Thor Equities, LLC v. Factory Mutual Insurance Company

Background

Thor sued Factory Mutual over the insurer’s refusal to provide coverage for COVID-19-related losses at Thor’s commercial properties. Thor alleged that government stay-at-home orders closed non-essential businesses, disrupted its properties, and caused lost rental income. Thor sought coverage under several policy provisions, including provisions concerning communicable diseases, business interruption, restrictions on access, and physical loss or damage.

The order addressed only the parties’ motions to exclude expert testimony. It did not decide whether the insurance policy ultimately covered Thor’s losses. Under Federal Rule of Evidence 702, expert testimony is admissible only if the expert is qualified, the testimony will help the factfinder, it rests on sufficient facts or data, and it results from reliable methods reliably applied to the case.

Factory Mutual’s Motion

Factory Mutual sought to exclude all testimony from Thor’s experts Igor Burstyn and Jeffrey Stempel.

Igor Burstyn

Burstyn, an environmental and occupational-health professor with epidemiology experience, calculated the probability that someone infected with COVID-19 entered at least one Thor property during March 2020. His analysis used COVID-19 prevalence data, assumptions about occupancy, and assumptions about the people entering Thor’s properties.

The court excluded Burstyn’s opinions about the presence of COVID-19 at Thor’s properties. The court found that his analysis measured whether people who entered a Thor property contracted COVID-19 at some point during March, not whether they had COVID-19 when they entered or while they were on the property. Because the model did not distinguish between people infected before entering a property and people infected later in March, the court found that it did not answer the question it was offered to address. The court treated that missing distinction as a major factor and concluded that the analysis was too incomplete to be relevant.

The court also excluded Burstyn’s statement that hospitals and nursing homes had a “high” prevalence of COVID-19. It found that the term was vague and that Thor had not shown a reliable basis for Burstyn’s opinion. Burstyn had not specifically studied COVID-19 prevalence at hospitals or nursing homes in the identified cities and had relied on news reports about nursing homes in New York.

The court allowed Burstyn to testify about the issuance of stay-at-home orders in March 2020. It found that, given his expertise, he could compile information about those historical orders for the jury. Because the court excluded Burstyn’s opinion about COVID-19 prevalence at hospitals and nursing homes, it found the issue of whether he could testify about the location of those facilities moot.

Jeffrey Stempel

Stempel, a law professor with expertise in insurance law, history, and industry practices, discussed insurance coverage, policy exclusions, and the development of property and business-interruption insurance.

The court excluded Stempel’s testimony. It found that parts of his report improperly stated legal conclusions about what Thor’s policy covered. Experts may not testify about legal issues. The court also found that Stempel’s industry-custom testimony did not focus on a specific potentially ambiguous policy term or explain how industry custom clarified that term. Instead, the report generally discussed insurance coverages and the history of different provisions. The court concluded that the report did not satisfy the requirements for admitting evidence of industry custom and usage under New York law.

Thor’s Motion

Thor sought to exclude portions of Factory Mutual’s rebuttal experts’ testimony.

William Way

The court did not address Thor’s arguments about alleged problems in William Way’s report. Factory Mutual had offered Way’s testimony only to rebut Stempel’s testimony and conceded that Way’s rebuttal was unnecessary to the extent Stempel’s underlying testimony was excluded.

Manish Sagar

Sagar, a professor of medicine specializing in internal medicine and infectious diseases, discussed the characteristics, transmission, mitigation, and prevalence of SARS-CoV-2. Thor challenged only Sagar’s opinion that the presence of COVID-19 on a surface did not require the surface’s repair or replacement.

The court excluded that opinion. It found that Sagar’s report and deposition did not establish that “repair” or “replacement” had a specialized meaning in virology or that his conclusion was supported by sufficient facts, reliable principles, or reliable methods. His experience could support testimony about how to remove the virus from a surface or what laboratories do after a viral spill, but it did not adequately support an opinion about whether building materials required repair or replacement.

Disposition

The court stated that Factory Mutual’s motion to exclude was granted in part and denied in part. Burstyn could testify about stay-at-home orders, while the other challenged Burstyn opinions and all of Stempel’s testimony were excluded. The court granted Thor’s motion to partially exclude in full and excluded Sagar’s challenged opinion. Judge Gabriel W. Gorenstein issued the order.