Slavin v. USAA Casualty Insurance Company et al
Filing
179
ORDER granting in part, denying in part, and deferring in part 162 Plaintiff's Motion In Limine to Exclude Evidence of Post-Litigation Events, Attorney Fees and Causation. Granting 158 Defendant's Motion to Exclude the Expert Opinions of Mr. Kevin Hromas, by Judge Lewis T. Babcock on 7/10/2017. (ebuch)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
LEWIS T. BABCOCK, JUDGE
Civil Case No. 14-cv-01839-LTB-KMT
PATRICK SLAVIN,
v.
Plaintiff,
GARRISON PROPERTY AND CASUALTY INSURANCE COMPANY,
Defendant.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This matter is before me on the following pre-trial motions: 1) Motion In
Limine to Exclude Evidence of Post-Litigation Events, Attorney Fees and
Causation, filed by Plaintiff Patrick Slavin [Doc #162]; and 2) Motion to Exclude the
Expert Opinions of Mr. Kevin Hromas, filed pursuant to Federal Rule of Evidence
702 by Defendant, Garrison Property and Casualty Insurance Company
(“Garrison”). [Doc #158] After consideration of the parties’ briefs and attachments,
as well as oral arguments at a hearing on June 28, 2017, I GRANT IN PART, DENY
IN PART, and HOLD IN ABEYANCE PART of Plaintiff’s motion in limine, and I
GRANT Garrison’s Rule 702 motion to exclude the expert testimony of Mr. Hromas.
I. BACKGROUND FACTS
Plaintiff filed a property claim with Garrison, pursuant to his homeowner’s
insurance policy, after a hailstorm on June 6, 2012 caused damage to the front of
his home. The front of his home is L-shaped and only one side – known as the front
façade – incurred damage. The harm included damage to the window frames and to
the brick on the front façade. Plaintiff’s policy provides for replacement cost
coverage.
Garrison issued an initial payment to Plaintiff on June 21, 2012. After a
structural engineer assessed the brick damage, Plaintiff sent Garrison a bid from
his contractor to repair the damage (including replacing the brick) on the front
façade. Garrison’s adjustor inspected the damage in early November of 2012, and
then issued Plaintiff another check on December 21, 2012.
Sometime in late 2012 or early 2013, Plaintiff’s contractor determined that
the brick on Plaintiff’s home was previously manufactured by General Shale, but
was no longer being produced as a standard product. General Shale told Plaintiff’s
contractor that it would be willing to manufacture a special production run of
50,000 bricks. In March and again in April of 2013, Plaintiff requested that
Garrison pay to have the 50,000 bricks manufactured by General Shale (although
far less were needed) to replace the damaged bricks on the front façade of his home.
Garrison rejected Plaintiff’s request.
General Shale then provided Plaintiff a bid for the special run of 50,000
bricks of $25,774.99 on August 23, 2013. On September 24, 2013, Plaintiff provided
Garrison an estimate from his contractor of $59,645.99 to replace the damaged
brick on the front façade. This amount included $25,744.99 for the 50,000 bricks to
be made by General Shale.
Garrison responded that the cost to manufacture the brick was excessive, and
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countered with a contractor’s bid to replace “the entire front of his home (not just
the damaged front façade) with new brick” that would not match the existing brick
in color and in texture, in early November of 2013, for $24,439.55. Because the cost
to repair the front façade with the specially manufactured brick exceeded the cost to
replace the entire front elevation, Garrison indicated that it would pay to replace
the entire front elevation pursuant to the policy language which allows for
replacement cost coverage to “(1) Replace, or pay you our cost to replace the
property with new property of like kind and quality without deduction for
depreciation.” Garrison’s contractor’s bid was for brick that would be “as close as
possible to your existing brick, but will not have the same texture and will be
slightly off color,” and that was why Garrison “is going to replace the entire front of
your home corner to corner.” On April 10, 2014, Garrison completed its
investigation of Plaintiff’s claim, closed the file, and sent him another check.
Plaintiff thereafter filed this lawsuit, on May 30, 2014, in District Court of
Douglas County, Colorado. [Doc #2-5] The case was subsequently removed to this
court by Garrison, on the basis of diversity jurisdiction pursuant to 28 U.S.C. §1332
and §1444. [Doc #1] Plaintiff’s Amended Complaint asserts claims against Garrison
for: 1) Breach of Contract; 2) Common Law Bad Faith Breach of Contract; and 3)
Statutory Unreasonable Delay or Denial of Insurance Benefits pursuant to Colorado
Revised Statutes §10-3-1115 and §10-3-1116 . [Doc #9]
II. POST-FILING FACTS
Eight to nine months after Plaintiff filed this lawsuit, in February/March of
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2015, General Shale agreed to produce a lesser amount of the specialty brick upon
the request of Garrison’s counsel. Specifically, it indicated that it would be willing
to manufacture a reduced run of 16,000 (as opposed to its previous requirement of
50,000) bricks. The estimate for this smaller run was approximately $11,203, as
opposed to the $24,439.55 for the 50,000 run.
Plaintiff then elected to have the amount of the loss on his claim determined
by invoking the appraisal clause of his homeowner’s insurance policy on March 16,
2015. The resulting Appraisal Award, which only addressed contested line items,
determined the amount for replacement windows (at $12,884.61) and for
replacement of the brick (at $23,623.25) with the specialty brick to be manufactured
by General Shale in a reduced run. Pursuant to my court-ordered itemized
accounting, Garrison contends it has overpaid Plaintiff by $6,603.36 and Plaintiff
contends that Garrison still owes him $4,890.64. [Doc #156]
On March 1, 2017, I denied Garrison’s motion for summary judgment. [Doc #
156] I ruled that because a genuine issue of material fact exists as the total amount
of the loss set by the Appraisal Award (of the awarded amount for the brick and the
windows plus the line items not set by the appraisers) and, in turn, whether
Garrison has paid Plaintiff’s claim in full or not, Plaintiff’s breach of contract claim
could not be dismissed on summary judgment. Additionally, I ruled that Plaintiff’s
bad faith breach claims – for bad faith breach of an insurance contract and for
statutory unreasonable delay or denial of payment – could not be dismissed because
a jury could find that Garrison acted unreasonably in handling Plaintiff’s claim.
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III. PLAINTIFF’S MOTION IN LIMINE
In his Motion In Limine, Plaintiff seeks a pre-trial ruling excluding evidence
based on its lack of relevancy. Rule 402 of the Federal Rules of Evidence provides
that relevant evidence is generally admissible, and evidence is considered relevant
if: (1) it has any tendency to make a fact more or less probable that it would be
without the evidence; and (2) the fact is of consequence in determining the action.
Fed. R. Evid. 401. A court may exclude relevant evidence, however, if its probative
value is substantially outweighed by the danger of unfair prejudice, confusing the
issues, misleading the jury, undue delay, wasting time, or needlessly presenting
cumulative evidence. Fed. R. Evid. 403. This Court’s Rule 401 and 403
determinations receive deference and are reviewed under an abuse of discretion
standard. See Tanberg v. Sholtis, 401 F.3d 1151, 1162 (10th Cir. 2005).
A. POST-LITIGATION EVIDENCE
Plaintiff first seeks a ruling that evidence relating to events that occurred
after he filed this lawsuit is not admissible at trial. After Plaintiff filed this lawsuit
in May of 2014, Garrison’s counsel contacted General Shale, sometime in early
2015, to see if it would agree to make a smaller run of the specialty bricks. General
Shale agreed to the reduced-run. Then, a month or so later, in March of 2015,
Plaintiff invoked the appraisal provision of the insurance policy “to determine the
total amount of loss owed.” The appraisal clause in the policy specifically provides
that:
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If you and we fail to agree on the amount of loss, either may demand
an appraisal of the loss . . . The appraisers will separately set the
amount of the loss. If the appraisers submit a written report of an
agreement to us, the amount agreed upon will be the amount of the
loss.
The specific amount of the loss determined by the Appraisal Award is disputed by
the parties. Garrison believes that the appraised value of the entire loss on the
claim was assessed at $48,009.68, and Plaintiff believes that it was $60,503.68 – the
difference of $12,494.00 is based on whether the amounts determined by the
appraisers to repair the windows and the brick was duplicative of other work on the
claim. It is undisputed, however, that the appraisers relied upon the cost of the
reduced-run of specialty bricks from General Shale when assessing the amount of
the loss.
Evidence of the post-litigation events (both General Shale’s agreement to
produce a reduced-run of specialty brick and the Appraisal Award process and
amount) could be relevant to several different issues to be decided by the jury in
this case. Specifically, the evidence relates to a determination of the dollar amount
of the “covered benefit,” whether Garrison breached its insurance contract with
Plaintiff, and whether Garrison acted reasonably or in bad faith when handling
Plaintiff’s claim.
I first address whether evidence of the Appraisal Award is relevant to the
determination of the dollar amount of the covered benefit for the purpose of
assessing damages on a successful unreasonable delay/denial claim. Plaintiff
argues that the amount of the covered benefit is a jury determination and that the
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Appraisal Award “could not and did not determine the amount of the covered
benefit as of November 2013 based upon information available to the parties then.”
[Doc #171 pp 3-4] See Colo Rev. Stat § 10-3-1116(1); Colo. Jury Ins. 25:10.
Defendant argues, in response, that the amount of the Appraisal Award is a binding
determination of the amount of the covered benefit.
As I indicated in my ruling from the bench, the parties in this case agree that
the “covered benefit” in this case consists of the amount of the loss assessed by the
Appraisal Award on the contested items; specifically, the amount for replacement
windows ($12,884.61) and for replacement of the brick ($23,623.25) for a total of:
$36,507.86. Therefore, evidence of the Appraisal Award is not relevant to an
assessment of the amount of the covered benefit because that amount has been
stipulated to by the parties. See Hansen v. American Family Mutual Insurance Co.,
383 P.3d 28, 37 (Colo. App. Dec. 19, 2013), rev’d on other grounds, 375 P.3d 115
(Colo. June 20, 2016)(ruling that the jury should not have been instructed to
determine the amount of the covered benefit which was set at the maximum UIM
policy benefits available after reduction of payment by the legally liable party, and
the amount paid by the insurer following a mediation settlement); see also Home
Loan Investment Co. v. St. Paul Mercury Ins. Co., 78 F.Supp.3d 1307 (D. Colo.
2014); Peden v. State Farm Mut. Auto. Ins. Co., 2016WL7228830 (D. Colo. Dec. 14,
2016)(unpublished)(ruling that because the maximum amount of the UIM benefits
available were ultimately paid to the plaintiff, the amount of the “covered benefit”
was not subject to dispute). Additionally, I note that Plaintiff concedes that such
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stipulation by the parties as to the amount of the covered benefit, and that Garrison
has paid Plaintiff for the amount assessed by the Appraisal Award, renders his
breach of contract claim no longer cognizable. Because the amount of the covered
benefit in this case is no longer in dispute and, in turn, Plaintiff’s contract claim is
not longer at issue, evidence of the Appraisal Award process and amount is not
relevant for the purpose of assessing the amount of the “covered benefit” by the
jury.
I next address Plaintiff’s argument that evidence of the Appraisal Award, as
well as General Shale’s agreement to do a reduced-run of brick, is also not relevant
to prove that Garrison acted reasonably in defense of Plaintiff’s bad faith breach
and statutory unreasonable delay/denial claims. Plaintiff asserts that Garrison will
seek to introduce this evidence in support of its contention that Plaintiff’s “claim
was excessive and that Garrison’s conduct was reasonable” because Garrison
offered to pay Plaintiff more than the amount of loss ultimately assessed to be due
on the claim by the appraisers. Plaintiff argues that such evidence should not be
admissible for the purpose of assessing Garrison’s reasonableness or bad faith
because the jury must assess reasonableness at the time Garrison made decisions
when handling Plaintiff’s claim. See Anderson v. State Farm Mutual Automobile
Ins. Co.,416 F.3d 1143, 1147-48 (10th Cir. 2005)(ruling that “[f]or purposes of bad
faith, the reasonableness of an insurer’s conduct is evaluated under the
circumstances that existed at the time”); Peiffer v. State Farm Mut. Auto. Ins. Co.,
940 P.2d 967, 970 (Colo. Ct. App. 1996)(holding that insurer’s decision to deny
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benefits “must be evaluated based on the information before the insurer at the time
of that decision”). Plaintiff thus argues that the jury’s determination of Garrison’s
reasonableness is assessed at the time the claim decisions were made and stopped
at the time he filed this lawsuit and, as a result, any post-filing evidence related to
the Appraisal Award and the reduced-run of brick is not relevant.
Garrison argues, in response, that the agreement to a reduced-run of brick
and the Appraisal Award is part of the claim and, as such, evidence related to such
evidence is admissible at trial for the purpose of assessing its reasonableness and
bad faith in the claims process. Garrison maintains that both General Shale’s
agreement to do a reduced-run of brick (even though the request came from counsel)
and the Apprisal Award (which assessed the amount of the loss, was binding, and
was initiated by Plaintiff and completed pursuant to the terms of the homeowner’s
policy) were a continuation of the claims adjustment process, not part of litigation
activity. Garrison thus asserts that this evidence is relevant and admissible to
determine the reasonableness of it actions and decisions, as well as to provide
context to the jury for the amount of the Apprisal Award. See Rabin v. Fid. Nat.
Prop. & Cas. Ins. Co., 863 F. Supp. 2d 1107, 1112 (D. Colo. 2012)(noting that the
“duty of good faith and fair dealing continues unabated during the life of an
insurer-insured relationship, including through a lawsuit or arbitration between
the insured and the insurer.”)(quoting Sanderson v. American Family Mut. Ins. Co.,
251 P.3d 1213, 1217 (Colo. App. 2010)).
I conclude that General Shale’s agreement to a reduced-run of brick, as well
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as the subsequent determination of the Apprisal Award, both constitute routine
claim activity to assess the amount of the loss. And, as a result, this evidence is
relevant to determining the reasonableness of Garrison’s conduct in handling
Plaintiff’s claim under Rule 401 (relevant evidence need only have “any tendency to
make the existence of any fact that is of consequence to the determination of the
action more probable or less probable than it would be without the evidence”). See
generally Tae Hyung Lim v. American Econ. Ins. Co., 2014WL1464400 (D. Colo.
Apr. 14, 2014)(ruling that evidence of an appraisal and resulting award and
payment by the insurer was relevant to Plaintiff’s statutory unreasonable
delay/denial claims). Additionally, because the agreement for a reduced-run of
brick and the Appraisal Award determination were routine claim activity, as
opposed to settlement negotiations in the course of litigation activity, it is not
deemed inadmissible compromise offers/negotiations evidence pursuant to Federal
Evid. Rule 408. Although both events occurred after litigation, the reduced-run of
brick agreement and the Appraisal Award were neither an offer of settlement nor
conduct made during compromise negotiations, and thus does not constitute
prohibited use of evidence as set forth in Rule 408(a). I further note that to the
extent Plaintiff has previously indicated that he is challenging the evidence that
Garrison’s counsel asked General Shale to manufacturer the reduced-run of
specialty bricks on the basis that it would potentially disqualify Garrison’s current
counsel, Plaintiff now clarifies that he does not intend to seek to disqualify counsel
from trying this case.
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However, I find that to the extent that evidence of the Appraisal Award
amount and process is relevant to the jury’s determination of reasonableness/bad
faith in the claims process, it is attenuated in light of its irrelevancy to the amount
of the covered benefit. Furthermore, any such relevance is outweighed by the
danger of confusing the issues and misleading the jury pursuant to Rule 403. I
agree with Plaintiff’s assertion at oral arguments that presenting evidence of the
Appraisal Award and the confusion related to the parties’ disagreement as to the
amounts awarded would result in a multitude of ancillary evidence including,
perhaps, testimony from the appraisers. While the degree of materiality and
probativity necessary for evidence to be relevant is minimal, Court must exclude
even relevant evidence if its probative value is substantially outweighed by the
danger of confusion of the issues or misleading the jury and “[s]uch circumstances
might arise when evidence suggests to the jury that it should render its findings . .
.when circumstantial evidence would tend to sidetrack the jury into consideration of
factual disputes only tangentially related to the facts at issue in the current case.”
United States v. Jordan, 485 F.3d 1214, 1218 (10th Cir. 2007). This is the case
here. I conclude that the danger of confusing the issues and misleading the jury –
as well as undue delay and wasting time – substantially outweighs the minimal
probative value of this evidence and, thus, I will exclude evidence of the Appraisal
Award amount and process at trial pursuant to Rule 403. However, the same
dangers do not exist related to the evidence that Garrison’s counsel asked for and
received an agreement from General Shale, after Plaintiff filed suit, to manufacture
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a reduced-run of specialty brick for a lower price. As such, this evidence is relevant
pursuant to Rule 401 and will be admissible at trial for the purposes or proving or
disproving Garrison’s reasonableness and/or bad faith in the handling of Plaintiff’s
claim.
B. ATTORNEY FEES AND LITIGATION EXPENSES
I note that Plaintiff, in his motion, argues that if the process and amount of
the Appraisal Award is admissible, evidence related to the alleged excessiveness of
legal costs/fees involved in this case should be admissible to counter that evidence
as it relates to Garrison’s reasonableness in its claims handling decisions. Because
I have excluded this evidence, the alleged excessiveness of the attorney fees is not
admissible as Plaintiff and Garrison agree that litigation conduct is generally
inadmissible to prove an insurer’s bad faith or unreasonableness. Thus, I hold that
the attorney fees incurred in this case is not relevant or admissible.
C. CAUSATION
Finally, Plaintiff seeks a ruling excluding evidence of the cause of the damage
to his home. He argues that during the claims process Garrison did not contest that
the hailstorm on June 6, 2012 caused the damage (including to the brick) to the
front façade of his home. Plaintiff asserts, however, that during depositions and
other litigation proceedings, Garrison “continually attempted to resurrect the
question of causation.” As a result, Plaintiff contends that Garrison has,
throughout the course of this litigation, communicated an intent to reopen the
ultimate issue of causation and that allowing Garrison to present evidence that
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anything other than the June 2012 storm caused the brick damages would be
prejudicial and inadmissible.
Garrison responds that during the claims handling process – particularly
early on in the process – the cause of the damage to the brick (specifically, the
cracks in the mortar) was initially unknown. Because Plaintiff alleges that
“Garrison failed to include in its initial repair estimate the storm damage to [the]
brick façade” as an example of bad faith claims handling [see Doc # 147], Garrison
argues that questions about causation were at issue during the initial processing of
the claim. Thus, evidence of when causation was established would be relevant to
assess whether Garrison’s actions were, at the time they were made, reasonable or
constituted bad faith.
It is clear that both parties agree that the ultimate causation of the damage
to the front façade of Plaintiff’s house is not at issue. As such, if Garrison attempts
to present evidence that the property damage in this case was not caused by the
storm of June 2012, such evidence would be irrelevant under Rule 401. It appears,
however, that the evidence at issue relates to the reasonableness of the timing of
the causation assessment by Garrison during the course of handling of Plaintiff’s
policy claim. Therefore, evidence as to the timing of the causation determination by
Garrison may be relevant and admissible. As a result, I hold in abeyance and defer
ruling on the admissibility of any causation evidence until such time as it is
proffered at trial.
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D. CONCLUSION
Because the amount of the covered benefit in this case is no longer in dispute
and, in turn, Plaintiff's contract claim is not longer at issue, evidence of the
Appraisal Award amount and process is not relevant for the purpose of assessing
the amount of the “covered benefit” by the jury. However, because it constituted
routine claim activity to determine the amount of the loss, evidence of the Appraisal
Award has some relevancy to determining the reasonableness of Garrison's conduct
in handling Plaintiff’s claim under Rule 401. Nonetheless, I conclude that the
danger of confusing the issues and misleading the jury substantially outweighs the
minimal probative value of this evidence and, thus, I will grant Plaintiff’s request to
exclude evidence of the Appraisal Award amount and process at trial pursuant to
Rule 403. Because I have excluded this evidence, Plaintiff will not be allowed to
present evidence related to the alleged excessiveness of legal costs/fees involved in
this case. However, evidence related to the post-litigation agreement from General
Shale to manufacture a reduced-run of specialty brick for a lower price, is relevant
pursuant to Rule 401 and will be admissible at trial for the purposes or proving or
disproving Garrison’s reasonableness and/or bad faith as it made decisions in the
handling of Plaintiff’s claim. Finally, I will defer ruling on the admissibility of
evidence propounded by Garrison related to when causation was established – in
order to assess whether Garrison’s actions were reasonable or constituted bad faith
– when and if it is introduced at trial.
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IV. GARRISON’S RULE 702 MOTION
In this motion, Garrison seeks to exclude the testimony of Plaintiff’s
proffered witness, Kevin Hromas J.D., as a expert on “the scope and reasonableness
of [Garrison’s] claim handling in the course of the investigation and resolution of
the claim as found within the generally accepted insurance industry standards.”
[Doc #158-1]
A. APPLICABLE LAW
A district court must act as a “gatekeeper” in admitting or excluding expert
testimony. Bitler v. A.O. Smith Corp., 400 F.3d 1227, 1232 (10th Cir. 2005).
Admission of expert testimony is governed by Fed. R. Civ. P. 702, which provides:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or
otherwise if: (a) 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; (b) the testimony is based on sufficient facts
or data; (c)the testimony is the product of reliable principles and
methods; and (d) the expert has reliably applied the principles and
methods to the facts of the case.
Thus, the Court first determines whether the expert is qualified by knowledge, skill,
experience, training, or education to render an opinion. 103 Investors I, L.P. v.
Square D Co., 470 F.3d 985, 990 (10th Cir. 2006). Then, the Court must review the
specific proffered opinions and assess the underlying reasoning and methodology to
determine whether it is both scientifically valid and relevant to the facts of the case,
i.e., whether it is helpful to the trier of fact. Id.; see also Dodge v. Cotter Corp., 328
F.3d 1212, 1221 (10th Cir. 2003)). The proponent of the expert testimony bears the
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burden of proving the foundational requirements of Rule 702 by a preponderance of
the evidence. United States v. Nacchio, 555 F.3d 1234, 1241 (10th Cir. 2009). While
an expert witness’s testimony must assist the jury to be deemed admissible, it may
not usurp the jury’s fact-finding function; the line between what is helpful to the
jury and what intrudes on the jury’s role as the finder of fact is not always clear, but
it is well-settled that “[a]n opinion is not objectionable just because it embraces an
ultimate issue.” Fed. R. Evid. 704(a).
For the purposes of this motion, Garrison does not challenge that Mr.
Hromas is qualified to testify as an expert. Instead, it is Garrison’s position that
Mr. Hromas should not be allowed to testify because his opinions are not reliable
and thus are not helpful to the jury. To establish that the expert testimony is
reliable, the reasoning or methodology underlying the testimony must be valid and
must be properly applied to the facts in issue. Daubert v. Merrell Dow Pharm., Inc.,
509 U.S. 579, 592-94, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993)(listing four
nondispositive factors relevant to assessing reliability). “The trial judge must have
considerable leeway in deciding in a particular case how to go about determining
whether particular expert testimony is reliable.” Kumho Tire Co. v. Carmichael, 526
U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).
B. INAPPPLICABLE STANDARD
First, I agree with Garrison that Mr. Hromas’ opinions are unreliable
because he weighs Garrison’s decisions with an inapplicable standard of conduct
when assessing the reasonableness of handling Plaintiff’s claim. Specifically, Mr.
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Hromas imposes a “duty of utmost good faith” on Garrison’s actions which requires
that the insurer put the interest of the insured “above and beyond its own interest.”
Garrison argues that this is the wrong standard of care, as Colorado law requires
only reasonable conduct on the part of the insurer when making decisions on an
insured’s claim. See Colo Rev. Stat. § 10-3-1115(1)(a)(prohibiting and insurer from
“unreasonably delay[ing] or deny[ing] payment of a claim for benefits owed to or on
behalf of any first-party”); Colo. Jury Instr. Civil 25:5 (“[a]n insurers delay or denial
in authorizing payment of a covered benefit is unreasonable if that action is without
a reasonable basis”); Bernhard v. Farmers Ins. Exch., 915 P.2d 1285, 1289 (Colo.
1996)(noting that one who is acting as a fiduciary for another has the duty to act
with the utmost good faith and loyalty on behalf of, and for the benefit of, the other
person, but “[t]he duty required of an insurer towards the insured is much more
constrained”). Because the duty of “utmost good faith” provides the analytical
backbone of Mr. Hromas’ opinions, Garrison argues that it is not reliable and he
should be excluded from testifying as an expert in this case. See City of Hobbs v.
Hartford Fire Ins. Co., 162 F.3d 576, 586 (10th Cir. 1998)(upholding the district
court’s decision that the proffered expert could not testify because he, in part,
“lacked specialized knowledge about handling of bad faith cases in New Mexico
involving third party insurance disputes”).
Plaintiff acknowledges that Mr. Hromas “lacks experience with Coloradospecific insurance standards,” but notes that he has repeatedly clarified that he
understands that the “utmost good faith” standard is distinct from the “reasonable
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conduct” standard required by Colorado law. Plaintiff contends that his opinions
are instead based on the accepted insurance industry standard that “insurers treat
their insureds fairly.” Specifically, Plaintiff contends that Mr. Hromas’
methodology is reliable in that his opinion applies statements of generally accepted
industry principles – that he has gleaned from his decades of experience in the
industry – to assess the scope and reasonableness of Garrison’s investigation.
In reading Mr. Hromas’ report, it is apparent that his opinion as to whether
Garrison’s actions during the claims handling process were unreasonable or
constituted bath faith were based on whether Garrison’s representatives acted with
the “utmost good faith.” Plaintiff contends that even if Mr. Hromas relied on an
incorrect legal standard, there is no authority for the exclusion of all of his opinion
“on the sole basis of a single alleged incorrect legal standard.” While that may be
true, here the standard is applied and weighed against most if not all of the actions
of the Garrison representatives. For example, in a section entitled “Coverage
Analysis” in Mr. Hromas’ expert report, he concludes that:
1) Jason Kimbro (the initial independent adjuster) “is not relieved of
the duty of utmost good faith and fair dealings with Plaintiff and the
requirement to put Plaintiff’s interests above his own [and] he failed
to do so in a direct and deliberate manner.” [Doc #158-1 pg. 9];
2) The catastrophe representatives from Garrison “had no appreciation
for their duty to put the interests of Plaintiff ahead of their own
interests to produce a ‘closed’ claim.” [Doc #158-1 pg. 9];
3) Keenan Reinhert (the assigned representative) “bears the greatest
responsibility for delivering the duty of utmost good faith to Plaintiff in
the final resolution of the matter” and his claims decisions “directly
flies in the face of the industry standard of utmost good faith.” In
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addition, he engaged in numerous delays after Plaintiff retained
counsel and apparently “took the position that he was no longer held to
any standards of utmost good faith in dealing with Plaintiff” at that
time. “All of these actions by Mr. Reinert fail the most basic of best
practices and good faith industry standards for the settlement of
claims under an insurance contract.” [Doc #158-1 pp 9-13];
4) T.J. Bartt (Mr. Reinert’s supervisor) “had a duty of utmost good
faith to attempt to address the concerns raised in the handling of the
claim by Mr. Reinert” at the first sign of potential problems with a file.
[Doc #158-1 pg. 14]; and
5) Raymond Kelly (upper management at Garrison) took positions that
are “troubling in the context of the duty of utmost good faith owed to
the Garrison policyholders in general and Plaintiff directly” and “could
reasonably be considered as institutional bad faith on the part of
Garrison as there are no checks and balances or management oversite
in place to insure that policyholders are treated fairly or with utmost
good faith and properly under the terms and conditions of the policy
contract.” [Doc #158-1 pg. 14]
Based on the foregoing, it is clear that Mr. Hromas relied upon and applied
the standard of utmost good faith – as opposed to the applicable standard of
reasonableness – when forming his opinions as to Garrison’s handling of Plaintiff’s
claim. Plaintiff’s argument that Mr. Hromas’ opinion is within the reasonable
confines of his subject area, and that he only lacks specialization in the area of
Colorado law, is unavailing.
C. POLICY INTERPRETATION
Additionally, I note that Mr. Hromas’ opinions are not reliable because they
rest on an implausible interpretation of policy language – specifically, that the
policy obligated Garrison to pay any cost necessary to restore Plaintiff’s property to
its “pre-loss condition” by replacing damages materials with identical material and
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construction. Because Mr. Hromas’ opinion is rooted in an interpretation of the
policy obligations that is plainly incorrect, Garrison argues that his expert
testimony would not be helpful to the jury as “both unreliable and irrelevant.”
Plaintiff asserts, in response, that Mr. Hromas’ interpretation is grounded in the
policy language, and that a challenge to that interpretation would go to the weight
of his opinion, not render it unreliable. I agree with Garrison, however, that Mr.
Hromas’ opinion is based on an interpretation of the policy language that defies
plain language which, in turn, renders his expert opinion unreliable.
The parties homeowners insurance policy provides, in a section entitled
“SECTION I - LOSS SETTLEMENT” as follows with regard to dwelling coverage:
Subject to the amount of insurance covered losses are settled as
follows: . . .
2. All items under Property We Cover - Dwelling Protection and
buildings on the “residence premises” under Other Structures
Protection. We will pay our cost to repair or our cost to replace the
damaged property with similar construction and for the same use on
the premises shown in the Declarations . . .
It appears, however, that during the claims process, Garrison indicated to
Plaintiff that his coverage was that designated for “Structures that are not
buildings and [a]ll covered structures whether or not they are buildings, if located
away from the ‘residence premises’.” That coverage provides that:
We will pay the lesser of:
a. The ‘actual cash value’; or
b. Our cost to replace the property with property of like kind, quality,
age and condition; or
c. Our cost to repair or our cost to restore the property to the condition
it was in just before the loss.
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Mr. Hromas contends that this language does not support Garrison’s position that
the could repair the brick damage by replacing it with similar – not identical –
brick. In support of this opinion, Mr. Hromas relies on a policy definition of
“Replacement Cost Coverage” found under the loss settlement provisions for
personal property. The personal property definition of Replacement Cost Coverage
is:
Replacement Cost means the cost, at the time of loss, of a new item
identical to the one damaged, destroyed or stolen. If an identical item
is no longer manufactured or cannot be obtained, replacement cost will
be the cost of a new item which is:
a. Similar to the insured article, and
b. Of like quality and usefulness.
Mr. Hromas opines that the definitions of Replacement Cost Coverage in the policy
(for the dwelling, for structures located away from the residence premises, and for
personal property) are “contradictory” and “could easily be construed as confusing
or ambiguous to an Insured and should be interpreted in a light most favorable to
the Insured.” [Doc #158 - pg 11]
Regardless of which loss settlement coverage provision in Plaintiff’s policy
applies, I agree with Garrison that Mr. Hromas’ opinion that a definition of
“Replacement Cost Coverage” for replacing personal property would somehow apply
to support an interpretation that the policy requires “identical” materials and
construction is implausible and without merit. Moreover, Mr. Hromas’ conclusion
that the policy contains contradictory terms, that “could be easily construed as
confusing and ambiguous to an insured and thus should be interpreted in a light
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most favorable to the insured,” is clearly a legal opinion rather than an opinion as
to insurance industry standards. See Specht v. Jensen, 853 F.2d 805, 808 (10th Cir.
1988)(ruling that a lawyer is not allowed to testify as an expert witness regarding
his opinions on the legal obligations arising from a contract, and on the legal
significance of various facts in evidence). I conclude that Mr. Hromas’
interpretation of the insurance policy language underlying his opinion that
Garrison acted unreasonably or in bad faith based on its contrary interpretation
renders his expert opinions unreliable.
D. LEGAL OPINIONS
In addition, I note that Mr. Hromas’ report expresses numerous other legal
opinions and conclusions, as well as purports to define the applicable law of this
case. Mr. Hromas opines that Garrison violated a legal duty, as opposed to acted in
contravention to ordinary practices of the industry, which is not permissible expert
testimony under Colorado law. See Baumann v. Am. Family Mut. Ins. Co., 836 F.
Supp. 2d 1196, 1200-03 (D. Colo. 2011)(ruling that “[w]hile other experts may aid a
jury by rendering opinions on ultimate issues, our system reserves to the trial judge
the role of adjudicating the law for the benefit of the jury. When an attorney is
allowed to usurp that function, harm is manifest”)(quoting Specht v. Jensen, supra,
853 F.2d at 808-09). While testimony of experts concerning ordinary practices or
trade customs in an industry are admissible to enable the jury to evaluate the
conduct of the parties as against the standards of ordinary practice, opinions as to
the legal standards which the expert contends control the case are not. Baumann v.
22
Am. Family, supra, 836 F. Supp. 2d at 1200 (citations omitted)(ruling that an
insurance industry expert’s opinion that the insurer had a duty to pay its insured
was phrased in terms of a legal duties or obligations and, thus, improperly usurped
the function of the trial judge to instruct the jury on the law). Finally, I agree with
Garrison that Mr. Hromas’ report improperly asserts his own factual findings;
expressed opinions based solely on speculation; engages in advocacy; and
inappropriately comments on Garrison’s litigation conduct.
E. CONCLUSION
For all the foregoing reasons, I conclude that Mr. Hromas’ opinions as to
whether Garrison’s representatives acted reasonably or with bad faith in handling
Plaintiff’s claim would not be helpful to the jury. Accordingly, I hold that in my role
as a gatekeeper of expert testimony, the opinions expressed by Mr. Hromas are
unreliable to the extent that they will not be helpful to a jury and, as such, his
expert testimony will be not be admitted pursuant to Rule 702. Mr. Hromas’
proffered testimony, as expressed in his expert report, is not the product of reliable
principles in that they are based on an inapplicable standard of care, and they rely
on an implausible interpretation of Garrison’s obligations under the applicable
insurance policy. In addition, Mr. Hromas’ expressed opinions are replete with
legal opinion and conclusions. Plaintiff has failed to prove the foundational
requirements of Rule 702 by a preponderance of the evidence and I grant Garrison’s
motion to exclude Mr. Hromas’ testimony.
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V. RULINGS
ACCORDINGLY, I rule as follows on the parties’ pre-trial motions:
1) The Motion In Limine to Exclude Evidence of Post-Litigation Events,
Attorney Fees and Causation, filed by Plaintiff Patrick Slavin [Doc #162] is:
GRANTED IN PART as to evidence of the process and amount of the Appraisal
Award as well as the Attorney Fees and Cost incurred during the litigation of this
lawsuit; DENIED IN PART as to evidence of the post-litigation agreement from
General Shale to manufacture a reduced-run of specialty brick at a lower price; and
DEFERRED IN PART as to evidence of when causation was established if it is
introduced at trial.
2) The Motion to Exclude the Expert Opinions of Mr. Kevin Hromas, filed
pursuant to Federal Rule of Evidence 702 by Defendant, Garrison Property and
Casualty Insurance Company [Doc #158] is GRANTED.
Dated: July
10
, 2017 in Denver, Colorado.
BY THE COURT:
s/Lewis T. Babcock
LEWIS T. BABCOCK, JUDGE
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