Eric K. Bowers and Victoria L. Vish | Zelle LLP | May 11, 2018
Every litigator knows the term “battle of the experts.” This is commonly heard in first-party property cases. Usually the term suggests uncertainty, i.e. that the jury will hear both sides’ experts and simply pick one. But winning the war in these cases often means avoiding the expert battle altogether, by challenging — and excluding — the other party’s expert testimony. It cannot be overstated: winning or losing a property case often turns on the credibility and, in the first instance, admissibility, of expert testimony. This is because without expert testimony, many property insurance cases cannot be proven.
Designate your experts with sufficient specificity for discrete subject areas and avoid generalized, broad disclosures. Make sure your expert has reviewed your draft disclosures and is comfortable with the subjects on which he or she is being designated before making your expert disclosures, so the individual can appropriately qualify as an expert on that matter. Show the expert the designation again before they are deposed to address any questions the expert may have about the designation.
The Basics of Expert Testimony
Following the United States Supreme Court’s decision in Daubert v. Merrell Dow Pharmaceutical, Inc., federal trial court judges are charged with the duty of acting as initial “gatekeepers” and determining whether challenged expert witness testimony is relevant and reliable before it may be presented to the factfinder.
The trial court must first determine whether the proffered expert testimony is relevant, that is, whether it has any tendency to make a fact more or less probable than it would be without the evidence; and whether the fact is of consequence in determining the action. To be relevant, the proposed testimony must be “sufficiently tied to the facts of the case that it will aid the jury in resolving a factual dispute.” If the trial judge determines that the proffered testimony is relevant and reliable, he or she must then determine whether to exclude the evidence because its probative value is outweighed by the “danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, or needless presentation of cumulative evidence.”
Like federal trial courts under the Daubert test, Texas trial courts are also endowed with the responsibility of acting as the evidentiary gatekeeper and have broad discretion to determine the admissibility of evidence. Under Texas law, the testimony of a qualified expert may be precluded if it is unreliable. The unsupported opinion of even the most qualified expert is of no assistance to the jury. Testimony that is not grounded in accepted methods and procedures constitutes nothing more than “subjective belief or unsupported speculation.” The requirement has its roots in Texas Rule of Evidence 702, which provides:
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.
While the Texas rule is virtually identical to Federal Rule of Evidence Rule 702, it omits parts (b)-(d) of Federal Rule of Evidence 702 (the subparts incorporating Daubert and Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137, (1999)). This is inconsequential, however, because the Texas Supreme Court and Court of Criminal Appeals have both articulated standards concerning the admissibility of expert testimony that are consistent with the federal rule’s text. In short, Rule 702 focuses on assessing the reliability of expert testimony.
In Texas, for expert testimony to be admissible: (1) the expert must be qualified; and (2) the testimony must be relevant and be based on a reliable foundation. Thus, an expert’s opinions must be both relevant and reliable. Unreliable evidence is of no assistance to the trier of fact and is therefore inadmissible under Rule 702. To further guide trial courts in assessing reliability, the Texas Supreme Court has crafted two tests: the Robinson factor analysis and the “analytical gap” test. Further, and particularly important to many first-party cases, the Texas Supreme Court has determined that expert testimony is unreliable if it fails to rule out other plausible causes. The Robinson factors for gauging the reliability of an expert’s methodology include:
1) the extent to which the theory has been or can be tested;
2) the extent to which the technique relies upon the subjective interpretation of the expert;
3) whether the theory has been subjected to peer review and/or publication;
4) the technique’s potential rate of error;
5) whether the underlying theory or technique has been generally accepted as valid by the relevant scientific community; and
6) the non-judicial uses which have been made of the theory or technique.
Robinson teaches that, in addition to demonstrating that an expert witness is qualified to testify under Texas Rule of Evidence 702, the proponent of the evidence must demonstrate the expert’s testimony is relevant to the issues and based on a reliable foundation.
Complementing the Robinson standard, a trial court properly excludes expert testimony as unreliable under the “analytical gap” test if: (1) the foundational data underlying the opinion is unreliable; (2) the methodology used by the expert to interpret the underlying data is flawed; (3) notwithstanding the validity of the underlying data and methodology, there is an analytical gap in the expert evidence; or (4) the expert fails to rule out other plausible causes. In applying this reliability standard, however, the court does not decide whether the expert’s conclusions are correct; rather, the court determines whether the analysis used to reach those conclusions is reliable. The Texas Supreme Court noted in Merrell Dow Pharmaceuticals Inc. v. Havner:
If the foundational data underlying opinion testimony are unreliable, an expert will not be permitted to base an opinion on that data because any opinion drawn from that data is likewise unreliable. Further, an expert’s testimony is unreliable even when the underlying data are sound if the expert draws conclusions from that data based on flawed methodology. A flaw in the expert’s reasoning from the data may render reliance on a study unreasonable and render the inferences drawn therefrom dubious. Under that circumstance, the expert’s … testimony is unreliable and, legally, no evidence.
Moreover, an “analytical gap” renders an opinion unreliable, such as the failure to rule out other possible causes of a particular injury or condition. For instance, in a case where an insurance carrier denied its insureds’ claim for foundation damage, the court relied on Gammill and found that the expert left an “analytical gap” between his observations and his conclusions on causation. Because the expert failed to rule out other causes of the damage and merely made assumptions attempting to rule out settlement and tree influence, his causation conclusion was simply “unreliable.”
Types of Expert Opinions in First-Party Property Cases
Causation Causation opinions based on possibility, speculation and surmise are not evidence. Texas courts have consistently held that an expert’s testimony on causation can be unreliable if the expert fails to rule out other plausible causes.
In State Farm Lloyds v. Hamilton, for example, the carrier argued that the conclusions of the insured’s expert were ipse dixit (i.e., dogmatic and unsupported opinions). The court explained, however, that the expert had sufficiently connected his observations and data concerning the leak, soil samples and the foundation movement. State Farm also argued that the insured’s expert failed to rule out historical facts such as placement of footings and installation of a shelf and drain reasonably explaining why the insured’s entire foundation tilted. The court nevertheless held that the expert’s opinion was not unreliable, because all other possible causes were eliminated before concluding that a plumbing leak was the cause of the foundation damage. Moreover, the court held the testimony was not conclusory because the opinions were based on facts and analyses that were made available to the jury.
Try to elicit testimony from an opposing causation expert acknowledging other potential causes of the damage observed. Then probe for an admission that the expert did not reliably rule out the other potential cause(s).
Scope of Damage and Valuation
Expert opinions with respect to the scope of damage in first-party cases, especially those involving weather events, can often incorporate the expert’s opinion on causation. In first-party property cases, insureds may suffer damage by multiple causes of loss. Some of the damage may be concurrent; that is, caused at the same time by two or more contributing factors. Others may not be concurrently caused. This is particularly important when some of the causes are covered and others are not.
A typical policy definition of “replacement cost” is “the amount it would take to replace property with property of the same kind and quality, determined at the time of loss.” “Actual cash value” is commonly defined as “the replacement cost, at the time of loss, of the property damaged or destroyed, less depreciation.” Under a replacement cost value, or RCV, policy, the insured typically must repair or replace the damaged property to recover the full replacement cost; otherwise, the insured may recover only the actual cash value.
Many policies require the insured either to repair or replace, or notify the carrier of its intent to repair or replace, within a certain time period to be able to recover the holdback/depreciation. Failure to comply with this notice requirement bars any later claim for replacement cost coverage.
Often when the insured has not made repairs or, in some cases, has not elected RCV coverage under an applicable notice period, a damage expert’s valuation of the loss on a replacementcost basis may not be admissible. If an expert merely equates actual cash value with replacement cost value or otherwise fails to deduct depreciation to calculate actual cash value, the testimony is not helpful to the jury and is not probative of actual cash value. Under these circumstances, expert opinion testimony as to replacement cost value amount is inadmissible, because it does not relate to any issue before the jury and should be excluded under Rule 402, which deals with the admissibility of only relevant evidence. Moreover, a jury hearing testimony on the amount of replacement cost, without accounting for depreciation, might be misled into believing that actual cash value need not account for depreciation. The jury might therefore erroneously equate actual cash value with replacement cost value. Rule 403 considerations such as confusing the issues or misleading the jury should be cited to challenge such testimony in this situation.
Expert testimony should be challenged on all potential grounds, if possible, so no potentially valid argument is left unasserted.
Expert witnesses are often crucial to coverage/causation and damages issues in first-party property insurance cases. The shrewd litigator will not dismiss these issues merely as a “battle of the experts,” but instead will see them as opportunities make their case and undermine the opposition’s case. By using the evidentiary rules and case law to challenge the other side’s expert opinions, you just might win the war without ever having to engage in a “battle of the experts.”
 4 McDonald & Carlson Tex. Civ. Prac. § 21:59 (2d. ed.) (citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)).
 Tex. R. Evid. 401.
 E.I. du Pont de Nemours & Co., Inc. v. Robinson, 923 S.W.2d 549, 556 (Tex. 1995) (citing Daubert, 509 U.S. at 589-93).
 Tex. R. Civ. Evid. 403.
 See Robinson, 923 S.W.2d at 556; City of Sugarland v. Home and Hearth Sugarland, L.P., 215 S.W.3d 503, 510 (Tex. App.—Eastland 2007); Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 719 (Tex. 1998).
 Cooper Tire & Rubber Co. v. Mendez, 204 S.W.3d 797, 801 (Tex. 2006).
 Gharda USA, Inc. v. Control Solutions, Inc., 464 S.W.3d 338, 348 (Tex. 2015).
 Testimony by Expert Witnesses, 2A Tex. Prac., Handbook on Texas Evidence R. 702.
 The Committee Note to Rule 702 explains the rule was amended in response to Daubert, 509 U.S. 579. Under Daubert, expert testimony is admissible only if the proponent demonstrates that: (1) the expert is qualified; (2) the evidence is relevant to the suit; and (3) the evidence is reliable. See Watkins v. Telsmith, Inc., 121 F.3d 984, 988–89 (5th Cir. 1997).
 Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 499 (Tex. 2001).
 Id; Gammill, 972 S.W.2d at 726.
 Robinson, 923 S.W.2d at 557.
 Gammill, 972 S.W.2d at 727; Robinson, 923 S.W.2d at 556.
 Merrell Dow Pharmaceuticals, Inc. v. Havner, 953 S.W.2d 706, 720 (Tex. 1997); Robinson, 923 S.W.2d at 559.
 Robinson, 923 S.W.2d at 557.
 State Farm Lloyds v. Mireles, 63 S.W.3d 491, 493–94 (Tex. App.—San Antonio 2001, no pet.) (citing Robinson, 923 S.W.2d at 556).
 See Kimberly S. Keller, Bridging the Analytical Gap: The Gammill Alternative to Overcoming Robinson & Havner Challenges to Expert Testimony, 33 St. Mary’s L.J. 277, 302–20 (2002).
 Havner, 953 S.W.2d at 728; Southland Lloyds Ins. Co. v. Cantu, 399 S.W.3d 558, 563 (Tex. App.—San Antonio 2011, pet. denied).
 953 S.W.2d 706, 714 (Tex. 1997), cert. denied, 523 U.S. 1119.
 Mireles, 63 S.W.3d at 494 (citing Gammill, 972 S.W.2d at 727); Weiss v. Mechanical Associated Servs., Inc., 989 S.W.2d 120, 126 (Tex. App.—San Antonio 1999, pet. denied).
 Mireles, 63 S.W.3d at 499–500.
 Havner, 953 S.W.2d at 711–12.
 See, e.g., Allstate Tex. Lloyds v. Mason, 123 S.W.3d 690, 698 (Tex. App.—Fort Worth 2003, no pet.).
 265 S.W.3d 725 (Tex. App.—Dallas 2008, pet. dism’d).
 Id. at 731.
 Id. at 733-34. See also Gulley v. State Farm Lloyds, 461 S.W.3d 563, 575 & 577 (Tex. App.—San Antonio 2014, pet. denied).
 See, e.g., Devonshire Real Estate & Asset Mgmt., L.P. v. American Ins. Co., 2014 WL 4796967 *5 n.5 (N.D. Tex. Sept. 26, 2014) (unpub.) (noting that while the insured cannot claim RCV without first repairing or replacing, it could invoke the two-step process of electing ACV and then later submitting an additional claim for any repair costs that it incurred in excess of the ACV already paid).