LM Ins. Corp. v. Halleluyah Restoration, LLC

Decision Date08 March 2023
Docket NumberCV422-011
PartiesLM INSURANCE CORPORATION Plaintiff, v. HALLELUYAH RESTORATION, LLC, Defendant.
CourtU.S. District Court — Southern District of Georgia
ORDER

CHRISTOPHER L. RAY UNITED STATES MAGISTRATE JUDGE

Before the Court is Plaintiff LM Insurance Corporation's (LM) Motion to Strike Expert Report of Edward J. Priz and Exclude Proposed Expert Testimony.” Doc. 26. Defendant Halleluyah Restoration, LLC (Halleluyah) responded, doc. 28, and LM replied, doc. 30. For the following reasons, LM's motion is GRANTED, in part, and DENIED, in part. Doc. 26.

BACKGROUND

LM alleges that it provided two workers' compensation insurance policies to Halleluyah, an exterior renovation business. Doc. 5 at 5. As discussed more fully below, the policies incorporated provisions of a manual generated by the National Council on Compensation Insurance (“NCCI”) by reference. See, e.g., doc 26-1 at 7-8 (Halleluyah's expert explains NCCI manual incorporation). LM subsequently conducted an audit of Halleluyah and determined that Halleluyah inaccurately characterized several of its laborers as independent contractors when it applied for the policies. Doc. 5 at 5-6; see also doc. 26 at 2. Accordingly, Halleluyah “did not include these employees in its [policy] applications”, which resulted in lower premiums. Doc. 5 at 6, doc. 26 at 2. The audit revealed that Halleluyah was unable to produce documents demonstrating the type of work performed by its laborers, and to explain large cash withdrawals in its records. Doc. 5 at 6. LM filed this breach of contract action against Halleluyah seeking over $700,000 in additional premiums. Id. at 7-9.

Halleluyah seeks to offer the expert testimony of Edward J. Priz, a forensic premium auditor and workers' compensation insurance underwriting expert. See doc. 26-1 at 16 (Priz's curriculum vitae); id. at 1-15 (Priz's report). In his report, Priz renders 25 specific opinions regarding, e.g., the accuracy of LM's calculation of additional premiums, and LM's determination that Halleluyah inaccurately characterized its laborers as independent contractors. See id. at 4-6 (Priz lists his 25 specific opinions); id. at 7-15 (Priz's report elaborates on the listed opinions). LM asks the Court to exclude all of Priz's proposed testimony under Federal Rule of Evidence 702. Doc. 26 at 1. Halleluyah argues that all of Priz's testimony is admissible. Doc. 28 at 8.

ANALYSIS

Federal Rule of Evidence 702 compels the Court to perform a “gatekeeping” function concerning the admissibility of expert scientific evidence. United States v. Frazier, 387 F.3d 1244, 1260 (11th Cir. 2004) (citing Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589 n.7, 597 (1993)). In performing this task, the Court must consider whether the party offering the evidence has shown:

(1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry mandated in Daubert; and (3) the testimony assists the trier of fact, through the application of scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in issue.

Frazier, 387 F.3d at 1260 (quoting City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 562 (11th Cir.1998)). The proponent of the expert opinion bears the burden of establishing qualification, reliability, and helpfulness by a preponderance of the evidence. Daubert, 509 U.S. at 592, n.10.

Under the first prong, “experts may be qualified in various ways. While scientific training or education may provide possible means to qualify, experience in a field may offer another path to expert status.” Frazier, 387 F.3d at 1260-61; see also Fed.R.Evid. 702 (a witness may be qualified as an expert by “knowledge, skill, experience, training, or education[.]). But, [w]hen an expert witness relies mainly on experience to show he is qualified to testify, ‘the witness must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.' Payne v. C.R. Bard, Inc., 606 Fed.Appx. 940, 942-43 (11th Cir. 2015) (quoting Frazier, 387 F.3d at 1261).

As to the second prong, “the reliability criterion remains a discrete, independent, and important requirement for admissibility.” Frazier, 387 F.3d at 1261 (emphasis omitted). “The Supreme Court in Daubert set out a list of ‘general observations' for determining whether expert testimony is sufficiently reliable to be admitted under Rule 702.” United States v. Brown, 415 F.3d 1257, 1267 (11th Cir. 2005) (citation omitted). These factors, or observations, inquire into the expert's “theory or technique” and are: (1) whether it can be (and has been) tested; (2) whether it has been subjected to peer review and publication; (3) what its known or potential rate of error is, and whether standards controlling its operation exist; and (4) whether it is generally accepted in the field.” Id. (citation omitted). “Sometimes the specific Daubert factors will aid in determining reliability; sometimes other questions may be more useful.” Frazier, 387 F.3d at 1262. “Indeed, the Committee Note to the 2000 Amendments of Rule 702 expressly says that, [i]f the witness is relying solely or primarily on experience, then the witness must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.' Id. at 1261.

Expert testimony must also assist the trier of fact. Frazier, 387 F.3d at 1262. “By this requirement, expert testimony is admissible if it concerns matters that are beyond the understanding of the average lay person.” Id. (citation omitted). This inquiry is commonly called the “helpfulness” inquiry. Prosper v. Martin, 989 F.3d 1242, 1249 (11th Cir. 2021) (citing Frazier, 387 F.3d at 1260). “Expert testimony which does not relate to any issue in the case is not relevant and, ergo, non-helpful.” Id. (internal quotations omitted) (quoting Daubert, 509 U.S. at 591). Although [a]n opinion that embraces a legal conclusion is inadmissible because it is unhelpful to the trier of fact”, Moore v. Wright Med. Tech., Inc., 2016 WL 1316716, at *9 (S.D. Ga. Mar. 31, 2016) (citing Fed.R.Evid. 704 advisory committee's note), [a]n opinion is not objectionable just because it embraces an ultimate issue.” Fed.R.Evid. 704(a).

LM groups Priz's 25 specific opinions in four categories,[1] and argues that each category is inadmissible:

First, Mr. Priz would like to testify that LM incorrectly determined that Halleluyah's laborers were employees, not independent contractors, under Georgia employment law. [Cit.]
Second, Mr. Priz would like to testify that LM applied incorrect NCCI classification codes to the work being performed by Halleluyah's laborers. [Cit.]
Third, having determined that Halleluyah's laborers were actually independent contractors, [Priz] would like to testify that the policies do not permit LM to charge additional premiums related to those contractors. [Cit.] And, finally, [Priz] has performed his own audit of Halleluyah's premiums in line with the above-described assumptions. [Cit.]

Doc. 26 at 3 (formatting altered); see also doc. 28 (Halleluyah does not expressly dispute this categorization). LM argues that each of these categories are unhelpful “legal conclusions” which infringe on the roles of the judge and jury. See doc. 26 at 6-11. It contends that the opinions amount to testimony that “LM failed to adhere to [the terms of the policies], which is an improper subject for expert testimony because it “is a legal issue . . . involv[ing] contract interpretation.” Doc. 30 at 4. Halleluyah counters that the testimony merely “assist[s] the trier of fact in sorting through the labyrinth of industry customs and jargon” related to the “highly technical” NCCI manual, doc. 28 at 5, and clarifies “industry standards”, id. at 7.[2]

Although [a]n expert may opine on an issue of fact within the jury's province, he may not give testimony stating ultimate legal conclusions based on those facts.” Armstead v. Allstate Prop. & Cas. Ins. Co., 2016 WL 4123838, at *4 (N.D.Ga. July 1, 2016) (quoting United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991)). Under Georgia law, which governs in this removed diversity action, see Jenkins v. CLJ Healthcare, LLC, 481 F.Supp.3d 1313, 1319 (S.D. Ga. 2020), [t]he question of interpretation of the contract is for the jury, and the question of legal effect is for the judge. In neither case do we permit expert testimony.” Armstead, 2016 WL 4123838, at *4 (quoting Plantation Pipeline Co. v. Continental Cas. Co., 2008 WL 4737163, *7 (N.D.Ga. July 31, 2008)). [Q]uestions of fact in contract interpretation arise only upon a finding of ambiguity.... Expert testimony purporting to interpret the terms of a contract is therefore proper only after a court has determined contractual language to be ambiguous.” S.-Owners Ins. Co. v. Tasman Servs. LLC, 2022 WL 4290437, at *4 (M.D. Fla. Sept. 16, 2022) (citations omitted).[3]Courts have also recognized that in certain circumstances, expert testimony regarding a contract may be admissible if there is a “need to clarify or define terms of art, science, or trade[.] S.E.C. v. Goldsworthy, 2008 WL 2943398, at *4 (D. Mass. Jan. 3, 2008) (citation omitted); see also Fair Isaac Corp. v. Fed. Ins. Co., 447 F.Supp.3d 857, 872-73 (D. Minn. 2020) (although “unambiguous contract language is interpreted by the court as a matter of law[,] . . . [c]ourts have frequently recognized the value of expert testimony defining terms of a...

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