Lead GHR Enterprises, Inc. v. American States Insurance, et al.

Filing 68

ORDER denying defendant's 25 MOTION to Strike Plaintiff's Rebuttal Expert Disclosure. Signed by US Magistrate Judge Veronica L. Duffy on 03/25/14. (Duffy, Veronica)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
LEAD GHR ENTERPRISES, INC.,
formerly d/b/a GOLDEN HILLS
RESORT, now d/b/a DAYS INN LEAD,
SOUTH DAKOTA
Plaintiff,
vs.
AMERICAN STATES INSURANCE CO.,
Defendant.

)
CIV. 12-5056-JLV
)
)
)
)
) ORDER DENYING DEFENDANT’S
)
MOTION TO STRIKE EXPERT
)
TESTIMONY AND GRANTING
) PLAINTIFF LEAVE TO DESIGNATE
)
AN INITIAL EXPERT WITNESS
)
[Docket No. 25]
)

INTRODUCTION
Plaintiff Lead GHR Enterprises, Inc. (hereinafter “Lead GHR”) brings this
diversity action alleging claims for breach of contract and bad faith denial of
insurance benefits based on the denial by American States Insurance
(hereinafter “American States”) of a claimed insurance loss arising from an
August 3, 2010, hail storm. Docket No. 1-1. American States has filed a
motion to strike Lead GHR’s rebuttal expert witness disclosure. Docket No. 25.
Lead GHR objects to the motion, but also argues in the alternative for leave to
designate its rebuttal expert witness as an initial expert witness. Docket No. 33,
at 5. The district court, the Honorable Jeffrey L. Viken, Chief Judge, referred
American States’ motion to strike to this magistrate judge for determination
pursuant to 28 U.S.C. ' 636(b)(1)(A).

FACTS
On December 21, 2012, Lead GHR and American States submitted a
“Joint Rule 26(f) Report,” which set forth the parties’ agreed-upon discovery,
motions, and trial deadlines. Docket No. 21. The court issued a scheduling
order based upon the parties’ submission. See Docket No. 32. In the court’s
order, the provisions relating to expert witnesses were as follows.
Plaintiff was required to disclose the identity and reports of any retained
experts by May 31, 2013. Id. at ¶ 7. Defendants were to make like disclosures
by June 28, 2013. Id. Any expert not properly designated in accordance with
the court’s order is not permitted to testify. Id. A party designating an expert is
required to identify the expert, state the subject matter on which the expert is
expected to testify, and disclose the expert’s report at the time of designation.
Id. at ¶ 8. The expert’s report must contain:
a. A complete statement of all opinions the witness will express and the
basis and reasons for them;
b. The facts or data considered by the [expert] witness in forming them;
c. Any exhibits that will be used to summarize or support them;
d. The witness’s qualifications, including a list of all publications
authored in the previous 10 years;
e. A list of all other cases in which, during the previous 4 years, the
witness testified as an expert at trial or by deposition; and
f. A statement of the compensation to be paid for the study and testimony
in the case.

2

Id. These requirements are based on Fed. R. Civ. P. 26(a)(2)(B). Id. All
discovery, including discovery related to expert witnesses, was required to be
completed by October 8, 2013. Id. at ¶ 4.1
Lead GHR did not disclose the identity or report of any expert witnesses by
the May 31, 2013 court-ordered deadline. On June 28, 2012, American States
designated Timothy Strasser as its expert witness for trial. Docket No. 27-10, at
2. In its disclosure, American States provided Mr. Strasser’s curriculum vitae,
billing rate, incorporated his December 22, 2010 report (the Haag Engineering
report), documenting his opinions and conclusions regarding the condition of the
Golden Hills Resort’s (hereinafter the “hotel”) roof,2 and identified the single case
in which Mr. Strasser testified as an expert witness within the last four years.
See id. at 2–5.
On July 17, 2013, Lead GHR filed a “Rebuttal Expert Disclosure” wherein
it designated Gene Reiling as an expert witness it expected to testify. Docket No.
The court notes that the district court’s scheduling order was not entered until
August 16, 2013, which was well after the expert designation deadlines agreed to
by the parties had already passed. However, the district court in its scheduling
order adopted the parties’ agreement as to the expert designation deadlines, so
there was no after-the-fact surprise to the parties. Compare Docket No. 32,
with Docket No. 21, at 2.
1

American States retained Mr. Strasser “to determine the extent of hail-caused
damage to [the hotel’s] roof” as a result of the August 3, 2010 hail storm. See
Docket No. 27-3, at 3–4. Following Mr. Strasser’s examination of the hotel’s
roof, he drafted a report documenting his opinions and conclusions on December
22, 2010. Id. at 7. American States relied on this report, in part, in reaching
its January 10, 2011 decision to deny coverage for Lead GHR’s claim of damages
to the hotel’s roof as a result of the August 3 hail storm. See Docket No. 27-5, at
1, 4.
2

3

27-11. Lead GHR attested that Mr. Reiling is a certified insurance counselor
with eleven years of experience as a claims adjustor and twenty-six years of
experience as an insurance agent/counselor. Id. at 2. In the Rebuttal Expert
Disclosure, Lead GHR stated that “Mr. Reiling is expected to testify concerning
the standard of care for insurance companies.” Id. Subsequently, in briefing
for this motion, Lead GHR clarified that Mr. Reiling’s testimony will be used to
rebut “[t]he clear implication [of Strasser’s testimony] . . . that ‘functional
damage’ is a sufficient basis to deny coverage on an otherwise covered loss.”
See Docket No. 33, at 4. To date, Lead GHR has not disclosed any written report
documenting Mr. Reiling’s opinions or the facts and data he considered. See
Docket No. 32, ¶ 8; FED. R. CIV. P. 26(a)(2)(B)(i)–(vi).
On September 27, 2013, Mr. Reiling was deposed. Docket No. 40-1, at 2.
Prior to the deposition counsel for American States stated that it was his
intention to depose Mr. Reiling as a fact witness due to American States’ pending
motion to strike Mr. Reiling’s testimony as an expert witness. See Docket No.
42-1, at 3. At the deposition, counsel for Lead GHR informed counsel for
American States that Mr. Reiling could either be deposed as an expert witness,
although no written report had been prepared, or as a fact witness. Docket No.
40-1, at 3. Counsel for American States chose to depose Mr. Reiling as a fact
witness and reserved the right to depose him again later as an expert witness
should this court not grant its motion to strike. See id.

4

At the deposition, Mr. Reiling indicated that he had never seen
Mr. Strasser’s report (the Haag Engineering report), the contents of which
Mr. Strasser would be testifying to as an expert witness and Mr. Reiling would
supposedly be called upon to rebut. Id. at 5–6. Mr. Reiling further testified
that beyond mere oral anecdotes the only document he had reviewed was
American States’ January 10, 2011 denial of coverage letter. Id. at 5–7.
Mr. Reiling also acknowledged that his knowledge of the condition and
background of the hotel’s roof, at the time Lead GHR contacted him for advice,
was relatively limited. Id.
On August 8, 2013 American States filed the instant motion to strike
Mr. Reiling’s expected expert testimony, asserting that Mr. Reiling’s designation
was untimely and that Lead GHR had not disclosed the report and accompanying
information required by Rule 26 and the district court’s scheduling order. See
Docket Nos. 25, 26. Thereafter, on August 26, 2013, American States
conditionally designated Peter J. Hildebrand as its sur-rebuttal expert witness
should the court refuse to strike Mr. Reiling’s expert testimony. Docket No.
34-3. American States articulated that it would “expend the time and resources
for a full report from [Mr. Hildebrand] only upon the Court’s denial of [its] Motion
[to strike Mr. Reiling’s expected testimony].” Id. at 1.

5

DISCUSSION
A.

Expert Witness Disclosure Requirements
As an initial matter, the court finds that the expert witness disclosure

requirements of Federal Rule of Civil Procedure 26(a)(2) are equally applicable to
initial and rebuttal expert witness disclosures. As explained more fully below, a
principal objective of a rebuttal expert witness, as distinguished from an initial
expert witness, is “to challenge the evidence or theory of an opponent—and not to
establish a case-in-chief.” Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748,
759 (8th Cir. 2006) (citing Cates v. Sears Roebuck & Co., 928 F.2d 679, 685 (5th
Cir. 1991) (“Rebuttal must be kept in perspective; it is not to be used as a
continuation of the case-in-chief.”)); see supra Part A.1. To that end, the
disclosure requirements promulgated by the Federal Rules of Civil Procedure do
not distinguish between initial expert witnesses and rebuttal expert witnesses.
See Complaint of Kreta Shipping, S.A., 181 F.R.D. 273, 276, (S.D.N.Y. 1998)
(“[R]ebuttal expert testimony is not excepted from the reporting requirements of
Rule 26(a)(2)(B).”); see also Cong. Air Ltd. v. Beech Aircraft Corp., 176 F.R.D.
513, 516–17 (D. Md. 1997).
Lead GHR’s expert witness disclosure for Mr. Reiling was insufficient. In
the parties’ Joint Rule 26(f) Report, both Lead GHR and American States
expressly agreed to the “[d]isclosure of the identity of expert witnesses under
Rule 26(a)(2)(A) and the full disclosures required by Rule 26(a)(2)(B),
accompanied by the written report prepared and signed by the expert witness.”
6

Docket No. 21, at 2. This requirement was also part of the district court’s
scheduling order. See Docket No. 32, ¶¶ 7–8. Thus, it is clear that the parties
and the district court incorporated Federal Rule of Civil Procedure 26(a)(2)(A) and
(B) by reference into the scheduling provisions dealing with expert witness
disclosures. See Docket Nos. 21, 32. Moreover, there is no language in either
the court’s scheduling order or the parties’ proposal that would cause the Rule
26(a)(2)(A) and (B) disclosure requirements to apply only to initial expert
witnesses as opposed to rebuttal expert witnesses. Such an interpretation
would lead to an unfair and incongruous result.
If the court adopted Lead GHR’s interpretation that rebuttal experts are
exempted from the disclosure requirements of Rule 26, the result would be that
the plaintiff need not identify its rebuttal expert witness nor generate and serve
the expert’s written report. Lead GHR’s interpretation is not consistent with
Rule 26. For example, Rule 26(a)(2)(D), in setting the time period in which
expert testimony must be disclosed, states that “absent a stipulation or a court
order, the [Rule 26(a)(2)(A) and (B)] disclosures must be made . . . if the evidence
is intended solely to contradict or rebut evidence on the same subject matter
identified by another party under Rule 26(a)(2)(B) . . . .” See FED. R. CIV. P.
26(a)(2)(D)(ii). Further, the plain language of Rule 26 states that: “[u]nless
otherwise stipulated or ordered by the court, this disclosure [i.e. the identity of
the expert witness] must be accompanied by a written report—prepared and
signed by the witness—if the witness is one retained or specially employed to
7

provide expert testimony . . . .” FED. R. CIV. P. 26(a)(2)(B) (emphasis added).
Here, the parties expressly agreed that Rule 26(a)(2)(A) and (B), and not some
other disclosure agreement, would govern their expert witness disclosures. See
Docket No. 21, at 2. The court incorporated these same provisions in its
scheduling order. See Docket No. 32.
Under Rule 26(a)(2)(B), each party’s expert must generate a written report
that contains:
(i)

a complete statement of all opinions the witness will express
and the basis and reasons for them;

(ii)

the facts or data considered by the witness in forming them;

(iii)

any exhibits that will be used to summarize or support them;

(iv)

the witness’s qualifications, including a list of all publications
authored in the previous 10 years;

(v)

a list of all other cases in which, during the previous 4 years,
the witness testified as an expert at trial or by deposition; and

(vi)

a statement of the compensation to be paid for the study and
testimony in the case.

FED. R. CIV. P. 26(a)(2)(B)(i)–(vi); see also Docket No. 32, ¶¶ 7–8 .
Lead GHR identified Mr. Gene Reiling as an expert witness, thereby
satisfying the requirement called for by Federal Rule of Civil Procedure
26(a)(2)(A) that it identify its expert. See Docket No. 27-11, at 1. Lead
GHR then stated that “Mr. Reiling is expected to testify concerning the
standard of care for insurance companies as follows.” Id. However,
following this statement, Lead GHR, in its description of the standard of
8

care for insurance companies, essentially only restated its case-in-chief as
to why Lead GHR is entitled to indemnity from American States for
damages suffered as a result of the August 3, 2010 hail storm. Compare
id. at 1–2, with Docket No. 1-1, at 3–7 (the amended complaint). Lead
GHR did not proffer any opinions or reports of Mr. Reiling or his basis in
forming his conclusions, nor were any facts or data that Mr. Reiling
considered provided, no summary exhibits were provided, no list of cases
in which Mr. Reiling has testified in were provided, and no statement of
compensation was provided. See Docket No. 27-11 (The court notes that
Mr. Reiling’s years of service as a claims adjustor and insurance
agent/counselor, which speak to his qualifications, was provided.). Thus,
the disclosure requirements for Mr. Reiling’s written report—which was
required to accompany his designation as an expert witness—were not
met. Accordingly, the court finds that Lead GHR’s designation of
Mr. Reiling as an expert witness failed to satisfy the disclosure
requirements for an expert witness’ written report under Rule 26(a)(2)(B).
B. Whether Mr. Reiling is Properly Classified as a Rebuttal Expert Witness
Mr. Reiling is not a rebuttal expert witness. Rather, Lead GHR is
attempting to utilize Mr. Reiling as an initial expert witness. The Eighth Circuit,
in Marmo v. Tyson Fresh Meats, Inc., described the attributes of a rebuttal
witness at length. Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 758–60
(8th Cir. 2006). “‘The function of rebuttal testimony is to explain, repel,
9

counteract or disprove evidence of the adverse party.’” Id. at 759 (quoting
United States v. Lamoreaux, 422 F.3d 750, 755 (8th Cir. 2005)) (citing Faigin v.
Kelly, 184 F.3d 67, 85 (1st Cir. 1999) (“The principal objective of rebuttal is to
permit a litigant to counter new unforeseen facts brought out in the other side’s
case.”). “[R]ebuttal evidence may be used to challenge the evidence or theory of
an opponent—and not to establish a case-in-chief.” Id. (citing Cates v. Sears
Roebuck & Co., 928 F.2d 679, 685 (5th Cir. 1991) (“Rebuttal must be kept in
perspective; it is not to be used as a continuation of the case-in-chief.”)).
Finally, the Eighth Circuit in Marmo concluded that “[A] district court should
allow rebuttal evidence only if it is necessary to refute the opponent’s case.” Id.
citing (HENRY WIGMORE, EVIDENCE IN TRIALS AT COMMON LAW § 1873 (1976)).
Here, American States timely identified Mr. Strasser, a forensic structural
engineer, as an expert witness and sufficiently disclosed his corresponding
written report. See Docket Nos. 27-3, 27-10. “Mr. Strasser will provide expert
testimony based on the opinions contained in his report dated December 22,
2010 . . . .” Docket No. 27-10, at 2. Mr. Strasser’s December 22, 2010 report
was the product of a two-day examination of the hotel’s roof following the August
3, 2010 hail storm, and it represents Mr. Strasser’s opinions and conclusions
regarding “the extent of hail-caused damage to [the hotel’s] roof.” Docket No.
27-3, at 3.
Lead GHR asserts that “[t]he clear implication of this testimony is that
‘functional damage’ is a sufficient basis to deny coverage on an otherwise covered
10

loss. [And,] Mr. Reiling’s designation is offered to explain and repel this obvious
inference.” Docket No. 33, at 4. To that end, Mr. Reiling will “testify
concerning the standard of care for insurance companies.” Docket No. 27-11,
at 1. However, despite plaintiff’s characterization of Mr. Reiling as a rebuttal
expert witness, Reiling had not read Mr. Strasser’s December 22, 2010 report,
and except for the January 10, 2011 denial letter, his knowledge of the condition
of the hotel’s roof was limited to oral anecdotes. See Docket No. 40-1, at 3–7.
Unlike Mr. Reiling, Mr. Strasser is neither an insurance agent/counselor
nor a claims adjuster. He is an independent engineer, and he is not purporting
to offer testimony as to the standard of care that insurance companies should
exercise. Rather, Mr. Strasser’s expected testimony will be limited to his
findings, opinions, and conclusions of the condition of the hotel’s roof, as
documented in his December 22, 2010 report, following the August 3 hail storm.
Throughout his report, Mr. Strasser notes the occurrence of several hail
indentations on the roof and references the roof’s ability to nevertheless continue
to function properly. See Docket No. 27-3, at 3–7. American States then used,
and referenced, Mr. Strasser’s December 22 report to support its decision to
deny coverage to Lead GHR. Mr. Strasser was not involved as a decision-maker
in American State’s decision to deny coverage.
As previously noted, Mr. Strasser’s testimony will be limited to the physical
condition of the hotel’s roof at the time of his inspection and “nothing more.”
Docket No. 36, at 6. Mr. Strasser will not offer testimony as to what is a
11

sufficient basis to deny coverage on an otherwise covered loss. Moreover,
Mr. Strasser will not offer testimony regarding the appropriate standard of care
for insurance companies. If Mr. Reiling were disputing or offering evidence
contrary to Mr. Strasser’s regarding the physical condition of the hotel’s roof, his
testimony could validly be characterized as rebuttal expert witness testimony.
However, it does not appear that Mr. Reiling disputes Mr. Strasser’s findings and
conclusions regarding the condition of the hotel’s roof. Indeed, as of this
juncture it is unclear whether Mr. Reiling is even aware of Mr. Strasser’s
December 22 report, let alone his findings and conclusions therein.
Therefore, because Mr. Strasser’s testimony is limited to the roof’s physical
condition—not whether “functional damage” is an appropriate basis on which to
deny an otherwise covered claim—and because Mr. Reiling seemingly does not
dispute Mr. Strasser’s findings and conclusions, Mr. Reiling will not “explain,
repel, counteract, or disprove” the testimony offered by Mr. Strasser. See
United States v. Lamoreaux, 422 F.3d 750, 755 (8th Cir. 2005). Mr. Reiling is
therefore not properly characterized as a rebuttal expert witness. Rather,
Mr. Reiling is an initial expert witness that is expected to testify as to the
appropriate standard of care for insurance companies and his identity and
written report should have been disclosed by American States on May 31, 2013,
in accordance with the Joint Rule 26(f) Report. See Docket No. 21, at 2.
Because this court finds Mr. Reiling to be an initial expert witness, rather
than a rebuttal expert witness, the court must determine the appropriate
12

sanction for Lead GHR’s failure to timely designate Mr. Reiling and provide his
report and accompanying data.
C. The Remedy for an Insufficient and Untimely Disclosure of an Expert
Witness
“The power of the trial court to exclude exhibits and witnesses not
disclosed in compliance with its discovery and pretrial orders is essential to the
judge's control over the case.” Sellers v. Mineta, 350 F.3d 706, 711 (8th Cir.
2003) (citations omitted) (internal quotation marks omitted). Accordingly,
“[w]hen a party fails to provide information or identify a witness in compliance
with [Federal Rule of Civil Procedure] 26(a) or (e), the district court has wide
discretion to fashion a remedy or sanction as appropriate for the particular
circumstances of the case.” Wegener v. Johnson, 527 F.3d 687, 692 (8th Cir.
2008) (citing FED. R. CIV. P. 37(c)(1)). The Eighth Circuit has previously held
that a party’s “failure to disclose in a timely manner is equivalent to [a] failure to
disclose.” Trost v. Trek Bicycle Corp., 162 F.3d 1004, 1008 (8th Cir. 1998)
(citing Sylla-Sawdon v. Uniroyal Goodrich Tire Co., 47 F.3d 277, 284 (8th Cir.
1995)).
Under Federal Rule of Civil Procedure 37(c)(1), “[t]he district court may
exclude the information or testimony as a self-executing sanction unless the
party’s failure to comply is substantially justified or harmless.” Wegener, 527
F.3d at 692 (citing FED. R. CIV. P. 37(c)(1); see also Davis v. Thomson Multimedia,

13

No. 4:01CV3159, 2003 WL 25693572, at *2 (D. Neb. Sept. 2, 2003)).3 “The
offending party has the burden to demonstrate their conduct was substantially
justified or harmless.” Braun v. Menard, Inc., 2013 WL 123712 (D.N.D. Jan. 9,
2013) (citing Fu v. Owens, 622 F.3d 880 (8th Cir. 2010); see also Torres v. City of
Los Angeles, 548 F.3d 1197, 1213 (9th Cir. 2008)).
Furthermore, “[t]o aid in the [district] [c]ourt’s determination of whether
the failure [to disclose] was substantially justified or harmless and to help decide
upon an appropriate sanction or remedy, the Eighth Circuit has instructed
[district] courts to consider, inter alia, . . . four [additional] factors.” Anderson v.
Bristol, Inc., 936 F. Supp. 2d 1039, 1061 (S.D. Iowa 2013). These factors, as
enumerated by the Eighth Circuit, are “the reason for noncompliance, the
surprise and prejudice to the opposing party, the extent to which allowing the
information or testimony would disrupt the order and efficiency of the trial, and
the importance of the information or testimony.” Wegener, 527 F.3d at 692
(citing Sellers, 350 F.3d at 711–12; Marti v. City of Maplewood, 57 F.3d 680, 683
(8th Cir. 1995) (setting forth a variety of possibly relevant factors)); see also
Anderson, 936 F. Supp. 2d. at 1061, Jenkins Med. Labs. of E. Iowa, Inc., 880 F.

The court notes that the same “substantial justification or harmless” showing
under Federal Rule of Civil Procedure 37(c)(1), is applicable to both an untimely
disclosure and an insufficient disclosure under Rule 26(a)(2). See Bonin v.
Chadron Cmty. Hosp., 163 F.R.D. 565, 568–569 (D. Neb. 1995) (applying the
“substantial justification or harmless” test following an insufficient Rule 26(a)(2)
disclosure). Accordingly, the court’s analysis with respect to the appropriate
remedy for Lead GHR’s untimely and insufficient expert witness disclosure
merges at this juncture.
3

14

Supp. 2d 946, 956 (N.D. Iowa 2012); cf. Patterson v. F.W. Woolworth Co., 786
F.2d 874 879 (8th Cir. 1986) (citations omitted) (The court gives judicial notice to
the similarity of the four factors enunciated in Wegener with the factors identified
in Patterson.).
“[F]ailure to disclose an expert witness required by [Federal Rule of Civil
Procedure] 26(a)(2)(B) can justify exclusion of testimony at trial.” McCoy v.
Augusta Fiberglass Coatings, Inc., 593 F.3d 737, 746 (8th Cir. 2010) (citations
omitted). However, exclusion is an extreme sanction and “the district court’s
discretion narrows as the severity of the sanction or remedy it elects increases.”
Wegener, 527 F.3d at 692 (citing Heartland Bank v. Heartland Home Fin., Inc.,
335 F.3d 810 817 (8th Cir. 2003)). The Eighth Circuit has cautioned that “‘the
exclusion of evidence is a harsh penalty and should be used sparingly.’” Id.
(quoting ELCA Enters., Inc. v. Sisco Equip. Rental & Sales, 53 F.3d 186, 190 (8th
Cir. 1995)) (citing Bergfeld v. Unimin Corp., 319 F.3d 350, 355 (8th Cir. 2003)).
1. Whether Lead GHR’s Insufficient and Untimely Expert Witness
Disclosure was Substantially Justified
Lead GHR’s justification for its failure to comply with the expert witness
written report disclosure requirements under the Joint Rule 26(f) Report and for
failing to timely identify Mr. Reiling as an expert witness are twofold. With
respect to Lead GHR’s failure to disclose Mr. Reiling’s written report, Lead GHR
asserts that its disclosures were sufficient in light of Federal Rule of Civil
Procedure 26(a)(2)(A) and (B) and the plain language of the Joint Rule 26(f)
Report. For the reasons set forth above, Lead GHR’s interpretation of Rule
15

26(a)(2)(B) and the Joint Rule 26(f) Report is in error, see supra Part A.1, and the
court is not persuaded that Lead GHR was substantially justified in reaching this
interpretation.
With respect to the timeliness of Lead GHR’s disclosure of Mr. Reiling as an
expert witness, the court is also not persuaded that Lead GHR’s actions were
substantially justified. Lead GHR’s stated reason for designating Mr. Reiling as
an expert witness at the late date he was designated was because once American
States designated Mr. Strasser as its “sole expert, it became clear that Defendant
was abandoning its original basis for denial [the negligent workmanship
exclusion], and attempting to invoke an alleged lack of ‘functional damage’ as its
principle basis for denying coverage.” Docket No. 33, at 5. Lead GHR asserts
that prior to Mr. Strasser’s designation as an expert witness its case did not
require expert testimony. See id. (“Consequently, Mr. Reiling was not intended
to be used as an expert on the standard of care.”).
A party’s failure to timely disclose an expert witness and his or her report
due to carelessness, inadvertence, or inattention to detail is not a substantial
justification for the error. N. Star Mut. Ins. Co. v. Zurich, 269 F. Supp. 2d 1140,
1145–46 (D. Minn. 2003). Here, Lead GHR asserts that prior to American
States’ identifying Mr. Strasser as its sole expert witness it did believe an expert
of its own was necessary. This assertion is without merit. American States
never abandoned its negligent workmanship exclusion coverage position. See
Docket No. 36, at 6, 11–12; see also Docket No. 27-5, at 3. Similarly, American
16

States’ referenced Mr. Strasser’s December 22, 2010 report no less than two
times in its January 10, 2011 denial of coverage letter in support of its coverage
position, so Mr. Strasser’s role in this litigation was not a surprise to Lead GHR.
See Docket No. 27-5, at 2, 4 (“Per the findings of the Haag Report [Mr. Strasser’s
report] . . . . American States Insurance Company will be unable to provide any
payment for your claim . . . .”). Moreover, Mr. Strasser authored his report
documenting the condition of the hotel’s roof on December 22, 2010, and
American States emailed this report to Lead GHR on January 11, 2011. Docket
No. 27-6, at 3. Thus, although American States’ did not identify him as an
expert witness until June 28, 2013, see Docket No. 27-10, Lead GHR had
knowledge of Mr. Strasser and his report for approximately two and one half
years prior to the May 31, 2013 deadline to disclose initial expert witnesses. See
Docket No. 27-5, at 2.
In light of these facts, the court fails to see how Mr. Strasser’s designation
as an expert witness so surprised Lead GHR that it was unable to foresee the
necessity of Mr. Reiling’s expert testimony. See Docket No. 33, at 2. Although
American States’ began its denial of coverage letter with a reference to the
negligent workmanship exclusion, Docket No. 27-5, at 3, Mr. Strasser’s report
was also clearly referenced as supporting its overall denial of insurance coverage.
Id. at 2, 4. Thus, it was clear as of January 10, 2011 that American States was
denying coverage based on its negligent workmanship exclusion and a lack of
insurable damage and that it would rely on Mr. Strasser’s report in so doing.
17

Lead GHR’s failure to timely identify Mr. Reiling as an expert witness can only be
attributed to its counsel’s carelessness, inadvertence, or inattention to detail.
The court finds that Lead GHR’s failure to timely identify Mr. Reiling as an initial
expert witness and disclose his written report was not substantially justified.
2. Whether Lead GHR’s Insufficient and Untimely Expert Witness
Disclosure Was Harmless
The court next considers whether Lead GHR’s insufficient and untimely
expert witness disclosure was harmless. In this prong of the analysis, the court
considers “the surprise and prejudice to the opposing party, the extent to which
allowing the information or testimony would disrupt the order and efficiency of
the trial, and the importance of the information or testimony.” Wegener v.
Johnson, 527 F.3d 687, 692 (8th Cir. 2008) (citing Sellers v. Mineta, 350 F.3d
706, 711–12 (8th Cir. 2003)).
Lead GHR’s insufficient and untimely disclosure of Mr. Reiling as an initial
expert witness prejudices American States. Lead GHR’s failure to timely
designate Mr. Reiling forced American States, in part, to depose Mr. Reiling as a
fact witness. American States was also forced to file its motion for summary
judgment without the benefit of Mr. Reiling’s expert report. Anderson v. Bristol,
Inc., 936 F. Supp. 2d 1039, 1062 (S.D. Iowa 2013) (citing the time and cost of
preparing a motion for summary judgment without the benefit of an expert
witness disclosure as at least some degree of prejudice). Furthermore, Lead
GHR still has not disclosed Mr. Reiling’s written report as required under Federal
Rule of Civil Procedure 26(a)(2)(B). Thus, if the court was to allow Mr. Reiling to
18

testify as an initial expert witness, American States would be forced to incur
additional costs re-deposing Mr. Reiling as an expert witness, as well as the costs
associated with procuring its own expert witness to rebut Mr. Reiling’s
testimony. Therefore, American States has suffered at least some degree of
prejudice as a result of Lead GHR’s insufficient and untimely disclosure, and will
suffer additional prejudice should the court allow Lead GHR leave to designate
Mr. Reiling as an initial expert witness.
Lead GHR’s failure to timely designate Mr. Reiling as an expert witness has
also disrupted the district court’s trial schedule. Lead GHR disclosed
Mr. Reiling’s identity to American States on July 17, 2013, over six weeks after
the deadline for disclosing initial expert witnesses. The district court, with few
exceptions, adopted the parties’ Amended Joint Rule 26(f) Report in its
scheduling order. See Docket Nos. 32, 31-1. All of the deadlines contained in
the scheduling order, including the discovery deadline, have since passed. See
Docket No. 32. No trial date, however, has been set. Id.
Furthermore, because Mr. Reiling has not yet drafted his expert report,
Lead GHR would require an additional time to generate and serve the report.
After which, American States would need time to generate and serve the written
report for its rebuttal expert.4 See Docket No. 34-3. Then, Lead GHR would
require further time to depose American States’ rebuttal expert witness. Thus,
Although American States denominates Mr. Hildebrand as a “sur-rebuttal”
expert, the court denominates him as a “rebuttal” expert because, as already
explained, the court has determined that Mr. Reiling was not a rebuttal expert at
all but an initial expert witness.
4

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Lead GHR’s untimely disclosure of Mr. Reiling has materially delayed the district
court’s trial schedule.
The court, however, recognizes the importance of Mr. Reiling’s testimony
to Lead GHR’s case. With respect to its breach of contract claim, it will be
imperative that Lead GHR demonstrate that the hotel’s roof suffered an insurable
damage (be it in in lost value, functionality, or aesthetically) as a result of the
August 3, 2010 hail storm. Lead GHR alleges that denial of insurance coverage
based solely on a “lack of functional damage” to the hotel’s roof is an insufficient
basis on which to deny an insured’s otherwise covered claim. Therefore, to the
extent that Mr. Reiling’s testimony informs the jury that roof damage, other than
damage to the functionality of the roof, is nonetheless an insurable loss, it is
important for Lead GHR to clearly communicate this to the jury in its
case-in-chief for the breach of contract claim.
With respect to Lead GHR’s bad faith claim, it is imperative that Lead GHR
demonstrate that American States failed to adhere to the standard of care
insurance companies are required to follow in denying an insured’s claim. As
such, Mr. Reiling’s expert testimony identifying the appropriate standard of care
for insurance companies to follow when denying an insured’s claim, as well as
his opinion as to how American States violated this standard, will clearly be
important to Lead GHR’s case-in-chief for its bad faith claim.
In considering each of these factors in conjunction with the Eighth
Circuit’s preference against excluding evidence, ELCA Enters., Inc. v. Sisco
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Equip. Rental & Sales, 53 F.3d 186, 190 (8th Cir. 1995) (“Exclusion of evidence is
a harsh penalty, and should be used sparingly), the court finds that Lead GHR’s
untimely and insufficient disclosure of Mr. Reiling was in fact not harmless.
However, excluding Mr. Reiling’s expert-witness testimony is too harsh of a
penalty under the specific facts of this case. See Benson v. Giordano, No.
05-4088-KES, 2008 WL 2781202, at *2 (D.S.D. June 9, 2008) (“The purpose of
the ‘harmless provision’ is to ‘avoid unduly harsh penalties in a variety of
situations.’”) (quoting FED. R. CIV. P. 37 advisory committee’s note (1993)).
Under Federal Rule of Civil Procedure 37(c)(1), instead of excluding evidence, the
court may “order payment of the reasonable expenses, including attorney’s fees,
caused by the failure.” FED. R. CIV. P. 37(c)(1)(A). The court finds that such a
remedy is appropriate in this case.
By granting Lead GHR leave to designate Mr. Reiling as an initial expert
witness with additional time to generate and serve his written report on
American States, the court gives great weight to the importance of Mr. Reiling’s
expected testimony, in light of the court’s most basic function, namely the search
for and ascertainment of the truth—especially during discovery. See Citizens
Bank of Batesville, Ark. v. Ford Motor Co., 16 F.3d 965, 967 (8th Cir. 1994) (“[T]o
have not allowed [the witness’] testimony would have been a perversion of the
trial process as a search for the truth and could have resulted in a miscarriage of
justice.”). Moreover, this court will not “blind[ly] adhere[] to the constraints of a
[s]cheduling [o]rder, without proper regard for the bases and effects of
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non-compliance.” Tomlin v. Holecek, 158 F.R.D. 132, 135 (D. Minn. 1994).
However, the court’s twin concern “that the flouting of discovery deadlines
causes substantial harm to the judicial system” guides its recommended
discovery deadlines going forward in this case. See Jochims v. Isuzu Motors,
Ltd., 144 F.R.D. 350, (S.D. Iowa 1992) (citing Geiserman v. MacDonald, 893 F.2d
787, 792 (5th Cir. 1990)).
Lead GHR has had knowledge of Mr. Strasser’s report for approximately
two and one half years in advance of its May 31, 2013 initial expert witness
disclosure deadline. Furthermore, American States referenced Mr. Strasser’s
report on multiple occasions when explaining its denial of coverage. Lead GHR
has had ample time and opportunity to review Mr. Strasser’s report and
designate a suitable expert witness prior to the May 31 deadline. Moreover,
Lead GHR’s erroneous interpretation that Federal Rule of Civil Procedure
26(a)(2)(B) does not require Mr. Reiling—when designated as a rebuttal expert
witness—to disclose a written report, has delayed the progression of this case
even further.
Because the district court’s discovery deadlines have passed, this court
recommends to the district court that the discovery deadlines be extended to
allow Gene Reiling and Peter Hildebrand to be designated and deposed as expert
witnesses. The court will order that Lead GHR generate and serve the written
report of its expert witness, Mr. Reiling, on American States within fourteen days
of this order. The court further orders that American States generate and serve
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the written report of its rebuttal expert witness, Peter J. Hildebrand, within
fourteen days of receiving service of Mr. Reiling’s written report. Additionally,
the court orders, if consistent with the district court’s scheduling order, that the
deposition of both Mr. Reiling and Mr. Hildebrand be taken within thirty days of
Lead GHR receiving service of Mr. Hildebrand’s written report. (Mr. Reiling’s
deposition could be taken as soon as American States is served with his written
report.)
Assuming American States is timely served with Mr. Reiling’s forthcoming
written report, the court discerns that the primary harm suffered by American
States, as a result of Lead GHR’s insufficient and untimely expert witness
disclosure, is economic in nature. Murphy v. Kmart Corp., No. 07-5080-KES,
2009 WL 1617477, *at 7 (D.S.D. June 9, 2009). In order to mitigate this harm,
Lead GHR is responsible for all costs associated with the re-taking of
Mr. Reiling’s deposition as an expert witness. These costs include court
reporter fees, expert witness fees in connection with the deposition, and the costs
incurred by American States’ counsel for lodging and travelling to and from the
deposition. Id. (citing Magelky v. BNSF Ry. Co., No. 1:06-CV-025, 2008 WL
281778, at *2 (D.N.D. Jan. 29, 2008) (imposing the burden of paying for the costs
of deposing expert witnesses, including court reporter fees and the fees charged
by the treating physicians’ to attend the deposition, on the party that failed to
disclose its experts’ written reports in accordance with Federal Rule of Civil
Procedure 26(a)(2)(B)). However, American States’ is still responsible for its own
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attorney’s fees. Id. (citing Jochims, 144 F.R.D. at 356 (imposing deposition
costs on the party that failed to adhere to the district court’s scheduling order,
while continuing to require the opposition to pay its own attorney’s fees).
CONCLUSION
In accordance with the above discussion, it is hereby
ORDERED that American States Insurance Company’s motion to strike
[Docket No. 25] be denied in its entirety. It is further
RECOMMENDED that the district court extend the scheduling deadlines
to allow for the below-described expert discovery to take place. It is further
ORDERED that Lead GHR Enterprises, Inc. be granted leave to designate
Gene Reiling as an expert witness within fourteen (14) days from the date of this
opinion. Lead GHR must turn over all required reports and other data and
documents as set forth in the district court’s scheduling order at the time of its
designation of Mr. Reiling. It is further
ORDERED that American States Insurance Company be granted leave to
designate Peter Hildebrand as an expert witness within fourteen (14) days after
receiving the report and other required data concerning Mr. Reiling. American
States must turn over all required reports and other data and documents as set
forth in the district court’s scheduling order at the time of its designation of
Mr. Hildebrand.

It is further

ORDERED that the depositions of Mr. Reiling and Mr. Hildebrand be
completed no later than thirty (30) days from the date Lead GHR is served with

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Mr. Hildebrand’s expert report if such discovery is consistent with the district
court’s scheduling order. It is further
ORDERED that Lead GHR Enterprises, Inc. pay to American States the
following costs associated with re-deposing Gene Reiling: court reporter and
transcription fees, expert witness fees in connection with the deposition, and the
reasonable cost of travel and lodging incurred by counsel for American States
Insurance Company in travelling to and from the deposition.
NOTICE OF RIGHT TO APPEAL
Pursuant to 28 U.S.C. § 636(b)(1)(A), any party may seek reconsideration
of this order before the district court upon a showing that the order is clearly
erroneous or contrary to law. The parties have fourteen (14) days after service of
this order to file written objections pursuant to 28 U.S.C. § 636(b)(1)(A), unless
an extension of time for good cause is obtained. See FED. R. CIV. P. 72(a); 28
U.S.C. § 636(b)(1)(A) (2006). Failure to file timely objections will result in the
waiver of the right to appeal questions of fact. See FED. R. CIV. P. 72(a).
Objections must be timely and specific in order to require review by the district
court. See Thompson v. Nix, 897 F.2d 356 (8th Cir. 1990) (per curiam); Nash v.
Black, 781 F.2d 665 (8th Cir. 1986).
Dated March 25, 2014.
BY THE COURT:
/s/

Veronica L. Duffy

VERONICA L. DUFFY
UNITED STATES MAGISTRATE JUDGE
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