Mason v. Amtrust Financial Services, Inc.

Background

Eugene Mason was hired by AmTrust Financial Services, Inc. in September 2013 as Senior Vice President, Professional Liability. His employment letter provided for an annual bonus equal to three percent of net underwriting income and a discretionary bonus. AmTrust terminated his employment on July 17, 2019.

Mason sued AmTrust and Davis Lewis. After earlier rulings, only Mason’s breach-of-contract claim concerning 2018 bonuses remained for trial. A bench trial was scheduled to begin on January 6, 2021. AmTrust calculated a 2018 underwriting loss of more than $6 million and concluded that no underwriting-income bonus was owed. Mason’s expert, Evan D. Bennett, calculated more than $33 million in 2018 underwriting income and a bonus of more than $1 million.

AmTrust moved to exclude Bennett’s testimony and the May 2018 management report on which Bennett relied. Bennett used AmTrust’s spreadsheet, the May Report, a redacted AmTrust document, figures supplied by Mason, and Mason’s employment letter. He changed some figures from AmTrust’s spreadsheet, including earned premiums and incurred losses, and added amounts for ceded commission and reinsurance recovery.

Legal standard

Federal Rule of Evidence 702 governs expert testimony. It allows a qualified expert to testify when specialized knowledge would help the fact-finder, the testimony is based on sufficient facts or data, reliable methods, and a reliable application of those methods. The party offering the expert bears the burden of showing admissibility by a greater-than-50-percent standard.

The court explained that an expert must be qualified in the subject area and must use a reliable foundation and methodology. An opinion may be excluded when it is based on inadequate data, unsupported assumptions, or an unreliable method. The analysis must be reliable at every significant step.

Qualifications

The court found that Bennett was not qualified to give an expert opinion about AmTrust’s 2018 incurred losses. Calculating incurred losses requires analyzing insurance reserves, including claims that have occurred but have not yet been reported, and assessing risk. The opinion states that this work is performed by actuaries.

Bennett was not an actuary and had never provided actuarial services for an insurance company. He did not claim familiarity with the actuarial principles used to calculate incurred losses, had no identified actuarial education or experience, and did not use actuarial methods. He acknowledged that his $4 million incurred-loss estimate was a “guess.” The court therefore rejected Mason’s argument that these shortcomings affected only the weight of Bennett’s testimony rather than whether he could testify at all.

Reliability

The court also held that Bennett’s calculations were unreliable. His reduction of AmTrust’s incurred-loss figure from more than $33 million to $4 million was essential to producing a profit and a bonus calculation. Bennett’s report did not explain how he reached the $4 million estimate, and neither his report nor his direct testimony described a recognized methodology for doing so.

The court further found that other changes to AmTrust’s spreadsheet were unsupported. Mason supplied figures for additional revenue, ceded commission, and reinsurance recoveries, but neither Mason’s affidavit nor the other materials explained their sources or how they were calculated. Because the reliability of those figures had not been shown, the court ruled that they also could not support Bennett’s testimony.

Disposition

Judge Denise Cote granted AmTrust’s November 20 motion to exclude Mason’s expert testimony. The court denied as moot AmTrust’s motion to exclude the May Report. This order addressed the evidence that could be presented at trial; it did not decide whether Mason ultimately was entitled to the 2018 bonuses.