Court Won’t Strike “Expert” Report by Broker on Application Ambiguity and Best Practices

A Maryland federal court has refused to strike a purported expert report by a former broker opining that an insurer “should have” asked clarifying questions about the insureds’ response to “ambiguous” application questions.  Humane Soc. of U.S. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2014 WLJ 3055568 (D. Md. July 3, 2014).  However, the court required the broker to provide additional information concerning the bases for his opinions that a warranty exclusion was “not intended to apply” to application answers that that were not material to the insurer and that the underlying lawsuit constituted a claim made during the period of the insurer’s policy.

The insurer argued that the broker’s report amounted to improper legal conclusions.  The court disagreed with the insurer’s contentions, in particular with respect to the broker’s opinions that certain application questions were “ambiguous as to the information being requested” and that “in light of best practices in the insurance industry [the insurer] should have probed deeper than the questions asked in the application” for which the insured failed to disclose litigation against an affiliated entity.  The court concluded that the broker’s opinion regarding the insurer’s obligation to ask additional questions did not reach the ultimate issue whether the insureds were entitled to coverage and, therefore, that the broker’s opinion regarding the clarity of the application questions appeared proper.

The insurer also objected to the broker’s opinions (1) that a warranty exclusion was “not intended to apply” to any facts or representation that was not material to the insurer, and (2) that the underlying claim was deemed made during the claims-made period of the insurer’s policy and was not deemed made during a prior period.  The insurer argued that these opinions were improper legal conclusions.  The court declined to strike these portions of the expert report but concluded that the bases for these conclusions was unclear and provided the insureds with 14 days to supplement the expert report.