Court: District Court, M.D. Tennessee; December 3, 2017; Federal District Court
The court reviewed the defendant Erie Insurance Group's Motion for Summary Judgment, which was fully briefed and subsequently denied. Plaintiffs Debra and Dennis Daniels filed a claim on July 28, 2015, for damage to their home allegedly caused by a sinkhole, leading Erie to engage Rimkus Consulting Group for an inspection. The Rimkus Report, issued on December 22, 2015, concluded that sinkhole activity was unlikely, attributing the damage instead to differential foundation settlement, soil erosion, and organic material decomposition. Erie denied the claim on February 1, 2016. The Daniels filed suit on June 30, 2016, alleging breach of the insurance policy and bad faith under Tennessee law, seeking compensatory and punitive damages. After various procedural developments, including modifications to the Initial Case Management Order and expert disclosures, Erie moved for summary judgment on September 13, 2017, claiming the plaintiffs lacked admissible evidence to counter the Rimkus Report. The plaintiffs attempted to extend their response deadline on September 29, 2017, citing confusion over the deadline and disruptions caused by Hurricane Irma.
On September 15, 2017, Erie submitted a supplemental report from Rimkus dated September 14, and the depositions of experts were rescheduled to September 20 and 28, 2017, as per an agreement in the modified Case Management Order. Erie filed its Motion for Summary Judgment before deposing the plaintiff's expert, Gulati. In response to concerns raised by the court in a related case, Walsh v. State Farm Fire & Cas. Co., the plaintiffs had FTE prepare a supplement to its Revised Report on September 20, 2017, hoping it would address the court's concerns regarding Gulati’s methodology. The plaintiffs requested an extension to file their Response to the Motion for Summary Judgment until ten days after the deposition transcript of Gulati was available. Erie did not oppose the extension but contested the use of FTE's Supplemental Report, asserting it was not provided prior to their Motion for Summary Judgment and was submitted on the day of Gulati’s deposition. Erie explained that the delay in filing the Rimkus Supplemental Report was due to needing a complete copy of FTE's job file, which was only partially provided until August 15, 2017. The court granted the plaintiffs' extension request, setting November 13, 2017, as the new deadline for their opposition and allowing Erie until November 27, 2017, for a reply. However, the court ruled that while the plaintiffs could use Gulati’s deposition transcript, any opinions from the late-filed Supplemental Report would be excluded from consideration in the Motion for Summary Judgment. The plaintiffs filed their Response on time, and Erie filed a prompt Reply. The legal standard for granting a Motion for Summary Judgment, under Rule 56, requires showing no genuine dispute of material fact and entitlement to judgment as a matter of law.
To succeed in a motion for summary judgment, the defendant must demonstrate that the plaintiff cannot prove at least one essential element of the claim based on undisputed material facts. After the defendant's initial showing, the plaintiff must present evidence beyond the pleadings, indicating a genuine issue for trial. The court evaluates the evidence by favoring the non-moving party and is not tasked with weighing the evidence but rather with identifying any genuine issues for trial. A mere scintilla of evidence will not suffice; the evidence must be more than merely colorable, and a genuine issue exists only if a reasonable jury could find in favor of the non-moving party.
Additionally, the defendant's motion challenges the admissibility of the plaintiff's expert witness testimony under Rule 702 of the Federal Rules of Evidence and Rule 26(a) of the Federal Rules of Civil Procedure. Rule 702 allows qualified experts to testify if their knowledge aids the trier of fact, provided the testimony is based on sufficient facts and reliable principles applied to the case's facts. The district court serves as a gatekeeper for expert testimony, ensuring it is both relevant and reliable, while acknowledging that the rejection of expert testimony is uncommon. The court assesses the scientific validity of the expert’s reasoning and methodology but will not exclude testimony solely due to the weaknesses in its factual basis. The Daubert standard allows experts considerable leeway in their opinions, even if not grounded in firsthand knowledge, as long as they are reliably based on the expert's knowledge and experience within their field.
Expert testimony must be based on scientific methods and derived from case-specific facts, rather than requiring complete knowledge of all case questions. Rule 702 mandates that expert testimony cannot stem from mere subjective belief or speculation. The party presenting expert testimony must demonstrate, by a preponderance of the evidence, that the expert is qualified and offers scientific knowledge that aids the trier of fact. Additionally, Rule 26 requires the disclosure of expert witnesses along with a signed report detailing all opinions, their basis, and the facts considered.
In this case, the defendant seeks summary judgment on claims of breach of contract, bad faith, and punitive damages. The plaintiffs have withdrawn their claims for bad faith and punitive damages, leaving only the breach of contract claim. The defendant argues that the plaintiffs' expert reports are inadmissible and insufficient to support their claim that the damage to their house was due to a sinkhole. Conversely, the plaintiffs assert that the expert report, alongside the expert's deposition, is admissible and demonstrates a factual dispute regarding the cause of the damage. They also assert that "decomposition of organic material," cited by the defendant's expert as a cause of damage, is not excluded and thus could be covered.
Under Tennessee law, a breach of contract claim requires proof of an enforceable contract, a breach by the opposing party, and resultant damages. The validity of the insurance contract is not disputed; the key issue is whether the denial of the claim constitutes a breach. To avoid summary judgment, the plaintiffs must establish a material factual dispute regarding whether a covered event caused the damage. The qualifications of the plaintiffs’ expert, Gulati, as a licensed Professional Engineer and Environmental Property Assessor, are acknowledged by the defendant, which challenges the admissibility of his opinions based on purported deficiencies in their reasoning and methodology.
The Daubert standard requires trial judges to evaluate whether expert scientific testimony presents (1) scientific knowledge and (2) assistance to the trier of fact regarding a relevant issue. This involves assessing the scientific validity of the expert's reasoning and methodology as it applies to the case facts. In FTE's initial report, Gulati's analysis is solely based on the findings of the Rimkus Consulting Group, which concluded that sinkhole activity was unlikely to be the cause of damage to the plaintiffs' residence, attributing it instead to differential settlement due to inadequate foundation embedment. Gulati disagrees, asserting that sinkhole activity is present and has caused structural damage, based on evidence from Standard Penetration Test borings indicating soil weakening. However, his report lacks a detailed explanation of the methodology used to reach his conclusions, failing to connect the presence of sinkholes to the damage observed. Consequently, the court finds Gulati's initial report inadequate under Daubert and Rule 702, concluding it does not provide evidentiary support for the plaintiffs' claims. The Revised FTE Report is also challenged by Erie for similar deficiencies, particularly the absence of methodological explanations linking the conclusions to the facts.
Erie contends that the Report inadequately explains how the results of the tests conducted were utilized to conclude that sinkhole activity caused damage to the plaintiffs' residence. Erie also criticizes the Report for not clarifying the methodology used to assess the reliability of the Rimkus Report. In contrast, plaintiffs argue that expert testimony evaluation is a jury's responsibility and assert that both they and their expert, Mr. Gulati, have addressed the court's concerns from a previous case. They specifically reference Mr. Gulati's deposition, which they claim elaborates on his methodology without introducing new opinions, but rather supplements prior reports.
In its Reply, Erie argues against considering Gulati's deposition testimony, stating it was a discovery deposition meant to address deficiencies in the Revised Report. The Revised Report, dated May 9, 2017, reiterates issues identified in the Rimkus Report regarding the plaintiffs' residence, including structural damage and open surface depressions. This time, FTE engaged Richard Simmons Drilling Co. to conduct four Structural Standard Penetration Test (SPT) borings, which, along with homeowner information and Rimkus data, led to a conclusion that sinkhole activity caused the damage.
Gulati supports his opinion with a Sinkhole Investigation Fact Sheet detailing the investigation's scope, including the SPT borings that indicated high porosity linked to voids or solution channels. He provides descriptions of the bore samplings, confirming soil conditions consistent with sinkhole activity. The drilling, executed by a truck-mounted rig, reached depths of 15.5 to 21 feet, with sample collection following ASTM D 1586 standards, detailing the testing process and results.
Advancement of the sampler is driven by a hammer, delivering blows until a penetration of 18 inches is achieved or an excessive blow count is reached. Following this, the sampler is extracted, and the soil sample is sealed in a plastic bag. A representative maintained a field log of the samples, which were labeled and sent to the laboratory for examination and classification based on texture and plasticity per the Unified Soil Classification System. The report indicates that transitions between soil strata are often gradual, suggesting that boundaries on boring logs are approximate.
Soil analysis revealed topsoil to clay in the upper 2.5 feet, transitioning to firm sandy clay up to 5 feet, very soft clay to 20 feet, and dense limestone to a termination depth of 21 feet. Graphs included in the report show the number of hammer blows needed to reach specific depths, with the first boring (SPT-1) indicating soft soil with low resistance until limestone was encountered at approximately 20 feet. SPT-4 also showed low blow counts for the first five feet of soil.
The report concludes that the structure is affected by karst conditions and that minor differential settlement is not causing the distress observed at the residence, which was built in 1999 and has ongoing issues. Closed depressions indicating potential sinkhole activity were found within a mile of the residence. Significant differential settlement of up to 2.5 inches was documented, which is excessive given the geologic conditions. Remediation through underpinning of the foundation is recommended due to abnormal settlement linked to underlying karst conditions.
Gulati's professional opinions are based on various scientific data, including historical maps and definitions of sinkhole activity. His deposition clarified observations from the Standard Penetration Test (SPT), noting systematic weakening of soils between six and ten feet, with a significant decrease in blow counts indicating soil dissolution above limestone at 20 feet.
At a depth of 15 feet, limestone fragments were present in the soil, suggesting potential dissolution of limestone. The witness opined that this dissolution may have caused soil, sediment, or rock to ravel into subterranean voids due to groundwater erosion. He noted that the mixture of upper soil sediments with limestone indicates ongoing sinkhole activity, which is further evidenced by a specific photograph showing organic materials intertwined with clay. The expert, Gulati, stated it is a common industry practice to rely on the data and testing utilized in forming his conclusions and provided rationale for rejecting opposing expert opinions, particularly regarding the cause of damage to a residence.
The defendant argued that Gulati's Revised Report lacked sufficient methodological detail and clarity, potentially violating Rules 702 and 26(a)(2) regarding expert testimony, and sought to exclude his testimony under Daubert. However, the court found that the Sixth Circuit's interpretation of Rule 26 allows for expert elaboration beyond their written report, as long as the expert is available for deposition and cross-examination. Since Gulati had been deposed and extensively questioned, the court determined that concerns about trial ambush were mitigated. Additionally, the purpose of Rule 26(a)(2) to provide notice could be satisfied through deposition disclosures, making the defendant's motion to exclude Gulati's testimony unwarranted.
Gulati's deposition occurred over three months before the trial, and Erie did not assert any prejudice regarding its ability to prepare for cross-examination. Gulati sufficiently explained his methodology, creating a material factual dispute regarding the cause of structural damage to the plaintiffs' residence and whether the defendant is contractually obligated to cover the loss. He stated that relying on physical testing results from others is standard in the industry, identified data supporting his conclusion of sinkhole activity on the plaintiffs' property, and detailed his disagreements with the defendant’s expert. Although his testimony was somewhat unconventional and posed challenges for Erie, it rectified a potential noncompliance with Rule 26(a)(2). Erie submitted its Motion for Summary Judgment before deposing Gulati and raised concerns about the credibility of his opinions rather than their admissibility. The court emphasized that traditional means, such as vigorous cross-examination and presenting contrary evidence, are appropriate for addressing questionable testimony, as underscored by the Daubert standard, which favors admissibility of scientifically valid expert testimony. The court concluded that Gulati's testimony and expert report provided sufficient evidence to establish a material factual dispute regarding the damage's cause and its coverage under the Policy, leading to the denial of Erie's Motion for Summary Judgment. Additionally, the plaintiffs’ argument concerning "decomposition of organic materials" as a covered cause of damage was not considered, as it was inadequately briefed and no separate motion for summary judgment was filed by the plaintiffs. The defendant's Motion for Summary Judgment was ultimately denied, and the court did not find relevance in the deposition of John Edwards from a separate case to support the admissibility of the plaintiffs' expert report. An appropriate order will follow.
Karst conditions refer to geological formations primarily composed of limestone that are altered by acidic groundwater, which dissolves calcium carbonate, weakening the rock and allowing soil sediment to infiltrate the limestone. In a related case, *Travelers Property Casualty Corp. v. General Electric Co.*, the court denied a motion to exclude an expert witness's testimony despite deficiencies in the expert's report and deposition regarding methodology. The court indicated that the expert's opinions, articulated more clearly during a Daubert hearing, could be admissible under Federal Rule of Evidence 702, emphasizing that the standards for admissibility focus on the evidence's relevance and reliability rather than pretrial disclosures. While the expert's opinion was allowed, the court found the expert's brief report lacking in good faith, ordering the plaintiff to reimburse the defendant for a portion of the costs incurred during the expert's extensive deposition.
