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Fox v. Admiral Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

November 2, 2016

Ray A. Fox, by and through his guardian, Rose Fox, Plaintiff,
v.
Admiral Insurance Co., Defendant.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah, United States District Judge

         Plaintiff Ray Fox moves to bar defendant Admiral Insurance Co.'s expert William Cormack, and Admiral moves to bar Fox's expert Allan Windt. The parties offer these experts to opine on Admiral's good or bad faith in its approach to settlement of the underlying litigation. See generally [153]. For the following reasons, Fox's motion to bar William Cormack is granted in part and Admiral's motion to bar Allan Windt is granted in part.[1]

         I. Legal Standards

         The district court has a gatekeeping obligation to ensure that expert testimony is both relevant and reliable. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999). Under Federal Rule of Evidence 702, an expert witness qualified by “knowledge, skill, experience, training, or education” may testify if the expert's specialized knowledge will help the trier of fact, if the testimony is based on sufficient facts or data, and if the testimony is based on a reliable methodology. Before admitting expert testimony, a court must determine: 1) whether the witness is qualified; 2) whether the expert's methodology is reliable; and 3) whether the testimony will assist the trier of fact to understand the evidence or to determine a fact in issue. Myers v. Illinois Cent. R.R. Co., 629 F.3d 639, 644 (7th Cir. 2010). The proponent bears the burden of demonstrating by a preponderance of the evidence that the expert's testimony satisfies this standard. Lewis v. CITGO Petroleum Corp., 561 F.3d 698, 705 (7th Cir. 2009) (citing Fed.R.Evid. 702, Advisory Comm. Note).

         II. Analysis

         A. Admiral's Expert

         Cormack is an attorney with nearly 50 years of experience in insurance litigation and the insurance industry. Admiral offers Cormack as an expert on insurance industry custom and practice, arguing that Cormack's testimony would assist the jury in determining whether Admiral breached its duty to settle the underlying litigation by declining various settlement offers from Fox. Fox does not dispute Cormack's qualifications but contends that Cormack's anticipated testimony consists of legal conclusions regarding the insurance policies, which contradict the court's summary judgment rulings. Admiral responds that Cormack is qualified to testify and that his opinions merely reflect “industry custom and practice” on coverage.

         Cormack's report similarly states that his opinions on the reasonableness of Admiral's coverage positions are based on “industry custom and practice” and on how claims are “properly” handled by insurers. But Cormack construes various provisions of the insurance policies and explains available coverage (in his view), based on these contractual interpretations and on the allegations and rulings in the underlying litigation. See [173-1] at 155-75. Cormack opined that personal injury coverage (including civil rights violations) applied to Dr. Peters and Nurse Becker (in addition to Wexford); that professional services coverage did not apply because Fox did not allege a medical malpractice claim; that only one policy year applied and limits could not be stacked, meaning that only one $3 million limit was in play. [173-1] at 155-75. These opinions directly conflict with the court's rulings that: professional services coverage was available to Wexford, Dr. Peters, and Nurse Becker but that Dr. Peters and Nurse Becker were excluded from personal injury coverage; personal injury and professional services coverage applied to Fox's claim; multiple policy years were triggered and coverage could be stacked for more than $3 million. [153] at 12-26.

         Legal conclusions are not appropriate topics of expert testimony. An expert witness may not testify simply regarding his reading of a contract, RLJCS Enterprises, Inc. v. Professional Benefit Trust Multiple Employer Welfare Benefit Plan & Trust, 487 F.3d 494, 498 (7th Cir. 2007), and “expert testimony as to legal conclusions that will determine the outcome of the case is inadmissible.” Good Shepherd Manor Found., Inc. v. City of Momence, 323 F.3d 557, 564 (7th Cir. 2003). While Admiral maintains that Cormack is well-qualified to offer these opinions based on his experience in the industry, his qualifications are not at issue, and placing the phrase “based on industry custom and practice” before statements derived from legal interpretation of contracts does not make them admissible. None of the authority cited by Admiral permits an expert to testify as to their interpretation of insurance policies at issue, especially an erroneous interpretation.[2]Cormack may not offer testimony on these legal conclusions.

         Admiral argues that Cormack's testimony should be admissible because the reasonableness of Admiral's coverage positions should be an issue for the jury, citing to Stevenson v. State Farm Fire & Casualty Co., 257 Ill.App.3d 179, 184 (1st Dist. 1993). After a bench trial on a bad faith claim, judgment in that case was entered in favor of the insurer because its refusal to settle was not unreasonable, in part because coverage was fairly debatable. Stevenson, however, did not involve expert testimony at all, much less expert testimony interpreting insurance policies.

         In rebuttal to Fox's (now withdrawn) expert Driscoll, Cormack also offered the opinion that there was no conflict of interest between Admiral and Wexford in the underlying litigation. [173-1] at 175-78. Driscoll opined that Admiral should have recognized a conflict of interest between Wexford's interests and Dr. Peters and Nurse Becker's interests, although they were all represented by the same trial counsel. Now that Driscoll is not testifying at trial, it is unclear whether Admiral still seeks to introduce this opinion from Cormack. Fox argues, without citing authority, that whether Admiral engaged in a conflict of interest is a legal determination. Admiral did not respond to this argument, and it is Admiral's burden to prove the admissibility of Cormack's expert testimony. Admiral has not done so. See Lewis, 561 F.3d at 705. Cormack's opinions on conflicts of interest are inadmissible.

         Cormack may not opine on Admiral's reasonableness as a function of any legal conclusion concerning policy limits or insurance-contract interpretation. The ultimate opinions in his report cannot be separated from these legal conclusions, and so he may not offer them. But he may provide insight into industry custom and practice, and such testimony would be helpful to the jury, particularly to place Admiral's conduct in a context within which to judge its reasonableness. For example, an explanation of why the July 2012 settlement offer was unusual and placed pressure on multiple insureds in a manner that could compromise an insurance company's interests would be relevant. Testimony concerning the role that insureds play in requesting that their insurance company accept settlement offers would also be relevant. Testimony that insurance companies ought to evaluate settlements in light of policy limits (without opining on what the limits were in this case) may be offered. In general, testimony concerning the type of considerations that ordinarily, as part of the industry practice, factor into a company's decision to settle may be offered, but Cormack's application of those considerations to Admiral may not be offered because his methodology is too entwined with inadmissible legal opinions.

         B. Fox's Expert

         Fox offers Windt, an attorney with 30 years of experience in insurance coverage, to opine that Admiral acted unreasonably in rejecting Fox's settlement offers. Admiral argues that Windt impermissibly opines on insurers' legal obligations, interprets the insurance policies as to the coverage available to Wexford (and Dr. Peters and Nurse Becker), interprets the policies' anti-stacking provisions, and opines on the availability of contribution or indemnity in the underlying action. Fox does not directly address these assertions other than to respond that Windt did ...


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