Shadid LLC v. Aspen Specialty Insurance Company, 5:15-cv-00595

Background

Plaintiff Charles A. Shadid, L.L.C. sued Aspen Specialty Insurance Company for breach of contract and bad faith over alleged tornado/property damage during the policy period (claiming loss from May 31, 2013) under an August 2012 policy.
The Court previously denied summary judgment to Defendant on breach of contract and bad faith claims.
Both parties filed motions in limine seeking pretrial rulings on admissibility of broad categories of evidence relevant to coverage and bad-faith issues.
Plaintiff sought exclusion of: (1) evidence that losses occurred on dates other than May 31, 2013; (2) defenses not asserted in the denial; and (3) evidence obtained after the claim denial.
Defendant sought exclusion of numerous categories (including testimony about other insureds’ claims, two witnesses about a May 20, 2013 hailstorm, an Oklahoma Insurance Commissioner bulletin, loss-reserve information, payments to a field adjuster (ACM), and punitive-damages/financial evidence).
The Court issued mixed rulings: denied Plaintiff’s motion in limine in full; granted Defendant’s motion in part and denied in part, admitting several categories (with limits) and excluding the insurance bulletin and other specified items.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Admissibility of evidence obtained after claim denial	After-acquired evidence is irrelevant to bad faith; focus is on insurer’s conduct while claim was reviewed	Such evidence may show Plaintiff’s lack of cooperation, rebut loss amount, and is relevant to coverage/bad-faith defenses	Denied categorical exclusion; after-acquired evidence may be admissible as relevant to issues like cooperation and damages
Limiting defendant to defenses asserted in denial	Defendant should be barred from asserting coverage defenses not relied on at denial	Pretrial categorical limitation is improper; evidentiary objections should be made at trial	Denied categorical limitation; objections reserved for trial
Temporal scope of covered loss (May 31 vs. other dates)	Coverage should be decided as matter of law: insurer responsible for covered damage within policy period (May 31, 2013)	Coverage question for trial; plaintiff seeks dispositive ruling improperly	Denied plaintiff’s motion for substantive ruling; temporal questions reserved for trial
Admission of testimony about other insureds’ similar claims	Testimony of other insureds shows pattern/practice and is admissible under Fed. R. Evid. 406 for bad-faith intent	Irrelevant, prejudicial, Rule 403 and 404(b) concerns; would confuse jury and multiply issues	Admitted limited testimony of three insureds re: similar treatment; plaintiff must manage scope; defendant may rebut with similarly situated favorable treatment witnesses if timely notified
Testimony about May 20, 2013 hailstorm (non-May 31 event)	Relevant to whether losses occurred on other dates; probative to coverage	Irrelevant if coverage limited to May 31 storm	Denied exclusion; testimony may be relevant and timing/causation questions reserved for trial
Oklahoma Insurance Commission bulletin (earthquake)	Shows industry claims-handling practice re: pre-existing damage; admissible (possibly under business-records exception)	Irrelevant, hearsay, prejudicial under Rule 403	Excluded: plaintiff failed to establish hearsay exception foundation and probative value outweighed by risk jury would overvalue commissioner statement
Loss-reserve evidence	Showing $1,000,000 reserve is probative of insurer’s subjective view and bad-faith intent	Irrelevant; jury may misinterpret reserves as admission of liability	Admitted as relevant to bad faith; limiting instruction to be provided to avoid prejudice
Evidence of payments/relationship with field adjuster (ACM)	Admissible to show bias/impeachment of ACM witnesses	Irrelevant and unduly prejudicial	Denied exclusion; payments/relationship admissible subject to contemporaneous objections and trial rulings
Punitive damages/financial statements	Plaintiff will not introduce wealth evidence at initial phase under Oklahoma bifurcation statute	Not specifically contested in this opinion	Court will use Oklahoma two-stage (bifurcated) procedure; wealth/punitive evidence addressed at appropriate stage

Key Cases Cited

Buzzard v. Farmers Ins. Co., 824 P.2d 1105 (Okla. 1991) (discussing temporal focus of bad-faith claims and insurer conduct during claim handling)
Newport v. USAA, 11 P.3d 190 (Okla. 2000) (similar principle on evaluating insurer’s conduct during claim processing)
Shugart v. Cent. Rural Elec. Co-op., 110 F.3d 1501 (10th Cir. 1997) (federal courts may apply Oklahoma’s two-stage punitive damages procedure)
Bannister v. State Farm Mut. Auto Ins. Co., 692 F.3d 1117 (10th Cir. 2012) (recognizing use of Oklahoma bifurcated punitive-damages procedure)
Averitt v. Southland Motor Inn, 720 F.2d 1178 (10th Cir. 1983) (application of Rule 404(b) to corporate "other acts" evidence)
United States v. Ary, 518 F.3d 775 (10th Cir. 2008) (business-records hearsay exception requirements explained)