Recent Court Order Excluding Expert Testimony Offers Useful Reminders and Lessons for Construction Litigants

Amandeep S. Kahlon | Bradley Arant Boult Cummings

Construction claims often feature supporting testimony from design and/or scheduling experts, and exclusion of that testimony either by disqualification of the expert or a finding that the testimony is otherwise inadmissible can prove fatal to your claim or defense. States may vary in their requirements for admissibility of expert evidence, but most states follow some variant of Federal Rule of Evidence 702. Rule 702 provides that an expert 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.

The recent district court order in American Contractors Indemnity Co. v. Reflectech, Inc. granting a motion to strike an expert demonstrates the importance of satisfying the requirements for admission of expert evidence under Rule 702 and other like statutes. In that case, a surety sought indemnity for payment on bonds issued to a subcontractor that defaulted on a roofing subcontract. The surety investigated the general contractor’s claim for default against the subcontractor, settled with the general contractor for approximately $400,000, and then filed suit against the subcontractor for breach of their general indemnity agreement.

The defendant subcontractor proffered an expert to opine on the adequacy of the surety’s investigation and the appropriateness of payment of the general contractor’s bond claims. In moving to strike this expert, the surety argued (1) the expert should be disqualified due to lack of experience, and (2) the expert testimony was inadmissible because it was not based on sufficient facts or data as required under Rule 702(b). The court focused on the second prong of the surety’s argument in granting the motion to strike.  The court found that the expert’s opinion was not based on sufficient facts or data because of several admissions from the expert during his deposition. Specifically, the surety persuaded the court with the following facts derived from the expert’s deposition testimony:

  • The expert admitted he never visited the project site and interviewed only one individual, the owner of the subcontractor, before drafting his expert report;
  • The expert admitted he never reviewed the surety’s records regarding the general contractor’s claim and did not know what information the surety’s investigation uncovered because that information was never provided to him;
  • The expert testified that the surety’s records would have been helpful in forming his expert opinion (the subcontractor was unable to provide any explanation for failure to provide this material to the expert when it had been produced by the surety); and
  • The expert stated that he did not review the settlement portion of the general indemnity agreement, which he had opined was unconscionable.

The facts relied upon by the court highlight the importance of selecting and managing experts in construction disputes. When selecting an expert, a party should be mindful of the expert’s prior testifying experience and his or her approach to investigating a claim or subject area for which an opinion is required. A party should also ensure its expert receives and reviews all the documents and information necessary to formulate his or her opinion. To be successful, this process requires an active dialogue with the expert throughout the course of a matter.  For example, document productions from other parties and deposition testimony from witnesses will uncover additional information an expert may need to support his or her opinions. Consistent engagement with an expert will help avoid outcomes such as that encountered by the roofing subcontractor in this case and should help a party better develop its claims or defenses as a matter proceeds.

Admissibility of Expert Opinions in Insurance Bad Faith Trials

David McLain | Colorado Construction Litigation| October 8, 2019

In 2010, Hansen Construction was sued for construction defects and was defended by three separate insurance carriers pursuant to various primary CGL insurance policies.[i]  One of Hansen’s primary carriers, Maxum Indemnity Company, issued two primary policies, one from 2006-2007 and one from 2007-2008.  Everest National Insurance Company issued a single excess liability policy for the 2007-2008 policy year, and which was to drop down and provide additional coverage should the 2007-2008 Maxum policy become exhausted.  In November 2010, Maxum denied coverage under its 2007-2008 primarily policy but agreed to defend under the 2006-2007 primarily policy.  When Maxum denied coverage under its 2007-2008 primary policy, Everest National Insurance denied under its excess liability policy. 

In 2016, pursuant to a settlement agreement between Hansen Construction and Maxum, Maxum retroactively reallocated funds it owed to Hansen Construction from the 2006-2007 Maxum primary policy to the 2007-2008 Maxum primary policy, which became exhausted by the payment.  Thereafter, Hansen Construction demanded coverage from Everest National, which continued to deny the claim.  Hansen Construction then sued Everest National for, among other things, bad faith breach of contract.

In the bad faith action, both parties retained experts to testify at trial regarding insurance industry standards of care and whether Everest National’s conduct in handling Hansen Construction’s claim was reasonable.  Both parties sought to strike the other’s expert testimony as improper and inadmissible under Federal Rule of Evidence 702.
In striking both sides’ expert opinions, the U.S. District Court Judge Christine Arguello set forth the standards for the admissibility of expert opinions in Federal Court:

Under Daubert, the trial court acts as a “gatekeeper” by reviewing a proffered expert opinion for relevance pursuant to Federal Rule of Evidence 401, and reliability pursuant to Federal Rule of Evidence 702.[ii]  The proponent of the expert must demonstrate by a preponderance of the evidence that the expert’s testimony and opinion are admissible.[iii]  This Court has discretion to evaluate whether an expert is helpful, qualified, and reliable under Rule 702.[iv]

Federal Rule of Evidence 702 governs the admissibility of expert testimony. Rule 702 provides that a witness who is qualified as an expert by “knowledge, skill, experience, training, or education” may testify 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.

In deciding whether expert testimony is admissible, the Court must make multiple determinations. First, it must first determine whether the expert is qualified “by knowledge, skill, experience, training, or education” to render an opinion.[v]  Second, if the expert is sufficiently qualified, the Court must determine whether the proposed testimony is sufficiently “relevant to the task at hand,” such that it “logically advances a material aspect of the case.”[vi]  “Doubts about whether an expert’s testimony will be useful should generally be resolved in favor of admissibility unless there are strong factors such as time or surprise favoring exclusions.”[vii]

Third, the Court examines whether the expert’s opinion “has ‘a reliable basis in the knowledge and experience of his [or her] discipline.’”[viii]  In determining reliability, a district court must decide “whether the reasoning or methodology underlying the testimony is scientifically valid.”[ix]  In making this determination, a court may consider: “(1) whether a theory has been or can be tested or falsified, (2) whether the theory or technique has been subject to peer review and publication, (3) whether there are known or potential rates of error with regard to specific techniques, and (4) whether the theory or approach has general acceptance.”[x]

The Supreme Court has made clear that this list is neither definitive nor exhaustive.[xi]  In short, “[p]roposed testimony must be supported by appropriate validation—i.e., ‘good grounds,’ based on what is known.”[xii]

The requirement that testimony must be reliable does not mean that the party offering such testimony must prove “that the expert is indisputably correct.”[xiii]  Rather, the party need only prove that “the method employed by the expert in reaching the conclusion is scientifically sound and that the opinion is based on facts which sufficiently satisfy Rule 702’s reliability requirements.”[xiv]  Guided by these principles, this Court has “broad discretion” to evaluate whether an expert is helpful, qualified, and reliable under the “flexible” standard of Fed. R. Evid. 702.[xv]

With respect to helpfulness of expert opinions, Judge Arguello explained:

Federal Rule of Evidence 704 allows an expert witness to testify about an ultimate question of fact.[xvi]  To be admissible, however, an expert’s testimony must be helpful to the trier of fact.[xvii]  To ensure testimony is helpful, “[a]n expert may not state legal conclusions drawn by applying the law to the facts, but an expert may refer to the law in expressing his or her opinion.”[xviii]

“The line between a permissible opinion on an ultimate issue and an impermissible legal conclusion is not always easy to discern.”[xix]  Permissible testimony provides the jury with the “tools to evaluate an expert’s ultimate conclusion and focuses on questions of fact that are amenable to the scientific, technical, or other specialized knowledge within the expert’s field.”[xx]

However, “an expert may not simply tell the jury what result it should reach….”[xxi]  Further, “expert testimony is not admissible to inform the trier of fact as to the law that it will be instructed to apply to the facts in deciding the case.”[xxii]  Similarly, contract interpretation is not a proper subject for expert testimony.[xxiii]

Finding that all three of the experts intended to offer opinions that were objectionable on the basis of helpfulness, Judge Arguello granted both parties’ motions to exclude the expert testimony of the opposing experts. 


[i] Hansen Construction, Inc. v. Everest National Insurance Company, 2019 WL 2602510 (D. Colo. June 25, 2019).

[ii]See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589–95 (1993); see also Goebel v. Denver & Rio Grande W. R.R. Co., 215 F.3d 1083, 1087 (10th Cir. 2000).

[iii]United States v. Nacchio, 555 F.3d 1234, 1241 (10th Cir. 2009); United States v. Crabbe, F. Supp. 2d 1217, 1220–21 (D. Colo. 2008); Fed. R. Evid. 702 advisory comm. notes.

[iv]See Goebel, 214 F.3d at 1087; United States v. Velarde, 214 F.3d 1204, 1208–09 (10th Cir. 2000).

[v]Nacchio, 555 F.3d at 1241.

[vi]Norris v. Baxter Healthcare Corp., 397 F.3d 878, 884, 884 n.2 (10th Cir. 2005).

[vii]Robinson v. Mo. Pac. R.R. Co., 16 F.3d 1083, 1090 (10th Cir. 1994) (quotation omitted).

[viii]Norris, 397 F.3d at 884, 884 n.2 (quoting Daubert, 509 U.S. at 592).

[ix] Id. (quoting Daubert, 509 U.S. at 592–93).

[x]Norris, 397 F.3d at 884 (citing Daubert, 509 U.S. at 593–94).

[xi]Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150 (1999).

[xii]Daubert, 509 U.S. at 590.

[xiii]Bitler v. A.O. Smith Corp., 400 F.3d 1227, 1233 (10th Cir. 2004) (quoting Mitchell v. Gencorp Inc., 165 F.3d 778, 781 (10th Cir. 1999)).

[xiv] Id.

[xv]Velarde, 214 F.3d at 1208–09; Daubert, 509 U.S. at 594.

[xvi] United States v. Richter, 796 F.3d 1173, 1195 (10th Cir. 2015).

[xvii] Fed. R. Evid. 702.

[xviii] Richter, 796 F.3d at 1195 (quoting United States v. Bedford, 536 F.3d 1148, 1158 (10th Cir. 2008)); see, e.g., Killion v. KeHE Distribs., LLC, 761 F.3d 574, 592 (6th Cir. 2014) (report by proffered “liability expert,” which read “as a legal brief” exceeded scope of an expert’s permission to “opine on and embrace factual issues, not legal ones.”).

[xix] Richter, 796 F.3d at 1195 (quoting United States v. McIver, 470 F.3d 550, 562 (4th Cir. 2006)).

[xx] Id. (citing United States v. Dazey, 403 F.3d 1147, 1171–72 (10th Cir. 2005) (“Even if [an expert’s] testimony arguably embraced the ultimate issue, such testimony is permissible as long as the expert’s testimony assists, rather than supplants, the jury’s judgment.”)).

[xxi] Id. at 1195–96 (quoting Dazey, 403 F.3d at 1171).

[xxii] 4 Jack B. Weinstein et al., Weinstein’s Federal Evidence § 702.03[3] (supp. 2019) (citing, e.g., Hygh v. Jacobs, 961 F.2d 359, 361–62 (2d Cir. 1992) (expert witnesses may not compete with the court in instructing the jury)).

[xxiii] Id. (citing, e.g., Breezy Point Coop. v. Cigna Prop. & Cas. Co., 868 F. Supp. 33, 35–36 (E.D.N.Y. 1994) (expert witness’s proposed testimony that failure to give timely notice of loss violated terms of insurance policy was inadmissible because it would improperly interpret terms of a contract)). 

Professor Stempel’s Expert Testimony for Insurer Excluded

Tred R. Eyerly | Insurance Law Hawaii | August 14, 2019

    The court denied Daubert motions for several experts with the exception of Professor Stempel’s expert testimony opining that the insurer did not act in bad faith Adell Plastics, Inc. v. Mt. Hawley Ins. Co., 2019 U.S. Dist. LEXIS 102942 (D. Md. June 19, 2019).

    A fire demolished several buildings at Adell’s facility. Adell was insured under a commercial property policy issued by Mt. Hawley. Mt. Hawley sued Adell, seeking a declaration that it owed no coverage, and requesting recoupment of a substantial advance payment. Adell filed a counterclaim, alleging that Mt. Hawley had breached the policy and had acted with a lack of good faith. Before the court were several pretrial motions, including motions to exclude testimony of eight expert witnesses.

    The court denied Adell’s motion to exclude several experts to be called by Mt. Hawley. The accountant’s testimony was relevant. Adell had to prove damages on its breach of contract claim, and the accountant’s testimony would aid the jury in evaluating Adell’s documentation and calculating documented damages. Mt. Hawley’s fire safety expert investigated the Adell fire. Mt. Hawley had shown that his expert opinion would be sufficiently reliable for admissibility. Further, three fire protection engineers offered by Mt. Hawley and two fire protection engineers to be called by Adell were allowed to testify. Each expert based his investigation and conclusions on the standards of fire investigation as set out in the NEPA Guide for Fire and Explosion Investigations. This was a fire insurance case, and fire protection engineers would be allowed to testify and illuminate the circumstances of the fire. 

    Regarding Adell’s motion to exclude Professor Stempel, the court found this testimony was irrelevant. Stempel’s report described the law and made various legal conclusions. A legal conclusion was not likely to assist the jury because the court would provide all necessary legal conclusions in the form of jury instructions. Here, Stempel wanted to tell the jury what result to reach on the lack of good faith issue. The legal conclusions on an ultimate issue for trial predominated Stempel’s report. Therefore, Adell’s motion to exclude his testimony was granted. 

Growing Pains: The Story Behind Florida’s Daubert Arc – Part 1

Alan J. Lazarus | Drinkler Biddle & Reath | July 1, 2019

The steady but sometimes slow adoption by the states of the Daubert standard for expert admissibility, and the accompanying recession of the Frye standard, is something of a coming of age for the national jurisprudence. Frye has become outmoded and anachronistic in an era of dizzying technological and scientific advancement ─ and riddled with exceptions. Daubert’s focus on reliability and fit incorporates the necessary flexibility, rigor, and judicial engagement to warily allow the expert wheat while turning away the chaff. The transition has played a pivotal role in fine-tuning the tort system in search of well-founded fact-finding and more rational adjudications.

But as we all know, a maturation process can be painful, halting, and fraught with challenges. That aptly describes the Florida experience in moving from Frye to Daubert.

The legal community took notice recently when the Florida Supreme Court at last, but rather abruptly, adopted the Daubert standard for admissibility of expert testimony. But many may be unaware of the full back story, a tale replete with starts and stops, victories and setbacks, and what might pass for intrigue in a litigator’s office.

Firmly Frye

Florida was historically a dedicated Frye state. Soon after the U.S. Supreme Court issued Daubert, rejecting the Frye rule in favor of a reliability and relevance test and imposing a rigorous gatekeeping obligation, the Florida Supreme Court first reacted to the decision in Flanagan v. State, 625 So.2d 827, 829 n.2 (Fla. 1993). The Court’s entire discussion (shorn of citations) was this:

We are mindful that the United States Supreme Court recently construed Rule 702 of the Federal Rules of Evidence as superseding the Frye test. However, Florida continues to adhere to the Frye test for the admissibility of scientific opinions.

More thoughtful discussions and reaffirmations were later issued in Brim v. State, 695 So.2d 268 (Fla. 1997), Hadden v. State, 690 So.2d 573 (Fla. 1997) and Castillo v. E.I. DuPont de Nemours & Co., 864 So.2d 1264 (Fla. 2003). In Castillo, the Supreme Court interpreted the first prong of Daubert, scientific reliability (described as “scientific validity”), to be the equivalent of the Florida Frye test, but rejected the second prong, “fit,” as improperly evaluating the expert’s ultimate conclusion rather than the underlying science. That view is wrong, but it at least suggested that perhaps the distance between reliability gatekeeping and the Frye standard as recognized in Florida was not great.

Marsh – The Exception Swallows the Rule

The gulf widened considerably in 2007 when the Supreme Court decided Marsh v. Valyou, 977 So.2d 543 (Fla. 2007). As discussed below, Marsh prescribed a standard for expert testimony that could not be more dissimilar to Daubert. Whereas Daubert sets reliability as the sine qua non of admissibility and requires the trial judge to rigorously assess the reliability (and “fit”/relevance) of the testimony before admitting it, the Florida Supreme Court essentially immunized almost all scientific expert testimony in Florida courts from any meaningful scrutiny, as a practical matter. The Court did this by drastically enlarging the “pure opinion” exception to the Frye standard.

The theory behind the “pure opinion” exception is that where the expert’s opinion is based solely on expertise, rather than impenetrable “science,” the jury is capable of evaluating the testimony as it would that of any fact witness and protective gatekeeping is not necessary. Accordingly, Frye does not apply. Neither does any other special test of reliability.

In Marsh, the plaintiff’s expert testified that a series of car accidents had caused plaintiff to develop fibromyalgia. The trial court excluded the testimony under Frye as not based on generally accepted scientific principles – the scientific community had not reached any consensus as to whether trauma was capable of inducing fibromyalgia. The court of appeal affirmed, rejecting arguments that the testimony was pure opinion excepted from Frye and that Frye was satisfied. Meanwhile, another District Court of Appeal reached a contrary result in a similar case. The Supreme Court resolved the conflict, finding the testimony was (1) pure opinion not subject to Frye and (2) admissible under Frye in any event.

The pure opinion holding was marred by a prominent internal inconsistency. The Court held that medical causation opinions based on a physician’s review of the patient’s medical history, clinical physical examinations, their own experience, published research, and differential diagnosis is pure opinion testimony not subject to Frye. But in support, the Court cited court of appeal cases emphasizing that the exception applies only when the opinion “is based solely on the expert’s training and experience.”

The holding also eliminated any safeguards against junk science in the vast majority of cases. Even accepting the pure opinion exception’s premise – that an expert relying solely on background, training, and experience can be adequately “analyzed by the jury as it analyzes any other personal opinion or factual testimony by a witness,” and therefore need not be Frye-tested for general acceptance reliability – once the expert claims support in scientific research some form of reliability filter becomes necessary. Thus, without acknowledgment, Marsh substantially expanded the population of cases that would escape any reliability screening, of any type, by broadening “pure opinion” to include testimony relying in part on scientific research.

As to satisfying Frye, the Court decided, in dicta, that the existence of “numerous published articles and studies [that] recognize an association between trauma and fibromyalgia” sufficiently demonstrated the reliability of the underlying principle that trauma can cause fibromyalgia. The Court observed that “a lack of studies conclusively demonstrating a causal link”… “and calls for further research do not preclude admission”; nor does a lack of supporting epidemiology. But the Court ignored the fundamental difference between association and causation and the fundamental nature of a general causation analysis. None of the studies cited – presumably the research relied on by the expert to establish general causation – was a controlled study demonstrating a causal link. The Court’s dicta therefore diluted and distorted the “general acceptance” standard for those rare cases where Fryestill applies.

Two of the justices in the four-justice majority specially concurred, adding that they believed Frye had been superseded by Florida’s adoption of the Evidence Code and effectively replaced by a pure relevance standard. The three dissenters argued that the absence of general acceptance of the general causation premise – that trauma can cause fibromyalgia – precluded both sidestepping and satisfying Frye. Because general causation is a prerequisite for specific causation and a differential diagnosis analysis, a specific causation opinion built upon a disputed general causation premise cannot be deemed a pure opinion. Scientific research inevitably plays a role, and its reliability needs to be assessed. And the lack of consensus on general causation leaves Frye’s general acceptance requirement unsatisfied.

Neither plaintiffs’ attorneys nor the experts they hire are generally stupid, and it soon became apparent that after Marsh they could assure admissibility simply by having the expert raise his/her right hand and say they were applying their expertise, even if their analysis also relied on scientific research.

Claim Denied? Why Picking the Wrong Expert Can Cost You

Ian Dankelman | Property Insurance Coverage Law Blog | June 2, 2019

Picking the right expert has never been more important when fighting an insurance company that has wrongfully denied an insurance claim. The rule for expert admissibility has just changed in Florida and the same concerns about experts apply everywhere.

Under the Frye test, a party seeking to introduce expert evidence had to prove the general acceptance of the underlying scientific principles and methodology that the expert employed when advancing new or novel scientific testimony. Now, Florida has adopted the Daubert  standard, which requires the trial judge to ensure that “any and all scientific testimony or evidence admitted is not only relevant, but reliable.”1 In reaching this decision, the Supreme Court emphasized that the amendments would reduce forum shopping and harmonize Florida’s standard with the standard employed by federal courts.

However, in dissent, Justice Labarga cautioned that “Daubert and its progeny drastically expand[] the type of expert testimony subject to challenge.”2 One concern over the amendment the dissent highlighted was that the new standard would undermine the constitutional right to a jury trial by authorizing judges “to exclude from consideration the legitimate but competing opinion testimony of experts.”3 Another was that the new expert testimony standard would overburden the courts, impede the ability of parties to prove their cases on the merits, and increase litigation costs.

So what does this mean for policyholders? On one hand, Daubert is the well-established standard in federal court, and there is clear direction in federal case law that state judges can follow to reach reasoned rulings. It is likewise conceivable that the number of cases removed from state court to federal court will be reduced based on the amendments to the evidence code. The new standard will also give policyholders a new ability to challenge the insurers’ experts when their work does not meet the requirements demanded by the Daubert standard. On the other, policyholders’ cases may be delayed while Florida courts deal with increasing numbers of challenges to expert opinion testimony. Policyholders will likely face additional hearings on the admissibility of expert testimony that will require intense preparation.

It remains to be seen how judges will tackle the increase in challenges to expert testimony in Florida’s courts. Only one thing is certain: the amendment to the evidence code will have important ramifications on all litigation in Florida.
__________________________
1 In re: Amendments to the Florida Evidence Code, No. SC19-107 (Fla. May 23, 2019).
2 Id. at 13 (Labarga, J., dissenting).
2 Id. at 15-16.