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McElgunn v. Cuna Mutual Group

May 31, 2009

SHARON MCELGUNN, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF TERI POWELL, PLAINTIFF,
v.
CUNA MUTUAL GROUP; CUNA MUTUAL LIFE INSURANCE COMPANY; AND CUNA MUTUAL INSURANCE SOCIETY, DEFENDANTS.



The opinion of the court was delivered by: Karen E. Schreier Chief Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO LIMIT TESTIMONY OF PLAINTIFF'S RETAINED EXPERT GARY FYE

Defendants move to bar and/or limit testimony of plaintiff's retained expert, Gary T. Fye. Plaintiff opposes the motion. The motion to limit Fye's testimony is granted in part and denied in part.

DISCUSSION

Trial courts are given broad discretion in fulfilling their role as gatekeepers to insure that proffered expert testimony is both relevant and reliable. Wagner v. Hesston Corp., 450 F.3d 756, 758 (8th Cir. 2006). Further, district courts have great latitude in determining whether expert testimony meets the reliability requisites of the rule governing admissibility of such testimony. First Union Nat'l Bank v. Benham, 423 F.3d 855, 861 (8th Cir. 2005). To be admitted under Rule 702, expert testimony must meet three prerequisites. Lauzon v. Senco Prods., 270 F.3d 681, 686 (8th Cir. 2001).

First, evidence based on scientific, technical, or other specialized knowledge must be useful to the finder of fact in deciding the ultimate issue of fact. This is the basic rule of relevancy. Second, the proposed witness must be qualified to assist the finder of fact. Third, "the proposed evidence must be reliable or trustworthy in an evidentiary sense, so that, if the finder of fact accepts it as true, it provides the assistance the finder of fact requires. . . ."

Id.

Moreover, opinion testimony from an expert is not "inadmissible solely because it embraces an ultimate issue to be decided by the trier of fact." Kostelecky v. NL Acme Tool/NL Indus., Inc., 837 F.2d 828, 830 (8th Cir. 1988); Fed. R. Evid. 704(a). The opinion must "assist the trier of fact to understand the evidence or to determine a fact in issue." Kostelecky, 837 F.2d at 829. "Opinions that are phrased in terms of inadequately explored legal criteria or that merely tell the jury what result to reach are not deemed helpful to the jury." United States v. Whitted, 11 F.3d 782, 785 (8th Cir. 1993). A court should exclude expert testimony that is so fundamentally unsupported that it cannot assist the jury. Hose v. Chicago Northwestern Transp. Co., 70 F.3d 968, 974 (8th Cir. 1995). "Doubts regarding whether an expert's testimony will be useful should generally be resolved in favor of admissibility." Sphere Drake Ins. PLC v. Trisko, 226 F.3d 951, 955 (8th Cir. 2000).

Gary Fye is qualified to give an expert opinion. He has been continuously employed with the insurance industry as a claims handler or reviewer since 1962. He has been employed by major insurance companies and as an independent claims handler. He has previously testified as an expert regarding insurance claims practices in both state and federal courts in numerous states.

I. October 23, 2006, Preliminary Disclosures

The court will first address the admissibility of Fye's opinions located within his October 23, 2006, preliminary disclosure. The court notes that this ruling indicates which of Fye's opinions are admissible during his testimony. The preliminary disclosure itself as an exhibit is inadmissible as cumulative of Fye's testimony at trial.

1. Defendants' Wealth

Fye states that "[i]f [he is] asked to testify about the influence of goal setting on claims handling, [he] would explain the relationship between emphasizing lower loss ratio and combined ratio and wrongful claim practices and how they relate to written and earned premium." Docket 392-2 at 10-11. Because goal setting in claims handling is an area of the insurance industry with which the jurors may not be familiar, such information may provide the jury with assistance in understanding the ultimate issues in this case. Fye's testimony is based on his specialized knowledge of the insurance industry and he is qualified to give the opinion. Accordingly, Fye will be allowed to give this opinion.

2. General Principles of Insurance

With respect to Fye's opinions regarding the general principles of insurance, which are contained within his preliminary disclosure, the court finds that an expert is not needed to testify as to the purpose of insurance. First, the jurors, based upon their life experiences and common sense, can form their own opinions as to the purpose of insurance and do not need the assistance of an expert. Second, defendants' advertising material that plaintiff plans to introduce in evidence reveals the purpose of the credit disability insurance policy purchased by Powell. Accordingly, Fye will not be allowed to testify as to his general opinions regarding the purpose of insurance or more specifically, the purpose of credit disability insurance purchased by Powell in this case.

3. Role of Insurance Companies

The court finds that Fye's opinions regarding the role of insurance companies are admissible. Fye opines that insurance industry standards require insurers to adopt and implement systems for the prompt investigation and settlement of claims and to objectively investigate reasons to pay claims, not just reasons that would support denying them. Because Fye is qualified as an expert in the insurance industry, he may testify as to the industry standards and whether defendants complied with those standards. This testimony will assist the jury in understanding what standards the insurance companies must follow. Therefore, Fye may testify as to his opinions regarding the role of insurance companies.

4. The Teri Powell Claim

As an insurance industry expert, Fye is qualified to testify as to insurance industry standards and whether defendants complied with those standards. With regards to the first paragraph, Fye is qualified to testify that Powell became disabled from teaching Spanish due to a combination of physical and emotional conditions. While Fye has no medical training, he is qualified to make a determination as to whether or not Powell was disabled under the terms of the insurance policy, similar to the role of a claims adjuster. Opinion testimony from an expert is not "inadmissible solely because it embraces an ultimate issue to be decided by the trier of fact." Kostelecky v. NL Acme Tool/NL Indus., Inc., 837 F.2d 828, 830 (8th Cir. 1988); Fed. R. Evid. 704(a). The opinion must "assist the trier of fact to understand the evidence or to determine a fact in issue." Kostelecky, 837 F.2d at 829. Opinions that are phrased in terms of inadequately explored legal criteria or that merely tell the jury what result to reach are not deemed helpful to the jury." United States v. Whitted, 11 F.3d 782, 785 (8th Cir. 1993). A court should exclude expert testimony that is so fundamentally unsupported that it cannot assist the jury. Hose v. Chicago Northwestern Trans. Co., 70 F.3d 968, 974 (8th Cir. 1995). "Doubts regarding whether an expert's testimony will be useful should generally be resolved in favor of admissibility." Sphere Drake Ins. PLC v. Trisco, 226 F.3d 951, 955 (8th Cir. 2000).

Fye's testimony as to whether Powell meets the insurance contract definition of disabled will assist the jury because of his extensive knowledge of insurance industry standards and the common language of policies. Because jurors are unfamiliar with insurance industry standards and procedures relating to credit disability claims, Fye's testimony will provide an understanding of those standards and will help demonstrate whether defendants met their standard of care under the law. See TCBY Sys., Inc. v. RSP Co., 33 F.3d 925, 929 (8th Cir. 1994). Thus, the court will allow Fye to explain to the jury what a reasonable insurer would do with regard to Powell's claim. And the remainder of the information contained within the first paragraph are all facts that Fye may properly rely upon in reaching his opinion as to whether defendants acted in bad faith.

With respect to the second and third paragraphs, the court finds that the facts articulated by Fye are facts that he may properly consider in forming his opinion. Accordingly, Fye may testify that he relied on these facts to assist him in forming his opinion in this case.

5. Preliminary Opinions

Fye's first preliminary opinion states that Powell's claim appears to be a covered claim that falls within insurance coverage and that testing the insured's resolve by erecting barriers to the acceptance of the claim is improper. His opinion that defendants' correspondence is less than helpful and appears biased toward non-acceptance of Powell's claim is admissible because this is an opinion he formed by relying on the facts of the case and the standards of the insurance industry.

Fye's second preliminary opinion is admissible for the most part. The only part of the opinion that is inadmissible states that withholding benefits increases financial stress and that CUNA did not use the policy to soften the financial consequences of Powell's disability. These statements address common sense concepts that a jury will understand based on their experience and life experiences. But the rest of the opinion deals specifically with insurance industry standards and whether defendants have complied with those standards and therefore is admissible.

Fye's third preliminary opinion is admissible because it relates to the insurance industry standards and defendants' compliance with those standards.

II. December 21, 2006, First Supplemental Disclosure

The court next addresses the admissibility of Fye's opinions located within his December 21, 2006, first supplemental disclosure. The court notes that this ruling indicates which of Fye's opinions are admissible during his testimony. The first supplemental disclosure report itself is inadmissible as cumulative of Fye's testimony at trial.

1. Defendants' Worth

Fye states that the 2005 CUNA Mutual Group Annual Report indicates that for 2005, the reported figures are $14.574 billion for assets and $1.658 billion for surplus. Docket 392-3 at 2. Fye is not a financial expert. Rather, he is an expert in the insurance industry qualified to testify as to insurance industry standards. Plaintiff may solicit evidence of defendants' wealth and profits from other witnesses and does not need an expert to testify as to defendants' wealth and profits. Accordingly, Fye's opinions as to defendants' wealth as articulated in his first supplemental disclosure are inadmissible.

2. The Teri Powell Claim

As noted above, Fye is an insurance industry expert and therefore is qualified to testify as to insurance industry standards and whether defendants complied with those standards, which includes whether Powell became disabled as defined under the insurance contract from teaching Spanish due to a combination of physical and emotional conditions. Furthermore, the rest of the information contained within the first paragraph includes facts that Fye may properly rely upon in forming his opinion as to whether defendants acted in bad faith. This information includes the fact that Powell bought life and total disability insurance, that medical records of Dr. Berry, Dr. Hill, and Dr. Lawlor documented Powell's condition, and that Powell's status worsened over time.

With respect to the second paragraph, the court finds that Fye may rely on the facts to form his opinions in this case that from 2003 onward Powell remained able to care for animals in other people's homes and make hats; that this work was part time at either a net loss or at minuscule pay levels; and that Powell also did some volunteer work and helped friends. But Fye may not opine that the circumstances show this work was largely a labor of love and like a hobby because this is an opinion outside the scope of Fye's expertise. Fye is an insurance industry expert, not a vocational expert or psychological expert capable of determining the exact nature and intent of Powell's activities. Indeed, Powell is the best person to testify as to whether her ventures were considered work or hobbies.

Regarding the third paragraph, Fye's opinion that attempting to disqualify an insured from total disability benefits because she is capable of some activity tends to thwart the purpose of coverage is proper and admissible. Further, the fact that medical support for Powell's disability claims is supported by the Social Security Administration's and South Dakota Retirement System's findings of disability is information that Fye can properly rely on in forming his opinions in relation to this case.

In relation to the fourth and fifth paragraphs, the court finds that the facts articulated by Fye are facts that he may properly consider in forming his opinion. Accordingly, Fye may testify that he relied on these facts to assist him in forming his opinion in this case.

3. Claim Standards and Practices

This section of Fye's first supplemental disclosure contains ten opinions relating to insurance claim handling. The court finds that all of these opinions are admissible. Fye's testimony will assist the jury because of his extensive knowledge of insurance industry standards. Fye's specialized knowledge of practices within the insurance field and the proper method of handling an insurance claims is relevant, helpful, and admissible as testimony in a bad faith case. See St. Joe Minerals Corp. v. Occupational Safety and Health Admin. Review Comm'n, 647 F.2d 840, 845 n.8 (8th Cir. 1981) (evidence of industry standards made the existence of an unreasonably dangerous condition more or less probable). Because jurors are unfamiliar with insurance industry standards and procedures relating to insurance claims, Fye's testimony will provide an understanding of those standards and will help demonstrate whether defendants met their standard of care under the law. See TCBY Sys. Inc., 33 F.3d ...


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