Law And Legal Expert was Not Allowed to Opine on Generally Accepted Industry Custom

This case arises out of a car accident and a resulting lawsuit. In September 2017, Plaintiffs alleged that Sarah Montalvan and Anita Myers were involved in a car accident, Myers was deemed to be at fault, and Montalvan made two settlement demands on Defendant National General Insurance Company, as Myers' insurer. Defendant rejected Montalvan's settlement demands but, later, made an offer to Montalvan to settle Montalvan's claims against Myers for the policy limits in Myers' insurance policy.

Montalvan rejected Defendant's policy tender, filed a lawsuit against Myers, and obtained a $1.1 million judgment against Myers in California state court. Myers partially assigned her claims against Defendant to Montalvan and, together, Myers and Montalvan alleged that Defendant breached the implied covenant of good faith and fair dealing in Myers's insurance contract, as well as the contract itself.

Plaintiffs offered Peter Knowe as an expert witness on insurance industry customs and practices while Defendant offers GailAnn Stargardter as its expert witness on insurance industry customs and practices. On July 7, 2026, the Court entered an order identifying deficiencies in both parties' expert reports and directing the parties to submit supplemental expert reports addressing the deficiencies identified in the Court's order. Pursuant to the Court's Daubert order, the parties have filed supplemental expert reports.

Insurance Expert Witness

Peter Knowe has specialized qualifications and experience in adjusting, investigating, and evaluating insurance claims. During his career in the insurance industry spanning 26 years, he was trained in evaluating and responding to policy limit demands and time-limited demands.

Want to know more about the challenges Peter Knowe has faced? Get the full details with our Challenge Study report.

Law And Legal Expert Witness

GailAnn Y. Stargardter is a practicing attorney specializing in "insurance coverage and bad faith," and has been practicing in Washington since 1988, and California since 2007.

Stargardter's practice is limited to insurance coverage and bad faith. Stargardter was previously employed as a claim attorney for an insurance company, where she reviewed files to "determine whether claims were being handled consistent with state and company requirements." She also provides training to insurance clients regarding the California state settlement regulations, is a "co-author of California Insurance Law (The Recorder (2015))," and previously testified as an expert witness.

Discover more cases with GailAnn Stargardter as an expert witness by ordering her comprehensive Expert Witness Profile report.

Discussion by the Court

A. Defendant's Objections to the Supplemental Knowe Report

In Knowe's supplemental report, Knowe elaborates on the methodology supporting the opinions offered in his initial report. Knowe wrote that he derived the sixteen standards for insurance industry claims handling that he articulated in his initial report from his experience with insurance industry claim-handling guidelines, training programs, authority procedures, and audit protocols. Knowe explained that he was trained on these standards as an insurance adjuster and senior technical representative at Aetna Casualty and Surety Co. from 1979 to 1991, he wrote claims-handling guidelines and taught proper claims-handling to employees during his employment at Infinity Insurance Group from 1991 to 2006, and, since 2006, he has reviewed claim manuals, training materials, and authority procedures for carriers nationwide in more than 240 engagements.

Knowe's supplemental report stated the basis for each of the sixteen industry standards articulated in Knowe's initial report and also ties the basis for each standard to a particular source. For example, Knowe opined that, as an industry standard, insurance companies should assist with the presentation of insurance claims.

Knowe explained that insurance adjusters are trained to identify perceived problems with policy demands and supporting records and raise them to a claimant's counsel while the demand is open, so claims can be resolved in a manner that protects the insured from exposure to excess liability. In support of this opinion, Knowe said that, over a period of sixteen years, he trained insurance adjusters to seek clarification on policy demands. Knowe also said that this standard is memorialized in the National Association of Insurance Commissioners ("NAIC")'s Model Act, which Knowe said is a source that has both shaped and memorializes industry custom and practice, as well as in the California Insurance Code, which Knowe said tracks the NAIC's Model Act.

Analysis

Defendant's objections to Knowe's supplemental report primarily address the factual basis for Knowe's opinion that the way Defendant responded to Montalvan's policy demand departed from industry custom and practice. For example, in his supplemental report, Knowe opined that Defendant departed from industry custom and practice by tendering a policy demand to Montalvan after rejecting Montalvan's earlier policy demands, despite there being no change in the information available to Defendant.

In Knowe's explanation for the factual basis of his opinion, he said that Tuck, Defendant's claims adjuster, previously determined that Montalvan's claim was valued at $25,000, but Defendant nevertheless rejected Montalvan's policy limits demands. Knowe also said that, after rejecting Montalvan's demands, Defendant did not receive any additional medical information but, roughly two months after receiving the first demand and one month after receiving the second demand, Defendant made a policy limit offer to Montalvan. Knowe opined that Defendant's policy limit offer departed from industry custom and practice because insurance industry standards call for insurers to take timely action after evaluating an insurance claim but, here, Defendant made an offer for the same sum Montalvan previously demanded, two months after rejecting Montalvan's demands, without receiving additional information to support Defendant's change in position.

Defendant argued that this opinion lacks a sufficient factual basis or a reliable methodology. In support, Defendant argued that Knowe interpreted phrases in the claim file for Montalvan's claim, which use the phrases "policy limits case" and "FULL VALUE up to 25K," to conclusively establish a duty to pay. Defendant argued that, in reaching this interpretation of the evidence, Knowe disregarded the "contingency inherent" in Defendant's valuation of the claim and the information provided to Defendant. Similarly, Defendant argued that Knowe failed to apply a reliable methodology to support this opinion because Knowe's "opinion that [Defendant] failed to meet industry standards is wholly based on [Knowe's] erroneous supposition that [Defendant] valued the claim at policy limits at the time [Defendant] extended the counter-offers." Defendant's other objections raise similar arguments.

Defendant's objections to Knowe's proposed testimony go to the weight of Knowe's testimony, not its admissibility. Therefore, the Court held that Knowe may offer testimony consistent with the opinions articulated in his supplemental expert report.

B. Plaintiffs' Objections to the Supplemental Stargardter Reports

In Stargardter's supplemental expert report, Stargardter describes her experience working as an attorney in the insurance industry. For example, from 1990 to 1992, Stargardter worked as a claims attorney for State Farm and, from 1992 to 1995, Stargardter worked as a claim superintendent for State Farm and, as part of her role, trained employees on case law interpreting insurance regulations. According to her report, since 1995, Stargardter has worked in private practice as an attorney and, in her practice, focuses on disputes concerning insurance coverage.

Stargardter's supplemental report offered six opinions concerning Defendant's evaluation of and response to Montalvan's insurance demands, which are the same as the six opinions offered in Stargardter's initial expert report. In the executive summary of her opinions, Stargardter stated that she formed her opinions based on her background, training, and experience, as well as applicable industry standards, statutes and regulations governing the insurance industry, case law interpreting those statutes and regulations, and Defendant's internal guidelines. Stargardter also stated that she will testify that the manner in which Defendant handled Montalvan's claim was "compliant" with California's insurance statutes, applicable regulations, and case law interpreting those statutes and regulations.

At the outset of her analysis, Stargardter writes that insurance industry standards are partially derived from insurance regulations, statutory law, and case law. Stargardter stated that her opinions as to Defendant's compliance with industry standards is partially based on her knowledge of the law and, when her opinions refer to "generally accepted industry standards," she is referring to industry standards as shaped by California insurance regulations, statutory law, and case law.

Aside from a single reference to a website addressing background principles applicable to the insurance industry, Stargardter's analysis did not cite to any source for her opinions. Instead, Stargardter repeatedly refers to "generally accepted industry standards" within the insurance industry, without addressing the source from which these generally accepted industry standards are derived or how she derived these opinions based on her experience in the insurance industry.

Stargardter's supplemental rebuttal report claims that Knowe's methodology is unreliable because he articulates "standards" governing what constitutes generally accepted industry custom and practice without citing to "the California Claims Handling regulations or case law." Nearly every rebuttal opinion offered in Stargardter's supplemental rebuttal report applied California insurance regulations to the facts of the case or argues that Knowe's opinions are not supported by applicable case law. For example, Stargardter argued that Knowe's opinion that insurance companies must treat their policyholder's interests with at least equal regard to their own interests is not supported by applicable California insurance regulations. Similarly, Stargardter argued that California insurance regulations do not require insurers to assist "third-party claimants . . . on what they need to do to enhance the presentation of their claim."

Plaintiffs argued that Stargardter's supplemental reports, like her initial reports, offer impermissible legal conclusions, couched in general references to "industry standards."

The opinions articulated in Stargardter's supplemental reports opine on ultimate issues of law or, otherwise, lack a reliable methodology. In describing her methodology, Stargardter acknowledged that her opinions are based, in part, on California law, and her opinions about what constitutes generally accepted industry standards are "shaped" by California law. However, Stargardter did not explain any basis for her opinions beyond her knowledge of the law. From the Court's comparison between Stargardter's initial report and her supplemental report, it appears that, in several instances, Stargardter's supplemental report merely restates Stargardter's recitation of case law, prefacing Stargardter's opinions with a generic reference to "generally accepted industry standards" and removing Stargardter's previous citations to case law.

Stargardter also explicitly stated that she will testify that Defendant's handling of Montalvan's claim was compliant with applicable regulations, statutes, and case law; addresses an insurance company's legal obligations pursuant to the implied covenant of good faith and fair dealing; and opines on Defendant's compliance with various state insurance regulations. The Court has thoroughly reviewed Stargardter's supplemental expert report and rebuttal report and, based on the Court's review, Stargardter did not appear to offer any opinions that are adequately supported by a reliable methodology. Therefore, the Court excluded Stargardter from testifying.

Held

Based on the Court's review of the parties' supplemental expert reports, the parties' objections, and the relevant law, the Court finds that Plaintiff's proposed expert, Peter Knowe, has cured the deficiencies identified in the Court's Daubert Order and Defendant's proposed expert, Gailann Stargardter, has not. Therefore, Knowe may offer testimony consistent with the opinions articulated in his supplemental expert report, and Stargardter is precluded from testifying as an expert in this action.

Key Takeaway

In a trial court's capacity as the "gatekeeper" of expert testimony, the Court's function centers not on the correctness of the expert's conclusions but the soundness of the expert's methodology. Thus, courts should screen "unreliable nonsense opinions" but should not exclude testimony merely because an expert's opinions are impeachable. Most of Defendant's objections to Knowe's opinions raise factual disputes about Knowe's interpretation of evidence, which is not a proper basis for exclusion. Any flaws in Knowe's methodology do not render his opinions "so incomplete" as to be inadmissible.

Please refer to the blog previously published about this case:

The Insurance Expert's Testimony on Claims Handling Contained Deficiencies

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