Insurance Expert’s Testimony on Market Multiples Range Excluded
Posted on June 27, 2025 by Expert Witness Profiler
The matter before the Court stems from Plaintiff USI Insurance Services LLC’s (“USI”) lawsuit against Defendants Alliant Insurance Services Incorporated (“Alliant”), William J. Havard III, Robert Engles, Jenise Purser, and Justin Walsh (collectively, “Defendants,” or without referring to Alliant, the “Individual Defendants”) relating to allegations that, among other things, they engaged in the improper solicitation of USI’s clients on Alliant’s behalf after resigning from USI.
Defendants filed a motion to exclude certain trial testimony and the opinions of USI’s industry expert witness, Thomas R. Linn.
Insurance Expert Witness
Thomas Richard Linn has extensive experience in the insurance industry, having served as the Executive Vice President of Marsh, Berry & Company, Inc., one of the nation’s largest insurance agency consulting firms. Throughout his 22-year tenure at MarshBerry, Linn advised industry players on financial and organizational development and served as an intermediary to insurance-related mergers and acquisitions totaling more than $2 billion.
Discussion by the Court
Defendants objected to Linn’s testimony concerning (1) certain “market multiples” derived from other undisclosed insurance transactions and (2) opinions on the enforceability and interpretations of the restrictive covenants in the Individual Defendants’ employment agreements.
Market Multiples
USI planned to offer Linn’s testimony on the process for buying, selling, and acquiring books of business (“BOB(s)”) in the commercial insurance industry and the typical pricing for such assets. Linn opined that industry uses “multiples of revenue” as a rule of thumb to price of a firm or BOB and “multiples of EBITDA” to calculate the sale price. He further provided specific ranges of multiples for revenue and for EBITDA in which the range covers standard business risks in the insurance industry and unique, transaction-specific risks.
Defendants attacked Linn’s factual basis for reaching the proffered multiples. According to Defendants, Linn based his multiples every transaction he worked on during his twenty-two-year career, including those concerning the sale of entire insurance brokerage firms and isolated BOBs.
Defendants also pointed out that when their counsel asked him to identify specific comparable transactions involving the sale of BOBs underlying his multiples, Linn refused to identify the names, revenues, locations, and acquisition prices as confidential and indicted that he based the multiples on the “the judgment [he] . . . gained after 22 years of experience.”
Linn testified that he spoke with partners who worked at his former company for “touch points and points of reference for which he used to form [his] opinion” regarding the status of the marketplace and current pricing multiples. These conversations related to the sale of entire brokerage firms, not BOBs, and Linn did not receive any information regarding any specific transactions.
He further testified that asking about BOBs in particular was unnecessary because the valuation of a BOB incorporates a discount from the valuation of the entire firm, which remained the same since the time he was with the company.
Analysis
Though it is possible that business assets like BOBs may sell at some multiple that accounts for various discounts or premiums based on various performance and market-based factors as a matter of general principle, Linn opined to a specific range of multiples by applying that rule, i.e., the principle, to a set of unidentified facts.
The proffered range of multiples is not a matter of general principle but rather a conclusion drawn from analytical reasoning based on Linn’s facts and experience. But Linn, however, refused to disclose the facts, i.e., the transactions, underlying the range, removing the Court’s ability to evaluate whether those transactions provide a sufficient factual basis to support his opinion.
Linn indiscriminately included every transaction from his career without explaining how the various factors impacted his analysis to arrive at specific numbers that define the boundaries of the range. Consequently, Linn failed to link his experience in valuing BOBs with his conclusion on the range of multiples, and by never explaining how the relevant factors apply to determine a particular multiple, the Court is left with no basis to determine whether he reliably applied such factors to reach his ultimate conclusion.
Additionally, by failing to explain how the particular factors apply to discount a BOB, Linn’s testimony on a range provided the jury with no guidance on how to determine the appropriate multiple within that range. Therefore, the Court excluded Linn’s testimony pertaining to the specific range of market multiples. This exclusion, however, is narrow because the Defendants’ challenge pertains to the ranges themselves and not the general principles underlying the sales process. Linn may testify to the other general market-based principles addressed prior to arriving at the specific multiple.
Enforceability and Interpretations of the Restrictive Covenants
The parties disputed whether Linn should have been permitted to testify that the restrictive covenants in the Individual Defendants’ employment agreements reflected industry standards and remained reasonable. Their disagreement focused on the relevance of his opinion to the covenants’ enforceability. They raised these arguments before the Court issued its summary-judgment ruling, which resolved the enforceability question. After that decision, any additional testimony became unnecessary and irrelevant.
Held
The Court granted the Defendants’ motion to exclude certain testimony of Thomas R. Linn.
Key Takeaway:
An expert must establish the reliability of the principles and methods, “along with the particular method of analyzing data thereby obtained, to draw a conclusion regarding the particular matter to which the expert testimony was directly relevant.” In other words, without more, Linn generated his proffered range of multiples based on mere ipse dixit.
Case Details:
| Case Caption: | USI Insurance Services LLC V. Alliant Insurance Services Incorporated Et Al |
| Docket Number: | 2:23cv192 |
| Court Name: | United States District Court, Arizona |
| Order Date: | June 26, 2025 |
