By Richard Lewis, Partner, Reed Smith LLP
In Versai Management Corp. v. Clarendon America Insurance Co., the court concluded that a policyholder need not prove the magnitude of its Business Income claim through an expert forensic accountant, but instead could rely on the testimony of the company’s president.
In the last decade, it has become increasingly common for an insurance company litigating a Business Income claim to move to exclude testimony of the policyholder’s forensic accountant or other expert under “gatekeeping” rules of evidence such as F.R.E. 702. A successful motion along these lines can cripple the policyholder’s case by eliminating the evidence by which the policyholder sought to establish the magnitude of its Business Income loss.
In Versai, the policyholder suffered damage to its apartment complexes from Hurricane Katrina, causing it to lose Business Income. In litigation over its insurance claim, the policyholder failed to produce expert reports as to the magnitude of its Business Income loss by the date established by the court. The insurance company moved for summary judgment on the ground that, without such expert testimony, the policyholder could not prove that it was owed any Business Income beyond what it had been paid. In opposition to that motion, the policyholder proffered various affidavits, including one from its president, as to the magnitude of its unpaid Business Income loss.
Reversing the District Court’s judgment for the insurance company, the Court of Appeals concluded that the policyholder could prove the magnitude of its Business Income claim through lay testimony of witnesses in positions such as company president. Policyholders litigating Business Income claims should take note of this holding and prepare their case to include both expert testimony from forensic accountants and lay testimony of company officers as to the magnitude of their loss.
Lexis.com subscribers can access the complete commentary, Reed Smith LLP on Versai Management Corp. v. Clarendon America Insurance Co.: Proving Business Income Losses Through Company Officers and Not Forensic Accountants. Additional fees may be incurred. (approx. 5 pages)
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Lexis.com subscribers can access the Lexis enhanced version of Fifth Circuit decision with summary, headnotes, and Shepard’s, Versai Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729 (5th Cir. La. 2010).
Non subscribers can access the free unenhanced version of the opinion available from lexisONE Free Case law, Versai Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729 (5th Cir. La. 2010).
Richard Lewis is a partner in the New York office of Reed Smith LLP. He has experience litigating a wide variety of first- and third-party insurance coverage issues. Along with John Ellison, Richard secured one of the most important policyholder decisions from the WTC attacks, a reversal of summary judgment, and grant of summary judgment, by the Second Circuit in Zurich American Insurance Co. v. ABM Industries, Inc., 397 F.3d 158 (2d Cir. 2005). Richard is the author of the treatise Business Income Insurance Disputes (Aspen 2006), which he supplements on an annual basis by reading and reviewing all time-element cases decided in the previous year, along with relevant briefing and commentary.
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