Howard v. Certain Underwriters At Lloyd's Of London

• Decision Date: 25 March 2011
• Docket Number: No. CV-09-1042-PHX-GMS,CV-09-1042-PHX-GMS
• Parties: Loren L. Howard, a single man, Plaintiff, v. Certain Underwriters at Lloyd's of London, an alien, unauthorized insurer, Defendant.
• Court: U.S. District Court — District of Arizona

Loren L. Howard, a single man, Plaintiff,

v.Certain Underwriters at Lloyd's of London, an alien, unauthorized insurer, Defendant.

No. CV-09-1042-PHX-GMS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Dated: March 25, 2011

NOT FOR PUBLICATION

ORDER

Pending before the Court are the following motions: (1) Plaintiff Loren Howard's Motion for Summary Judgment on Defendant's Counterclaim for Rescission (Doc. 41); (2) Motion for Summary Judgment (Doc. 43) filed by Defendant Certain Underwriters at Lloyd's of London; and (3) Plaintiff's Motion to Strike (Doc. 45). For the reasons stated below, the Court grants in part and denies in part Plaintiff's Motion to Strike, denies Plaintiff's Motion for Summary Judgment, and denies Defendant's Motion for Summary Judgment.

BACKGROUND

In January 2005, Plaintiff Loren Howard, a football player at Northwestern University, applied for disability insurance after being approached by an insurance broker, James Padilla, who told Plaintiff that he qualified for the insurance. (Doc. 42; 44, Ex. 1; 50). On January 7, 2005, Plaintiff submitted the application for disability insurance to Defendant. (Doc. 41). The insurance application contained the following question: Have you ever injuredor suffered pain or discomfort, or had surgery to... [your] Right Knee? (Doc. 42, Ex. 2). Plaintiff answered "no." (Id.). Plaintiff did disclose that he had missed the first six games of the season after having surgery on his right ankle in January 2004 and his left ankle in September 2004 to treat peroneal ligament subluxation. (Doc. 44, Ex. 1). He also noted on his application that he had experienced muscle spasms of his lower back in March 2004 and a left PIP dislocation (left hand) in April 2004. Defendant approved the application, excluding coverage of Plaintiff's ankles, and issued a policy, providing $500,000 of coverage, with effective dates of December 17, 2004 through August 1, 2006. (Doc. 42; Doc. 44, Ex. 1). Subsequently, Padilla approached Plaintiff again, offering to increase Plaintiff's coverage by another $500,000. (Doc. 42; 44, Ex. 2). To receive the increase in coverage, Plaintiff was required to submit a Letter of Health, which he dated February 27, 2005, indicating that there had been no change in his health since he submitted his original application in January 2005. (Doc. 42, Ex. 6). On March 7, 2005, Plaintiff received a letter, stating that his coverage had been increased to $1 million, effective February 10, 2005. (Doc. 42, Ex. 4).

In May 2005, based on the recommendation of an orthopedist at Northwestern University, Plaintiff underwent arthroscopic surgery to address "chronic quadriceps tendinitis" and chondromalacia patella of his right knee. (Doc. 42, Ex. 17). Plaintiff contends that, by August 2005, he began experiencing pain in his right knee again, and as a result, underwent another surgery later that month. (Doc. 42, Ex. 18). Unable to fully recover following several knee surgeries, Plaintiff contacted Padilla regarding a claim for disability. (Doc. 42, Ex. 22, 23). In August 2007, Padilla submitted Plaintiff's claim, which appears to assert that as a result of an accident-the May 2005 surgery-he was totally disabled and suffering from right knee tendinitis, level 3 chondromalacia, and other complications following surgery. (Doc. 42, Ex. 24; 44, Ex. 2). The relevant provision of his insurance policy states:

In the event that the Insured sustains Bodily Injury caused in and of itself by an Accident occurring during the Certificate period and which, solely and independently of any other cause, results in the Total Disablement directlyculminating in the Permanent Total Disablement of the Insured, and providing the Total Disablement commenced within six (6) months of the date of such Accident, then the Insurer agrees to pay benefits stated in the Schedule to the Insured.

(Doc. 42, Ex. 3).

As of April 2009, Defendant had not issued a final decision regarding Plaintiff's claim. Accordingly, Plaintiff filed his Complaint. (Doc. 2, Ex. 1).

DISCUSSION

I. Motion to Strike

Plaintiff filed a motion to strike underwriter Colin Fairlie's July 23, 2010 affidavit pursuant to Rule 37(c) of the Federal Rules of Civil Procedure for Defendant's failure to disclose the subject of any discoverable information that Fairlie could offer to support Defendant's claims as required by Rules 26(a) and 26(e) of the Federal Rules of Civil Procedure. (Doc. 45).¹ Specifically, Plaintiff contends that Defendant never indicated that Fairlie would provide evidence regarding Defendant's decision to rescind Plaintiff's policy or supporting the rescission claim. Plaintiff requests that the Court exclude Fairlie's testimony in its entirety, award fees and costs to Plaintiff in connection with filing his Motion to Strike, and inform the jury of Defendant's failure to disclose the testimony at trial. Upon review of the affidavit in question, the Court issued an order requesting that each party submit a supplemental memorandum addressing the issue of whether Defendant was required to disclose Fairlie as an expert under Federal Rule of Evidence 702 because the subject of Fairlie's affidavit was derived from "specialized knowledge." (Doc. 59).

Defendant contends that Fairlie's affidavit and testimony should not be excluded because he is serving as a fact witness, not an expert witness. (Doc. 60). Defendant argues that Fairlie is "providing evidence as a party about facts and circumstances within hispersonal knowledge and about decisions he made regarding the issues in this litigation." (Id.). If the Court interprets Fairlie as providing an opinion, Defendant asserts that the opinion would be within the scope of Federal Rule of Evidence 701.

To the extent that Fairlie's initial affidavit describes the process and any determinations actually made with regard to the issuance of Plaintiff's policy and the exclusion of Plaintiff's ankles, specifically paragraphs 1-7, that portion of the affidavit will not be stricken. (Doc. 44, Ex. 9). However, in paragraphs 8 and 9, Fairlie describes a hypothetical situation, in which Plaintiff submits medical information about his right knee, and explains the steps he would have taken and determinations he would have made had that actually occurred. Defendant incorrectly describes these circumstances as fact. (Doc. 60). The circumstances described cannot be considered facts, by definition, because they did not actually take place. Without any underwriting guidelines or other similar materials, Defendant appears to be relying on Fairlie's opinion as an expert who has specialized knowledge of underwriting standards to establish William J. Sutton & Co.'s standards for making determinations about insuring athletes with particular types of injuries.

Defendant attempts to describe any opinion expressed as "lay witness" opinion, subject to Federal Rule of Evidence 701. Rule 701 explains that lay testimony is limited to opinions or inferences which are "rationally based on the perception of the witness" and "not based on scientific, technical, or other specialized knowledge." (emphasis added). The Advisory Committee's Note to the 2000 Amendments further explains that the amendment incorporates the following distinctions: "lay testimony 'results from a process of reasoning familiar in everyday life, ' while expert testimony 'results from a process of reasoning which can be mastered only by specialists in the field.'" Fed. R. Evid. 701 advisory committee's note (quoting Tennessee v. Brown, 836 S.W.2d 530, 549 (Tenn. 1992)). It is clear from the language of paragraphs 8 and 9 of the affidavit that Fairlie is not providing testimony "'common enough'" to require only a "limited amount of expertise." United States v. Figueroa-Lopez, 125 F.3d 1241, 1245-46 (9th Cir. 1997) (quoting United States v. VonWillie, 59 F.3d 922, 929 (9th Cir. 1995)). Rather, paragraph 8 states: "Based upon my25 years in the sports insurance industry, I know that tendonitis can be a chronic condition that does not develop overnight, but can be a condition that builds up over time." Fairlie then goes on to describe, based on his extensive experience, what he would have required from Plaintiff and how he would have interpreted certain medical information to come to an ultimate conclusion about Plaintiff's policy. (Doc. 44, Ex. 9).

Setting aside the issue of whether Fairlie is qualified by "knowledge, skill, experience, training, or education" to testify regarding Plaintiff's knee condition and generally about a diagnosis of tendinitis, see Fed. R. Evid. 702, Fairlie's affidavit provides an opinion about a hypothetical situation based on Fairlie's assertion of specialized knowledge in underwriting standards. Cf. Cedar Hill Hardware & Constr. Supply, Inc. v. Ins. Corp. of Hannover, 563 F.3d 329, 343 (8th Cir. 2009) (witness testifying about underwriting standards and decisions was qualified as an expert due to his "specialized knowledge"); Am. Gen. Life Ins. Co. v. Schoenthal, 555 F.3d 1331, 1338-39 (11th Cir. 2009) (witness testifying about financial underwriting standards and risk management issues qualified as an expert based on his education and experience); Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998, 1015-16 (9th Cir. 2004) (concluding that a witness testifying about claims adjustment standards who has "twenty-five years' experience working for insurance companies" and has evaluated claims and insurance policies was correctly considered an expert witness). Therefore, Defendant was required to disclose Fairlie's testimony to the extent that it constitutes expert testimony. Cf. Hangarter, 373 F.3d at 1015 (explaining that "the advisory committee notes emphasize that Rule 702 is broadly phrased and intended to embrace more than a narrow definition of qualified expert" (internal quotation marks omitted)).

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