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Hahn v. United Fire and Casualty Co.

United States District Court, W.D. Texas, Waco Division

April 6, 2017




         Before 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.

         I. BACKGROUND

         Plaintiff 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).

         Defendant 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).

         On 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.

         Plaintiff 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 Code.

         Soon 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.

         United 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 objections.

         The 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.


         Defendant 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.

         A. Objections to Phelps's Report & Motion to Exclude Phelps's Testimony

         Defendant 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.

         Federal 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:

         A 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 methods; 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).

         Federal 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 prejudicial effect.

Fed. R. Evid. 703.

         Following 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).

         Plaintiff 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.

         The parties agree that a “Cosmetic Damage Exclusion” applies to Plaintiff's insurance policy with Defendant. It provides:

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 roof covering.
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 ...

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