United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Z. Lee United States District Judge
September 2002, Blue Moon Lofts Condominium Association
(“Blue Moon”) sued The Structural Shop, Ltd.
(“TSS”) and others in the Circuit Court of Cook
County for damages related to allegedly defective condominium
improvements. Blue Moon eventually obtained a default
judgment against TSS. And TSS's insurer, Essex Insurance
Company (“Essex”), refused to indemnify TSS for
the judgment. Blue Moon then settled its claims against TSS,
and in doing so, received an assignment of TSS's rights
in its insurance policy with Essex.
initiated this action against TSS and Blue Moon, seeking a
declaratory judgment that it has no duty to indemnify TSS for
the Cook County default judgment. In turn, Blue Moon has
asserted a counterclaim for a declaratory judgment to the
contrary and has asserted a number of affirmative defenses,
including that Essex should be estopped from denying
coverage, that Essex waived its right to assert coverage
defenses, and that its refusal to settle Blue Moon's case
against TSS constituted bad faith. In support of its
affirmative defenses, Blue Moon has proffered the expert
testimony of Olie R. Jolstad. In response, Essex has provided
its own expert, William T. Cormack.
side has moved to bar the other's expert, and for the
reasons that follow, the motions   are granted in
part and denied in part.
admissibility of expert testimony is governed by Federal Rule
of Evidence (FRE) 702 and the Supreme Court's seminal
decision in Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993). See United States v.
Parra, 402 F.3d 752, 758 (7th Cir. 2005) (“At this
point, Rule 702 has superseded Daubert, but the
standard of review that was established for Daubert
challenges is still appropriate.”). FRE 702 permits
testimony by an expert-i.e., someone with the
requisite “knowledge, skill, experience, training, or
education”-to help the trier of fact “understand
the evidence or [ ] determine a fact in issue.”
Fed.R.Evid. 702. An expert witness is permitted to testify
when (1) “the testimony is based on sufficient facts or
data, ” (2) “the testimony is the product of
reliable principles and methods, ” and (3) the expert
“has reliably applied the principles and methods to the
facts of the case.” Id.
tasks the district court with serving as the evidentiary
gatekeeper, ensuring that FRE 702's requirements of
reliability and relevance are satisfied before allowing the
finder of fact to hear the testimony of a proffered expert.
See Daubert, 509 U.S. at 589; see also Kumho
Tire Co. v. Carmichael, 526 U.S. 137, 147- 49 (1999).
District courts have broad discretion in determining the
admissibility of expert testimony. See Gen. Elec. Co. v.
Joiner, 522 U.S. 136, 142 (1997); Lapsley v. Xtek,
Inc., 689 F.3d 802, 810 (7th Cir. 2012).
deciding whether to admit expert testimony, district courts
employ a three-part framework, ascertaining whether: (1) the
expert is qualified by knowledge, skill, experience,
training, or education; (2) the reasoning or methodology
underlying the expert's testimony is reliable; and (3)
the expert's testimony will assist the trier of fact in
understanding the evidence or determining a factual issue.
See Bielskis v. Louisville Ladder, Inc., 663 F.3d
887, 893-94 (7th Cir. 2011). The proponent of the expert
bears the burden of demonstrating that the expert's
testimony satisfies the Daubert standard by a
preponderance of the evidence. Lewis v. CITGO Petroleum
Corp., 561 F.3d 698, 705 (7th Cir. 2009).
while “[a]n opinion is not objectionable just because
it embraces an ultimate issue, ” Fed.R.Evid. 704,
expert opinions that “merely tell the jury what result
to reach” are inadmissible, id. 1972 advisory
committee notes. Moreover, “Rule 704 . . . does not
provide that witnesses' opinions as to the legal
implications of conduct are admissible.” United
States v. Baskes, 649 F.2d 471, 479 (7th Cir. 1980);
see also Haley v. Gross, 86 F.3d 630, 645 (7th Cir.
1996) (suggesting that it would be “improper”
for an expert witness to “tell the jury why the
defendants' conduct was illegal” or “testify
regarding the dictates of [the] law”). Accordingly,
“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). Experts “cannot
testify about legal issues on which the judge will instruct
the jury.” United States v. Sinclair, 74 F.3d
753, 758 n.1 (7th Cir. 1996).
Olie R. Jolstad
seeks to exclude the testimony of Blue Moon's expert,
Olie R. Jolstad. Blue Moon proffers Jolstad's testimony
as “permissible opinions on the insurance industry
standards involved in the underlying matter.” Blue
Moon's Resp. Essex's Mot. Bar 2, ECF No. 127.
Specifically, Jolstad's report contains three opinions:
(1) “Essex failed to promptly and thoroughly
investigate the claim/underlying lawsuit”; (2)
“Essex knew, or should have known, consistent with
industry custom and practice that it needed to promptly issue
a reservation of rights (ROR), and/or file a declaratory
action. It's [sic] failure to do so caused
prejudice to TSS”; (3) “Essex engaged in unfair
claims handling practices and/or breached its duty by failing
to settle or negotiate a settlement of the case, and/or to
advise its insured of the risk and consequences of not
settling the case. This unreasonable delay and conduct was
prejudicial to TSS.” Essex's Mem. Supp. Mot. Bar,
Ex. A (“Jolstad Report”), at 9, 13, 16, ECF No.
124-1. Jolstad supports these general opinions with
additional opinion testimony, as discussed in greater detail
seeks to bar all of Jolstad's testimony, arguing in
pertinent part that “[t]he proffered opinions usurp
this Court's role in deciding the legal standards which
govern this case, and, should this matter proceed to trial,
would usurp the jury's role in deciding the ultimate
legal and factual questions.” Id. at 3. For
its part, Blue Moon counters that Jolstad's opinions
“are not legal opinions, nor do they provide
conclusions on the ultimate issues, ” but instead
discuss relevant customs, practices, and standards in the
insurance industry. Blue Moon's Resp. Essex's Mot.
Bar at 2.
reviewed Jolstad's report, the Court concludes that his
testimony consists of some of both. Accordingly, while the
Court will not permit Jolstad to testify as to the law that
governs this case or the legal implications of Essex's
conduct, it will permit Jolstad to testify as to customs,
practices, and standards in the insurance industry and
whether Essex's conduct met those standards. Fed.
Ins. Co. v. Arthur Andersen, LLP, No. 1:03CV01174, 2006
WL 6555232, at *3 (N.D. Ill. Jan. 18, 2006) (explaining that
“[e]vidence relating to the insurance industry's
custom and practice of claims handling” is relevant and
helpful to the jury, but barring testimony “as to the
ultimate issues of whether [an insurer] breached its
duty”); see also Kearney v. Auto-Owners Ins.