991

WL 222260 (N.D. Ill. Oct. 25, 1991) (con’t)

“However, a legal expert may not give a legal opinion as to the meaning of the ambiguous contract terms. Nor may a legal expert give a legal opinion as to the legal standards believed to be derived from the charter.”

– The court held that the expert may testify about the ordinary practices of Delaware companies with identical indemnification language in their charters, but could not offer legal opinions.

116

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Lone Star Steakhouse & Saloon, Inc. v. Liberty Mut.
• Ins. Group, 343 F. Supp. 2d 989 (D. Kan. 2004)

– At issue was expert testimony of a law professor submitted by the insurer addressing the economic consequences of interpreting an insurance policy as the insured suggested. – The expert-professor’s testimony was that two conditions must exist for coverage to be provided: (1) there must be some chance that the loss will occur over a particular period; and (2) the chance of accident may not be within the direct control of the policyholder.

117

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Lone Star Steakhouse & Saloon, Inc. v. Liberty Mut.
• Ins. Group, 343 F. Supp. 2d 989 (D. Kan. 2004)

(con’t)

– The expert concluded that the flooding damages sustained by the insured did not fit the insurance policy’s definition of “accident,” because the insured could have easily prevented

• r controlled the resulting damage.

– The expert stated, “It would thwart the public policy goals of creating incentives for parties to prevent losses under their control if [the insured] were successful in shifting its responsibility for that harm to its insurer.”

118

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Lone Star Steakhouse & Saloon, Inc. v. Liberty Mut.
• Ins. Group, 343 F. Supp. 2d 989 (D. Kan. 2004)

(con’t)

– The court excluded the testimony of the expert, on the ground that the testimony would not assist the trier of fact. – The court found that an insurance policy is not to be construed according to its potential economic effects, but rather as a “reasonable person in the insured’s position would have understood [it] ... Expert testimony that the damages must be ‘probabilistic’ to be covered would not, in the court’s view, assist the jury in understanding these terms.”

119

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Lone Star Steakhouse & Saloon, Inc. v. Liberty Mut.
• Ins. Group, 343 F. Supp. 2d 989 (D. Kan. 2004)

(con’t)

– The court also found that the expert’s opinion regarding coverage and control was unhelpful. The condition appeared nowhere in the policy and would only confuse the jury. – The court determined that the expert’s analysis contradicted precedent and, by striking his testimony, reaffirmed its responsibility to instruct the jury on applicable law.

120

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Lone Star Steakhouse & Saloon, Inc. v. Liberty Mut.
• Ins. Group, 343 F. Supp. 2d 989 (D. Kan. 2004) (con’t)

– The court also dismissed the policyholder’s expert testimony

• n similar grounds. That expert stated that “damages in the

2000 lawsuit fell within the definition of an ‘occurrence.’” The court considered this opinion a legal conclusion that would not assist the jury in evaluating the facts. – Also excluded was the expert’s belief that “Liberty Mutual has no basis to apply the exclusion for ‘expected or intended injury,’” and was “barred by estoppel from denying coverage.” – According to the court, these statements involved interpretation of contract terms that should be explained to the jury by the judge alone.

121

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• SR In’t Bus. Ins. Co., Ltd. v. World Trade Ctr. Props.,

LLC, 467 F.3d 107 (2d Cir. 2006)

– The issue was whether the September 11 attacks on the World Trade Center constituted one or two occurrences within the meaning of the insurance policy at issue. – The insured offered expert testimony on insurance industry custom and practice regarding “per occurrence” property insurance coverage.

122

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• SR In’t Bus. Ins. Co., Ltd. v. World Trade Ctr. Props.,

LLC, 467 F.3d 107 (2d Cir. 2006) (con’t)

– The insurers challenged the testimony on these grounds:

• expert lacked practical experience on which to ground his
• pinion;
• expert employed no genuine methodology and drew upon no

external reference points in reaching his opinion; and

• expert could not offer a consistent, reliable methodology by

which he applied his opinions to the facts of the case.

123

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• SR In’t Bus. Ins. Co., Ltd. v. World Trade Ctr. Props.,

LLC, 467 F.3d 107 (2d Cir. 2006) (con’t)

– The court rejected all of these arguments and found that:

• expert had over 30 years of experience in the insurance

industry as both a broker and an underwriter and was familiar with practices in the industry, including practices relating to “per

• ccurrence” property provisions.
• expert was able to identify a practice whereby insurers equate

the definition of occurrence to a physical cause of loss to maximize the number of deductibles that an insured would be required to pay.

• insurers ignored the fact that the expert’s testimony did not

depend on engineering or scientific expertise but instead related to the customs and practices of the insurance industry.

124

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Dormitory Auth. of the State of N.Y. v. Con’t Cas. Co.,

2013 WL 840633 (S.D.N.Y. March 5, 2013)

– Involved claims for professional negligence against an architect where the question was whether one claim that was not raised in the demand letter arose from or was related to another claim that was raised, under the insurance policy’s “related wrongful acts” provision. – The court considered (on summary judgment) testimony of insurance expert about the meaning of “related” in the policy.

125

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Mahoney v. JJ Weiser & Co., 2007 WL 3143710

(S.D.N.Y. Oct. 25, 2007)

– Denying motion to preclude testimony by insurance expert

• n customs and practices in the health insurance industry.
• AMEX Assur. Co. v. Caripides, 316 F.3d 154 (2d Cir.

2003)

– Admitting insurance-expert testimony, through court- appointed witness and a party witness, on interpretation of accidental death insurance policy.

126

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Peckham v. Continental Cas. Ins. Co., 895 F.2d 830

(1st Cir. 1990)

– Finding no legal error in admitting testimony from insurance experts/attorneys on causation, over objection that it was an “ultimate issue.” – Reasoning: “Insurance is a complicated subject and the industry, over time, has developed a patina of custom and

• usage. Arcana abound. Defendant’s proffered experts

could reasonably be expected to shed some light in a shadowy domain.”

127

Expert Testimony Regarding the Meaning

• f Insurance Policy Provisions
• Scottsdale Ins. Co. v. City of Waukegan, 689 F.
• Supp. 2d 1018 (N.D. Ill. 2010)

– Insured proffered an expert to testify about coverage. – The court struck many of the expert’s conclusions as improper “legal conclusions that will determine the outcome

• f the case.” For example:
• Opinions addressing limitations of coverage according to policy

terms “usurp the Court’s role” in interpreting policy language.

• Opinions offering conclusions about insurer’s duties under the

law are improper testimony about legal implications of conduct.

• Conclusions as to the scope of policies improperly tell the jury

what result to reach.

128

Expert Testimony About Whether A Reinsurer Was Obligated To Pay Its Reinsured

• Suter v. General Accident Ins. Co. of America, 424 F.
• Supp. 2d 781 (D.N.J. 2006)

– The Integrity liquidator was seeking reinsurance proceeds from General Accident for Pfizer heart valve coverage. – The reinsurer argued that reinsurance payments were not due to Integrity, because Integrity allegedly failed to determine in good faith whether the product liability claims had triggered coverage obligations. – Integrity submitted expert testimony in support of Integrity’s good faith efforts.

129

Expert Testimony About Whether A Reinsurer Was Obligated To Pay Its Reinsured

• Suter v. General Accident Ins. Co. of America, 424 F.
• Supp. 2d 781 (D.N.J. 2006) (con’t)

– The expert was a former Integrity employee. He discussed how the matter would be analyzed by a “hypothetical” liquidation court. – He additionally offered his view on how the hypothetical liquidation court might construe relevant caselaw. – The court rejected the reinsurer’s argument that this testimony was an impermissible legal conclusion, focusing

• n the nature of the expert’s background and qualifications.

130

Expert Testimony About Whether A Reinsurer Was Obligated To Pay Its Reinsured

• Suter v. General Accident Ins. Co. of America, 424 F.
• Supp. 2d 781 (D.N.J. 2006) (con’t)

– The court noted the expert’s 34 years of experience in the insurance business and his involvement in settlements of legal disputes. – “Where an expert is opining as to the custom and practice of a particular business, and where someone who is an expert in a particular field would be expected to understand the ways in which the laws affect the business, such testimony should be admitted.” – Here, the expert did not advise on what the law requires, but rather, what someone familiar with the law and practices of the insurance industry “believes to be the impact of the law

• n the business.”

131

Expert Testimony About Whether A Reinsurer Was Obligated To Pay Its Reinsured

• Suter v. General Accident Ins. Co. of America, 424 F.
• Supp. 2d 781 (D.N.J. 2006) (con’t)

– The court found that it was relevant that the testimony was presented at a bench trial, not a jury trial, where there is less danger of the expert usurping the role of the judge in advising the jury. – “Where, as here, there is no jury to instruct, the ability of the witness to ‘stray out of bounds and into the rightful territory

• f the Court is significantly lessened.”

132

General Themes of Case Law On Insurance Experts

• Expert testimony about the customs and practices of

the insurance business

– Typically admissible

• Expert testimony that directly guides the jury on what

the law is and how to apply the law

– Typically inadmissible – Cannot usurp the role of the court in instructing the jury on the law

• The line is not clear between what is improper expert

testimony about what the law is and proper expert testimony about standard industry practice.

133