The Drug and the Deal

The drug at the center of this case was approved by the FDA in 2006 for chronic idiopathic constipation in adults. It later received approval for two additional indications: irritable bowel syndrome with constipation in women, and opioid-induced constipation in adults with chronic, non-cancer pain. One company developed it; another commercialized and sold it under a licensing agreement that gave the seller exclusive rights in the United States and Canada in exchange for royalties tiered between 18% and 26% of annual net sales. By 2020, annual sales were running at approximately $427 million.

The key compound patent expired in July 2014. Sixteen additional patents remained listed in the FDA’s Orange Book, with expiration dates stretching to 2027. The Plaintiffs alleged these remaining patents were narrow, weak, and easy for generics to design around. Several were never asserted in litigation against any generic challenger — a fact the Plaintiffs pointed to as evidence that even the brand-side companies viewed them as non-impediments to generic entry.

The first generic company filed its abbreviated new drug application in February 2010. As the first filer, it stood to receive 180 days of marketing exclusivity once approved — a regulatory incentive under the Hatch-Waxman framework designed to reward companies willing to challenge brand patents. Patent infringement litigation followed. Then, in September 2014, the parties settled. The first filer agreed to delay generic entry until January 1, 2021. The settlement included a royalty structure: the first filer would pay the brand company 50% of its gross profits as the sole generic on the market, 15% with one other generic present, and nothing with two or more.

The settlement also gave the first filer the option to market an authorized generic version of the brand product rather than manufacturing its own. The same royalty terms applied either way.

The Plaintiffs alleged this structure created a powerful incentive for the brand company not to launch its own authorized generic during the first filer’s exclusivity window. They characterized the arrangement as a de facto “no-authorized-generic” agreement — a reverse payment made not in cash but in the promise of a competition-free market. The complaint laid out detailed calculations: the first filer’s estimated revenues during the initial 180-day period would be roughly $173 million as the sole generic, compared to roughly $57.6 million each for the first filer and the brand if an authorized generic had also been launched. The Plaintiffs estimated the value of this payment at between $29 million and $280 million.

Before the settlement, the brand’s developer had also filed a citizen petition with the FDA, arguing for more stringent bioequivalence requirements on generic versions of the drug. The FDA denied the petition, stating that its safety concerns were based on an “incorrect” premise. The Plaintiffs alleged the petition was filed to delay generic approvals.

Five additional generic companies later filed their own applications, were sued, and settled. Each settlement set the generic entry date at January 1, 2023. In every consent judgment, the brand-side companies acknowledged “a significant risk” associated with continuing to litigate.

On January 4, 2021, the first filer launched an authorized generic. No competing generic entered until January 2023.

The Expert and Her Assignment

To prove their antitrust claims, the Plaintiffs needed to establish that the brand company held market power. They retained a healthcare policy economist — a professor at a major medical school who had recently been named department chair — to provide expert testimony on market definition and market power.

Her analysis drew on two categories of evidence. The first was what she called “direct evidence”: price declines following generic entry, high gross margins, and the alleged reverse payment. The second was “indirect evidence”: a hypothetical monopolist test and a natural experiment measuring whether price declines for the drug caused changes in sales of other chronic constipation treatments.

Her pricing analyses relied on wholesale acquisition cost — the manufacturer’s list price to wholesalers, before rebates, discounts, or coupons.

The Motion to Exclude

In November 2024, the brand company moved to exclude the expert’s testimony. The motion attacked on four fronts: her qualifications, her direct evidence, her indirect evidence, and her underlying data.

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A Heart Condition, a Long Wait, and a Lawsuit

The case began with a newborn. A girl born in November 2010 at a regional medical center in Idaho was found to have a heart murmur shortly after birth. An echocardiogram performed two days later confirmed she had several ventricular septal defects — commonly known as VSDs — which are holes in the wall separating the two lower chambers of the heart.

The child was referred to a university-affiliated pediatric cardiology clinic and a children’s hospital in a neighboring state. A cardiologist evaluated her and ordered a complete echocardiogram, which revealed a perimembranous VSD along with additional muscular VSDs showing bidirectional shunting. That meant blood was flowing abnormally in both directions through the holes. The cardiologist recommended a follow-up in six to eight weeks.

At a visit the following month, the same cardiologist noted no significant heart enlargement and found the child growing well. She recommended another echocardiogram around the time the child reached six months of age.

In May 2011, a second cardiologist took over the child’s care at the university clinic. This physician — who would become the central figure in the lawsuit — ordered an electrocardiogram but did not perform an echocardiogram. According to the complaint, she noted the child was uncooperative during attempts to conduct one and wrote that she did not believe an echocardiogram was necessary. She did acknowledge, however, that she could not rule out the possibility the VSD would need surgical closure, noting it would depend on whether there was evidence of pulmonary hypertension or failure to thrive.

The complaint alleged that the physician did not note symptoms suggesting the child was failing to thrive at that visit. She recommended a return in six months.

According to the complaint, the visits that followed over the next several years shared certain features. At a December 2011 follow-up, the physician ordered an electrocardiogram but not an echocardiogram. The electrocardiogram showed upright T-waves at V1, which she attributed to probable right ventricular hypertrophy — a thickening of the heart’s right ventricle wall that can be associated with increased pressure in the lungs. She noted she believed things were going well and that the exam suggested a tiny VSD with no significant pulmonary hypertension. She recommended a return in six months and noted that if the electrocardiogram remained borderline, a sedated echocardiogram would be needed.

The complaint again alleged the physician did not note symptoms suggesting failure to thrive.

More than a year passed before the next visit. In February 2013, the physician once again ordered an electrocardiogram — which again showed upright T-waves at V1 — but did not perform an echocardiogram. She concluded the VSD was small and found no evidence of pulmonary hypertension, failure to thrive, or low cardiac output. She recommended a return in one year and planned to repeat an echocardiogram after the child turned three, to avoid sedation.

In January 2014, nearly three years after this physician had taken over the child’s care, the first echocardiogram under her watch was performed. It confirmed the perimembranous VSD and three or four additional muscular VSDs with evidence of bidirectional shunting, predominantly left to right. The physician noted that the main pulmonary artery was dilated. She also noted the child was doing well from a cardiac standpoint, opined the VSDs would close over time, and advised the family to return in three years.

The complaint alleged the physician did not evaluate the child for immediate surgical intervention at that visit.

A Hospital Stay and Mounting Concerns

In June 2014, the child was admitted to the children’s hospital for meningitis and a fever. During that admission, another echocardiogram was performed. It revealed multiple VSDs with left-to-right shunting, along with a mildly dilated main pulmonary artery, a mildly dilated right pulmonary artery, and a dilated left atrium. A cardiology consult assessed the child’s symptoms as possibly consistent with Kawasaki’s disease, though she did not meet all classic criteria. She responded to treatment and was discharged several days later.

At a July 2014 follow-up, the treating physician noted the child had been moody, was not eating, and had been averaging several bloody noses per day. She diagnosed congenital heart disease with a small perimembranous VSD, dilated left atrium, and dilated main and right pulmonary arteries. She opined the VSD might still close on its own and recommended a return in three years.

The complaint again alleged the physician did not evaluate the child for immediate surgical intervention.

Later that month, an echocardiogram was performed, but it did not assess the VSDs — though the child’s history of multiple VSDs was noted in the report. When the physician reviewed this echocardiogram a month later, she noted that for some reason the VSDs had not been assessed. She set a follow-up for the following year.

In August 2015, the child was seen by a different cardiologist at the university clinic. This new physician ordered an echocardiogram that revealed multiple VSDs with bidirectional, predominantly low-velocity, left-to-right shunting. The findings concerned this cardiologist, as they suggested elevated right ventricular pressure. She referred the child for cardiac catheterization.

According to the complaint, by August 2015, the child’s pulmonary hypertension — which the family alleged had been evident throughout the prior physician’s care — had become severe and irreversible. The new cardiologist informed the family that the pulmonary hypertension was permanent and that surgery to repair the VSDs should have been performed years earlier.

In December 2015, surgery was performed to repair and close the VSDs. But the damage, the complaint alleged, was done. The child was left with irreversible pulmonary hypertension, a condition she and her family would need to manage for the rest of her life. The complaint stated she had significant limitations on daily activities and remained at risk for further medical complications.

The Lawsuit

The family filed suit in December 2018 in federal Court, with jurisdiction based on diversity of citizenship. They brought a single cause of action for medical malpractice, alleging the Defendants owed a duty to provide the same care a reasonable and prudent healthcare provider would under similar circumstances, and that this duty was breached.

The specific allegations of negligence included failure to timely diagnose and treat the child’s conditions, failure to timely perform appropriate testing including echocardiograms, failure to properly recognize and interpret test results, failure to timely determine that surgical repair was needed, failure to timely consult with or refer to other specialists, and failure to establish and follow appropriate protocols.

The family sought damages including past and future medical expenses, disability, lost earning capacity, loss of enjoyment, physical and emotional pain and suffering, and loss of filial consortium for the parents. They demanded a jury trial.

An Expert Appears — Forty-Two Months In

The Court entered a scheduling order giving the Defendants fifteen months to disclose their expert witnesses. That deadline was extended multiple times — first to eighteen months, then to twenty-two, and finally to twenty-seven months — landing on a final deadline of May 30, 2021.

On June 1, 2021, the university Defendants filed what they described as a partial expert disclosure, identifying two physicians who would testify on liability. About a month later, pursuant to an agreement with opposing counsel, they disclosed the remainder of their experts: a life-care planner and an accountant, both focused on damages. Neither of these experts addressed the Affordable Care Act or how it might apply to the child’s future medical needs.

At that point — twenty-eight months after the lawsuit was filed — the Defendants had disclosed all of their experts, according to the family’s later account of the timeline.

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A Family Disturbance Call Turns Fatal

The underlying facts of this case began on an October evening in 2006, when sheriff’s deputies responded to a telephone call about a family disturbance at a trailer park. According to the complaint filed later in federal Court, the call came in at approximately 6:15 p.m. and was placed by the decedent’s estranged wife. She called again shortly afterward to update the deputies, saying the man was going through her trailer and was “stabbing stuff.”

The first deputy arrived at 6:43 p.m. Two more followed. The estranged wife directed them to the trailer in question. When deputies arrived at the unit, they reportedly observed a male figure looking out through a sliding glass door. According to the complaint, one deputy deployed a police canine into the trailer. A male was also observed trying to break through a bathroom window without success.

Shortly afterward, the man emerged through the front door. The complaint alleged that three deputies were positioned outside with their government-issued firearms drawn. When the man stepped out, the Plaintiffs alleged he was struck at least twelve times by bullets — in the thorax, back, buttocks, shoulder, and thigh.

The complaint further alleged that the man was unarmed when he emerged and did not pose any threat to himself or others. He was declared dead at the scene. The Plaintiffs alleged that no attempts to resuscitate or aid him were known to have been made, and that the deputies had not witnessed him commit any crime, had no warrant for his arrest, and had no legal cause to seize him.

The Lawsuit Takes Shape

The decedent’s estate and surviving family — his minor daughter (through a legal custodian), his father, his brother, and two sisters — filed suit in the United States District Court for the Southern District of California. They named a county government, a city government, and up to fifty unnamed individual Defendants.

The complaint raised five causes of action. The first was a federal claim for wrongful death under 42 U.S.C. § 1983, alleging the deputies deprived the decedent of his Fourth and Fourteenth Amendment rights through excessive force. The Plaintiffs argued the force was objectively unreasonable and performed with deliberate indifference to the man’s safety and welfare. The second cause of action was for assault and battery resulting in wrongful death under state law. The third was for intentional infliction of emotional distress. The fourth was for negligence.

The complaint also alleged a broader institutional problem. The Plaintiffs argued that the Defendant governmental entities maintained a custom, policy, or practice of using excessive force against Hispanic males as a means of intimidation, and that they maintained an unconstitutional policy regarding alternatives to deadly force — specifically, that the entities knew or should have known they needed to arm and train deputies in less-lethal options such as tasers or stun guns, and that the failure to do so was a direct cause of the decedent’s death.

The Plaintiffs sought general damages including emotional distress, special damages, costs, exemplary and punitive damages, and attorney’s fees. They demanded a jury trial. The decedent’s spouse also filed a cross-complaint in the action.

Enter the Forensic Economist

About two years after the complaint was filed, the cross-complainant the decedent’s spouse retained a forensic economist to quantify the intangible loss suffered by the decedent’s surviving family. The expert report, dated August 11, 2008, was filed with the Court on October 30, 2008.

The expert had been running his own forensic economics consulting firm since 1988. He held an MBA with a focus in finance and investments from a well-known graduate business school and a bachelor’s degree in business administration with an economics major. Before entering forensic economics, he had spent years in corporate finance, securities analysis, and portfolio management — including stints as a securities analyst, a portfolio manager overseeing part of a $700 million mutual fund, and an assistant to a corporate group controller coordinating capital expenditures for a $2.5 billion defense equipment group.

He was not new to the Courtroom. His report included an extensive list of prior deposition and trial testimony spanning well over a decade and covering hundreds of cases across more than ten states. He had testified for both Plaintiffs and Defendants in wrongful death, personal injury, lost business profits, breach of contract, wrongful termination, medical malpractice, and product liability cases. His professional memberships included the American Economic Association, the Western Economic Association, and he was a founding member of the National Association of Forensic Economists. He had published articles on structured settlements, pension valuations, and the use of economists in litigation.

His rate for this engagement was $550 per hour.

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The Dressing Room and the Stimulator

On April 2, 2015, at 5:20 in the afternoon, Jacquelyn Orr walked into a Macy’s store at Oglethorpe Mall in Savannah, Georgia, and made her way to the downstairs dressing room. The first door she reached was cracked open. She pushed it with the back of her hand. According to her Amended Complaint, the door and its frame then fell on her, striking her right arm and shoulder blade and landing on her foot.

The store’s incident report, filed by Asset Protection writer Ericka Guzman, logged the event as “Struck or Inj By” a “Falling or Flying Object,” with the contributing factor recorded as “Door/Revolving Door.” Guzman observed that the customer’s wrist was red and appeared to be swelling. Photographs taken at the scene, later marked as Exhibit B, show an “Out of Order” sign near the dressing room area.

Ms. Orr and her husband William sued Macy’s in federal Court in April 2016, pleading negligence and loss of consortium. At the time of the Amended Complaint, they claimed past medical bills of $13,647.89 and past lost wages of $4,632.71, with future medical bills and future lost wages pleaded but not quantified.

As the litigation progressed, the medical picture sharpened. Jacquelyn Orr’s treating pain management physician, Dr. Markus Niederwanger at Optim Orthopedics in Savannah, diagnosed RSD also known as CRPS and recommended the implantation of a spinal cord stimulator to manage her pain. Dr. Niederwanger’s expert report estimated the total course of treatment at $149,774. Within that total, the Ambulatory Surgery Center facility charges for the trial and permanent stimulator components alone were projected at $188,660.

That was the number Macy’s retained LLB to challenge.

The Expert and the Brief

LLB was disclosed in August 2016 under Federal Rule of Civil Procedure 26(a)(2). His credentials included CPA/CFF and FHFMA designations, reflecting financial forensics and healthcare financial management specialties. The defense’s response brief built him up as a seasoned figure: more than 30 years in healthcare, service to over 500 healthcare clients since 1974, work on charge master and fee schedule rate-setting projects, a consultant and expert witness in over 200 cases or projects, testimony in over 50 cases, and admission as a medical billing, healthcare financial and reimbursement expert in multiple federal and state Courts.

His assignment in Orr was circumscribed. He offered no opinion on the reasonableness of Ms. Orr’s past medical bills. His entire brief was to review and assess the reasonableness of her projected future medical charges, with particular focus on the spinal cord stimulator, measured against three benchmarks: the 80th percentile of usual, customary and reasonable charges in the Savannah area, inpatient charges at the Medical University of South Carolina, and the Georgia statewide average.

His report produced four core numerical conclusions. The $69,000 projected ASC charge for the trial stimulator was, in his analysis, 36% above the local 80th percentile UCR figure of $17,979. The $119,660 projected charge for the permanent stimulator was 41% above his local UCR comparator of $48,865. The combined $188,660 was 42% above the Medical University of South Carolina’s 2015 average inpatient charge of $79,307 for DRG 029, and 44% above the Georgia statewide 2014 average of $82,594 for the same DRG.

On those numbers alone, LLB’s opinion was that the projected facility charges were substantially higher than what the published data would suggest was reasonable.

The Thirteen-Step Method

LLB’s methodology, as described in his report and deposition, unfolded across thirteen steps. The core analytical moves can be grouped into five clusters.

He benchmarked the projected ASC facility charges against the 80th percentile of Reasonable Charge Data published by the U.S. Department of Veterans Affairs. He identified MS-DRG 029 — Spinal Procedures With CC Or Spinal Neurostimulators — as the equivalent inpatient DRG by starting from Medtronic’s commonly billed codes effective January 2016. He pulled reported DRG 029 charges from acute care hospitals in Georgia, South Carolina, and North Florida from the American Hospital Directory. He compared Savannah hospital outpatient charges for CPT codes 63650 and 63685 in 2015. He reviewed the CMS DRG Summary for Medicare Inpatient Prospective Payment Hospitals for 2014 to derive the Georgia statewide DRG 029 average.

He then performed an online search for published studies on spinal cord stimulator surgery costs in peer-reviewed professional journals and dedicated a section of his report titled “Independent Research on Spinal Cord Stimulation Surgery Costs” to detailing findings from four articles.

Notably, he did not conduct an independent survey of Savannah-area physicians, hospitals, or ambulatory surgery centers to ask what the local market actually charges for stimulator implantation. He did not speak with Ms. Orr’s treating physicians.

That last pair of choices — to rely entirely on published data, and not to undertake primary local research — became the gravitational center of the challenge.

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A $30 Million Policy, a Blocked Tower, and a Refusal to Pay

The underlying case began in September 2008, when three related title insurance companies Fidelity National Financial, Inc., Chicago Title Insurance Company, and Chicago Title Company (collectively “FNF”) sued their primary insurer, National Union Fire Insurance Company of Pittsburgh, PA, along with four excess insurers, in California state Court. The case was later removed to the United States District Court for the Southern District of California.

At the center of the dispute was a layered insurance program. FNF held a primary Financial Institution Bond and a primary Computer Crime Policy, both issued by National Union for a policy period running from late 2005 through late 2006. The FIB carried limits of $15 million per single loss and $30 million in the aggregate. Sitting above it were four excess layers from four separate insurers, each following the form of the primary coverage.

FNF submitted Proofs of Loss that exceeded the primary limits and reached into the excess layers. National Union did not pay. Because the excess policies required exhaustion of the layer below them before they would respond, National Union’s refusal to pay created a cascading blockage. None of the excess layers would open until the primary insurer paid first.

FNF sued for breach of contract, bad faith, and declaratory relief. The bad faith claim alleged a litany of failures: not acknowledging communications promptly, not adopting reasonable investigation standards, not affirming or denying coverage within a reasonable time, not attempting fair settlements once liability became clear, and forcing the insureds into litigation with no reasonable basis. FNF also sought punitive damages, alleging that National Union acted with conscious disregard of its insureds’ interests.

Enter the Expert: Decades of Experience, Nine Opinions, One Mission

FNF designated PF.A as one of two expert witnesses on claims handling and bad faith. PF.A held the C.P.C.U. (Chartered Property Casualty Underwriter) designation and had spent decades in the insurance industry, including building a claim department from the ground up. He was a licensed public adjuster. FNF’s second expert, Peter Haley, was a California-licensed attorney who had investigated over 100 insurance claims, including Financial Institution Bond claims, and had worked for both insurers and insureds. Haley’s experience included several high-profile fidelity claims.

PF.A’s assignment was to evaluate National Union’s handling of FNF’s claim and to opine on whether the insurer had met its obligations. His July 2011 expert report ran at least 38 pages and was organized around several core themes.

He opined that National Union failed to adopt and implement reasonable standards for the prompt investigation of claims. He concluded that National Union failed to conduct a reasonable investigation of the claim itself. He stated that National Union acted in bad faith by not trying to resolve the matter. And he went further, arguing that National Union’s conduct crossed the line from bad faith into malicious, callous behavior in conscious disregard of its insureds’ rights — testimony that would support FNF’s claim for punitive damages.

His report contained a Summary of Opinions section with nine numbered opinions. These ranged from assertions about National Union’s responsibility for implementing a prompt and fair investigation, to a statement that the claims department was “now apparently hiding behind its litigation attorneys,” to a forward-looking warning that unless things changed, the insurer’s bad-faith practices would continue.

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The Underlying Dispute: A Catastrophic Boiler Failure and a $15 Million Problem

In February 2005, a group of Dominion entities entered into an Alliance Agreement with Alstom Power, Inc. Under the agreement, Alstom provided inspection and maintenance services at Dominion’s power generation facilities in Massachusetts, governed by purchase orders.

In April 2007, an Alstom inspector conducted a routine inspection of a boiler at Dominion’s Salem Harbor Generating Station. Seven months later, on November 6, 2007, that boiler catastrophically failed. The explosive release of steam, hot water, and ash killed three workers and injured two others.

A wrongful death and personal injury lawsuit followed in Massachusetts Superior Court. Both Dominion and Alstom were named as Defendants. The litigation dragged on for six years, through voluminous discovery, dozens of depositions, and many expert reports, before settling in 2015. By the time it was over, Dominion had spent more than $9.9 million on defense costs and paid over $5 million in settlement.

Under the Alliance Agreement, Alstom had two key obligations: to defend and indemnify Dominion against third-party personal injury and death claims arising from Alstom’s services, and to obtain and maintain insurance — specifically, “commercial general liability insurance” with $1 million in primary coverage and $4 million in umbrella or excess coverage, for a total of $5 million. Dominion was to be named as an additional insured, and the insurance was to be primary with respect to Dominion’s interest.

Alstom obtained a CGL policy from Zurich American Insurance Company. But there was a critical difference between what Dominion expected and what Alstom procured.

Standard CGL policies pay defense costs outside the policy limits — the insurer funds the defense without reducing the money available for settlements or judgments. This is called a “non-eroding” policy. The Zurich policy, however, was an “eroding” or “burning limits” policy, meaning defense costs ate into the $5 million available. Every dollar spent on lawyers reduced the amount left for claims.

According to the complaint, Alstom never disclosed this to Dominion. The certificate of insurance sent to Dominion represented standard CGL coverage without mentioning the eroding structure. Even more troubling, Dominion alleged that Zurich had initially issued a standard non-eroding policy, and that Alstom repeatedly requested — between 2007 and 2010 — that Zurich amend it to an eroding policy. The amendment was issued retroactively in 2010. Dominion said it was never told.

In April 2016, Dominion sued Alstom for breach of contract, alleging that by purchasing an eroding policy, Alstom had failed to procure the “commercial general liability insurance” required by the Alliance Agreement. The financial stakes were significant: Dominion recovered only $5 million from the insurers, all toward defense costs, and nothing toward the $5 million settlement it had paid out of pocket.

The Expert: JWS and the “Universal Understanding” of CGL Insurance

To support its claim that the Alliance Agreement required non-eroding coverage, Dominion retained JWS, a tenured law professor at a major university law school. JWS had been a full-time law professor since 1986, teaching insurance law and contracts. He was the author or co-author of leading treatises and casebooks on insurance coverage, and his publications had been cited by Courts across the country. He had also served as an expert witness or consultant in numerous insurance matters.

JWS was retained to address one narrow question: what does the insurance industry universally understand the term “commercial general liability insurance” to mean, particularly regarding the treatment of defense costs?

His opinion was clear. Unless expressly agreed otherwise, standard CGL insurance is universally understood to include a duty to defend or fund defense costs with those costs being paid in addition to the stated policy limits. Defense spending does not erode the limits. This has been the default since the CGL policy form emerged in the 1940s, and it is reflected in the standard ISO forms used throughout the industry.

JWS was careful to draw boundaries. He was not interpreting the Alliance Agreement. He was not opining on what the parties subjectively intended. He was not rendering a legal opinion. He stated this repeatedly — in his report and at least half a dozen times during his deposition.

He also reviewed the series of Zurich policies issued to Alstom and found that the earlier policies were standard non-eroding CGL forms. It was only after the 2007 accident that Alstom obtained the retroactive endorsement converting the policy to eroding limits — a change JWS described as highly unusual for primary CGL insurance and one that was never disclosed to Dominion.

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Fire marshals arrived with ten police cars. They cut the power and ordered everyone out—guests and employees alike. The city required the owner to maintain full-time security, block access to prevent vagrants from entering, and attend council meetings to provide updates on repairs that never seemed to happen. Officials repeatedly warned they might condemn the entire property.

At the center of the insurance dispute stood a public adjuster we’ll call CWH—a man who had spent roughly forty years in the insurance industry, who held professional designations and had served as president of multiple state public adjuster associations. He had handled countless claims, prepared thousands of damage estimates, and testified in Courts across the region.

But when the insurer moved to exclude his expert testimony, the Court’s ruling revealed something important: in the world of Daubert challenges, general expertise in one area does not automatically translate to qualification in another. And for experts who work in insurance and damages assessment, the boundaries between what you know and what you can testify about may be narrower than you think.

The Property and the Losses

The Knights Inn consisted of three buildings. The first was a seventy-eight room “Studio Inn” designed for extended-stay customers. The second contained event rooms and guest accommodations for short-term visitors. The third housed a restaurant, bar, lobby, swimming pool, wading pool, and office. The property owner had operated this motel since 1995.

Catastrophe struck twice in spring 2014. On March 22, fire swept through the Studio Inn, causing heavy damage that rendered it unable to rent rooms. Just over a month later, on April 28, an EF-0 tornado passed to the southwest of the property, bringing winds and hail that allegedly damaged the roofs of all three buildings.

The wind claim would later become contentious in an unusual way. Initially, no one at the Knight’s Inn noticed any wind damage. The alleged roof damage was first observed approximately eleven months after the April 2014 tornado—and it was noticed by an employee of CWH’s firm who was investigating the fire claim. This delayed discovery would become another point of dispute.

The property owner, Haman Inc., notified its insurer and requested coverage to repair the damage and reopen the business. According to the complaint that would eventually be filed, the insurer—a major national carrier—failed to conduct a timely investigation, delayed repeatedly, and refused to pay contractual benefits. The insurer made only a partial payment on the fire claim. The property sat unrepaired. The business remained shuttered.

What followed was years of litigation involving breach of contract claims, bad faith allegations, and a bitter dispute over whether the insurance policy’s appraisal process had been properly followed. The property owner submitted a 225-page report itemizing damages, yet alleged the insurer paid less than one-fourth of the claimed structural damages. The lawsuit alleged the insurer had intentionally refused to pay undisputed amounts, investigated with a predetermined motive to deny, hired adjusters predetermined to side with the carrier, and requested documents the insurer knew did not exist—all allegedly to delay payment.

Enter the Expert

CWH operated an insurance claim adjusting company that represented policyholders in disputes with insurance carriers. His firm did mostly appraisal work, utilizing the appraisal provisions in insurance policies to resolve disputes regarding property damage claims.

He held a bachelor’s degree in theology not the credential you might expect for someone testifying about property damage but had supplemented that education with significant professional development. He earned a Chartered Property and Casualty Insurance Underwriter (CPCU) designation in the late 1970s and early 1980s. He also held an Associate in Claims (AIC) degree from the Insurance Institute of America and was a Rule 31 Approved Mediator through the Supreme Court of Tennessee.

His industry involvement was substantial. He served as past president of public adjuster associations in multiple states and sat on the board of a national association. He had attended seminars on protocol for analysis of mold and soot. He held public adjuster licenses in several states, though not in Alabama—which does not permit public adjusters to operate. In Alabama, he worked as an appraiser or expert.

His career path had been conventional for the industry. He worked as a re-inspector/trainer and claims adjuster for a major insurer from 1980 to 1986 before moving into public adjusting. He worked in Tampa, Florida and then Nashville, Tennessee before starting his own firm in 2007. He had been conducting appraisals in Alabama for over twenty years.

Notably, no one from his firm had ever been disqualified as an appraiser in Alabama. His testimony had been accepted by multiple federal judges in the Northern District of Alabama.

The property owner retained CWH’s company in January 2015 as its appraiser. The retention agreement specified an hourly rate of $375, but contained an unusual provision: the total fee was capped at thirty percent of any additional settlement awarded beyond what the insurer had already offered. If no additional recovery resulted, no fee would be due.

The agreement was later modified to stipulate that the firm made no promise or guarantee that any particular recovery could be obtained.

This fee arrangement would become a significant point of contention—though as we shall see, the property owner would argue that such arrangements were common throughout the industry, including among the insurer’s own experts.

The Expert Designation

When the property owner designated its expert witnesses in April 2019, CWH was identified as someone with over thirty-six years of insurance claims experience who would testify concerning damages assessments, repair costs, replacement costs, and actual cash value. The designation also stated he was familiar with insurance principles, policy terms, the requirements of good faith, and the appraisal process.

Most notably, the designation described him as “critical of the claims handling and of the appraisal conduct” of the insurer and its representatives.

This was where the trouble began.

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The Storm Before the Storm

On August 23, 2013, a hailstorm swept through Denver, Colorado. For the owners of a Quality Inn motel on Peoria Way, what followed would become a three-year legal battle that would ultimately test the boundaries of insurance expert testimony in federal Court.

JAS Hospitality, LLC owned the commercial property and held a Commercial Policy of Insurance with Auto-Owners Insurance Company. The policy, which had become effective just weeks before the storm on July 1, 2013, provided coverage for wind and hail damage under a Special Form Insuring Agreement — what industry professionals recognize as the broadest possible form available in the standard insurance market.

When JAS contacted Auto-Owners to report roof damage and water intrusion from the August hailstorm, the insurer dispatched investigators. What those investigators found — or didn’t find — would become the central battleground not just for the coverage dispute, but for a heated fight over whether the insurer’s expert witness should ever be allowed to testify at all.

A Tale of Four Reports

The evidentiary landscape that emerged from the claim investigation was unusually complex, featuring four separate reports that the parties would later characterize in dramatically different ways.

The Cat Crew Report: On October 23, 2013, Auto-Owners sent Bob Deck of Cat Crew, an independent adjusting firm, to inspect the property. The inspection found no hail damage to the roof. Instead, Cat Crew attributed the problems to poor maintenance and concluded that normal wear and tear was the cause of any loss.

The ISO Report: On the same day — October 23, 2013 — Mark Griffin of the Insurance Services Office visited the property. But Griffin’s assignment was fundamentally different. He had been tasked by Auto-Owners’ underwriting department with performing a general overview property inspection and measurements for underwriting purposes, not a damage assessment. Griffin was never granted access to the roof. His report described the property’s overall condition as “average” and noted that the insured had told him about “minor roof damage” from a recent rain storm that was “in the process of being fixed.”

The PT&C Report: Because the insured disagreed with Cat Crew’s findings, Auto-Owners commissioned a second inspection. On December 18, 2013, Ron Goff, an engineer with PT&C Forensic Consulting Services, examined the roof. His report, issued December 24, 2013, reached the same conclusions as Cat Crew: the roof had not sustained hail-related damage, had not sustained wind-related damage, and the water intrusion resulted from deficient installation, inadequate drainage, and long-term deterioration.

The SBSA Report: Not satisfied with the insurer’s conclusions, JAS retained its own forensic engineer in April 2014. SBSA inspected the roof and issued a report in October 2014 concluding that, within an engineering degree of probability, hail impact from the August 2013 storm had damaged the building’s built-up roofing system. SBSA observed fractures and indentations on membrane base flashings and parapet caps consistent with hail impact, and documented interior damage in three second-floor guest rooms consistent with moisture intrusion.

Notably, SBSA acknowledged a limitation: given the scale of fracturing from both hail impact and natural aging, the firm could not determine the proportion of damage attributable to each cause.

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For economics experts, this question presents both an opportunity and a trap. Industry-standard testimony about what a reasonable market participant “should have known” can be enormously powerful. But opponents will argue that such testimony improperly invades the province of subjective knowledge—that no expert, however qualified, can read another party’s mind.

A 2014 case from the Southern District of Ohio illustrates how these tensions play out in practice, and offers a roadmap for economics experts who find themselves in similar territory.

The Underlying Dispute: A Fraud Scheme Unravels

The case began with what appeared to be a straightforward insurance fraud. Mulberry Insurance Services, a California-based wholesale insurance brokerage, had been offering retail brokers access to a commercial real estate habitational insurance program. The problem was that the policies Mulberry was binding didn’t actually exist—at least not with the carriers whose names appeared on the paperwork.

The timeline tells the story. In June 2011, Mulberry contacted National Condo & Apartment Insurance Group (NCAIG), an Ohio-based retail broker, offering access to the program. Mulberry would act as the wholesale broker; NCAIG would sell policies to end customers. Mulberry began submitting quotes and issuing binders identifying AIX Specialty Insurance Company as the carrier.

By September 2011, the scheme began to unravel. AIX Specialty sent NCAIG a cease-and-desist letter stating that NCAIG was not authorized to market AIX’s policies and that any policies being marketed were not approved by AIX. The letter was unambiguous: these policies were not real.

The situation deteriorated rapidly. In February 2012, Swiss Re sent its own cease and desist letter to Mulberry, noting that an investigation with the Illinois Department of Insurance had revealed that Mulberry was issuing binders for policies on behalf of North American Specialty Insurance Company and North American Capacity Insurance Company without authorization. The complaint in the subsequent litigation alleged that a reinsurance contract Mulberry had presented was forged.

Days later, AIX Specialty sent another cease-and-desist letter, noting that Mulberry continued to use the AIX name despite the prior warning. AIX announced it would be referring the matter to fraud units at appropriate state insurance departments. The Illinois Department of Insurance followed with its own letter advising that policies purportedly issued on behalf of various carriers “may not constitute legally valid insurance.”

Here is where the story takes its critical turn.

On January 31, 2012 after Mulberry had received the first cease and desist letter and was aware of serious questions about its authority to bind coverage Mulberry’s principal submitted an application for professional liability (errors and omissions) insurance to Maxum Indemnity Company.

The application contained a standard question: “Does the applicant have any knowledge of potential errors and omissions claim(s)?”

Mulberry’s principal checked “No.”

Based on this representation, Maxum issued an E&O policy to Mulberry with effective dates of March 1, 2012 to March 1, 2013. The policy took effect just days after the Illinois Department of Insurance had warned that Mulberry’s policies might not be legally valid.

Within months, eight lawsuits had been filed against Mulberry, all stemming from the fraudulent policy scheme. The Plaintiffs property owners who had purchased what they believed to be valid insurance alleged that Mulberry was negligent and breached fiduciary duties. Mulberry did not appear in any of the lawsuits. Defaults were entered.

The parties who had sued Mulberry then turned to Maxum, seeking payment under the E&O policy. Maxum responded by filing a declaratory judgment action in the U.S. District Court for the Southern District of Ohio, seeking either rescission of the policy based on Mulberry’s misrepresentations, or a declaration that the policy provided no coverage due to a pre-inception knowledge exclusion.

The case would ultimately span over five years, involve multiple appeals to the Sixth Circuit, and produce a final judgment of over $2.9 million against Maxum. But before any of that could happen, the parties fought a preliminary battle over expert witnesses—a battle that would determine what evidence the jury could hear about industry standards and professional obligations.

The Expert Witness Battle Takes Shape

The coverage dispute turned on a seemingly straightforward question: did Mulberry have “knowledge of or information related to” potential claims before the policy took effect? The policy’s Exclusion J(2) barred coverage for claims arising from wrongful acts the insured knew about prior to policy inception.

Maxum’s initial expert, Daniel Ginden, was disclosed to testify on the underwriting of the policy and the materiality of Mulberry’s alleged misrepresentations. As the underwriter of the policy at issue, Ginden would opine that he would not have written the coverage or at minimum would have charged a higher premium if Mulberry had disclosed the true facts.

NCAIG, which was contesting Maxum’s denial of coverage, then disclosed Kent Littlejohn as its expert. According to NCAIG’s disclosure, Littlejohn would testify about “the procedures of procuring insurance, and particularly, the duties of a potential insured relative to requirements for insurance applications.”

This is where the disclosure drafting became critical.

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The Hurricane Claims That Sparked a Courtroom Battle

Om Sai Ram Hospitality, LLC operated a commercial hotel in Ville Platte, Louisiana, insured under a Businessowner’s policy issued by AmGuard Insurance Company, a subsidiary of Berkshire Hathaway. The coverage period ran from February 2020 through February 2021, with Replacement Cost Value coverage.

Then came Hurricane Laura.

On August 27, 2020, Laura made landfall as a Category 4 hurricane with sustained winds of 150 mph, devastating the region around Lake Charles. The storm shredded the power grid and thousands of structures across Southwest Louisiana. The hotel sustained significant structural damage. Om Sai Ram promptly notified AmGuard and began mitigation efforts as required under the policy.

Less than six weeks later, Hurricane Delta struck nearly the same area. The already-damaged hotel took another hit. Om Sai Ram again notified its insurer.

What followed, according to the policyholder, was a pattern of inadequate investigation and delayed payment. AmGuard assigned an independent adjusting firm, Engle Martin, to inspect the property. The adjuster submitted reports with unresolved questions about coverage and damage, but according to the Plaintiff, AmGuard failed to follow up. Months passed. The insured grew frustrated with the lack of status updates. Engle Martin eventually closed its file.

It was not until April 2022—over eighteen months after the hurricanes—that Om Sai Ram submitted a formal proof of loss seeking over $1.3 million for building damage, business personal property loss, and business income claims. The Plaintiff alleged that AmGuard failed to respond within the timeframes required by law.

Om Sai Ram filed suit in federal Court in August 2021, raising claims for breach of contract and bad faith under Louisiana Revised Statutes 22:1892 and 22:1973. Under Louisiana law, insurers who fail to timely pay claims without probable cause face penalties of 50% of the amount due plus attorney’s fees for 30-day violations, and up to twice the damages sustained for 60-day violations. The policyholder alleged that AmGuard’s conduct was arbitrary and capricious.

The case proceeded through the Court’s streamlined settlement process for Laura and Delta claims but did not resolve. It survived the insurer’s motion for summary judgment on bad faith, with the Court finding genuine issues of material fact about the adequacy of AmGuard’s investigation. As trial approached, Om Sai Ram designated an expert witness to testify about AmGuard’s claims handling. That designation triggered a Daubert challenge that would test the boundaries of expert testimony in insurance disputes.

The Expert and His Report

The Plaintiff retained CMM, an attorney with deep roots in the insurance industry. Before entering legal practice, CMM had spent eighteen years at a major insurance company handling thousands of claims as both an adjuster and supervisor. He had received the Associate in Claims certification from the Insurance Institute of America. After transitioning to legal practice in 1990, he continued to focus substantially on insurance matters. He also maintained ongoing involvement in industry education, giving presentations on ethics and claims handling at regional conventions and authoring the personal lines claims handling section for a major risk management publication.

By the time of this case, CMM had been retained as an expert in more than 200 cases across federal and state Courts in numerous jurisdictions. He had been qualified as an expert on insurance industry claims handling standards in multiple states. His hourly rate was $525 for work on the case and $575 for deposition and trial testimony.

CMM produced a 64-page expert report that methodically catalogued what he characterized as AmGuard’s failures throughout the claims process.

His report drew on multiple sources to establish applicable standards: insurance industry textbooks used to train claims personnel, the National Association of Insurance Commissioners’ Model Unfair Claim Settlement Practices Act (which Louisiana and more than 45 other states had adopted), and the insurer’s own policies and procedures manual. CMM noted that the Model Act and its accompanying regulations were not merely regulatory requirements but also articulations of general insurance industry standards, and that many insurers had incorporated these standards into their own claims manuals.

The accusations were extensive and detailed.

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