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Insurance Law

SNR Denton on Butler v. First Acceptance Insurance Co.: Lawyer Cannot Testify as Expert in Bad Faith Case Where Lawyer’s Background Is Not Relevant To Issues in Case

   By Ronald D. Kent, Partner, SNR Denton

Butler v. First Acceptance Insurance Co., 652 F. Supp. 2d 1264 (N.D. Ga. 2009), concerns an insurer’s duty to settle.  Butler received what his lawyer regarded as an inadequate response to a time-limit demand for the $25,000 policy limit, obtained a $3.25 million consent judgment and an assignment of the insured’s rights, and brought the bad faith action.  He sought to present lawyer testimony about the insurer’s allegedly improper claim handling.

The insured’s fault quickly became clear, and the damages (loss of both legs in ugly circumstances) were clearly very large.  Butler’s lawyer sent a ten-day time-limit demand for the policy limits just before the July 4 weekend, leaving the adjuster only five business days to respond.  He did not tell the insurer that workers compensation was paying the medical bills or that it had already asserted a lien claim for $163,275.09.  The insurer had concerns about hospital and workers compensation liens and got legal advice indicating that some of those liens could not be released by the injured party.  Two days before the demand expired, the insurer faxed an offer of policy limits, contingent on protection of the insured from any liens.  Butler’s lawyer regarded this as a counter-offer and rejection of his demand.

In the bad faith case, Butler sought to present expert testimony from Frank E. Jenkins, III, a personal injury attorney to the following opinions:

(1) First Acceptance was required to complete its evaluation of the risk to its insured and to respond to the time-limited demand in a timely manner; (2) First Acceptance was under a duty to protect its insured by paying its policy limits in accordance with the demand; (3) Mr. Butler's demand for a limited release was entirely reasonable under the circumstances of this case; (4) First Acceptance's response to Mr. Butler's demand was a counter-offer that constituted a rejection of the terms of Mr. Butler's demand for settlement and Mr. Butler was under no duty to continue negotiating with First Acceptance; (5) First Acceptance should have known the effect of a limited release, as it is commonly used in Georgia; (6) First Acceptance's refusal of the demand was a failure to exercise the standard of care required of First Acceptance to give the proper consideration to its insured's interest in this case; (7) the failure to investigate the existence of a medical lien was a failure to exercise the standard  [**11] of care required of First Acceptance to give the proper consideration to its insured's interest in this case; (8) First Acceptance also failed in protecting its insured's interest because it did not determine the legal effect of the workers' compensation payments on behalf of Mr. Butler in conjunction with the "made whole" doctrine in Georgia; and (9) First Acceptance did not protect its insured's interest because it failed to notify her of the time-limited demand until after the time for response had elapsed.  [Id. at 1269.]

The court granted a Daubert motion to exclude that testimony, reasoning that:

Mr. Jenkins is not qualified to provide expert testimony on the standard of care for a claims adjuster receiving a time limited demand letter. Mr. Jenkins is an attorney who has represented parties in personal injury and insurance litigation for over 30 years. He is co-author of Georgia Automobile Insurance Law, Including Tort Law. Mr. Jenkins was retained as an expert in a Georgia state court case involving a tortious failure to settle claim. The court notes, however, that Mr. Jenkins has never worked in the insurance industry, nor has he litigated a tortious failure to settle case. While an expert may be qualified  based on "knowledge, skill, experience, training, or education," the court finds that Mr. Jenkins' extensive background is not relevant to the legal issues here. Mr. Jenkins' experience relates to personal injury and insurance claims in general. Mr. Jenkins admitted that he never litigated a tortious failure to settle claim and therefore his background does not match the subject matter of this suit. Further, because Mr. Jenkins lacks the qualifications necessary to opine in a tortious failure to settle case, Plaintiff cannot explain how Mr. Jenkins' experiences lead to the opinions he has offered in this case. Nor can Plaintiff show that Mr. Jenkins' testimony would offer the jury any more than what Plaintiff's counsel could argue in closing arguments. Finally, the court notes that the great bulk of Mr. Jenkins' proposed testimony sets forth legal standards for insurers under Georgia law. The jury, however, is not to receive its instructions of law from a party's expert, rather it receives them from the judge. For these reasons, the court concludes that Mr. Jenkins is not qualified to offer his opinion in this case because his area of experience is not relevant for the issues in the  litigation and will not aid the trier of fact.  [Id. at 1272]

The court went on to hold that the response was a counter-offer which did reject the demand and left a jury question whether the insurer had improperly failed to settle.  Id. at 1273-78.

The court’s rejection of Mr. Jenkins’ testimony serves as a useful reminder that lawyer experts may not usurp the court’s role in instructing the jury on the law and may not opine as to matters which are beyond the scope of their own expertise.

The case raises other significant issues regarding time-limit demands, bad faith set-ups, and the proper handling of liens in connection with offers to settle.  These questions are addressed in §§ 2.03[6][d][v] & 2.03[8] of New Appleman Insurance Bad Faith Litigation, of which I am co-author.

Ronald D. Kent is co-author of the second edition of New Appleman Insurance Bad Faith Litigation. He heads the litigation department in SNR Denton's Los Angeles office. He is also co-chair of the firm's national insurance litigation and coverage practice and is a member of the firmwide Policy and Planning (management) Committee. Since 2005 he has been named each year as a leading trial lawyer nationally and in California, based on peer client evaluations, by Chambers USA: America's Leading Lawyers, the highly respected independent attorney rating organization.

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Additional Bad faith commentaries by Ronald D. Kent are available on the LexisNexis Insurance Law Community:

SNR Denton on McReynolds v. American Commerce Insurance Co.: Interpleader as a Safe Harbor for Multiple Demands.

SNR Denton on Reasonableness of Insurer’s Delay in Offering Policy Limits Is Question of Fact: Allstate Insurance Co. v. Herron.

SNR Denton on Genovese v. Provident Life & Accident Insurance Co.: Florida Upholds Insurer’s Attorney-Client Privilege in Bad Faith Cases.

SNR Denton on Sanderson v. American Family Insurance Co.: “Fair Debatability” Not Threshold Defense in Colorado?.

SNR Denton on New Jersey Manufacturers Insurance Co. v. National Casualty Co.: Primary Insurer Has Right To Discovery from Excess Insurer To Assess Fault for Failure To Settle.

SNR Denton on Cedell v. Farmers Insurance: Bad Faith Is Not Enough to Destroy Attorney-Client Privilege on a First-Party Claim in Washington.

SNR Denton on Allstate Insurance Co. v. Miller: Failure to Inform Insured of Settlement Opportunity as a Basis for Excess Judgment Liability.

SNR Denton on In re Professionals Direct Insurance Co.: The Sixth Circuit Interprets Boone v. Vanliner.

SNR Denton on In re County of Erie: Second Circuit Adopts Narrow Rule on At-Issue Waiver of Attorney-Client Privilege.

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