Expert Article Library

Expert Testimony In Insurance Coverage And Bad Faith Cases

by Charles M. Miller, Esq.

By Charles M. Miller, Esq. Email:

In its March 23, 1999 decision in Kumho Tire et al v. Carmichael, et al. No.97-1709 (March 23, 1999), the U.S. Supreme Court extended Daubert v. Merrell DowPharmaceuticals, Inc. 509 U.S. 579 (1993) to testimony provided by allexpert’s in federal court. This decision may have important implications for experttestimony in insurance coverage and bad faith cases.

In Kumho Tire the Court held that the trial court’s gatekeeping functionwith regard to the reliability of expert testimony applied not only to scientifictestimony, but also to all expert testimony. In so doing the Court held that the trialcourt, in its gatekeeping role, may not only consider the Daubert factors todetermine the reliability of expert testimony, but may also apply other factors bettersuited for the particular case before it.

The objective, according to the Court, "is to make certain that an expert, whetherbasing testimony upon professional studies or personal experience, employs in thecourtroom the same level of intellectual rigor that characterizes the practice of anexpert in the relevant field."

Applying these standards to the case before it, the Court found that defendant’sexpert’s testimony was not reliable. That expert testified the the cause of a tireblowout was a defect in the tire. Although the Court found several reasons to doubt theexpert’s reliability, what appears to have impressed the court the most was theexpert’s subjectiveness. Indeed, the court noted that there were no articles orpapers which supported the expert’s methodology or opinion.

This decision may have a significant impact on expert testimony in insurance coverageand bad faith cases both in federal and state court. Expert opinion testimony is oftenrequired in bad faith cases to establish that the insurer’s claims handling did ordid not fall within the custom and practice in the insurance industry. (See Neal v.Farmers Ins. Exch. (1978) 21 C3d 910, 924) Frequently, former claims adjusters ormanagers are called upon to provide this testimony. This testimony is often based on theexperience and training of the expert. It is this same testimony that may now be open tochallenge under Kumho Tire.

Under Kumho Tire testimony of an expert based solely on experience and trainingmay not be enough. Such testimony may be construed, as the Court did in Kumho Tire,as simply too subjective. Insurance coverage and bad faith experts may have to point tospecific standards, publications and papers, which support their opinions. Such standards,to name just a few, may be found in the model Unfair Claims Practices Act, the states ownUnfair Claims Practices Act and its implementing regulations, publications or otherwritten materials, and possibly even the conduct of other insurers in the same case.

Although Kumho Tire applies only to federal courts, its admonitions could be picked upat the state trial court level. Some states have adopted the Daubert standard, andcan be expected to extend Daubert (if they haven’t already done so) to allexpert testimony. As for those states which have not adopted Daubert, trial judgesmay now be more emboldened to examine the qualifications of experts.

For example, California courts have adopted the Kelly-Frye test for determiningthe admissability of scientific evidence. (See Frye v. United States (D.C. Circ.1923) 293 Fed. 213, and People v. Kelly (1976) 17 Cal.3d 24). However, it hasrecently been held that Kelly-Frye only applies to scientific evidence (Peoplev. Ward (4th Dist. April 13, 1999) No. E020993 ("Kelly-Fryeapplies to cases involving novel devices or processes."). Ward now raises thesame question raised by Daubert: What test applies to the admissability ofnonscientific evidence?

The Ward court has given some quidance on what factors should be considered indetermining the admissability of nonscientific expert testimony. These include theexpert’s experience; the closeness of the expert’s expertise to theexpert’s opinion; and whether the expert followed accepted methodologies to reachhis/her conclusions. (Id.) Applied to expert testimony in insurance coverage or badfaith cases, it may be concluded that an expert’s testimony must (1) be based onsufficient experience to permit the expert to offer an opinion, (2) that the expert’stestimony be limited to the expert’s field of expertise (e.g. testimony regardinginsurance claims handling should be limited to those expert’s with a background inhandling insurance claims, rather than with a background in such areas as insuranceunderwriting), and (3) the expert must have reviewed the types of materials an expert oninsurance coverage and bad faith would usually review for the purposes of offering anopinion (i.e. the claims file, the policy, claims manuals, and so forth).

It would appear that the Ward factors may be less demanding than those appliedto nonscientific expert testimony pursuant to Kumho Tire. For example, Warddoes not appear to be concerned with whether the expert bases his/her opinion on theleading literature in the expert’s field. Indeed, the court in Ward expresslystated that the failure of a proferred expert to follow the diagnostic models in a leadingtext in the expert’s field was not a reason to exclude his testimony.(Id.) Theadmissability of an expert’s opinion under Kumho Tire may reach a differentresult.

The entire picture will not be known until there are additional appellate courtdecisions on how Kumho Tire will apply to expert testimony in insurance coverageand bad faith cases. Those decisions, both on a state and federal level, will hopefullyprovide more specific quidance on how Kumho Tire will apply in the federal courtsand in those states which have adopted Daubert. As for states which have notadopted Daubert, such as California, future decisions should determine whether thestricter Kumho Tire standards will be added to the standards for the admissabilityof nonscientific expert testimony already in use. In the meantime however, we can andshould expect more frequent challenges to expert testimony in insurance coverage and badfaith cases, and counsel presenting such testimony should be prepared for such challenges.