Plaintiff, Gallatin Fuels, Inc. sought payment under an insurance policy issued by Defendant Westchester Fire Insurance Company (“Defendant” or “Westchester”) to Mon View Mining Corporation (“Mon View”) for fuel cell-powered mining equipment that was destroyed on April 8, 2002. The destruction occurred when the mine in which the equipment was being used returned to its natural water level when the power to the mine was shut off after Mon View failed to pay outstanding utility bills. Gallatin was named as a loss payee under the policy. Gallatin also alleged that Westchester’s actions constituted bad faith in violation of Pennsylvania law.
Plaintiff offered the expert testimony of George Hoffman (“Hoffman”) on the issue of bad faith.
According to his expert report, Hoffman had significant experience as an insurance claims adjuster and has testified approximately fifty times as a claims adjuster at deposition or at trial. Hoffman had not testified previously as an expert witness.
Defendant did not challenge Hoffman’s qualifications as a bad faith expert. Rather, Defendant sought to exclude portions Hoffman’s testimony at trial on the grounds that Hoffman had (1) expressed inadmissible opinions concerning the coverage available to Gallatin under the policy; (2) had provided subjective interpretations of Westchester’s actions and intent; and (3) provided ultimate conclusions that Westchester has acted in bad faith. Defendant argued that Hoffman’s testimony should be limited to that which was relevant to whether Westchester lacked a reasonable basis for denying Gallatin’s claim and, if so, whether it did so with knowledge of or reckless disregard for the absence of a reasonable basis.
The Court first made a point to find that Hoffman’s testimony was not excludable simply because he proposed to testify with respect to Plaintiff’s bad faith claims. Although an insured is not required to prove an insurer’s bad faith practices through expert testimony, such expert testimony is permissible if it is helpful to the trier of fact and is otherwise admissible. Among other things, expert testimony may be appropriate with respect to issues such as insurance claims adjusting procedure, an insurer’s compliance with industry customs and standards, and whether the insurer lacked a reasonable basis for denying an insured’s claim. Because Hoffman’s proposed testimony was not per se inadmissible, the Court took a look at each of Defendant’s specific objections to that testimony in turn.
The Court next addressed Defendant’s contention that Hoffman should not be permitted to testify as to his opinion on the application of the insurance policy to Gallatin’s loss. The Court agreed with this position, noting that Hoffman’s opinions on the issue of contract construction would not assist the jury in understanding coverage, and were based solely on Hoffman’s subjective interpretation of the policy language, and are impermissible legal conclusions.
Therefore, the Court granted Defendant’s motion to the extent it sought to preclude Hoffman from testifying as to his construction of the insurance policy and his application of this construction to Plaintiff’s contract claim. However, the Defendant’s motion was denied to the extent Hoffman’s testimony would assist the fact-finder with respect to the issue of bad faith.
The Court then addressed Defendant’s argument that it was inappropriate for Hoffman to testify as to his opinion on Westchester’s violations of various insurance statutes, including Pennsylvania’s Unfair Insurance Practice Act (“UIPA”) and the Unfair Claims Settlement Practices (“UCSP”) regulations promulgated thereunder, as support for his opinion that Westchester has acted in bad faith. Here the Court disagreed with the Defendant’s argument.
As an initial matter, the mere fact that Hoffman’s testimony may rely in part on his understanding of the UIPA or UCSP did not render that testimony inadmissible. None of these statutory provisions or regulations were directly at issue in this case, and Hoffman’s references to the same were ancillary to the ultimate issue of bad faith. Furthermore, whether or not Westchester complied with applicable insurance statutes or regulations may be relevant as to whether Westchester acted reasonably and/or deviated from industry standards.
The Court disagreed with Defendant that the probative value of this evidence was substantially outweighed by the danger of unfair prejudice in this case. The Court also did not believe that there was some potential for prejudice and/or confusion associated with allowing Hoffman to present such testimony at trial because the ultimate issue was not whether Defendant violated the UIPA and/or UCSP but whether it lacked a reasonable basis for denying benefits and, if so, whether it knew or recklessly disregarded that fact. Thus, although a violation of the UIPA or UCSP is not a per se violation of the bad faith standard, this danger did not substantially outweigh the probative value of the evidence. Moreover, to the extent the danger of prejudice or confusion does exist, such danger may be cured by an appropriate jury instruction.
Finally, Defendant argued that Hoffman should not be permitted to opine at trial that Westchester acted in bad faith. The Court agreed with this argument.. Although expert testimony may be helpful to the fact-finder in a bad faith case, an expert may not give an opinion as to the ultimate legal conclusion that an insurer acted in “bad faith” in violation of applicable law. Hoffman’s opinion on this purely legal question was outside his area of expertise and simply is not relevant or helpful to the jury. Accordingly, the Court granted Defendant’s motion to the extent it sought to preclude Hoffman from testifying at trial that Westchester acted in bad faith.
The Court also believed that Hoffman should be precluded from testifying at trial as to the subjective intent of the claims handlers responsible for Gallatin’s claim or any other individual. For example, Hoffman could not testify that it was Westchester’s “intention from day one” to deny coverage to Gallatin. Likewise, Hoffman could not testify as to what he believes another individual “thought”, “believed”, or “felt.” An expert simply is not in any better position than the jury to assess another’s subjective intent.
In short, while Hoffman’s testimony with respect to issues such as insurance claims adjusting procedure, Westchester’s compliance with industry customs and standards, and whether Westchester lacked a reasonable basis for denying Gallatin’s claim may be relevant, testimony that Westchester actually acted in bad faith or testimony regarding Westchester’s subjective intent would not be helpful to the fact-finder and could not be presented at trial.