Wilshire Insurance Company v. Yager

          ORDER

          HONORABLE JAMES A. SOTO, UNITED STATES DISTRICT JUDGE

         Pending before the Court are numerous motions in limine filed by both parties, and Defendants' motion to bifurcate trial The motions are discussed below.^[1]

         BACKGROUND

         This case involves an insurance dispute that arises from an automobile accident in Tucson, Arizona. On November 12, 2014, Javier Lopez was driving his 2004 Econoline Van (“Van”). The Van was involved in an accident with a motorcycle driven by Patrick Yager. Yager suffered various physical injuries in the accident. It is disputed as to who was at fault in the accident. Yager argued that Lopez made an unsafe lane change and collided with Yager. Defendants argued that Yager had been in three other accidents, had been required to go to driving school twice for speeding, that he has driven his motorcycles at speeds of 190 miles an hour, that Yager lacks any memory of the accident, and that witnesses to the accident indicated that Yager caused the accident.

         After the accident, Yager filed a lawsuit in Pima County Superior Court against Lopez alleging that he was at fault in the accident; in addition, Alonso Pastor was also named in the lawsuit (“State Lawsuit”). Pastor was named in the State Lawsuit as he was the named insured under a commercial auto liability policy with Wilshire Insurance Company (“Wilshire”); the Van that Lopez owned was added as a covered auto under Pastor's previously existing policy with Wilshire, but Lopez was not listed as a named insured under that policy (the “Policy”).^[2] There was no evidence reflecting that Wilshire was aware of Lopez's existence prior to the accident in question; Wilshire was only informed of Lopez's existence after the accident had already occurred. Likewise, Girard (i.e., the insurance agency that actually procured the liability insurance policy on behalf of Pastor) also argued that it was never aware of Lopez's existence prior to the accident in question, and that it was only informed of Lopez's existence after the accident had already occurred;^[3] this issue was disputed by Yager who introduced evidence that Girard may have been aware of Lopez's existence prior to the accident and therefore failed to properly procure liability insurance for him from Wilshire.

         Lopez tendered his defense to Wilshire pursuant to the Policy issued to Pastor. In March of 2015, Wilshire retained counsel to defend Lopez in the State Lawsuit. However, by August of 2015, Wilshire sent Lopez a reservation of rights letter informing him that while Wilshire would continue to provide counsel to Lopez in the State Lawsuit, it was doing so under a reservation of rights because although Lopez's V an was li st e d as a covered auto under Pastor's Policy, Lopez was not an insured under the Policy (i.e., one has to be both an “insured” driving a “covered auto” for liability coverage to apply).

         Yager's claims in the State Lawsuit against Pastor were dismissed at summary judgment, and that dismissal was affirmed on appeal. The State Lawsuit against Lopez ended when Lopez entered into a Morris agreement with Yager whereby Lopez assigned all of his rights against Wilshire and Girard to Yager; pursuant to the Morris agreement, the parties stipulated to a judgment of $1.5 million, and Yager agreed not to seek recovery of the judgment, or any other form of damages, against Lopez. Thereafter, Wilshire filed the instant declaratory judgment action against Yager and Lopez in this Court seeking a declaration that Wilshire owed no duty to indemnify. In response, Yager asserted claims for breach of contract and bad faith against Wilshire, and claims against Girard stemming from its failure to properly procure insurance coverage for Lopez. This Court dismissed all of the claims against Wilshire at summary judgment, but Yager's claims against Girard remain as this Court denied summary judgment as to Girard.

         ADMISSIBILITY STANDARDS

         As pertinent to the motions in limine, Fed.R.Evid. 402 provides: "Relevant evidence is admissible unless any of the following provides otherwise: • the United States Constitution; • a federal statute; • these rules; or • other rules prescribed by the Supreme Court. Irrelevant evidence is not admissible." Fed.R.Evid. 401 defines relevant evidence as follows: "Evidence is relevant if: (a) it has any tendency to make a fact more or less probable than it would be without the evidence; and (b) the fact is of consequence in determining the action." Fed.R.Evid. 403 provides that: “The court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” As to experts, Fed.R.Evid. 702 states that “[a]witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.”

         DISCUSSION: MOTIONS IN LIMINE

         Docs. 261, 256, 258: Expert Carmine Cornelio, Fault, Reasonableness of the Settlement Agreement

         Girard seeks to exclude the testimony of expert Carmine Cornelio. See Doc. 261. Cornelio's proposed testimony at trial pertains to his expert opinion that the Morris agreement stipulating to a $1.5 million judgment against defendants was reasonable. Girard, however, argues that Cornelio's testimony is unreliable and subject to exclusion because he did not have an adequate basis to form his opinion. For example, Girard argues that Yager only provided Cornelio with “cherry-picked” information to support the $1.5 million judgment, but failed to provide Cornelio with: the pleadings and discovery from the underlying lawsuit, Yager's actual medical records and bills, statements from eye witnesses, deposition testimony of Javier Lopez, and evidence of Yager's second surgery and lost wage claims. In addition, Girard argues that at his deposition, Cornelio admitted that the information he was provided was limited, that the information withheld would benefit the defense position, and that he not comfortable with parts of his opinion in light of the withheld information. Nonetheless, to support his opinion, Cornelio specifically reviewed: Yager's medical records from the hospital, the rehabilitation hospital and his treating orthopedic doctor; Yager's policy limit demand and attachments including a summary of the medical billing; evaluations of the case from Lopez's attorney to the insurance company; notes from the adjuster regarding value of the case; the offer of judgment and judgment; Yager's responses to summary judgment; the police report regarding the accident; photos taken by the police at the scene of the accident and photos of Yager's injuries; the letter from Lopez's attorney to the insurance company transmitting the offer of judgment and indicating that this is a liability case with damages that could exceed the policy limits; portions of Yager's deposition; and other related documents from Lopez's attorney's file. Based on this information, Cornelio's expert report opined that the value of the case was between one and two million dollars, and he reaffirmed that this was still his valuation of the case at his deposition (even after Defendants' presented him with additional information). The Court finds that there is a sufficient basis to support Cornelio's expert opinion, and Girard's motion to exclude his expert testimony (Doc. 261) is denied.^[4]

         Yager seeks to prevent Girard from impeaching Cornelio with prior public and private censures he received while he was a judge with the Pima County Superior Court. See Doc. 256. Yager argues that such impeachment is irrelevant, unduly prejudicial, and improper character impeachment. Girard argues, however, that if Cornelio testifies as to his prior history as a judge, then Girard should be allowed to impeach him with the censures in question. Girard argues that Yager undoubtedly chose Cornelio as his expert to use the prestige of the office to impact the jury inasmuch as the jurors may give undue weight to his opinion because they may believe that judges are fair, unbiased, and experts in the law. As such, Girard argues that it should be able to question him as he has been censured for being biased during mediations, and that of the 32 available votes evaluating whether he meets the standards for being a judge, 27 of his peers voted that he “does not meet the standards” of judges, and he only received 4 votes for “meeting standards” of judges. The Court agrees with Girard's position. Cornelio's expertise can be established without him testifying as to being a judge in the past; rather, he can establish his expertise through testimony reflecting that he practiced as an attorney for many years (including personal injury litigation), and that he has also conducted hundreds of settlement conferences. However, if Yager has Cornelio testify as to his history of being a judge, Girard will be allowed to cross-examine him as to the discipline and censure he received related to being a judge.

         Cornelio's expert opinion is also implicated in Yager's motion to preclude any reference to his comparative fault in the accident with Lopez. See Doc. 258. Yager primarily argues that there is no evidence of comparative fault, that Lopez is precluded from denying that he caused the accident pursuant to A.R.S. § 13-807 because he pled guilty to making an unsafe lane change in relation to the accident, ^[5] and that liability can not be disputed after Lopez's acceptance of fault in the Morris agreement. While § 13-807 states that a “defendant who is convicted in a criminal proceeding is precluded from subsequently denying in any civil proceeding brought by the victim . . . the essential allegations of the criminal offense of which he was adjudged guilty, ” the Arizona Court of Appeals has held that § 13-807 does not necessarily bar a defendant in a civil action from raising affirmative defenses such as contributory negligence and comparative fault as these generally are not recognized as defenses to criminal conduct which deny required allegations of the criminal offense. See Williams v. Baugh, 214 Ariz. 471, 474 (Ct. App. 2007). As to Yager's fault, Girard seeks to question the reasonableness of the Morris agreement and Cornelio's expert opinion that the Morris agreement in question stipulating to a $1.5 million judgment is reasonable. For example, during his deposition, when Cornelio was confronted with information reflecting that Yager may have been comparatively at fault in the accident, ^[6] Cornelio conceded that Yager provided him only limited information, that Yager did not provide him with information as to his comparative fault, that the information Yager provided favored Yager's position, the previously undisclosed information presented at the deposition could favor Defendants' position, and that he was uncomfortable with some of his expert opinions in light of the new information. See Doc. 268, Ex. B-Cornelio's Deposition: (p. 135, line 1-6: “Q: Are you still comfortable with the statement, in your opinion, that your opinion is based upon the presumption that this was a case in which [Yager] has little or no comparative fault? [Cornelio:] . . . no.”); p. 55, line 24 to p. 56, line 3: “Q: As you are sitting here today, having seen some new information [today at the deposition], are you still comfortable with your opinion that a $1.5 million stipulated judgment was reasonable . . . [Cornelio:] I don't know.”). Furthermore, in light of these issues, the fact that Lopez may have admitted fault in the Morris agreement, does not bar Girard from attacking the reasonableness of the Morris agreement in this case. See, e.g., United Services Automobile Association v. Morris, 154 Ariz. 113, 120 (1987) (“We recognize . . . that an insured being defended under a reservation might settle for an inflated amount or capitulate to a frivolous case merely to escape exposure or further annoyance . . . the [stipulated] ‘judgment' does not purport to be an adjudication on the merits; it only reflects the settlement agreement. It is also evident that, in arriving at the settlement terms, the [insureds] would have been quite willing to agree to anything as long as plaintiff promised them full immunity . . . [N]either the fact nor amount of liability to the claimant is binding . . . unless . . . [the claimant] can show that the settlement was reasonable and prudent . . . The test as to whether the settlement was reasonable and prudent is what a reasonably prudent person in the insureds' position would have settled for on the merits of the claimant's case . . . This involves evaluating the facts bearing on the liability and damage aspects of claimant's case, as well as the risks of going to trial.”); Himes v. Safeway Insurance Company, 205 Ariz. 31, 39-40 (Ct. App. 2003) (“[W]hat is the standard to determine the extent to which a stipulated settlement is reasonable? . . . [T]he primary instruction is that a reasonable settlement should reflect what would have occurred if there had been an arm's-length negotiation between interested parties . . . This standard applies in every case in which the settlement represented by a . . . Morris agreement is subject to a review for reasonableness, whether the amount or judgment is stipulated to or whether the parties leave the amount open . . . [I]t is the absolute duty of the finder of fact to evaluate the evidence presented and determine what settlement amount the [claimant] has proved reasonable by a preponderance of the evidence . . . Not only does a ...