Bad Faith Insurance And Claims Expert

Here is a case discussing bad faith insurance and a claims expert.  This is an 2023 opinion from the Western District of Texas, San Antonio Division.  The opinion is styled, PMJ Bleu Terre Management, LLC v. AmTrust Insurance Company of Kansas, Inc.
AmTrust filed a Motion to Strike Expert, PMJ’s claims handling expert, Mark Earle.  The Court has authority in this matter pursuant to 28 U.S.C., Section 636(b)(1)(A).
This is a claim arising out of alleged property damage that resulted from a storm causing wind and hailstorm damage.
Rule 702 of the Federal Rules of Evidence was amended to provide that a witness “qualified as an expert . . . may testify . . . in the form of an opinion . . . if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.”  The Rule 702 analysis applies to all proposed expert testimony, including nonscientific “technical analysis” and other “specialized knowledge.
Expert testimony is admissible only if the proponent demonstrates that: (1) the expert is qualified; (2) the evidence is relevant to the suit; and (3) the evidence is reliable.  Notwithstanding the testing of an expert’s qualification, reliability, and admissibility, the rejection of expert testimony is the exception rather than the rule.
PMJ designated Earle, a building consultant and public adjuster, as a retained expert to testify primarily on claims handling issues.  Earle is a licensed adjuster in Texas, Louisiana, Florida, Oklahoma, South Carolina, North Carolina, and Georgia and has 16 years of experience as an independent adjuster for over 27 insurance carriers and has personally handled over 20,000 claims as a desk and field adjuster, including hail claims.  The expert designation for Earle indicates he intends to testify as to the following: (1) PMJ reported its loss in a timely manner and complied with all requests made by the insurer; (2) AmTrust performed a substandard investigation of the claim, unreasonably delayed considering the claim, and wrongfully denied the claim; (3) the cost to repair the roofing system and interior and exterior elevations is $1,324,355.66; and (4) the storm damage was likely caused by an April 28, 2021 storm during the policy period.
First, PMJ has satisfied its burden to establish that Earle’s testimony on the claims-handling process is reliable.  In reaching his opinions on claims handling, Earle reviewed the insurance policy, AmTrust’s claim notes, correspondence among the adjusters on the claim, damage estimates and reports of the adjusters, the reports of other designated experts, the Property Condition Assessment report from July 2020 records regarding the replacement of the Property’s roof in September 2017, and the Sedgwick invoice and activity log dated September 2021 regarding the investigation of the claim.  Earle also personally inspected the Property and prepared an estimate of damages.
Earle’s ultimate conclusion regarding claims handling is that AmTrust performed a “substandard investigation of the claim which resulted in a gross underpayment of the covered damages.”  This conclusion is based on Earle’s finding that the claim file suggests that the field and desk adjuster “had every intention to pay” the covered loss during the pendency of the claim but reversed their decision for “unclear” reasons.  Additionally, Earle found that AmTrust was provided clear documentation that indicates the roof was replaced in 2017, yet the adjuster did not change his position and “continued to claim in his report that the roof was damaged by a 2016 hail event,” which resulted in an “improper coverage determination.”
AmTrust argues that Earle’s opinions on the claims handling process should be stricken because his opinions are based on incorrect facts and assumptions, i.e., a flawed methodology. AmTrust argues Earle should have reviewed deposition testimony taken in the case; should have spoken personally to Deniece Dorsey (AmTrust’s desk adjuster), Robert Puga (the independent adjuster assigned the claim investigation on AmTrust’s behalf), and Wesselski; and should haveconsidered additional correspondence between these individuals in his timeline of AmTrust’s handling of the claim.  These are all issues best explored on cross examination and do not merit exclusion of Earle’s expert testimony on claims handling.
The record reflects that Puga inspected the Property on May 26, 2021, and made an initial recommendation to Dorsey on June 16, 2021, that $250,000 in reserves be set aside to cover the loss.  Earle states in his report that based on his experience and expertise, it would be typical to recommend reserves in the amount of $0 if the loss was not going to be covered.  Then on July 15, 2021, Puga submitted a report to AmTrust revising the roof replacement estimate to $134,111.20.  In this report, Puga suggests that a hail event did not occur on the alleged date of loss—May 3, 2021—and references three hail events from 2016 and one hail event from May 27, 2020 (all of which predate the policy period) as the source of the damage.  The report states that the “most damage hail likely occurred on April 12, 2016 which yielded hail 1.5” in diameter.”  (The errors in this sentence make its meaning ambiguous to the Court.) The report also indicates that at the time of the report the “coverage investigation was still in progress.”  On this same date, Dorsey emailed a status update to PMJ’s representative, apologizing for the delay and stating that Puga had confirmed “there is hail damage to the roof and a payment recommendation will be included with the report.”
The following day, Wesselski provided Dorsey with the July 2020 Property Condition Assessment and evidence of roof replacement in September 2017, which in his opinion ruled out any possibility that the hail damage occurred in 2016.  Dorsey responded that she agreed that the roof replacement invoice date eliminated the April 12, 2016 hail event but found the July 2020 assessment to be inconclusive in light of the lack of photos or a more detailed description of the roof condition.  There was additional correspondence between Dorsey and Wesselski on July 26, 2021, in which Wesselski reiterated his belief that the hail damage occurred during the policy period and asked Dorsey to not submit her denial letter until they “get this figured out.”  Despite these communications, Dorsey submitted a letter to PMJ’s representative on September 15, 2021, stating that the claim was still under review, but AmTrust had been unable to determine that the hail damage occurred during the policy period and based on weather reports, there were no hailstorms at the Property during that time.  The letter requested information and documentation supporting the claim that hail damage occurred during the policy term.
According to Sedgwick’s records, on September 29, 2021, Puga authored a second report summarizing communication with Wesselski and Dorsey and proposing a plan of action to complete the investigation.  Earle states in his expert report that this second report by Puga ignores the documentation showing that the roof was replaced in 2017 and again opines that the hail damage was a result of an April 2016 hail event.
This record does not demonstrate that Earle’s opinions were based on a flawed methodology due to Earle’s failure to consider certain evidence or to speak personally to other witnesses before rendering his opinion.  As PMJ points out in its response to AmTrust’s motion, Earle could not have reviewed the deposition transcripts before issuing his expert report, as Puga’s and others’ depositions were taken months after the report was issued.  That said, Puga’s deposition testimony is favorable to AmTrust’s interpretation of the evidence; Puga testified that he never intended to communicate that he believed the damage was caused by an April 2016 hail event but rather that both he and Dorsey consistently communicated to PMJ that the claim remained under investigation due to lack of evidence of a hailstorm during the policy period.  This is a fair reading of the communications and reports in evidence, but it is not the only reading.  That Earle read the communications differently does not render his opinion unreliable.  AmTrust may cross examine Earle with Puga’s testimony.
As to Earle’s failure to speak personally to Puga, Dorsey, and Wesselski, AmTrust does not cite any authority that an expert witness must personally interview witnesses to render a reliable opinion on claims handling.  The Court declines to exclude Earle on this basis.  Finally, Earle’s opinion is not unreliable because he does not refer to the July 26, 2021 communications between Dorsey and Wesselski in his expert report or Dorsey’s September 15, 2021 letter to PMJ’s representative requesting more information.  This is additional fodder for cross examination and also supports AmTrust’s position that the claim was still in process and that it did not mislead or mishandle the claim, but rather was attempting to identify a possible source of the hail damage during the policy period.
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