Car Insurers Accused of Rigging Policy Offerings in Anticompetitive Scheme

Car Insurers Accused of Rigging Policy Offerings in Anticompetitive Scheme
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Court: United States District Court for the Northern District of California, San Francisco Division
Jurisdiction: Federal
Case Name: Perez v. State Farm Mut. Auto. Ins. Co. et al
Citation: 2011 U.S. Dist. LEXIS 155921

Facts

This case involves a car insurance dispute. The plaintiffs claimed that the defendants had conspired to prevent insurance companies from competing based on the quality of repairs provided under their auto insurance policies. As part of this scheme, the defendant automobile insurance companies decided among themselves to sell only plans that included inferior repair parts. The plaintiffs claimed that the defendants also conspired to exclude and prevent competition from other insurance companies based on the quality of repair parts by setting up, financing, and directing a sham regulatory body that was completely controlled by the defendants. This sham organization was used to promote inferior crash-parts as acceptable substitutes to repair parts manufactured by the original equipment makers.

The plaintiffs alleged that as part of their non-compete conspiracy, the defendants required auto repair shops to use inferior parts and prevented other competitors from competing on the basis of the quality of repair parts—which significantly affected the number and quality of auto insurance policies available to policyholders in California. The plaintiffs filed a class action suit against the defendants and retained an actuarial expert as their rebuttal expert witness to support their case.

The Actuarial Expert Witness

The actuarial expert witness was currently employed at Insurance Resolutions Inc., an insurance industry specialist consultancy, and had over thirty years of actuarial experience. He received his bachelor’s and graduate degrees in mathematics from C.W. Post College and St. John’s University respectively. He was hired by the plaintiffs as a rebuttal expert witness in this case.

The defendants moved to exclude his expert testimony on the grounds that he exceeded the scope of the permissible rebuttal reports and testimony. The defendants also argued that the actuarial expert witness submitted his report late in the discovery process and the defendants did not get the chance to respond to it. Further, the defendants claimed that the expert’s opinions did not comply with the Daubert standard because they were not the product of reliable methods or principles.

The plaintiffs responded that the expert’s testimony specifically rebutted opinions of the defense’s experts. They also argued that the defendants’ second argument lacked merit and the actuary expert witness’s testimony was reliable under Daubert.

Discussion

The court noted that the actuarial expert witness was hired by the plaintiffs as a rebuttal witness only to rebut the objections that the defense’s own rebuttal experts had raised with relation to the econometric model used by the plaintiffs’ damages expert to calculate economic loss and damages. The court noted that the actuarial expert’s rebuttal report criticized the methodology and argument used by the defense rebuttal witnesses and was, thus, inside the permissible scope of rebuttal testimony.

The court also noted that the report was submitted in a timely fashion since it was received before the deadline. The court observed that the actuarial expert witness was hired only to evaluate and respond to the defense’s rebuttal expert reports. For this task, the actuarial expert relied on his extensive actuarial experience, rendering his opinion sufficiently reliable, as asserted in United States v. Sandoval-Mendoza.

Held

The court denied the defendants’ motion to exclude the plaintiffs’ actuarial expert witness’s testimony.