INSURANCE: Motion by Plaintiff alleging bad faith settlement of vehicle death case to exclude certain testimony & opinions of insurer’s hybrid and retained experts mostly denied… Molloy.
This is a bad faith action arising out of a High Country Paving loaded equipment trailer coming unhitched and colliding with another vehicle in 8/16, killing the driver and seriously injuring the passenger. High Country’s insurer United Fire ultimately settled with the 3rd-party victims for $3 million policy limits without securing a release for High Country. High Country then settled with the 3rd parties for an additional $1.275 million of its own money and then sued United Fire alleging bad faith related to the settlement and breach of contract for failing to pay CGL coverage.
The case was removed to this Court in 9/18. On 5/9/19 this Court certified a question to the Montana Supreme Court regarding United’s duty to obtain a release prior to paying policy limits. That Court issued its decision 12/31/19 clarifying Montana law regarding an insurer’s obligations when catastrophic injury may exceed insurance limits in a clear liability case. In the meantime each party sought to compel disclosure of materials identified in the other’s privilege log and also sought summary judgment. On 11/4/19 this Court granted both motions to compel. High County sought immediate relief by scurrying to the 9th Circuit through a petition for mandamus. Although the case was stayed pending resolution of that writ, the Court ruled on the pending summary judgment motions, determining that factual disputes remained regarding High Country’s bad faith claim but ruling in its favor on its contract claim. The 9th Circuit denied High Country’s mandamus petition 4/2/20. The case is set for trial 10/19/20. High Country seeks to exclude certain testimony and opinions of United’s hybrid and retained experts.
On 6/17/19 United disclosed as hybrid witnesses Guy Rogers, Jon Wilson, Katie Huso, and Nick Pagnotta plus a serial list of “Additional Hybrid Witnesses” including Clifford Edwards, Christopher Edwards, John Edwards, Mary Farjadi, Neal Scharmer, and “other representatives of United Fire” who may have formed relevant opinions. On 10/1/19 United disclosed its retained expert Gary Zadick. These individuals are expected to opine as to United’s duty to its insured and the value of the 3rd-party claims against High Country. In light of the answer to the certified question and this Court’s summary judgment ruling, the sole question remaining for trial is whether “the reasonable settlement value of this case exceeded $3 million.” As a preface to considering High Country’s arguments, it is important to note that the methods described are precisely what lawyers, adjusters, and insurers do every day in PI cases. Indeed, the very premise of High Country’s case is the valuation dispute of lawyers and adjusters.
Guy Rogers is a Montana attorney with extensive experience in civil litigation defense. United anticipates that he will provide opinions in 3 areas, only one of which is still at issue: “Whether the reasonable settlement value of the claims against High Country exceeded policy limits.” High Country unpersuasively seeks to exclude this opinion on the ground that it is not reliable and lacks sufficient foundation. It argues that his approach to claim valuation does not meet Daubert requirements because it is “not a scientific or precise exercise.” United responds that Daubert does not apply to non-scientific expert testimony. Neither party is entirely correct. While the rigid factors relevant to a scientific opinion need not be adhered to, courts are required “to make some kind of reliability determination to fulfill their gatekeeping function.” Hangarter (9th Cir. 2004). The factual basis for Rogers’s valuation opinion is stated as:
Mr. Rogers has also been involved in defending numerous personal injury and wrongful death cases, and has defended and tried cases against the Edwards Law Firm. He is familiar with the types of damages claimed and experts routinely retained by the Edwards Law Firm and other top-tier plaintiffs’ firms in personal injury and wrongful death cases. Mr. Rogers has also been the mediator in numerous personal injury and wrongful death cases. Based on the information provided to him by Mr. Scharmer, and his knowledge and experience, Mr. Rogers was of the opinion that it was reasonably clear that High Country’s liability to Mr. Edwards’ clients was in excess of $3,000,000.
He further explained in his deposition that a number of factors go into the “hopper” when valuing a wrongful death case, such as existing jury verdicts, venue, and prior experience in the field, as well as who the plaintiff is, the injuries sustained, and the plaintiff’s family situation. While he conceded that it would not be possible to provide a “precise dollar amount” and “no one has a crystal ball,” he consistently explains his process for determining a reasonable settlement range. The soundness of his methodology is supported by the discussion in Gibson (Mont. 1984), which shows the process lawyers engage in when assessing case values.
High Country further argues that the uncertainties surrounding the value of general damages make it an improper area for expert testimony. This argument highlights the unique procedural posture of the case. Unlike a usual case involving general damages, the jury will not be determining the actual value of the 3rd-party claims, but the reasonableness of an insurer’s valuation of a case. Thus it will need information about what United knew (facts) and how it made its decision based on those facts (opinions). Contrary to High Country’s characterization, Rogers’s approach is not an “amorphous thought experiment,” but a sufficiently reliable practice to be presented to a jury. Moreover, the fact that no one can accurately predict jury verdicts only further supports the importance of expert testimony in this field. The testimony offered by Rogers speaks to how an insurer values a case in certain circumstances. Simply saying that case valuation is impossible does not help a jury answer that question.
High Country further challenges the foundation of Rogers’s testimony, arguing that his opinions are based on a 45-minute call with Neal Scharmer, United’s Chief Legal Counsel/VP. Its brief shows that neither United nor Rogers has attempted to obfuscate the basis of his knowledge or the limits of his factual review. As argued by United, his brief review of the case is ripe for cross; as is High Country’s contention that Rogers did not follow his own methodology. Rogers is permitted to testify as a hybrid witness consistent with his disclosure.
Jon Wilson is likewise a Montana attorney with extensive experience in insurance coverage and civil defense litigation and is expected to testify to the same general subjects as Rogers. According to High Country, he has no firsthand knowledge of the case because he “never spoke to anyone at United Fire and never offered any advice” and argues that his opinions merely bolster or vouch for those offered by Rogers. Wilson’s testimony presents a close question. The record indicates that he was not directly involved in United’s case valuation, but was part of Rogers’s valuation methodology. After he was approached by United, Rogers consulted with Wilson. The question is whether the opinions formed and shared by Wilson during that consultation can be considered opinions formed “during the course of treatment.” Goodman (9th Cir. 2011) (discussing the boundaries under Rule 26(a)(2)(C) for a treating physician). The answer is a cautioned yes. Wilson’s disclosure shows that he formed his own contemporaneous opinion about the value of the case based on the information provided by Rogers. Tarter (D.Mont. 2019) (“When an expert is to offer testimony limited to his or her percipient knowledge i.e. knowledge and opinions formed at the time an earlier evaluation or report was made, the expert is treated as a non-retained expert.”). There is no indication that he offered an opinion or authored a report after the fact. Thus Wilson is permitted to testify to the opinion he formed at that time and its factual basis. However, he is prohibited from framing his testimony in terms that merely bolster Rogers’s opinions. Huawei (N.D. Cal. 2018).
Katie Huso is a Montana attorney with experience in PI and coverage claims. She was United’s coverage counsel. She is expected to testify to the same subject areas as Rogers and Wilson, as well as to the extent of coverage available under High Country’s policy. Given the narrow issues remaining, only her valuation opinion is relevant. High Country argues that it is improper “bolstering” and deficient under Rule 702 and Daubert because she simply changed her tune regarding settlement after speaking to Rogers. She stated in her deposition that she believed the claims were worth at least $3 million but was reluctant to assign a specific dollar value. However, High Country is correct that neither her disclosure nor her deposition provides a basis for her valuation of the claim. Nor does it appear that she provided a contemporaneous valuation. Nevertheless, she provides necessary factual background for how United processes claims such at issue here. Her fact testimony regarding her actions in this case, as well as who she spoke to and why, is permitted.
United’s hybrid disclosure as to “additional hybrid witnesses” states:
There are numerous fact witnesses who may provide opinion testimony in this case, including A. Clifford Edwards, Christopher Edwards, John Edwards, Mary Farjadi, Neal Scharmer, and other representatives of United Fire who formed opinions as to High Country’s liability, the reasonable settlement value of the third-party claims, and United Fire’s duties under Montana law. United Fire believes that the opinions that will be expressed by these witnesses are contained in the documents that have or will be produced in this case in discovery.
These witnesses include the plaintiff’s attorneys in the underlying matter and United’s employees. High Country seeks to exclude any such testimony on the grounds that this is not an actual disclosure. It is correct. Even assuming that the short summary identifies the subject of the testimony, it does not include “a summary of the facts and opinions to which the witness is expected to testify.” Rule 26(a)(2)(C)(ii). It is not sufficient to merely reference other unidentified discovery documents. Ibey (D.Mont. 2013). And because United unpersuasively maintains that its disclosure is adequate given the other discovery, there is no basis to conclude that the inadequate disclosure is harmless. Yeti by Molly (9th Cir. 2001) (placing the burden of proving harmlessness on the party facing sanctions. Nonetheless, these witnesses are permitted to testify as fact witnesses to matters limited to what they did and why they did it.
High Country also challenges a retained expert, Gary Zadick. Similar to the hybrid witnesses, Zadick is an experienced insurance litigation attorney. His opinions relate to an insurer’s duties to its insured, as well as the potential settlement value of 3rd-party claims. “The purpose of the detailed and specific disclosure requirements of Rule 26(a)(2)(B) is to provide full information so the parties can prepare for effective and efficient discovery.” Hash (D.Mont. 2009). Thus an expert report should include the “substance” of the testimony and its reasons. Id. “The report should offer the ‘how and why’ of the results, not mere conclusions.” Id. “Bald conclusions of an expert witness, or brief statements of ultimate conclusions with no explanation of the basis and reasons therefore, or the absence of a statement of how the facts support the conclusions, do not satisfy the Rule 26(a)(2)(B) requirements.” Id. High Country argues that Zadick’s report lacks the “how” and the “why.”
The format & content of Zadick’s disclosure is unique. After a brief factual section (that includes some opinions), his opinions are outlined in the “answers” to a series of “questions.” Of the 22 opinions proffered in this manner, only opinions 6 & 7 are relevant to the valuation issue. While High Country is correct that these opinions are somewhat conclusory, he adequately presents his valuation process earlier in his report. Its challenges to his analytical framework are better addressed on cross.
Nor is High Country’s improper supplementation argument compelling. United disclosed a rebuttal report for Zadick 10/30/19. Rebuttal reports are limited to evidence “intended solely to contradict or rebut evidence on the same subject matter identified by another party” in an expert report. Rule 26(a)(2)(D)(ii). Zadick explains that insurers must evaluate claims based on their investigation and information provided by the injured party’s counsel. He addresses the relevant considerations and explains why some facts are speculative and others are determinative. But he also specifically states his disagreement with High Country’s experts as to the ability to predict damage amounts and what types of considerations play a role in lowering or increasing total calculations. His opinions are appropriately “rebuttal.”
High Country’s motion is granted insofar as Huso and the “Additional Hybrid Witnesses” are limited to providing fact testimony at trial, and denied in all other respects.
High Country Paving v. United Fire & Casualty, 44 MFR 221, 4/17/20.
Jeffrey Tierney, Robert Baldwin, and Trent Gardner (Goetz, Baldwin & Geddes), Bozeman, for High Country; Jon Dyre (Crowley Fleck), for United.