American Empire Surplus Lines Insurance Company v. J.R. Contracting &…

Background

American Empire Surplus Lines Insurance Company issued J.R. Contracting & Environmental Consulting, Inc. a commercial excess liability policy. The premium was based partly on J.R.’s gross receipts during the policy period. After a post-policy audit concluded that J.R.’s actual gross receipts exceeded its estimate, American Empire claimed that J.R. owed an additional premium of $487,386. American Empire filed this action to recover that amount.

J.R.’s expert, Arthur R. Nelson, issued a report supporting J.R.’s position. American Empire then offered Thomas M. Trezise as a rebuttal expert. Trezise gave opinions about the policy, surplus-lines insurance, insurance-industry practices, audits, and the premium calculation. J.R. moved under Evidence Rule 702 and the Supreme Court’s expert-evidence standards to exclude Trezise’s opinions.

The Parties’ Positions

J.R. argued that Trezise lacked relevant experience with post-policy premium audits, particularly for surplus-lines policies, and that his opinions were speculative and unsupported. J.R. also argued that much of Trezise’s report consisted of legal conclusions rather than useful expert testimony.

American Empire argued that Trezise’s more than 30 years of insurance-industry experience, work involving policy forms and rates, supervision of people who conducted premium audits, and experience with insurance disputes qualified him to testify. It also argued that his experience provided a reliable basis for his opinions and that his testimony would help the fact finder.

Court’s Analysis

The court found Trezise qualified to provide expert testimony about insurance, but not legal conclusions. Trezise had worked as a trial attorney in insurance-related matters, held various insurance-industry positions for more than 30 years, supervised people who conducted premium audits, and had experience involving disputes over premiums owed under policies. The court concluded that this specialized knowledge could help the fact finder understand the evidence.

The court also found that Trezise’s permitted opinions were based on sufficient facts and reliable principles and methods. His opinions about insurance-industry practices and the surplus-lines market were grounded in his experience. The court treated J.R.’s criticism that Trezise lacked specific experience with post-policy premium audits as a challenge to the weight and credibility of his testimony, rather than a reason to exclude it.

The court determined that Trezise’s rebuttal testimony would likely help the fact finder, particularly because it responded to Nelson’s opinions. But experts may not testify about questions of law. The court therefore excluded Trezise’s opinions interpreting the insurance policy, including his discussion of whether a professional-liability exclusion limited coverage, and excluded his other legal conclusions about the parties’ contractual obligations.

Ruling

The court granted in part and denied in part J.R.’s motion. Trezise may testify in rebuttal about the insurance industry and audits and may give an opinion about premiums due under the policy based on a hypothetical set of facts. He may not testify about his interpretation of the policy or provide other legal conclusions.

The opinion also set November 20, 2024, as the deadline for pre-motion conference letters concerning any planned summary-judgment motions, under Judge Torres’s individual practices. Judge Analisa Torres had referred the Daubert motion to Magistrate Judge Stewart D. Aaron as a non-dispositive motion.