SEPTEMBER 2014 BAD FAITH CASES: CPA EXPERT PRECLUDED FROM TESTIFYING ABOUT INSURANCE LAWS AS IRRELEVANT AFTER PRIOR RULING ON BAD FAITH CLAIMS, BUT ALSO BECAUSE OF RISK OF JURY CONFUSION (Western District)

In United States Fire Ins. Co. v. Kelman Bottles, a case with a lengthy history concerning a number of bad faith claims the insured attempted to assert which were limited by the court, the court addressed numerous motions in limine prior to trial. This included efforts by the insurer to limit the testimony of one of the insured’s experts, a CPA. The court allowed testimony on accounting matters, but not matters related to insurance regulations and statutes, specifically, the Unfair Insurance Practices Act, 40 Pa. Stat. § 1171.1 (UIPA), and the Unfair Claims Settlement Practices regulations, 31 Pa. Code § 146.1 (UCSP).

Federal Rule of evidence 403 provides that a “court may exclude relevant evidence if its probative value is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” The insurer argued that an earlier decision broadly rejecting much of the insured’s bad faith claims mooted the testimony on these subjects. The insured argued that that “a violation of the UCSP and UIPA is not per se bad faith, and that no such sweeping prohibition for violations of the two exists in the Third Circuit.”

The insured attempted to distinguish a prior non-precedential Third Circuit 2002 case which held that “evidence of an insurer’s violation of the UIPA and UCSP was properly excluded under Rule 403 due to risk of prejudice.”

The court rejected the insured’s arguments “insofar as evidence of [the insurer’s] violation of the Pennsylvania insurance laws is not relevant to any of [the insured’s] remaining viable claims. Moreover, even if the evidence were probative, the risk of jury confusion is great. Absent relevance and in light of the risk of confusion of issues,” the motion to preclude this testimony was granted.

Date of Decision: August 8, 2014

United States Fire Ins. Co. v. Kelman Bottles LLC, 11cv0891, 2014 U.S. Dist. LEXIS 109982 (W.D. Pa. August 8, 2014) (Fisher, J. sitting by designation of U.S. Court of Appeals for the Third Circuit).