The underlying dispute involves Lorenzo Garcia, who alleges he was rear-ended while stopped at a red light when a chain-reaction collision sent another vehicle into the back of his car. Garcia alleges he suffered permanent, disabling injuries and held a State Farm automobile policy with $600,000 in UM/UIM limits. He alleges State Farm failed to pay the full benefits owed and brings claims for UIM benefits, bad faith, breach of contract and the duty of good faith and fair dealing, and violations of the New Mexico Unfair Trade Practices Act and New Mexico Unfair Insurance Practices Act. State Farm adjuster Randy Carney is also named as a defendant.
Garcia retained Elliott Flood, a 35-year insurance-industry veteran and inactive attorney, to testify about insurance industry customs, practices, and standards. Flood's report offered eleven opinions, including that no reasonable insurer would have valued Garcia's UM claim at $2,500 given evidence of permanent spinal injury, that offering a nuisance-value settlement under the facts presented constitutes lowballing outside standard claims practice, and that insurers handling first-party claims owe a heightened standard of fairness and transparency and a fiduciary-like responsibility to their policyholders.
United States Magistrate Judge Kirtan Khalsa granted State Farm's motion to exclude portions of those opinions. The court held that Flood's qualifications and the reliability of his methodology were not in dispute — the fight was over relevance and helpfulness to the jury. Applying Tenth Circuit precedent and Federal Rule of Evidence 702, the court drew the line between permissible testimony on industry norms and impermissible testimony that defines legal duties and applies law to facts.
The court relied on three analogous District of New Mexico and District of Colorado decisions. In American Automobile Insurance Co. v. First Mercury Insurance Co., the court held that experts could testify about facts relevant to good faith — such as industry standards for claims handling, typical practices and procedures, and the facts behind the parties' claims handling — but could not opine on whether a party owed or breached a legal duty or acted in good or bad faith. In Hansen Construction Inc. v. Everest National Insurance Co., a court excluded an expert whose report read like a legal brief, contained numerous legal pronouncements, and included the conclusion that the defendant's claim-related conduct was unreasonable — and declined to parse the admissible from the inadmissible portions, precluding the expert from testifying entirely. And in Smith v. Liberty Mutual Fire Insurance Co., a New Mexico federal court similarly barred experts from opining that an insurer's conduct was reasonable, unreasonable, or in good or bad faith.
Applying those principles, Judge Khalsa held that Flood's opinions in paragraphs 1, 2, 3, 7, 8, and 9 of his report — which repeatedly invoked what a reasonable insurer would do and implied that State Farm failed to act in good faith — impermissibly defined the scope of Defendants' legal duties and drew ultimate legal conclusions by applying law to facts. The court also noted that Flood's characterization of certain evidence as uncontroverted in paragraph 3 further encroached on the jury's fact-finding role.
Flood is precluded at trial from testifying about: the existence or scope of any contractual, common law, fiduciary, or statutory duty Defendants owed Garcia; whether Defendants breached any such duty; whether Defendants acted reasonably or unreasonably; and whether Defendants acted in good or bad faith. He may still testify about insurance industry customs, practices, and standards, and about how State Farm actually handled Garcia's claim measured against those norms.