Elk City Golf and Country Club v. Philadelphia Indemnity Insurance Company

Filing 102

ORDER granting in part, denying in part and reserved in part 80 Defendant's Combined Motions in Limine. Signed by Honorable Timothy D. DeGiusti on 1/3/2020. (mb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
ELK CITY GOLF AND COUNTRY
CLUB, INC.,
Plaintiff,
v.
PHILADELPHIA INDEMNITY
INSURANCE COMPANY,
Defendant.

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Case No. CIV-18-196-D

ORDER
Before the Court is Defendant’s Combined Motions in Limine [Doc. No. 80].
Plaintiff has responded in opposition [Doc. No. 87], and Defendant has filed a reply [Doc.
No. 93]. The matter is fully briefed and at issue.
Plaintiff’s breach of contract and bad faith claims arise out of an insurance policy
issued by Defendant to Plaintiff. Plaintiff alleges that its real and personal property was
damaged or destroyed by a tornado on May 16, 2017. The factual and procedural
background of the case appears in the Order of October 24, 2019 [Doc. No. 97], denying
summary judgment, and will not be repeated here.
Defendant seeks to exclude evidence, testimony, or argument regarding sixteen
subject areas: 1) an insurer’s legal duties to insureds; 2) alleged fiduciary duties owed by
Defendant; 3) the Oklahoma Unfair Claim Settlement Practices Act; 4) Defendant’s postlitigation conduct; 5) claims of privilege; 6) expert opinions of lay witnesses or opinions
of an expert outside the reasonable confines of his area of expertise; 7) expert testimony

not previously disclosed or based on documents or evidence not produced in discovery; 8)
Defendant’s loss or expense reserves; 9) news articles and related media, including
comments on social media; 10) comparisons to the Moore tornadoes or other tornadoes;
11) deaths or bodily injuries incurred from the May 16, 2017 tornado; 12) stereotypes of
“wealthy insurance companies” and “poor” or “disadvantaged” insureds; 13) the
construction and interpretation of the insurance agreement at issue; 14) duration of
Plaintiff’s relationship with Defendant and the amount of premiums paid; 15) financial
information of Defendant during the liability phase of the trial; and 16) testimony by
counsel whether through questioning or other means.
In response, Plaintiff states that it does not intend to comment or argue about a
fiduciary duty, privilege or claims of privilege, or present testimony from counsel. Plaintiff
also does not anticipate presenting evidence of news articles or related media; comparisons
to the Moore tornadoes or other tornadoes; deaths or bodily injuries sustained in the Elk
City tornado; stereotypes of “wealthy insurance companies” and “poor” or
“disadvantaged” insureds; the duration of its relationship with Defendant or the amount of
premiums paid; or Defendant’s financial information in the liability phase of the trial.
Further, Plaintiff agrees that neither party should present lay or expert testimony purporting
to interpret the terms of the insurance policy at issue.1

1

Much of Defendant’s motion amounted to little more than a request that Plaintiff adhere
to the rules of evidence, and otherwise avoid areas Plaintiff had no intention of pursuing in
the first place. Thus, the motion in large part was a waste of time and judicial resources.
2

Therefore, the Court finds that the only issues presented for decision by Defendant’s
motion concern the following five categories of evidence (renumbered for convenience):
1) Defendant’s legal duties; 2) the Oklahoma Unfair Claim Settlement Practices Act; 3)
Defendant’s post-litigation conduct; 4) expert testimony; and 5) Defendant’s loss and
expense reserves.
1.

Evidence concerning Defendant’s legal duties

Defendant contends that evidence of the legal duties it owes Plaintiff and evidence
of its claims handling practices, including questions of its own adjusters, should be
excluded pursuant to FED. R. EVID. 403, 701, and 702. Plaintiff asserts that asking
Defendant’s adjusters about their knowledge and training regarding claims handling
practices, or about the industry’s claims handling standards, does not invade the province
of the Court or jury. Further, Plaintiff maintains that Defendant’s adjusters are mixed
fact/expert witnesses, and that if they do not state a legal conclusion, they may refer to the
law in expressing their opinions.
The Court finds that the evidence Defendant seeks to exclude may be relevant to
Plaintiff’s breach of contract and bad faith claims. Plaintiff is permitted to establish
whether Defendant breached its contractual duties or acted in bad faith and, to the extent
Defendant’s claims handling demonstrates a breach of its contractual duties or indicates
unreasonableness or bad faith on Defendant’s part, such evidence may be admissible.
Plaintiff may inquire of Defendant’s adjusters about Defendant’s claims handling practices
and the industry standards based on the adjusters’ training and experience.

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Moreover, there are limitations on the adjusters’ testimony.2 “In no instance can a
witness be permitted to define the law of the case.” Specht v. Jensen, 853 F.2d 805, 810
(10th Cir. 1988). The adjusters cannot testify as to the legal parameters for bad faith under
Oklahoma law, because it is the duty of the Court to instruct the jury on the law. In
addition, the adjusters are not permitted to offer any opinion of the ultimate conclusion as
to whether Defendant acted in bad faith or breached the contract.
2.

Evidence concerning the Oklahoma Unfair Claim Settlement Practices
Act

Defendant moves to preclude Plaintiff from referencing or introducing into evidence
the Oklahoma Unfair Claim Settlement Practices Act (“UCSPA”), OKLA. STAT. tit. 36, §
1250.1 et seq. Defendant argues that no private right of action exists under the UCSPA
and to allow Plaintiff to argue the UCSPA establishes industry standards or imposes certain
standards on Defendant with respect to claims handling is irrelevant, misleading, and
unfairly prejudicial. Plaintiff asserts that Defendant’s claims handling expert, Arthur
Bates, has previously testified that the UCSPA sets a minimum standard of conduct for
insurers and provides guidance in determining whether an insurer’s actions were in good
faith. Plaintiff does not identify any provision of the UCSPA it intends to rely on at trial;
thus, the Court cannot make a meaningful determination of what evidence, if any, to
exclude.
The UCSPA “does not establish standards of care or standards of conduct for
measuring whether an insurer has violated its duty of good faith and fair dealing,” nor does

2

These limitations apply equally to adjusters for Defendant and Plaintiff.
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it provide a private right of action. Aduddell Lincoln Plaza Hotel v. Certain Underwriters
at Lloyd’s of London, 348 P.3d 216, 223 (Okla. Civ. App. 2014). Further, the UCSPA
“may provide guidance to a trial court in determining whether to grant summary judgment,
but it does not function as an appropriate guide for a jury to determine bad faith.” Id. at
224.

Considering Aduddell, it appears that any evidence that Defendant’s conduct

allegedly violated the UCSPA would be unfairly prejudicial. See FED. R. EVID. 403.
With these admonitions, the Court reserves ruling on this matter. Without citation
to any specific provision of the UCSPA, or the nature of any related reference, any ruling
now would be premature.
3.

Evidence concerning Defendant’s post-litigation conduct

Defendant also seeks to exclude evidence, testimony, and argument concerning its
post-litigation conduct and claims handling. Defendant cites Andres v. Okla. Farm Bureau
Mut. Ins. Co., 290 P.3d 15, 18 (Okla. Civ. App. 2012) and Timberlake Constr. Co. v. U.S.
Fid. and Guar. Co., 71 F.3d 335, 341 (10th Cir. 1995), for the proposition that an insurer’s
litigation activities should rarely, if ever, be admissible on the issue of bad faith. Defendant
asserts that evidence of its post-litigation conduct regarding Plaintiff’s claim is unfairly
prejudicial under FED. R. EVID. 403.
Plaintiff contends that Defendant “has never sent a denial letter per se other than a
terse rejection of Plaintiff’s repair and replacement cost estimates without explanation,”
and that, unlike Timberlake, Plaintiff is not seeking to introduce evidence of litigation
activities by defense counsel but rather evidence that Defendant has engaged in continuing
bad faith conduct. [Doc. No. 87 at 16, 18]. Plaintiff asserts, and Defendant concedes, that
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the duty of good faith and fair dealing does not stop when a lawsuit is filed. See, e.g., Hale
v. A.G. Ins. Co., 138 P.3d 567, 571–72 (Okla. Civ. App. 2006) (“[T]he analysis in bad faith
cases indicates the cutoff for relevant evidence is the date of payment or denial of the
claim.”).
Upon consideration of the cases cited and review of the record, the Court finds itself
unable to draw the bright-line rule sought by Defendant, barring admission of all evidence
regarding post-litigation conduct. Aside from Defendant’s rejection of Plaintiff’s repair
and replacement cost estimates on January 25, 2018 [Doc. No. 38-6], the Court finds no
denial of Plaintiff’s claim in the record.

That same day, Defendant’s general adjuster,

Ronald Murchek, requested additional documents from Plaintiff to determine the business
income loss. Id. Here, the parties appear to agree that some post-litigation facts, such as
the documentation for business income loss, are relevant. Defendant has indicated it did
not receive sufficient information to calculate business income loss while Plaintiff contends
that such information has been in Defendant’s possession for a considerable amount of
time. Further, Defendant asserts that Plaintiff failed to cooperate or perform conditions
precedent to entitlement of certain benefits under the policy. Defendant should not be
allowed to rely on post-litigation events to support its affirmative defense while denying
Plaintiff the opportunity to refute this affirmative defense with post-litigation facts that it
did cooperate or attempt to comply with the policy.
Here, claim review appears to be ongoing.

Moreover, the conduct Plaintiff

apparently seeks to admit does not pertain to litigation per se, but rather pertains to
Defendant’s continuing investigation.

Such conduct is directly relevant to the
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reasonableness of Defendant’s delay in resolving Plaintiff’s claim. “The claim in this case
has been neither fully paid nor denied, continuing the duty of good faith and fair dealing
well into the litigation.” Higgins v. State Auto Prop. & Cas. Ins. Co., 2012 WL 2571278,
at *6 (N.D. Okla. July 2, 2012).
Accordingly, the Court finds that the parties’ post-litigation conduct related to
continued claims investigation, evaluation, processing, and payment or non-payment will
generally be deemed admissible. However, Defendant’s specific objections based on
relevance and undue prejudice should be asserted at trial as appropriate.
4.

Expert testimony by lay witnesses, testimony outside an expert’s
expertise, expert testimony based on evidence not reviewed, or expert
testimony as to documents not produced in discovery

Defendant seeks to exclude lay witnesses from providing expert testimony; expert
testimony based upon materials not reviewed; experts from testifying outside their
purported expertise; expert testimony by witnesses not previously disclosed as experts; and
testimony by experts based upon documents or evidence not produced in discovery.
Essentially, Defendant is asking that Plaintiff follow FED. R. EVID. 701–704 in presenting
expert testimony at trial. Defendant does not assert a Daubert objection, and the time for
filing a Daubert motion has passed. No response from the Court is necessary. The parties
may make contemporaneous objections during trial if the proffered testimony exceeds the
boundaries of expert testimony under the Federal Rules of Evidence.
5.

Evidence concerning Defendant’s loss and expense reserves

Defendant objects to the introduction of evidence concerning its loss reserves for
Plaintiff’s insurance claim as irrelevant and prejudicial. Defendant argues that setting loss
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reserves is simply a business or accounting practice and satisfies a regulatory requirement,
but the jury is likely to misinterpret the evidence as an admission of liability. Plaintiff
contends that Defendant’s setting of a $2,575,703.80 loss reserve on Plaintiff’s insurance
claim shows Defendant’s internal assessment of the claim’s potential value and is relevant
to the subjective component of Plaintiff’s bad faith claim.3
Upon consideration, the Court finds that evidence of Defendant’s loss reserves is
relevant to Plaintiff’s bad faith claim and that Defendant has failed to show the probative
value of the evidence is substantially outweighed by a danger of unfair prejudice. See, e.g.,
Shadid, L.L.C. v. Aspen Specialty Ins. Co., Case No. CIV-15-595-D, 2018 WL 3420816,
at *5 (W.D. Okla. July 13, 2018) (on a motion in limine, the Court held that evidence of
the insurance company’s loss reserves was relevant to the insured’s bad faith claim); Fox
v. Country Mut. Ins. Co., Case No. CIV-17-1228-SLP (W.D. Okla. Nov. 27, 2018) [Doc.
No. 118] (denying the defendant’s motion in limine and finding that evidence of the
defendant’s loss reserves was relevant and not substantially outweighed by any danger of
unfair prejudice).
Further, the Court finds that any prejudice can be avoided by using an appropriate
jury instruction. The parties are invited to proffer a limiting instruction regarding evidence
of insurance loss reserves for use during the trial and at the completion of the evidence.
Subject to this condition, the Court finds that Defendant’s motion regarding loss reserves
should be denied.

3

Defendant’s own adjuster, Ronald Murcheck, preliminarily estimated the total loss at $2.5
million [Doc. Nos. 45-3 at 2, 45-4 at 2].
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CONCLUSION
Based on the foregoing, Defendant’s Combined Motions in Limine [Doc. No. 80]
is GRANTED in part, DENIED in part, and RESERVED in part as set forth herein.
IT IS SO ORDERED this 3rd day of January 2020.

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