Insurance Property Claims

Insurance property claims are a very big part of claims made against insurance companies.  As part of those property claims that get denied, it is important to properly prove the property damages by attaching a dollar value to them.  One way of proving the dollar value of these property damages is through the use of expert testimony.  Proving property damages by way of expert was a recent topic in a 2019, opinion from the Eastern District of Texas, Sherman Division.  This opinion is styled, Brandy Ventures, LLC v. Mesa Underwriters Specialty Insurance Company.

This case arises from alleged water damage resulting from a broken pipe on commercial property owed by Brandy Ventures and insured by Mesa.  Brandy alleges Mesa unfairly denied the claim and filed this lawsuit.

Brandy appointed Roy Young of YPA Public Adjusters, LLC, to testify regarding water damage.  Mesa filed a motion to strike any testimony of Young.

Federal Rule 702 of the Federal Rules of Evidence governs the admissibility of expert testimony.  While the district court must act as a gatekeeper to exclude all unreliable expert testimony, the rejection of expert testimony is the exception rather than the rule.

Expert testimony is admissible only if the proponent demonstrates that: (1) the expert is qualified; (2) the evidence is relevant to the case; and (3) the evidence is reliable.  To be reliable and therefore admissible under Rule 702, expert testimony as to a scientific, technical, or other specialized area must: (1) assist the trier of fact to understand the evidence or to determine a fact in issue; (2) be based upon sufficient facts or data; (3) be the product of reliable principles and methods; and (4) have reliably applied the principles and methods to the facts.  In evaluating the scientific validity or reliability of expert testimony, the Court in leading case on this subject, Daubert, noted some non-exclusive factors for the district court to consider: (1) whether the theory or technique has been tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) the known or potential rate of error of the method used; (4) the existence and maintenance of standards and controls in the methodology; and (5) whether the theory or method has been generally accepted by the scientific community.  But, as the Court stated in Daubert, the test of reliability is flexible, and the Daubert factors neither necessarily nor exclusively apply to all experts or in every case.  Rather, the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination.

In determining the admissibility of expert testimony, the trial court is not to consider the conclusions generated by an expert witness, but only the principles and methodology used to reach those conclusions.   When the principles and methodology are sufficient to allow the expert opinion to be presented to the jury, the party challenging the testimony must resort to vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof’ as the means to attack shaky but admissible evidence.

Mesa argues the testimony of Young should be struck because Brandy has already paid to repair the water damage at the Property, and therefore, Young’s estimates as to damages and cost have no bearing on the facts of the case.  Mesa further contends the damages estimated by Young do not match the actual cost of repair, and therefore, the testimony is not relevant, reliable, or admissible under Rule of 702.  Mesa does not cite to a single similar case in which testimony was struck on this basis.

Brandy responds that Mesa’s objections to Young are best explored on cross-examination.  Brandy further argues the testimony is relevant to an issue in the case (the cause and extent of the damages), is based on personal inspection of the Property, and employs Xactimate, an estimation program widely accepted in the insurance industry.  The Court finds the testimony is permissible under Rule 702.  The opinion is patently relevant, based on first-hand knowledge, and employs acceptable methodology.  Further, that Brandy was able to complete repairs for a different value does not conclusively speak to the damages incurred.  Brandy may have negotiated a reduced rate for repairs or may have paid a higher cost based on many practical factors of business decisions and time constraints.  To the extent the actual cost is different than what Young testifies is the market value, the objection is best addressed on cross-examination.  That is, the objections Mesa raise go to the weight Young’s testimony should be afforded rather than its admissibility. The Court finds Mesa’s Motion to Strike Young is, therefore, denied.