Madison - St. Clair Record

Friday, October 18, 2019

United Fire moves to disqualify expert in coverage dispute arising from $1.5 million judgment

Federal Court

By Record News | Jul 26, 2019


BENTON – United Fire and Casualty, defending a suit over settlement decisions among lawyers, moved to disqualify an expert who didn’t graduate from college and hasn’t worked in the insurance industry for 43 years. 

In a motion for exclusion at U.S. District Court Southern District of Illinois on July 15, United Fire counsel John Schultz of Kansas City called Gary Fye’s opinion nonsensical and absurd. 

“To allow Mr. Fye to testify about a lawyer’s conduct would be akin to allowing a high school student to testify against a doctor in a medical malpractice case,” Schultz wrote. 

Fye, as a witness for Thiems Construction Company, would testify that United Fire acted in bad faith in a Madison County suit.  United Fire had issued a policy covering the company in 2009, when Fred and Juanita Steinkuehler filed a claim against it. In 2013, a judge allowed a count for punitive damages. 

At trial that year, jurors awarded the Steinkuehlers $765,000 in compensatory damages and $765,000 in punitive damages. 

Fifth District appellate judges affirmed the verdict, and the Illinois Supreme Court denied review. United Fire paid compensatory damages in 2015, but not punitive damages. 

Thiems Construction paid punitive damages of $904,019.71 with interest, by a check from a credit line that the late owner Gary Thiems guaranteed with personal assets. 

Thiems retained Jon Rosenstengel of Belleville, who sued United Fire in St. Clair County Circuit Court for the amount of the check.  United Fire removed the suit to U.S. district court, and the clerk assigned it to Rosenstengel’s wife, District Judge Nancy Rosenstengel who recused herself. 

The clerk then assigned it to District Judge Staci Yandle and a settlement conference failed in 2017. 

In December 2018, Yandle set trial for December 2019. 

United Fire filed its July 15 motion for exclusion of Fye’s testimony as a companion to a motion for summary judgment. Schultz wrote in the summary judgment motion that in 2012, United advised Thiems Construction that the policy didn’t cover punitive damages. He said Thiems Construction understood that and retained Michael Garavalla for a separate defense on punitive damages. 

“Prior to the trial in the underlying lawsuit, Thiems Construction Company did not think a jury would award punitive damages,” Schultz wrote, adding that an insurer is not under a duty to settle a compensatory damage award merely to minimize its insured’s exposure to punitive damages. 

He noted that an insurer’s failure to settle is not a proximate cause of an award of punitive damages against the insured. In the motion to exclude Fye, Schultz wrote that Fye stated in a deposition that his opinions have been excluded around 20 times or so. 

Schultz quoted judges who found his opinion suspect and his tactics offensive, adding that another judge struck his testimony in its entirety.  He wrote that Fye uses the same boilerplate language in every report. 

“Fye believes the Thiems claim should have been handled by a claims adjuster as compared to the licensed attorneys who handled the Thiems claim for United Fire,” Schultz wrote.  “Thiems Construction got the very best that United Fire had to offer in terms of managing the litigation against it.” 

Schultz wrote that determining whether a duty to settle exists is a legal question and that insurers aren’t obligated to settle unless the settlement value of the covered claims exceeds the policy limits. He asked if United Fire might prevail in justification of its failure to settle, thereby establishing that its actions were at least reasonable. 

He wrote that only analysis of applicable case law could answer the question. 

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