LOUISIANA, April 13 – A United States District Court in Louisiana has issued a ruling permitting an expert to testify in a coverage action about industry custom and practice, but barring the expert from testifying about the applicability of a policy exclusion to a coverage dispute.
The insured, Foundation Health Services, sought reimbursement from Zurich American for defense costs and lossess associated with an underlying settlement with the U.S. Department of Justice and the Department of Health and Human Services. The disputed issues in the case were (1) whether a claim was first made during the policy period (2) whether a “professional services” exclusion in the policy applied to preclude coverage and (3) whether the insurer committed bad faith in denying coverage.
The insurer moved to preclude the plaintiff’s expert who was offered to testify about whether the insurer “met its obligations and responsibilities in connection with the claim at issue under custom and practice of the industry.” Id. at 4.
District Judge James Brady reviewed Federal Evidence Rules 702 and 704 and held that expert opinion on the applicability of certain exclusions “cross into the realm of making legal conclusions” were, therefore, inadmissible. Id. at 6. The Court also ruled however that “an expert may be allowed to testify regarding insurance industry standards for claims adjusting, but not the ultimate legal conclusions that an insurance company is acting in good faith.” Id.