Court Allows Actuarial Expert To Rely On Otherwise Inadmissible Analyses Performed By Another Expert


    Actuarial Expert

    Court: United States District Court for the Southern District of New York
    Jurisdiction: Federal
    Case Name: United States Bank Nat’l Ass’n v. PHL Variable Life Ins. Co.
    Citation: 112 F. Supp. 3d 122


    In this case involving a breach of good faith and fair dealing, the plaintiff, US Bank, owned 12 life insurance policies known as Phoenix Accumulator Universal Life (PAUL) policies. These policies were issued by the defendant PHL Variable Insurance Company (PHL). The plaintiff alleged that the defendant breached the policies and violated various laws by raising the cost of insurance rates on the subject PAUL policies in 2010 and 2011.

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    The plaintiff’s first motion was to preclude Phoenix from offering the analyses of the plaintiff’s actuarial expert. The plaintiff also made a second motion to exclude the defendant’s actuarial expert from testifying about Phoenix’s contention that “U.S. Bank would have received a COI Adjustment regardless of the methodology employed by Phoenix”. U.S. bank argued that the defendant’s expert could not testify to this fact because the expert offered no such opinion in either his expert report or his deposition.

    The plaintiff also moved to preclude Phoenix from eliciting testimony from any witnesses—including Phoenix’s actuarial expert witness—based on the “asset-share pricing model,” which the defendant did not disclose to the plaintiff.

    The plaintiff also moved to preclude Phoenix from eliciting testimony from its actuarial expert that the 2010 and 2011 COI rate increases were justified because Phoenix’s original expectations for investment earnings changed. The plaintiff argued that the defense expert’s testimony did not rest on a firm factual basis.

    Court’s Discussion

    Regarding the first motion, the court held that the expert’s purported analytical shortcoming was the subject of weight, not admissibility. Thus, the motion to exclude the testimony was denied.

    Regarding the second motion, the court held that the expert’s conclusory statements about alternative scenarios were not supported by the defendant’s actual behavior at the time. The court further held that they were neither supported by the defendant’s calculation of alternative courses Phoenix could have followed to reflect changing expectations without violating the terms of the policy or discriminating within a class of insureds. The defendant, therefore, failed to establish that the expert’s testimony about the inevitability of a COI rate increase was admissible.

    The court denied the third motion because the defendant and the plaintiff could not deny that the defendant produced both the expert’s report and other exhibits identified in the motion to U.S. bank in a timely fashion. While discussing the last motion to exclude the expert’s testimony, the court held that there was no reason at all to believe that the defendant could not produce reliable documentation recreating those assumptions. Whether it did so was for a jury to decide.

    The plaintiff’s motion to exclude the testimony of the defendant expert was denied in part and granted in part.

    What We Can Learn From This Case

    An actuarial expert is permitted to rely on facts, opinions, and data not of the expert’s own making—including analyses performed or findings made by another expert in the case—even if those facts, opinions, and data are otherwise inadmissible.