Expert Witness Opinions Beyond Purview
In excluding the testimony of an expert witness, "[t]he relevancy bar is low, demanding only that the evidence 'logically advances a material aspect of the proposing party's case,'" wrote U.S. Ninth Circuit District Court Chief Judge B. Lynn Winmill before excluding two experts' testimony completely and three partially in the title insurance bad faith litigation case of Stewart Title Guaranty Company v. Credit Suisse in which seven expert witnesses' testimonies were challenged.
Stewart Title had issued Credit Suisse a lender's title insurance policy of $227 million on mortgaged land that was to be used to build a ski resort. The policy did not contain the standard exceptions for mechanics' liens and creditors' rights. The developer defaulted on the loan and Credit Suisse filed a foreclosure action. Stewart Title initially defended Credit Suisse against multiple competing liens, then withdrew its defense and filed suit for a declaration that it did not need to indemenify Credit Suisse for any losses due to these liens.
Credit Suisse's title insurance expert witness, Albert Rush, a licensed attorney, was challenged by Stewart Title for his opinions on industry best practices. Rush opined "… that Stewart Title's conduct violated Idaho law and was an extreme deviation from industry standards of conduct." Justice Winmill took issue with Rush's testimony where he "… opines on Idaho law and concludes that Stewart violated that law."
An expert witness can testify about standard terms in an insurance policy, how insurance companies typically interpret those provisions and even use the law to explain industry standards, but an expert witness cannot testify as to what duties the law imposes nor whether or not those duties were violated. Expert witnesses may not make legal conclusions in their testimony.
Rush's opinions on industry standards and how Stewart Title fell short of those standards were not excluded; his opinions on the law were.
The testimony of Stewart Title's claims and underwriting expert witness, Bushnell Nielsen, fell under similar grounds. Neilsen, an attorney with over thirty years' experience in the title insurance industry, prefaced his opinions with reference to industry customs, he also opined on the method a jury should use to calculate damages — an area exclusively reserved for the Court. That testimony was denied, but his opinions on industry standards and practices concerning underwriting were allowed.
Credit Suisse also challenged the expert witness testimony of Robert Reilly, a certified appraiser, CPA and economic damages analyst. Reilly was retained by Stewart Title as a substitute for Trey Knipe, an appraiser who had died after the expert discovery deadline had closed. Reilly's testimony was limited by the court to what Knipe could have testified to as Knipe did not have the same expertise as Reilly. Justice Winmill found that Reilly's opinons went "far beyond" Knipe's. Stewart Title had argued that Reilly needed to do so to respond to the supplemented reports of Credit Suisse's appraisal expert Phillip Cook, but the court found that those supplementations were merely updated figures and corrections, and three of those corrections were previously excluded. In all, four of Reilly's six opinions were excluded.
Stewart Title challenged the testimony of Credit Suisse's expert Kenneth Franklin, a specialist in title insurance underwriting and issuance practices in Idaho. Stewart Title argued that Franklin's testimony was based on "conjecture and speculation". Franklin had concluded that Stewart Title knew before it closed the transaction that "Banner/Sabey was the general contractor" on the project, and that Stewart Title was taking short cuts in not obtaining a mechanic's lien waiver from Banner/Sabey at closing, that it "assumed the risk" to get a very substantial premium.
Justice Winmill found that Franklin was not engaging in undue speculation, but "… making an inference based on industry practice and the facts of this case" — something expert witnesses often do.
Credit Suisse's motion to exclude the testimony of Stewart Title's insurance bad faith expert witness Jeffrey Thompson was a simpler matter. While Thompson was an "… attorney with over 30 years of experience who has, over the last decade, spent about 80% of his time on insurance coverage and bad faith issues," Justice Winmill found that Thompson "… has no experience in the title insurance industry with either its practices or standards." His testimony was excluded.
The testimony of Stewart Title's expert witness Michael Mason, a certified real estate appraiser, was challenged by Credit Suisse for its relevance. Mason was retained to opine about flaws in the property appraisal relied upon by Stewart Title. However, the court had previously held that Stewart Title could not argue that it was misled by the appraisal, as it was stated to have been for financing purposes only, not market valuation. Thus, any flaws in the appraisal were irrelevant and Mason's testimony was excluded.
Successful challenges to expert witness testimony are often the result of opinions that exceed the scope of their authors' knowledge or experience, and sometimes that exceed their role as expert witnesses.