United States District Court, S.D. Texas, Corpus Christi Division
ORDER ON MOTION TO EXCLUDE
GONZALES RAMOS UNITED STATES DISTRICT JUDGE
Hawley Insurance Company (Mt. Hawley) filed this action
against TFP Properties III, LLC (TFP) asserting that it had
paid all sums owing under a property casualty policy on a
commercial property damaged by Hurricane Harvey. D.E. 1.
Before the Court is Mt. Hawley's motion to exclude
TFP's property valuation expert (D.E. 43), along with
TFP's response (D.E. 49) and Mt. Hawley's reply (D.E.
53). For the reasons set out below, the Court DENIES the
expert testimony may be submitted to the jury, the court must
act as a gatekeeper by “making a ‘preliminary
assessment of whether the reasoning or methodology underlying
the testimony . . . properly can be applied to the facts in
issue.'” Pipitone v. Biomatrix, Inc., 288
F.3d 239, 243-44 (5th Cir. 2002) (quoting Daubert v.
Merrell Dow Pharm., Inc., 509 U.S. 579, 592-93 (1993)).
Daubert and its principles apply to both scientific
and non-scientific expert testimony. Kumho Tire Co. v.
Carmichael, 526 U.S. 137, 147 (1999). Courts need not
admit testimony that is based purely on the ipse
dixit of the expert. Gen. Elec. Co. v. Joiner,
522 U.S. 136, 146 (1997). Ultimately, the court's
determination regarding the admissibility of evidence under
Daubert is subject to an abuse of discretion
standard. Id. at 142.
Hawley challenges the expert testimony of Sean Wiley, a
general contractor doing business as JW Construction and who
has experience as an insurance adjuster, having previously
performed work for Mt. Hawley's parent company. D.E. 49,
p. 6 n.2. Mt. Hawley states no complaint regarding
Wiley's experience, qualifications, or the relevance of
his opinion. Rather, Mt. Hawley contends that there is a
“complete lack of foundation for Wiley's valuation,
” thus challenging the reliability of his opinion. D.E.
53, p. 2.
explained that he used the internet and called supply houses
to investigate pricing of materials. He also contacted
subcontractors who do the specific tasks necessary to
research labor costs, just as he would to bid any
construction project. He compiled his results into task-based
unit costs, which combined labor and materials. D.E. 43-1, p.
16. He produced an itemized bid of unit costs per square
foot, along with a calculation of the total that sets out the
square footage involved for each task. D.E. 43-1. Wiley
testified that this is the ordinary practice for compiling a
construction bid and Mt. Hawley has not demonstrated that the
standard of the industry requires any other methodology for
researching and assessing costs or for assembling bids.
Mt. Hawley's real complaint is that Wiley did not keep
notes detailing his research to reveal the specific sources
of his cost estimates. Neither could he testify as to whether
he included certain items such as architectural fees, permit
fees, sales tax, and overhead or profit. In that regard, Mt.
Hawley likens this case to James River Ins. Co. v. Rapid
Funding, LLC, No. 07-cv-01146-CMA-BNB, 2009 WL 481688
(D. Colo. February 24, 2009), rev'd on other
grounds, 658 F.3d 1207 (10th Cir. 2011).
James River case involved the insured's purchase
of a condemned apartment property two weeks after securing an
insurance policy with a term of six months. The policy
covered multiple properties across a number of states. The
purchase price for the three buildings in the condemned
apartment complex, combined, was $1.8 million. The policy
limits were $3 million as applied to the apartment property.
Three months after the purchase, one of the buildings on the
property was destroyed by a fire, the result of suspected
arson. The insurance company valued the property at zero or a
negative value because it had been condemned, was vacant, and
remained uninhabitable. The carrier paid the cost of
demolition and fire department charges.
insured did not hire an expert, but valued the property
himself by coming up with a replacement value of over $7
million and allowing for 40% depreciation, resulting in a
claim value of $4, 489, 731, well over the original purchase
price for all three buildings. The insured thus claimed the
$3 million policy limits. There were a number of problems
with this opinion. For instance, there was no established
basis for the way the insured arrived at ¶ 40%
depreciation formula, which is contrary to IRS methodologies.
purposes, the problem was a lack of facts or data to support
the two numbers offered: replacement value and cost to bring
the property up to that value. There was no discussion of
what work would be required or the cost of doing that work.
Instead, the insured testified that he had a
“feeling” for such matters and that he
essentially intuited these numbers based on his assessment of
the pre-fire status of the building. None of this approach is
an accepted methodology or testable fact. Therefore, the
court excluded the testimony.
same result does not obtain here. The property is available
for inspection to determine what work is necessary. There is
no challenge to Wiley's methodology. And he has itemized
the proposed work and his estimate of the unit prices for
performing that work. These are numbers that can be tested,
should Mt. Hawley choose to have its expert also look into
the cost of materials and labor for the listed tasks and
confirm the square footage involved for each. Wiley's
source was not his own “feeling, ” but multiple
suppliers and subcontractors familiar with the type of work
to be done. The fact that he did not keep a record of the
specific sources for his estimate does not preclude Mt.
Hawley from consulting appropriate sources to see if the
numbers Wiley came up with are supportable.
issues go to the weight of the testimony rather than its
admissibility and are fair subjects for cross-examination.
See generally, Primrose Operating Co. v.
National American Ins. Co., 382 F.3d 546, 562 (5th Cir.
2004); United States v 14.38 Acres ofLand,80 F.3d 1074, 1078 (5th Cir. 1996); Dinker v ...