Idaho District Court Affirms Its Role as the Gatekeeper of Expert Testimony

Melissa Kenney | The Subrogation Strategist

Many subrogation claims involving fire losses rely heavily on expert testimony. Expert testimony is admissible under Federal Rule of Evidence 702 if it is both relevant and reliable. In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), whose standard has been incorporated into Federal Rule of Evidence 702, the Supreme Court instructed federal trial courts to act as a “gatekeeper” of expert testimony, giving them the power to exclude expert testimony that is not supported by sufficient evidence. In Maria Fernanda Elosu and Robert Luis Brace v. Middlefork Ranch Incorporated, Civil Case No. 1:19-cv-00267-DCN, 2021 U.S. Dist. LEXIS 14449 (D. Idaho Jan. 22, 2021) (Brace), the United States District Court for the District of Idaho exercised its gatekeeper role when it granted in part and denied in part the defendant’s motion to exclude expert testimony pursuant to Daubert and Federal Rule of Evidence 702.

Brace, involved a fire at a vacation cabin in McCall, Idaho. The cabin, owned by Maria Elosu (Elosu) and Robert Brace (Brace and collectively with Elosu, Plaintiffs) was part of a homeowner’s association called Middlefork Ranch, Incorporated (MFR). The cabin had a “wrap around” deck with a propane-fired refrigerator on the north side. On the day before the fire, Brace stained the deck using an oil-based stain. That night, Elosu smoked cigarettes on the deck. The next morning, Plaintiffs used rags to clean up excess oil from the deck and an MFR employee changed the propane on the refrigerator and relit the pilot light. At 4:00 p.m., a fire started in or around the cabin while no one was home. The fire was discovered by a group of contractors who testified that the fire was isolated to the east side of the cabin when they first arrived. Importantly, one witness testified that there was no fire and no flames around the propane-fired refrigerator. The fire destroyed the cabin and the contents within.

Plaintiffs sued MFR for negligently starting the fire and alleged that the MFR employee had knowledge of the hazard when he lit the refrigerator pilot light on the oil-stained deck. To prove its claim, Plaintiffs retained a fire investigator, Michael Koster (Koster), who inspected the scene ten months after the loss occurred, and a mechanical engineer, Richard Mumper (Mumper), who conducted various lab tests. Both experts concluded that “the fire started on the north deck as a result of excess oil vapors being ignited by the pilot light on the propane fridge.” In anticipation of trial, MFR filed a motion to exclude the opinions of Plaintiffs’ experts.

Motion to Exclude Koster’s Expert Opinion Regarding the Fire Origin and Cause

With respect to Koster, MFR argued that his conclusions should be excluded because they were speculative and not supported by evidence. The court agreed, finding that Koster failed to satisfy the standards set forth in Daubert and Federal Rule of Evidence 702 because his conclusion was mere speculation, either contrary to or unsupported by evidence in the record. Among other flaws, the trial judge focused on the fact that Koster, by his own admission, stated there was no concrete physical or testimonial evidence to support his theory that the fire started on the north side of the deck.

The court also took issue with the fact that Koster relied on an interested party’s version of the facts without conducting an independent investigation to verify the accuracy of those statements. He discounted other possible explanations for the fire, such as the spontaneous combustion of the oil rags and the careless disposal of smoking materials, based “solely off of the information that was given to [him] by [Plaintiffs].” Additionally, none of the witness interviews or transcripts supported his theory, including the testimony of the disinterested construction workers that reported observing fire on the east side of the cabin when they first arrived. Koster explained his conclusion was a “hypothesis” and that because he could not disprove it, “then there’s a high probability that it did occur.” As stated by the court: “Failing to disprove a theory that is speculative in the first place . . . would swallow the rules as applied to experts if allowed. If an expert could throw out any idea – and claim that so long as it remains unproven it’s a viable option – without oversight, the [c]ourt’s gatekeeping role is meaningless.”

Motion to Exclude Mumper’s Expert Opinion Regarding the Cause of the Fire

Plaintiffs hired Mumper to examine the remnants of the appliances including the propane refrigerator. Mumper conducted various lab tests, examined the evidence, found no abnormal electrical activity, and concluded there was no mechanical malfunction with the refrigerator that caused the fire. He goes on to opine, however, that the refrigerator pilot light caused the fire.

MFR asked the court to exclude Mumper’s opinion regarding the cause of the fire because he was not a certified fire investigator. The court noted that, because he worked for a firm that specialized in forensic fire investigations, Mumper might be qualified to offer opinions as to the origins of the fire. In the end, the court held that it would not preclude Mumper from testifying “about the tests he ran, his conclusions about those tests, and his opinion that those things did not start the fire.” On the other hand, the court ruled that Mumper could not testify as to the cause of the fire because his opinions lacked a proper foundation. The court based its decision on the fact that Mumper’s role appeared to be limited to investigating whether the refrigerator (or other appliances) malfunctioned and that he did not independently investigate other possible causes.

The primary purpose of an origin and cause investigation is to determine where the fire started and why. Expert testimony is admissible under Federal Rule of Evidence 702 if it is: (1) from a qualified source, (2) based on sufficient facts or data, and (3) will assist the trier of fact in resolving an issue that is relevant to the case. As established in Brace, it is generally not enough for a consulting expert to reach a conclusion as to the origin of a fire when his/her conclusion is contrary to or unsupported by evidence in the record.

Claim Handling Requirements by State – Idaho

Julitza Perez | Property Insurance Coverage Law Blog | August 17, 2018

Idaho is a state with a diverse weather, and property owners have risks all year long. Adequate insurance coverage should be considered by all property owners. Some of the natural disaster risks in Idaho are wildfires, snowstorms, flooding, and earthquakes.

An insured may not be required to obtain fire or hazard insurance in an amount that exceeds the replacement value of the improvements.1 The Idaho Supreme Court has held that it will not be considered a breach of contract for an insurance company to choose between paying the insured the policy amount or defending an insured in a lawsuit involving title to the property. Neither will it create a liability for emotional distress.

The “Gem State” regulates insurance claims under the “Unfair Claim Settlement Practices”2section of the Idaho Code. Like many other states, Idaho keeps track of practices in the business of insurance to avoid unfair methods or acts by insurance companies against insureds.

Idaho will consider as unfair practices those acts, omissions, or methods that consist of:

  • Misrepresenting facts in insurance policy related to coverages.
  • Failing to act reasonably and promptly upon communication with respect to insurance claims.
  • Failing to conduct a reasonable investigation.
  • Refusing to pay claims without reasonable investigation based upon all available information.
  • Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.
  • Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.
  • Compelling insureds to recover less amounts than due under their coverage.
  • Attempting to settle claims for less than a reasonable amount or on the basis of application altered without notice to, knowledge or consent of the insured.
  • Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made.
  • Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.
  • Delaying the investigation or payment of claims by requiring the insured duplicate information such as submitting a preliminary claim report and then a formal proof of loss.
  • Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the policy coverage.
  • Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

The Idaho Code also provides insureds a limited action to recover punitive damages. The insured must prove, by clear and convincing evidence, oppressive, fraudulent, malicious or outrageous conduct by the insurer.3 In all civil actions a claim for punitive damages shall be pursuant to a pretrial motion and after hearing before the court, amend the pleadings to include a prayer for relief seeking punitive damages. A court’s conclusion on the motion shall not be barred by lapse of time under any applicable limitation on the time in which an action may be brought or claim asserted, if the time prescribed or limited had not expired when the original pleading was filed.4 Judgments on punitive damages shall not exceed the greater of two hundred fifty thousand dollars ($250,000) or an amount which is three (3) times the compensatory damages contained in a judgment.5

The State of Idaho has a legitimate interest in preventing the mistreatment of its citizens by punishing insurance companies that exploit the vulnerability of their insureds.6 It is important for Idaho’s insureds to understand their policy coverage and how a claim should be adequately handled by its insurance company.
_______________________
1 IDAPA Section 12.01.10.060.
2 ID ST Section 41-1329. Unfair Claim Settlement Practices.
3 I.C. Section 6-1604 (1). Limitation on Punitive Damages.
4 I.C. Section 6-1604 (2). Limitation on Punitive Damages.
5 I.C. Section 6-1604 (3). Limitation on Punitive Damages.
6 Hall v. Farmers Alliance Mut. Ins. Co., 2008, 179 P. 3d 276, 145 Idaho 313.

Supreme Court of Idaho Rules That Substantial Compliance With the Notice and Opportunity to Repair Act Suffices to Bring Suit

Lian Skaf | The Subrogation Strategist | July 10, 2018

In Davison v. Debest Plumbing, Inc., 416 P.3d 943 (Ida. 2018), the Supreme Court of Idaho addressed the issue of whether plaintiffs who provided actual notice of a defective condition, but not written notice as stated in the Notice and Opportunity to Repair Act (NORA), Idaho Code §§ 6-2501 to 6-2504, et. seq., substantially complied with the act and if the plaintiffs’ notice was sufficient to bring suit. Section 6-2503 of the NORA states that, “[p]rior to commencing an action against a construction professional for a construction defect, the claimant shall serve written notice of claim on the construction professional. The notice of claim shall state that the claimant asserts a construction defect claim against the construction professional and shall describe the claim in reasonable detail sufficient to determine the general nature of the defect.” Any action not complying with this requirement should be dismissed without prejudice. The court held that the defendant’s actual notice of the defect was sufficient to satisfy the objectives of the NORA and, thus, the plaintiffs’ action complied with the NORA.

In Davison, Scott and Anne Davison hired general contractor Gould Custom Builders (Gould) to remodel a vacation home in McCall, Idaho. Gould subcontracted out the plumbing work to Debest Plumbing (Debest). This work included installing a bathtub. When the Davisons arrived at their home for the first time on July 25, 2013, they noticed a leak from the subject bathtub. The Davisons contacted Gould and, the next morning, Gil Gould arrived with a Debest employee to inspect the home. In addition to inspecting the home, the Debest employee repaired the leak and helped Gould remove some water-damaged material.

It was undisputed that Debest was at fault for this loss and that the Davisons never provided written notice of the defect directly to Debest. Although Debest admitted that the leak was its fault, the parties’ adjusters could not agree on the repair cost. Thus, the Davisons filed suit against Debest.

Debest filed a motion for summary judgment on the Davisons’ breach of contract and warranty claims for lack of privity and on their negligence claim for not complying with the written notice requirement of the NORA. In addition to dismissing the Davisons’ contract claims, the lower court awarded summary judgment on their negligence claim based on their failure to comply with the NORA.

The Supreme Court of Idaho reversed the lower court’s grant of summary judgment for the negligence claim.[1] The court analogized the facts herein to a case in which the plaintiffs substantially complied with the notice requirement of the Idaho Tort Claims Act by sending written notice to the district’s attorney, who forwarded it to the district secretary, instead of the plaintiffs sending it to the secretary directly. The court reasoned that, similarly to that case, the plaintiffs in this case met the objective of the NORA because the defendant had actual notice of the defective bathtub. Since the statute does not state that the plaintiff must specify the cost of remediating the defect, it found Debest’s argument that actual notice was insufficient to provide notice of the scope of the damage unpersuasive.

The court’s ruling in Davison establishes that, as long as plaintiffs satisfy the objectives of Idaho’s NORA, they fulfill its notice requirement and can proceed with a lawsuit. However, it should also serve as a warning for practitioners to be mindful of applicable statutory notice requirements and the fact that they have to satisfy them prior to filing suit. While the facts in Davison may have been sufficient for the court to find that the plaintiffs complied with the NORA’s notice requirement in this instance, courts will not, necessarily, find compliance in all cases where a plaintiff claims that the defendant had actual notice of the defects at issue. Furthermore, depending on the language of another state’s statute and/or that state courts’ interpretation of the applicable statute, actual notice may not suffice.


[1] The court affirmed the dismissal of the contractual claims and vacated an award for attorney’s fees.