Portions of Policyholder’s Expert’s Opinions Excluded

    The federal district court granted, in part, the insurer's motion to exclude portions of expert testimony. Tundra M. Holdings, LLC v. Markel Ins. Co., 2023 U.S. Dist. LEXIS 139952 (D. Alaska Aug. 10, 2023).    

    Plaintiff alleged a building it owned suffered damages consisting of building roof failure due to snow load. Plaintiff submitted a claim to Markel for its loss. 

    Plaintiff hired an engineering firm to conduct an inspection. The recommendation was to install snow guards and that 28 rafters be replaced with new beams. The evaluation did not state that the recommendation was required by law or ordinance. Nor did the evaluation make mention of replacing the metal roof on the building or anything about the water system or sprinkler system. Plaintiff then obtained an estimate of $687,500 for roof repair/replacement, store front repair, a sprinkler system installer and a water system upgrade. 

    Markel only paid $117,406.78 because the $687,500 estimate included upgrades that were not required by ordinance or law. The policy provided that "losses and costs incurred in complying with recommended actions or standards that exceed actual requirements imposed by ordinance or law are not covered." 

    Markel sent plaintiff a reservation of rights letter noting that coverage was excluded for loss or damage that was the result of "faulty, inadequate or defective design, specifications, workmanship, repair, construction, renovation, remodelling, grading or compaction." 

    Plaintiff filed suit asserting breach of contract, bad faith claims handling, and breach of the covenant of good faith and fair dealing. Plaintiff disclosed expert Elliot Flood to render "opinions on insurance industry customs, practices, and standards." Flood had over 30 years of experience in the insurance industry and had worked as an investigator and defense attorney for major insurers as well as insureds.

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    In his expert report, Flood offered 25 numbered opinions as well as numerous other opinions. Markel moved to exclude some of Flood's opinions. 

    Markel first moved to exclude Flood's opinions as to whether the estimate encompassed repairs that were required by law or ordinance as unreliable because Flood lacked the expertise to cover such opinions. For example, Flood opined that Markel had no reasonable basis to exclude paying for the cost of repairs necessary to rebuild to the minimum required by current building codes as reflected in the estimate. The court agreed that Flood was not qualified to offer an opinion as to whether the repair proposal would take the building back up to code because he was not a certified engineer or architect, and had 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. His opinions on this issue were unreliable and had to be excluded. 

    Markel also argued that some of Flood's opinions were legal conclusions that should be excluded. He opined that "under the terms of the policy, even if there is a defective design, that does not defeat coverage if the loss is caused by a listed peril, such as collapse from excessive weight of snow." He also opined that the Markel adjuster "knew, or should have known, the the defective design exclusion would not apply" and that Markel had "no reasonable basis" to send the reservation of rights letter because it was based on the defective design exclusion. 

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    The court agreed that these interpretations were opinions of the defective design provision which had to be excluded. Flood could not offer such an opinion nor could he offer an opinion as to whether it was reasonable for Markel to send the reservation of rights letter based on the defective design provision because the foundation of the opinion was Flood's interpretation of the policy.

    Markel also sought to exclude Flood's opinion on Markel's net worth. Flood opined that the audited financial statement showed Markel's net worth to be $1,637,775,000. Here, Flood was not attempting to authenticate Markel's public financial filing, but was stating that he used the filing to calculate Markel's net worth. Such evidence was relevant should the jury determine that punitive damages were warranted. The net worth opinion was also reliable because Flood had sufficient expertise to offer such an opinion,. He was a former had auditor and CPA with special expertise in insurance accounting. Therefore, Flood's opinions on Markel's net worth would not be excluded.