Policyholder Accounting Expert Barred
August, 2006
A Court of Appeals of Texas affirmed the barring of the policyholder’s damages expert David A. Borghesi, a C.P.A., in Wyndham International, Inc. v. Ace American Ins. Co., 186 S.W.3d 682 (2006). The court reasoned that his testimony was unreliable.
Facts
Wyndham sought damages of over $66 million in business income loss allegedly resulting from the 9/11 terrorist attacks. The insurer asserted that Borghesi’s testimony was unreliable because 1) he based his entire calculation on a comparison of monthly forecasts of hotel room revenue which were demonstrably unreliable; 2) he improperly extrapolated his already unreliable calculation for 101 hotel properties to an additional sixty-two hotel properties; and 3) he failed to account for market factors affecting the hospitality industry in September and October 2001, instead concluding that the entire difference between Wyndham’s forecast and actual results for a fifty?one day period was attributable to a covered loss.
Analysis
The Texas Court of Appeals affirmed the barring of Borghesi’s testimony, finding that Borghesi’s opinion was not based upon a reliable foundation. The court reasoned that Wyndham forecasts were not reliable. They were not prepared pursuant to any company - wide “hard and fast” rules. Moreover, extrapolated projections premised upon unreliable and flawed forecasts merely compounds the unreliability of his opinion. Finally, Borghesi’s failure to compensate for evidence of rebookings, or to compensate for any other causes which could have affected Wyndham’s profit other than the events of September 11, 2001, rendered his opinion little more than speculation. An expert who is trying to find a cause of something should carefully consider alternative causes.
Learning Point:
The opinions of policyholder damage and accounting experts should be analyzed to determine their reliability. If the proffered opinions are not reliable, a court may exercise its “gatekeeper” function pursuant to the applicable rules of evidence and order the exclusion of the testimony. •
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