United States District Court, W.D. Texas, Waco Division
PITMAN UNITED STATES DISTRICT JUDGE
the Court are Defendant United Fire and Casualty
Company's Motion for Summary Judgment, (Dkt. 50), Motion
to Exclude the Expert Testimony of Matt B. Phelps, (Dkt. 52),
and Objections to Evidence Attached to Plaintiff's
Response to Defendant's Motion for Summary Judgment,
(Dkt. 55). After reviewing these filings, the responsive
pleadings thereto, the record in this case, and the relevant
case law, the Court issues the following order.
Stephen Hahn filed this action against Defendants Bettina
Bowling and United Fire and Casualty Company (“United
Fire”) in the 146th District Court in Bell County on
March 27, 2015. (Pl.'s Orig. Pet., Dkt. 1-4, at 1).
Plaintiff brought claims for breach of contract, breach of
duty of good faith and fair dealing, and statutory violations
of the Texas Unfair Compensation and Unfair Practices Act,
the Texas Prompt Payment of Claims Act, the Texas Deceptive
Trade Practices Act (“DTPA”), and the Texas
Insurance Code. (Pl.'s Orig. Pet, Dkt. 1-4, at 5-11).
Generally, Plaintiff alleged in the petition that he had
entered a contract with United Fire to provide him an
insurance policy for commercial property located on Stan
Schluter Loop, in Killeen, Texas, (“the
Property”), and that United Fire and Defendant Bowling,
an insurance adjuster for United Fire, wrongfully denied
coverage after a storm caused damage to the roof of the
Property. (Pl.'s Orig. Pet, Dkt. 1-4, at 2-5).
United Fire removed the action to federal court on July 1,
2015, contending that Bowling, who, like Plaintiff, is a
citizen of Texas, was fraudulently joined in the action in
order to defeat diversity jurisdiction. (Def.'s Not. of
Removal, Dkt. 1, ¶¶ 4-6). No motion to remand was
filed, and the parties later agreed to dismiss Defendant
Bowling. (Agreed Mot. Dismiss, Dkt. 39).
January 23, 2017, Defendant United Fire filed a motion for
summary judgment on all of Plaintiff's claims.
(Def.'s Mot. Summ. J., Dkt. 50). United Fire makes five
arguments in support of its motion for summary judgment.
First, it argues that it is entitled to summary judgment on
Plaintiff's breach of contract claims because Plaintiff
will be unable to meet his burden to allocate between covered
and non-covered damage to his property, and because
Plaintiff's claim falls within the cosmetic damage
exclusion in his insurance policy. Next, United Fire argues
that it is entitled to summary judgment on Plaintiff's
bad faith and statutory claims because Plaintiff cannot
prevail on his breach of contract claims, because there was a
reasonable basis for United Fire's denial of
Plaintiff's claim; and because there is no evidence that
United Fire knowingly violated the Texas Insurance Code.
filed a response to United Fire's motion for summary
judgment on February 6, 2017, arguing that the damage to his
roof does not fall under the cosmetic damage exclusion to his
insurance policy, or that at least, he has provided
sufficient evidence that the damage was not cosmetic to
create a genuine issue of material fact. (Pl.'s Resp.,
Dkt. 54, at 6-7). Further, Plaintiff acknowledges that
extra-contractual damages are barred if the insurance policy
does not provide coverage of the claim, but asserts that
United Fire has not denied that hail damage is covered.
Plaintiff also argues that, based on the testimony of one of
United Fire's adjusters, jurors could conclude United
Fire “knowingly” violated the Texas Insurance
after it moved for summary judgment, United Fire filed a
Motion to Exclude the Testimony of Plaintiff's Expert
Matt B. Phelps. (Def.'s Mot. to Exclude, Dkt. 52). United
Fire argues that the definition of “damage” on
which Phelps relies will confuse the jury and be unduly
prejudicial. It also asserts that Phelps's opinions
should be excluded because they are based on data and a
methodology with a high potential rate of error, that have
not been peer reviewed or tested, and that are not generally
accepted in the relevant scientific community.
Fire invoked these same arguments in an objection to
Plaintiff's submission of Phels' expert report as
evidence in response to United Fire's motion for summary
judgment. (Def.'s Obj., Dkt. 55, 1-2). It also argued
that the estimate of alleged damage provided by Jerry Bird
should be deemed inadmissible as unsworn hearsay evidence. It
moved for both Phelps's report and the estimates from
Bird to be stricken from the summary judgment record.
Plaintiff responded to United Fire's motion to exclude
Phelps's testimony, arguing that Phelps's report is
admissible, but did not file a response to United Fire's
Court will first address Defendant United Fire's
objections to Plaintiff's summary judgment evidence and
its related motion to exclude Plaintiff's expert
testimony. The Court will then address Defendant's motion
for summary judgment.
EVIDENTIARY OBJECTIONS & MOTION TO EXCLUDE
United Fire submits objections to expert testimony of Matt B.
Phelps and Jerry Bird filed by Plaintiff Hahn in response to
United Fire's motion for summary judgment, and has filed
a motion to exclude the testimony of Phelps at trial.
Objections to Phelps's Report & Motion to Exclude
makes three objections to the Phelps Report attached to
Plaintiff's summary judgment response: (1) that it is
inadmissible pursuant to Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993); (2) that it
is inadmissible “as hearsay as it is an unsworn,
unverified expert report that is not supported by
affidavits;” (3) that the conclusions and opinions
about whether data and weather events contained in the report
should be excluded because Phelps is not a meteorologist and
“he relies on unsourced, ambiguous weather data”
to form conclusions about weather damage at the Property.
(Def.'s Obj., Dkt. 55, at 2). Defendant has also filed a
separate motion to exclude Phelps's testimony under
Daubert, primarily arguing that Phelps's
conclusions are based on a definition of “damage”
that conflicts with the term as it is used in the insurance
policy, and additionally contesting the methodology he uses.
(Def.'s Mot. Exclude, Dkt. 52, at 1). Plaintiff suggests
that the definition of “damage” Phelps relies on
is substantially similar to the one at issue in the policy,
and argues that Phelps's methods are generally accepted
in the scientific community. (Pl.'s Resp. to Mot.
Exclude, Dkt. 57, at 5). The Court will first address
Defendant's objection and motion under Daubert,
then, if it deems Phelps's testimony admissible, turn to
Defendant's other objections.
Rule of Evidence 702 has been amended to incorporate the
principles first articulated by the Supreme Court in
Daubert, as well as those enunciated in the many
later cases applying Daubert, including Kumho
Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999).
See Fed. R. Evid. 702 Advisory Committee Notes. Rule
702 now provides:
witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of
an opinion or otherwise if:
(a) the expert's scientific, technical, or other
specialized knowledge will help the trier of fact to
understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and
(d) the expert has reliably applied the principles and
methods to the facts of the case.
Fed. R. Evid. 702. “Daubert standards apply
not merely at trial, but also on summary judgment.”
Gen. Star Indem. Co. v. Sherry Brooke Revocable
Trust, No. CIV.A. SA-99-CA-1105, 2001 WL 34063890, at *9
(W.D. Tex. Mar. 16, 2001); see also Kumho Tire Co.,
526 U.S. at146 (affirming district court decision granting
motion for summary judgment in light of its decision to
exclude expert testimony pursuant to Daubert).
Rule of Evidence 703 also provides guidance for the
admissibility of expert testimony. Specifically, it provides:
An expert may base an opinion on facts or data in the case
that the expert has been made aware of or personally
observed. If experts in the particular field would reasonably
rely on those kinds of facts or data in forming an opinion on
the subject, they need not be admissible for the opinion to
be admitted. But if the facts or data would otherwise be
inadmissible, the proponent of the opinion may disclose them
to the jury only if their probative value in helping the jury
evaluate the opinion substantially outweighs their
Fed. R. Evid. 703.
Daubert and its progeny, trial courts are to act as
“gatekeepers, ” overseeing the admission of
scientific and nonscientific expert testimony. See Kumho
Tire Co., 526 U.S. at 147. Trial courts must make
“a preliminary assessment of whether the reasoning or
methodology underlying the testimony is scientifically valid
and of whether that reasoning or methodology properly can be
applied to the facts in issue.” Daubert, 509
U.S. at 592-93. In carrying out this task, district courts
have broad latitude in weighing the reliability of expert
testimony for admissibility. See Kumho Tire Co., 526
U.S. at 152 (recognizing trial court must have considerable
leeway in determining admissibility of expert testimony). The
district court's responsibility “is to make certain
that an expert, whether basing testimony upon professional
studies or personal experience, employs in the courtroom the
same level of intellectual rigor that characterizes the
practice of an expert in the relevant field.”
Id. The party seeking to have the district court
admit expert testimony must demonstrate that the expert's
findings and conclusions are based on the scientific method
and are reliable. See Moore v. Ashland Chem. Inc.,
151 F.3d 269, 276 (5th Cir. 1998).
designated Phelps to testify “regarding the inspection,
analysis, reports, investigation, and evaluation [of]
Plaintiff's property damage, the cause and origin of the
roof damage, [and] the scope of repairs required.”
(Pl.'s First Am. Rule 26(e) Designation, Dkt. 46, at 1).
Defendant first argues that Phelps's testimony should be
excluded because he uses a definition of “damage”
that conflicts with the term used in the policy.
parties agree that a “Cosmetic Damage Exclusion”
applies to Plaintiff's insurance policy with Defendant.
5. Cosmetic or Appearance Loss or Damage
We will not pay for loss or damage caused by the peril of
hail that alters the physical appearance of any part of any
roof covering made of metal but does not result in damage
that allows the penetration of water through the roof
covering or does not result in the failure of the roof
covering to perform its intended function to keep out
elements over an extended period of time. This exclusion
applies to roof coverings including the roofing material
exposed to weather, its underlayments applied for moisture
protection and all flashings required in application of the
Hail damage to roof coverings that results in damage that
will allow the penetration of water through the roof covering
or that results in the failure of the roof covering to
perform its intended function to keep out elements over an