Free Response to Motion - District Court of Arizona - Arizona

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Richard T. Treon (No. 002064) TREON AGUIRRE & NEWMAN, P.A. 2700 N. Central Avenue, Suite 1400 Phoenix, Arizona 85004-1133 Telephone: (602) 285-4400 Facsimile: (602) 285-4483 Daniel B. Treon (No. 014911) Douglas G. Shook (No. 005950) Stephen E. Silverman (No. 016757) TREON & SHOOK, P.L.L.C. 2700 N. Central Avenue, Suite 1000 Phoenix, Arizona 85004-1133 Telephone: (602) 265-7100 Facsimile: (602) 265-7400 Attorneys for Defendants/Counterclaimants

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA AMERICAN FAMILY INSURANCE COMPANY, Plaintiff/Counterclaim Defendant, v. ROBERT and JOY DUNN, Defendants/Counterclaimants. NO. CV2003-1277 PHX SRB

DEFENDANTS' RESPONSE TO PLAINTIFFS' MOTION IN LIMINE RE LEGAL OPINIONS AND CONCLUSIONS

Defendants/Counterclaimants Robert and Joy Dunn (the "Dunns"), through undersigned counsel, hereby respond to Plaintiffs' Motion in Limine Re Legal Opinions and Conclusions. The Dunns agree that pure legal conclusions are not an

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appropriate topic for expert opinion testimony. The Dunns also agree that there are
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a few statements in the written report of its insurance claims processing expert Charles Miller ("Miller") that express legal conclusions, especially when taken out of

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context. Miller will offer opinion testimony based on his expert knowledge of generally-accepted insurance claim handling practices. This is a subject upon which Miller has significant expertise based on his twenty years of experience working for Fireman's Fund Insurance Company, starting as a claims representative, promoted to senior claims representative, then promoted to branch office general adjuster and finally reaching the position of director of claims at the home office from 1986-1990. Miller graduated from law school in 1990, and his legal practice has focused on insurance law litigation. A. Expert Testimony Regarding Bad Faith is Admissible.

At trial, Miller will only offer opinions regarding American Family's conduct in
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the investigation and processing of the Dunns' insurance claim as it relates to standards of conduct that are generally recognized in the insurance industry. Generally accepted insurance industry practices is a subject outside the common knowledge of a lay jury. Federal and state courts across the country have

recognized that expert testimony on the reasonabless of an insurance company's conduct under generally accepted standards of practice is an appropriate subject of expert testimony under Rules 702 and 703 of the Federal Rules of Evidence, and

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similar state court rules. In Peckham v. Continental Casualty Ins. Co., 895 F.2d 830, 837 (1st Cir. 1990)

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the court approved of the defendant's use of two expert witnesses to offer opinions regarding the insurer's alleged bad faith and its causal connection to the plaintiff's

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alleged damages. The court recognized that: Insurance is a complicated subject and the industry, over time, has developed a patina of custom and usage. Arcana abound. Defendant's proffered experts could reasonably be expected to shed some light in a shadowy domain. Id. See also McNally v. Nationwide Ins. Co., 815 F.2d 254, 258 (3rd Cir. 1987) ("Both parties called expert witnesses to give their opinion on whether Nationwide acted unreasonably or in bad faith"); Ford v. Allied Mut. Ins. Co., 72 F.3d 836, 841 (10th Cir. 1996) (insurer's expert testimony regarding the issue of bad faith "was allowable in order to show the basis upon which Allied had declined payment under the UIM

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provisions of [the plaintiff insured's] policy"). Similarly, in Clearwater v. State Farm Mut. Ins. Co., 161 Ariz. 590, 595, 780 P.2d 423, 428 (App. 1989), the plaintiff called an attorney expert at trial who gave the opinion that State Farm's failure to settle a claim within policy limits constituted bad faith. State Farm argued that the attorney witness lacked specific knowledge of State Farm's procedures and practices and was incompetent to testify as to whether State Farm committed bad faith. Id. The court disagreed, holding that the

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trial court did not err when it allowed plaintiff's expert to give him opinion that State Farm had committed bad faith. Id. Also instructive is Neal v. Farmers Ins.

Exchange, 582 P.2d 980 (Cal. 1978), wherein the defendant insurer objected to the plaintiff's introduction of expert opinion testimony from two attorneys who testified
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that Farmers had acted in bad faith in failing to properly investigate and pay the plaintiff's insurance claim. In upholding the trial court's admission of the expert

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opinions on bad faith, the Neal court made the following observations: We can conceive of many ways in which a lay jury, in assessing the conduct and motives of an insurance company in denying coverage under its policy, could benefit from the opinion of one who, by profession and experience, was peculiarly equipped to evaluate such matters in a context of similar disputes. Id. At 993-94. See also Safeco Ins. Co. v. Ellinghouse, 725 P.2d 217, 224 (Mont. 1986) (holding that "[w]e find no abuse of discretion in allowing attorneys to appear as expert witnesses for the purpose of stating their opinion on an insurer's duty to evaluate the facts, on what constitutes a reasonable evaluation of the facts, or on how an insurer should have approached the negotiations with the plaintiff"). In Heyden v. Safeco Title Ins. Co., 498 N.W.2d 905, 919 (Wis. App. 1993), the court went so far as to hold that it was mandatory that the plaintiffs present expert testimony regarding the reasonableness of the insurance company's conduct in their bad faith case. The court held that the question of what a reasonable insurer would have done under the particular facts and circumstances was "a matter beyond the ken of the ordinary juror and, therefore, required expert testimony." Id. The Wisconsin Supreme Court later limited the Heyden holding, ruling that expert testimony is not essential to every bad faith case. Weiss v. United Fire & Casualty

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Co., 541 N.W.2d, 753, 759 (Wis. 1995). The Weiss court agreed, however, that a plaintiff would be required to introduce expert testimony to establish a prima facie

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case for bad faith if the trial court found that "an insurer's alleged breach of its good faith duty involves `unusually complex or esoteric' matters beyond the ken of an

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average juror." Id. Miller cannot be precluded from testifying to his opinion that certain aspects of American Family's handling of the Dunn's claim were unreasonable under the circumstances. It is true that the jury will ultimately decide whether American Family's conduct satisfies the Court's instructions as to the essential elements of a bad faith claim. Rule 704 of the Federal Rules of Evidence, however, makes it very clear that "testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact." B. Miller is Qualified as an Expert

As stated above, Miller has approximately twenty years of experience in claims adjusting. Miller also has almost fifteen years of experience in insurance litigation. In addition to having lived his professional life in the claims adjustment world of insurance practices, Miller is also a licensed attorney whose practice focuses solely on insurance matters. Miller's education and experience are more than enough to qualify him as an expert. Rule 702, Federal Rules of Evidence provides:

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If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise,
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if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

"Rule 702 contemplates a broad conception of expert qualifications." Hangarter v. Provident Life and Accident Insurance Co., 373 F.3d 998, 1015 (9th Cir. 2004) (quoting Thomas v. Newton Int'l Enters., 42 F.3d 1266, 1269 (9th Cir. 1994)). "Moreover, `the advisory committee notes emphasize that Rule 702 is broadly phrased and intended to embrace more than a narrow definition of qualified expert." Id., (citing Thomas and Rule 702, Federal Rules of Civil Procedure). Based on the witness' experience and education regarding "insurance policy law and disability policy language... participation in round tables in which Provident employees discussed terminating disability policies... familiar[ity] with insurance policy ethics from educational and practical experience," Hangarter found the witness qualified as an expert. Id. at 1018-19. Miller's alleged lack of experience in Arizona goes to his credibility, not the admissibility of his testimony. "The failure of the expert to be familiar with a statutory definition or standard effects his credibility, not his qualifications to testify. Ellis v. KLan Co., Inc., 695 F.2d 157, 161 (5th Cir. 1983). "It is not necessary that the witness have the highest possible qualifications or highest degree of skill or knowledge;

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rather, it is merely sufficient that the witness have a skill and knowledge superior to that of persons in general." Good v. City of Glendale, 150 Ariz. 218, 220, 722 P.2d

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386, 388 (App. 1986). See also Kannakeril v. Terminix International, Inc., 128 F.3d 802 (3rd Cir. 1997) ("Rule 702, which governs the admissibility of expert testimony, has a liberal policy of admissibility."). Finally, it is cynical and disingenuous for American Family to challenge the admissibility of Miller's testimony based on Miller's qualifications, because American Family's expert, Steven Plitt, has no experience in adjusting claims, although he worked for his father's insurance brokerage company when he was young. Plitt's only experience regarding claims adjusting is as an attorney advising insurance companies. C. Conclusion

Miller will not offer opinion testimony as to what the law of bad faith is or should be, but must be allowed to offer expert opinions regarding American Family's

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conduct based on his expert knowledge of insurance industry standards of practice. Miller is well qualified to offer his opinion, and American Family has the right to challenge Miller's credibility on cross-examination. RESPECTFULLY SUBMITTED this 22nd day of September, 2005. TREON, AGUIRRE & NEWMAN, P.A. By: s/Richard T. Treon Richard T. Treon, Esq. 2700 North Central Avenue, Suite 1400 Phoenix, Arizona 85004

and
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TREON & SHOOK, P.L.L.C.
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By:

s/Stephen E. Silverman Daniel B. Treon Douglas Shook Stephen E. Silverman 2700 North Central Avenue, Suite 1000 Phoenix, Arizona 85004

Attorneys for Defendants/Counterclaimants ORIGINAL of the foregoing electronically filed this 21st day of September, 2005, with: U.S. District Court Clerk COPY hand delivered this 21st day of September, 2005, to: The Honorable Susan R. Bolton United States District Court By: s/Laura L. Quesada

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