Are the Federal Courts Starting a Trend To Preclude Experts on Bad Faith Issues?

By Brent A. Green, Esq.*

Lawsuits by an insured against an insurance company often include claims for the company's alleged bad faith in the handling of the claim. Such claims filed in a federal court may be submitted to a jury. Experts can be hired by the insured-plaintiff to bolster the evidence presented. Such was allowed in a 2006 case of Gallatin Fuels v. Westchester Fire Insurance Co., 410 F. Supp. 2d 417 (W.D. Pa. 2006). The court in Gallatin allowed the expert to testify with regard to the insurance company's claim handling procedure, compliance with industry standards and customs, and even whether the insurance company had a reasonable basis for denying the claim. The court noted the general rule that the testimony may be admitted if it is helpful to the jury and is otherwise admissible, and that it will not be precluded simply because the expert might testify with respect to bad faith issues.

Recently, the federal Western District Court precluded the use of expert testimony to address issues of bad faith. In the case of Schifino v. GEICO, 2013 U.S. Dist. LEXIS 76532 (W.D. Pa. May 31, 2013), Schifino had a claim against his automobile insurance carrier, GEICO, for uninsured motorist benefits. He filed suit, alleging breach of contract and bad faith in the handling of his claim, and demanded trial by a jury. Schifino retained and intended to call an expert to testify as to GEICO's handling of the claim. A bad faith expert was also retained by GEICO. The experts were expected to testify on the issue of GEICO's compliance with the handling of claims, statutes and industry standards.

The Schifino court granted motions filed by both the plaintiff and the defendant to preclude the testimony of the other's expert. The judge reasoned that the issue of bad faith is neither so complex nor scientific that it is beyond the scope of the average juror's intelligence. The concept of bad faith is within the ordinary understanding of a lay person, and expert testimony is not always necessary. The jurors had to address the issue of whether GEICO had a reasonable basis for the manner in which it handled the plaintiff's claim. The judge determined that a reasonable juror possessed the requisite knowledge to assess that issue without testimony from an expert.

Schifino raised a concern that such expert testimony would usurp the jury's fact-finding function. The judge found that many of the opinions and conclusions contained in the report prepared by the plaintiff's expert related to the ultimate legal conclusion of whether GEICO acted in violation of the applicable law. Schifino argued that his expert's testimony would help a jury understand the insurance laws, regulations, industry standards and claim adjusting procedures employed by GEICO in handling this claim. The judge determined that the expert's proposed testimony constituted only the expert's own experience and personal interpretations of the law. Such opinions were outside the scope of expert testimony permitted by the court.

The Schifino case follows another recent case that precludes the use of an expert on bad faith issues. Last November, the same court issued an opinion precluding testimony of an expert on bad faith in the case Smith v. Allstate Insurance Company, 2012 U.S. Dist. LEXIS 76532 (W.D. Pa. Nov. 8, 2012). The Smith case held that bad faith is a legal concept that does not require specialized scientific or technical knowledge for a juror to understand. The opinion and reasoning in Smith were adopted and cited in the Schifino case to bar the use of expert testimony.

Pennsylvania state courts have long held that expert testimony is not required in cases involving bad faith allegations against an insurance company. In the case Bergman v. United Services Automobile Association, 742 A.2d 1101 (Pa. Super. 1999), the Pennsylvania Superior Court refused to adopt a blanket rule requiring expert testimony in all cases involving bad faith. The Bergman court observed a growing trend among other states that expert testimony is not mandated in cases where bad faith is alleged. After reviewing the expert's report and the record, the court in Bergman determined that the proposed expert testimony was not necessary and would not contribute to "anything that had not already been said …" The admission or exclusion of such experts in Pennsylvania still remains a matter within the discretion of the trial court.

Allegations of statutory bad faith are resolved by judges in Pennsylvania state courts, but excess verdict bad faith is still a jury issue. In federal courts, all allegations of bad faith are resolved by a jury. A judge in Pennsylvania may not need an expert to explain the legal principals of bad faith. With cases in the federal courts precluding experts who want to explain the legal principals to a jury, the trend may be moving toward precluding such experts for the jury as well.

*Brent, a shareholder in our Bethlehem, Pennsylvania, office, can be reached at 484.895.2319 or bagreen@mdwcg.com.

Defense Digest, Vol. 19, No. 3, September 2013

Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2013 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.