Alaska District Court Limits Insurance Expert’s Testimony  

In the spring of 2018, a building that Plaintiff, Tundra Mountain Holdings, LLC owned allegedly “suffered damages consisting of building roof failure due to snow load.” Plaintiff subsequently submitted a insurance claim to the Defendant, Markel Insurance Company. As per the report of Planning, Design & Compliance Engineers, it was recommended that snow guards be installed as a “life-safety concern” and that all 28 rafters be replaced with new beams but the recommendation of Planning, Design & Compliance Engineers did not state that replacing all 28 rafters was required by any law or ordinance nor was there any mention of replacing the metal roof on the building or anything about the water system or sprinkler system. 

Seim Construction’s proposal for estimate of repair based on the report submitted by Planning, Design & Compliance Engineers was for $687,500. Defendant only paid “$117,406.78” on Plaintiff’s claim because Defendant contended that the $687,500 repair estimate included upgrades that were not required by “ordinance or law.” Defendant subsequently sent Plaintiff a Reservation of Rights Letter stating that Plaintiff’s insurance policy excluded coverage for defective designs which in this case was the roof, the loss or failure of which was due to poor construction and not due to the alleged weight of ice and snow. 

Plaintiff subsequently commenced this action on April 02, 2020 asserting a breach of contract claim, a tortious bad faith claims handling claim, and a breach of the covenant of good faith and fair dealing claim.  

Insurance Claims and Accounting Expert Witness

Plaintiff offered the testimony of Elliott S. Flood J.D., M.P.A to opine on insurance industry customs, practices, and standards. Elliott S. Flood  has over 30 years of experience in the insurance industry and has “worked as an investigator and defense attorney for major insurers, as well as insureds” and “as an executive for an insurance company” serving as “vice president of special investigations” and then as “senior vice president of internal audit.” 

Defendant filed a motion to exclude some of his opinions. 

Discussion by the Court 

Flood opined that the amount of the bid from Seim Construction to repair to minimum code requirements was $687,500 and that Defendant’s payment of $117,406.78 did not meet the minimum code requirements to repair the losses. Flood also opined that Defendant lacked reasonable basis to exclude paying for the cost of repairs necessary to rebuild as per the minimum current building codes requirements as reflected in the Seim proposal.

The Defendant called into question Flood’s expertise to render opinions related to Seim Construction’s bid, repair costs, building codes, and insurance contract interpretation because he is not a certified engineer or architect and he has no expertise in construction, renovation, or restoration of a commercial building. Flood also had no expertise in the application of the building codes or ordinances that applied at the relevant time. By Flood’s own admission, he lacked expertise in building codes and specifically only dealt with the general concepts of insurance and what they meant. 

At his deposition, Flood testified that this case was a straightforward adjuster issue of building back to the code standards which involved meeting minimum requirements for repairing the loss that might imposed by the code. Defendant argued Flood’s lack of expertise in building codes made him unqualified to opine on whether Seim’s proposal adhered to legal requirements. His opinions on such issues therefore lacked a reliable basis. 

Flood opined on the defective design exclusion. He contended that even if there was a flawed design, coverage wouldn’t be negated if a covered peril caused the loss, like collapse due to snow weight. Flood argued that Potter’s theories of the defective design exclusion were unsupported and criticized the Defendant’s decision to send a Reservation of Rights stating the loss or partial failure to the roof was due to poor construction and was not due to the weight of ice and snow letter based on it. Defendant asserted that Flood’s opinions amounted to legal conclusions and thus should be excluded. 

Flood’s evaluation of the Defendant’s net worth was challenged by the Defendant on grounds of relevance but the Court held that the law found it relevant to a jury’s consideration of the amount of punitive damages citing Flood’s background as the former head auditor and Certified Public Accountant with special expertise in insurance accounting. 

The Court granted the motion to exclude regarding the rest of Flood’s opinion, admitting Flood’s testimony only in part. 

The Court also held that Flood opining on:

• the amount of the bid from Seim Construction to repair to minimum code requirements or
• the Defendant’s payment being short of the Seim Construction price, the lowest bid, to re-build back up to code or
• the Defendant lacking reasonable basis to exclude paying for the cost of repairs necessary or
• the defective design not defeating coverage or Potter’s theories being baseless or the Defendant’s lacking reasonable basis to send the Reservation of Rights letter

encroached upon the province of the Court and the jury.  

Held 

The Court admitted Flood’s testimony in part.

Key Takeaways: 

1. Legal Conclusions: An expert witness is expected to examine and analyse the facts of the issues involved based on their training and expertise and opine on matters beyond the understanding of the lay person. Courts always reserve the authority to draw conclusions on matters involving questions of law and the expert is not permitted to breach the province of the Court or the jury. 
2. Qualifications: The expert is not permitted to opine beyond the scope of their qualifications. Due to Flood’s lack of expertise in construction, renovation, or restoration of a commercial building or in the application of the building codes or ordinances applicable at the relevant time, the Court rejected Flood’s testimony regarding the Defendant’s payment being inadequate to cover the cost of repairs as per the minimum code requirements.