Genuine Dispute Summary Judgment Reversed for Abuse of Discretion and Trial of Fact Questions About Expert Opinions

Christopher Kendrick and Valerie A. Moore | Haight Brown & Bonesteel

In Fadeeff v. State Farm General Ins. Co. (No. A155691, filed 5/22/20 ord. pub. 6/8/20), a California appeals court held that triable issues of fact and the trial court’s failure to address a request for a continuance precluded summary judgment for an insurer under the genuine dispute doctrine.

In Fadeeff, the policyholders made a claim to State Farm for smoke damage to their home from the 2015 Valley Fire in Hidden Valley Lake, California. With State Farm’s approval, the insureds retained the restoration company, ServPro, to assist with smoke and soot mitigation. State Farm documented smoke and soot on the interior walls, ceilings and carpeting, and on all exterior elevations, including on the deck and handrail. State Farm made a series of payments on the claim totaling about $50,000.

The insureds then hired a public adjuster and submitted supplemental claims for further dwelling repairs and additional contents replacement, totaling approximately $75,000. State Farm responded by using its own independent adjuster to investigate, who was neither licensed as an adjuster, nor as a contractor. State Farm also retained forensic consultants for the structure and the HVAC system, but neither the independent adjuster nor the consultants were aware that State Farm had an internal operation guide for the use of third-party experts in handling first party claims, which guidelines were therefore not followed. In addition, the consultants made allegedly superficial inspections, with one attributing smoke and soot damage to other sources of combustion, including the insureds’ exterior propane barbecue, an internal wood fireplace and wood stove and candles that had been burned in the living room. None of the consultants asked the insureds when they had last used any of the sources of combustion.

State Farm denied the supplemental claim and in the subsequent bad faith lawsuit, State Farm, relying on its use of experts, moved for summary judgment on the ground that the “genuine dispute” doctrine defeats the bad faith claim where an insurer reasonably relies upon expert opinions in reaching a claim decision. The insureds’ opposition was based on declarations from their own adjuster and expert, who opined that the work performed to date had not completely removed soot throughout the structure, or the HVAC system. The declaration from the insureds’ expert also refuted the opinions of State Farm’s expert. Plus, the insureds made a request for a continuance under Code of Civil Procedure section 437c(h), which authorizes a court to order a continuance for additional discovery, on affidavits of necessity.

At the hearing on the summary judgment motion, the trial court did not address the request for continuance. The court sustained State Farm’s objections to portions of the insureds’ declarations and reports, which gutted the insureds’ evidence contradicting State Farm’s expert, and granted State Farm’s motion. On appeal, however, the appeals court found both factual questions and an abuse of discretion by the trial court, mandating reversal.

Regarding the former, the Fadeeff court said that the use of experts does not automatically insulate an insurer from bad faith liability under the genuine dispute doctrine. (Citing Guebara v. Allstate Ins. Co. (9th Cir. 2001) 237 F.3d 987, 994.) In particular, the Fadeeff court said that where the dispute is purely factual, such as differing opinions of experts, whether there was a genuine dispute can only be decided on a case-by-case basis. (Citing Chateau Chamberay Homeowners Assn. v. Associated International Ins. Co. (2001) 90 Cal.App.4th 335, 348.) The Fadeeff court quoted Chateau Chamberay’s list of circumstances where a biased investigation claim should go to jury: (1) the insurer was guilty of misrepresenting the nature of the investigatory proceedings; (2) the insurer’s employee’s lied during the depositions or to the insured; (3) the insurer dishonestly selected its experts; (4) the insurer’s experts were unreasonable; and (5) the insurer failed to conduct a thorough investigation. (Quoting Chateau Chamberay, supra, at 348-349.)

The Fadeeff court pointed out that the insureds had presented evidence that part of their claim had been denied by State Farm in violation of the California fair claim handling regulations, based on ServPro’s work power washing the outside of the structure, which had caused the paint to peel. State Farm had denied that part of the claim on the ground that it, as well as damage to carpets and wall coverings, was not smoke or fire damage, and excluded as wear, tear or deterioration. But the insureds argued that the damage to the exterior caused by power washing was required to be covered under California Code of Regulations, title 10, section 2695.9(a)(1), as “consequential physical damage incurred in making the repair or replacement not otherwise excluded by the policy [which should] be included in the loss.” The court also noted the problem of the internal operation guide, and the State Farm independent adjuster’s failure to follow it. That and several other inconsistencies lead the Fadeeff court to conclude that there were triable issues regarding whether State Farm could have reasonably relied on its experts in denying the supplemental claims.

The Fadeeff court also reversed the summary adjudication on punitive damages, finding that State Farm failed to carry its burden to show that the Fadeeffs could not prove that State Farm acted with an absence of malice, oppression or fraud. (Civ. Code, § 3294, subd. (a); § 437c, subd. (f)(1); Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1118.) The Fadeeff court found that “The fact that an individual plaintiff may not believe that the people at State Farm ’wanted to harm you or hurt you intentionally’ does not conclusively answer the question whether State Farm intentionally misrepresented or concealed a material fact, or acted with knowing disregard of the rights of others.” (Citing CACI No. 3946—Punitive Damages.)

More fundamentally, the Fadeeff court found that reversal was required in any case, because of the trial court’s failure to address the request for a continuance, either at the hearing or in its ruling. The court stated that whether or not to grant a continuance under section 437c(f) is a matter within the court’s discretion, and is reviewed for abuse of discretion. But the Fadeeff court stated that reversal was mandated because a trial court’s failure to exercise discretion is itself an abuse of discretion. (Citing Kim v. Euromotors West/The Auto Galley (2007) 149 Cal.App.4th 170, 176.)

Being an Expert Witness with “Nothing” to Witness

Advise & Consult, Inc.

Fire ravaged neighborhood.

Typically, when we are hired as a construction expert witness, we are given some preliminary documents and plan on a site visit.  We are then able to “witness” many of the damaged properties (if the damage has not already been repaired) and start gathering data on what caused the damage, who the responsible parties are, and what are the estimated costs to repair the damage – in a simplified example – to find a resolution for all parties involved and move on.

There are other instances, however, where we are hired as a construction expert witness and expected to find a resolution with “nothing” to witness.  It seems increasingly more often, large wildfires, hurricanes, tornadoes, and other natural disasters are ravaging many areas, resulting in massive damage to life and property, leaving little to nothing behind over hundreds of thousands of acres.  People have suffered catastrophic losses of most if not all personal possessions including property documentation.  These clients are emotionally worn out and completely overwhelmed with starting over and finding a place of stability for their family with so many questions left unanswered.  The experience is harrowing and painful to revisit and being asked to provide documentation or answer questions about this loss causes frustration and pours salt on yet to be healed open wounds.

Law firm administration do their best to gather as much info as possible for the expert witnesses to create their report. The problem is they know what information is needed to fully support their claim for damages but do not know exactly what is needed to satisfy the insurance company and this can add months to the process – only adding to the frustration and anxiety of firm staff and property owners.  Here lies the bottleneck and the client’s frustration – being asked to relive the pain trying to gather information that is not needed.  Multiply this by the potential hundreds of clients that you have signed to represent, and this can be very frustrating and nerve wracking for staff trying to deal with hyper emotional clients and finding that they are not moving through the process in the most efficient way – causing everyone involved only an increase in stress and anxiety.

When you have a qualified expert witness firm that knows the exact information that is needed for an accurate rebuild estimate report, it streamlines the entire process from beginning to end for the clients, the law firm and/or insurance company.  This information can be gathered through a short 30-60-minute phone interview and paired with public, online sites that can provide most, if not all, of the necessary information in a good picture of the loss.  When other documentation is available from the client, those documents can be dragged and dropped by the clients straight to the expert witness.  This can all be done with a 3-5 business day turn around.  This process is efficient, accurate, and less painful, making it a win for the client, a win for the law firm and/or insurance company, and a win for the expert witness.  If your expert witness firm cannot provide this type of resolution, why are they your expert witness firm?

Great Expert Witnesses are Vital

Advise & Consult, Inc.

Construction and Property Insurance cases can be very complex and difficult for attorneys, juries, judges and those outside of the construction industry. Expert witnesses, thusly, are important in obtaining a favorable verdict. During the pre-trial preparation it can become vital for a great expert witness to inform the attorney of where their client stands and what the strengths and weaknesses of the case are.

As the case progresses through depositions and into trial, a great expert witness is vital in explaining these complex construction principles to juries and judges. Not only does the expert witness need to be knowledgeable about construction, but it is vital that they connect with the jury and judge by being personable, friendly, trustworthy and concise, but also being able to break the complex details of the case down to bite size, understandable concepts that people without construction experience can at least determine culpability.

Amy Currotto, from Merlin Law Group, says this about expert witnesses:

In establishing damages and liability under the policy, expert-witness testimony before a jury is one of the most important tools. An entire case theory can ride on the back of successful expert witness testimony, which is why policyholder lawyers should begin to consult with experts from the very beginning of a case. It cannot be overstated that winning or losing a property case often depends on the credibility and admissibility of the expert testimony. This is because without expert testimony, many property insurance cases cannot be proven.

Courts have held, when a matter is beyond the common knowledge of an average person, an expert witness opinion will be required to testify on the essential issue of causation. Policyholders who fail to present competent expert testimony on the issue often fail to prove their case which may ultimately lead to dismissal.

Richard Friedman and Patrick Malone wrote a book – Rules of the Road, A Plaintiff Lawyer’s Guide to Proving Liability states “to win cases, you must defeat complexity, confusion, and ambiguity, or they will defeat you.”

“Battle of the experts” can make the jurors skeptical, but also truly appreciate hearing the testimony of a highly educated and well-informed witness who can credibly explain to them the complicated or technical aspects of the case. Clarity is key. Being “a teacher” is vital for the expert witness to explain their findings in a way that can be commonly understood and your case can rest on this ability. Cases have been lost based on an expert’s inability to effectively communicate their opinions and methodologies to the jury. Communication can help you rise to success or it can lead to your downfall, not just for the average person, but also for an expert witness.

Expert Witness: To Exclude, Or Not To Exclude, That Is The Question

Robert Quinn | Drew Eckl & Farnham

A significant factor to consider when evaluating a case, in particular for purposes of settlement, is whether the opposing party intends to utilize expert witnesses.  The inclusion or exclusion of opposing party’s expert witness in some instances may make or break a case.  The lack of an expert witness such as an economist may prohibit a plaintiff from proving future lost income which would significantly diminish the value of the case.  Or failing to disclose a orthopedist as a testifying expert may preclude an injured plaintiff from establishing causation.  Alternatively, the use of such expert witnesses by the plaintiff may significantly strengthen their case and convince you or your client that settlement is more advantageous than proceeding to trial.  The use of an expert witness becomes even more important when the other side intends to use one.  There are countless instances where juries put undue weight on the testimony of an expert merely because the other side failed to present similar testimony to rebut the expert’s opinion.  This makes the disclosure of an expert witness critical for evaluating a case for settlement. 

For many years in Georgia, an expert witness may be excluded under certain circumstances including the failure to disclose the expert witness by deadlines established in the court’s case management order.  The failure to disclose an expert witness pursuant to a court’s case management order in some instances have led to sanctions against the offending party including excluding that expert from testifying at trial.  The exclusion of the expert could certainly be devastating to your case and severely affect the settlement value.  However, a recent decision from the Georgia Supreme Court has changed the hardline rule regarding the exclusion of experts that were not timely disclosed pursuant to a court scheduling order.  Instead, the Georgia Supreme Court has now identified a list of factors that the court should consider when determining whether to exclude the late identified expert witness. 

 In Lee v. Smith, S18G1549, the Supreme Court was asked two questions, (1) whether it is proper for a trial court to exclude an expert witness solely because the witness was identified after the deadline established in the case management order, and (2) if it is improper to exclude such a witness, what factor should a trial court consider when exercising its discretion in determining whether to exclude said witness.  The case in question involved a collegiate athlete who was injured in a car accident.  Liability was not at issue and the only thing to be determined at trial were the damages sustained by the plaintiff.  Plaintiff did not disclose an expert witness in response to discovery requests.  The court had entered a case management order requiring all parties to identify all witnesses by May 12, 2017.  Plaintiff subsequently supplemented his responses to interrogatories identifying his sports agent as a damages witness.  However, he did not disclose his sports agent as an expert witness.  In June of the same year, defense counsel identified an expert witness to be called as a rebuttal witness regarding plaintiff’s newly submitted claim for future lost income. 

During the July pretrial hearing, plaintiff argued that the defendant’s rebuttal expert should be excluded because they were not timely identified pursuant to the case management order.  Defendant argued that the need for the expert witness did not become apparent until after the disclosure of plaintiff’s sports agent as a damages witness.  The court excluded the expert witness and explained that while he was sympathetic to the position of the defendant, the parties agreed to a scheduling order that required the disclosure of all expert witnesses by May and the most recent disclosure was untimely.

As a result of exclusion of defendant’s expert witness, plaintiff was able to submit unrebutted testimony regarding his claim for lost wages.  The jury eventually returned a verdict for $2 million dollars.

Defendant appealed this case to the Georgia Court of Appeals which initially affirmed the decision of the trial court.  Defendant then appealed this case to the Georgia Supreme Court.  The Georgia Supreme Court initially agreed that the trial court has broad discretion in setting scheduling deadlines and also imposing sanctions upon parties for failing to comply with those deadlines.  This had been the rule in Georgia for many years and similar sanctions excluding expert witnesses have been upheld.  However, the Georgia Supreme Court noted that the trial court’s discretion in fashioning a sanction for the party’s failure to comply with the scheduling order is not unlimited.  The court reasoned that “no harsher sanctions should be imposed than are necessary to vindicate the court’s authority.”  The Georgia Supreme Court further stated that a trial court must exercise some discretion by evaluating the specific circumstances surrounding the party’s non-compliance with an order to property determine what, if any, sanction is necessary to provide fairness to the parties and to vindicate the court’s authority.  The Georgia Supreme Court determined that because the sole reason the trial court decided to exclude the expert was he was untimely disclosed, the trial court had abused its discretion in sanctioning the defendant.     

However this did not end the court’s analysis of the matter.  The Georgia Supreme Court provided further guidance as to what a trial court should consider when determining whether or not the untimely disclosure of an expert witness warrants the sanction of excluding the witness.  The court ultimately decided that four factors should be considered when determining whether to exclude a late identified expert witness.  First, the explanation for the failure to disclose the witness, two, the importance of the testimony, three, the prejudice to the opposing party if the witness is allowed to testify and, four, whether a less harsh remedy than the exclusion of the witness will be sufficient to ameliorate the prejudice and vindicate the court’s authority.  Because these factors were not considered by the trial court when imposing the sanction of excluding the witness, the Supreme Court remanded the case for further consideration by the trial court.

What is important to understand from this new framework for determining a proper sanction for untimely disclosed expert witnesses is that the failure of a party now to meet the deadline in disclosing an expert witness does not immediately close the door for that witness’ inclusion at trial.  The parties need to be weary of the fact that the mere failure of a party to disclose an expert witness before the deadline will not immediately preclude them from using an expert witness at trial.  The parties must be cognizant of these factors going forward and understand the potential for disclosure of a previously unidentified expert witness when evaluating their case either for trial or for settlement.  Despite the fact that this new four factor test will allow some parties to include an expert witness that was previously not identified by the court’s scheduling order, we recommend taking all necessary steps to properly disclose any expert witnesses as soon as possible to ensure your ability to utilize those witnesses at trial.

Trials And Depositions: The Rules Are Different

R. David DePuy | McLane Middleton

The rules regarding the examination of witnesses at deposition are vastly different from the rules at trial, and while the COVID-19 epidemic is changing the way we do depositions from in person to video, the rules of how deponents are examined have not changed.  When an objection is made at trial, the court will direct the witness not to answer the question until the objection is ruled upon.  If the objection is found to be valid, the witness is directed not to answer the question. Different rules apply at deposition where witnesses generally must answer questions whether objections are made or not.  The practice at deposition is that lawyers need not interpose objections to questions, except as to the form of the question, because, except in limited circumstances, the person being deposed must answer the question anyway, whether an objection is made or not.  Thus, at deposition where a witness is being examined by one lawyer, the opposing lawyer may object on the basis that the question seeks hearsay testimony, or that the matter is irrelevant, or that the question calls for a conclusion, or calls for an opinion, or seeks personal information of the witness, or is immaterial, etc.  Despite those objections, the witness must answer and will be told by the lawyer making the objection: “You may answer.”  Thus, at deposition a witness may be required to answer some questions that he or she would not be compelled to answer at trial.

There are certain objections that must be raised at deposition, or they will be lost, such as when the objection asserts that a question is leading or is phrased in a way that could be corrected by the lawyer asking the question.  If the opposing lawyer has an objection based upon the “form” of the question, then that objection as to form must be raised at deposition so that the lawyer examining the witness is given the opportunity to rephrase the question and ask it properly.  But even if an objection is made, the deponent must answer.  With limited exceptions, all other objections are preserved and may be raised at trial.  

In a Law and Order episode, the prosecutor, Jack McCoy, was talking to his associate, Claire Kincaid, about her upcoming deposition and explaining that she might be asked certain questions likely to elicit harmful testimony by her.  The response by Claire Kincaid was: “Well, you’ll just object.”  McCoy’s reply to her was: “But Claire, you know you have to answer the question anyway.” That, in fact, is the general rule.

There are a limited number of objections at deposition which, when made, can be followed by an instruction by the client’s lawyer directing the client not to answer.  Thus, objections based on privilege, such as the attorney/client privilege, the Fifth Amendment privilege or the doctor/patient privilege, may be raised at deposition and a lawyer may instruct the client or possibly warn a witness not to answer on that basis.  There are, generally speaking, only three bases on which a lawyer may instruct a witness, usually his or her client, not to answer a question at deposition.  Those three bases are:

  1. Privilege.
  2. In support of a court order, such as an order to protect trade secrets or to limit inquiry into certain past conduct or other limitations previously imposed by the court.
  3. An objection made in support of a motion.  Such objections are usually made to a certain line of questioning on the basis that opposing counsel is badgering the witness or humiliating the witness or improperly examining the witness to such a degree that the lawyer instructs the witness, or his or her client, not to answer and interrupts the deposition, or at least that line of questioning, and thereafter files a motion with the court to preclude the continuation of the deposition, or that line of questioning, because the questioning is being pursued in an improper fashion or for an improper reason.  Such motions are seldom filed and opposing lawyers, after some saber rattling, normally come to an agreement limiting the questioning.

Thus, the rule in general is that witnesses at deposition must answer all questions they are asked, even if the opposing lawyer objects.  The objection is simply noted on the record and the client or witness is then instructed to answer the question.  This means that, especially in divorce cases, some very personal questions may be asked of the parties or of witnesses.  Thus, clients, and to some extent witnesses, should be prepared to have to respond to some intrusive questioning at deposition.   Therefore, a party to litigation should be prepared to undergo some unpleasant questioning, especially in divorce litigation, where just about anything may be the subject of inquiry.