Beware of the Coverage "Expert" - Legal Conclusions are Inadmissable in Coverage Cases Despite Federal Rule of Evidence 704
December, 2003
Introduction
Federal Rule of Evidence 704 governs the proper scope of expert testimony, providing that an expert opinion may be admissible even if it embraces the ultimate issue to be decided by the trier of fact. In a number of insurance coverage cases, litigants have sought under Rule 704 to introduce expert testimony as to the applicability of policy exclusions and the existence of coverage. Courts have overwhelmingly held that such opinions are inadmissible, despite Rule 704’s language permitting expert opinions to embrace ultimate issues of fact.
Rule 704 abolished the former prohibition on rendering opinions on ultimate issues. The former rule was unduly restrictive, difficult to apply, and often deprived jurors of useful information. The revised rule, however, “does not open the door to all opinions. . . . [Q]uestions which would merely allow the witness to tell the jury what result to reach are not permitted. Nor is the rule intended to allow a witness to give legal conclusions.” Owen v. Kerr-McGee Corp., 698 F.2d 236 (5th Cir. 1983).
Federal Rule of Evidence 704 must be read in conjunction with Federal Rule of Evidence 702 to determine the proper scope of an expert’s opinion. These rules provides as follows:
Rule 702
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
Rule 704
(a) Except as provided in subdivision (b), testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact.
Reading Rule 702 and 704 together yields the proper rule applicable to expert testimony: an expert may testify to “ultimate issues” under Rule 704 if the testimony “will assist the trier of fact” under Rule 702. See Mauet and Wolfson, TRIAL EVIDENCE, 290 (2nd ed. 2001). The Advisory Committee Notes to Federal Rule of Evidence 704 further clarify this point:
The abolition of the ultimate issue rule does not lower the bars so as to admit all opinions. Under Rules 701 and 702, opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time. These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach.
Limiting The Bounds of Admissible Insurance Expert Testimony
A number of cases establish that an insurance expert may testify to the meaning of terms in an insurance policy or industry custom and practice where terms of a policy are ambiguous. See, e.g., Aetna Casualty & Surety, Co. v. Dow Chemical Co., 28 F.Supp.2d 440, 447 (E.D.Mich. 1998). However, insurance experts may not testify as to legal conclusions or whether a particular matter is covered under an insurance policy.
Several cases underscore this point. In Montgomery v. Aetna Casualty & Surety Co., 898 F.2d 1537 (11th Cir. 1990), an insurer refused to pay for counsel for its insured after the insured was sued for breach of fiduciary duty. The court recognized that “the central question in the trial was whether the scope of [defendant’s] duty to defend was broad enough to encompass the suit [at issue]. This was a question of contractual interpretation, which the judge should have decided.” The trial court allowed the testimony of an insurance expert that the defendant had a duty to provide legal counsel under the policy language. The Eleventh Circuit Court of Appeals held that such testimony “was a legal conclusion, and therefore should not have been admitted. The District Court abused its discretion by allowing [the expert] to testify about the scope of the [defendant’s] duty under the policy.”
In Young v. State Farm Mutual Automobile Ins. Co., 1999 WL 3357177 (N.D. Miss. 1999), the plaintiff sued his insurer after his daughter was struck by a car and injured. The plaintiff’s insurance policy covered all persons related to him and living with him. There was an issue of fact as to whether the daughter was actually living with the plaintiff at the time of the injury. The plaintiff sought to introduce expert testimony of an insurance expert that “in his opinion [plaintiff’s daughter] was covered under the insurance policy and the defendants had no arguable basis to deny coverage.” The court held that such testimony “is nothing more than a legal conclusion as to the ultimate issue in the case.” The court acknowledged that Rule 704 allows testimony as to an ultimate issue, but reasoned that the rule “does not allow an expert to render conclusions of law.” The court granted defendant’s motion to strike the expert’s testimony.
In Employers Reinsurance Corp. v. Mid-Continent Casualty Co., 202 F.Supp.2d 1212 (D. Kan. 2002), a reinsurer sued its reinsured, seeking a declaratory judgment as to whether the applicable reinsurance agreement required it to reimburse the reinsured for litigation expenses. The defendant designated an expert witness to testify to his understanding of certain terms in the reinsurance policy, his understanding of industry custom and practice regarding claims settlement, and his conclusion about whether litigation expenses were covered under the reinsurance policy. The court held that the expert’s opinions regarding contractual terms and industry custom were admissible if the insurance contract was ambiguous. However, the expert’s opinions regarding whether litigation expenses were covered under the policy were inadmissible. The court held that such testimony was not helpful to the trier of fact, reasoning that “the normal experiences of lay jurors will allow them to draw their own conclusions on these issues, based on the evidence at trial.”
In Breezy Point Cooperative, Inc. v. Cigna Property and Casualty Co., 868 F. Supp. 33 (E.D.N.Y. 1994), an insured brought suit against a liability insurer after the insurer denied coverage based on notice provisions in the insurance policy. The defendant sought to introduce expert testimony that failure of the insured to provide timely notice violated the insurance policy’s terms and that such delay was unreasonable. The court held that both opinions were inadmissible, reasoning that “an expert is prohibited from offering his opinion as to the legal obligations of parties under a contract.” The court concluded that “the expert testimony defendant plans to introduce usurps the function of both the jury and this Court.”
In North River Ins. Co. v. Employers Reinsurance Co., 197 F. Supp.2d 972 (S.D.Ohio 2002), a reinsurer sought to introduce expert testimony about whether particular claims procedures were within the scope of the insurance policy at issue. The court held that “to the extent that it may be read as an opinion on the ultimate legal issue before the court, it is not admissible and will be disregarded.” The court reasoned that “expert opinions which express a legal conclusion are inadmissible.”
Learning Point:
These cases make clear that an insurance expert may not testify as to the ultimate issue of whether or not coverage is afforded under the terms of an insurance policy. The case law also demonstrates that experts may not testify as to any legal conclusion that may trigger coverage. Just as the expert in Young, for example, was prevented from testifying regarding the residency status of the party seeking coverage, an expert would not be permitted to testify as to whether an accident was caused by employee negligence where an insurance policy contained such an exclusion. Similarly, a court would be unlikely to allow an expert to testify that an act was caused by an insured’s criminal act or willful and wanton conduct in cases involving such exclusions.
Case law interpreting Federal Rules of Evidence 702 and 704 in insurance coverage cases demonstrates an effort to prevent experts from invading the traditional province of juries. Such “expert” coverage opinions merely tell jurors what conclusion to reach and are generally based on the same knowledge and evidence already available to and understandable by jurors. Such opinions do not “assist the trier of fact” under Rule 702 and are inadmissible despite Rule 704’s permissive language regarding opinions on the ultimate issue.
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