Seasoned Hydrology Experts Reference Unreliable Data In Flood Insurance Case

Court: United States District Court for the Eastern District of Michigan, Southern DivisionJurisdiction: FederalCase Name: Federal-Mogul Corp. v. Ins. Co. of Pa.Citation: 2016 U.S. Dist. LEXIS 114573

Facts

In 2011, plaintiff Federal-Mogul Corporation suffered substantial damage to its facility following a flood in the Rojana Industrial Park in Ayutthaya, Thailand. The parties stipulated that the plaintiff suffered a loss of $39,406,467 in property damage and $25,093,533 in “time element loss”, referring to economic loss due to an inability to operate normally. Pursuant to an insurance policy between the parties, the defendant, the Insurance Company of The State of Pennsylvania, paid the plaintiff $30 million for its losses, stating that a “high hazard flood zone” provision limited the amount it owed. The plaintiff filed suit to recover the remainder of its losses.

The Time Element Loss Claim

The court initially granted summary judgment for the plaintiff which the Sixth Circuit reversed. The parties then cross-moved for partial summary judgment on the plaintiff’s time element loss claim. The parties requested that the court decide whether the plaintiff’s time element loss claim would be limited by the high hazard sublimit, assuming it applied for purposes of the motions. The court determined that the high hazard sublimit would not limit recovery of the plaintiff’s time element loss if it applied, and therefore granted summary judgment in favor of the plaintiff on its time element loss claim of $25,093,533.

The Defendant’s Team Of Hydrology Experts

The plaintiff filed a motion before the court to exclude reports and testimony of the defendant’s hydrology experts. The defendant offered the expert opinion and testimony of two experts who had studied hydrology and flood conditions in the Chao Phraya River Basin and throughout Southeast Asia for over three decades. According to the defendant, the experts had been hired regularly for their “direct expertise on flooding in Thailand due to their skills with their statistical frequency analysis and computer modeling” as used in the subject report. They had formerly been retained by the Thai Government’s Royal Irrigation Department to study flood conditions in the Chao Phraya River Basin using the same River Network Model utilized in this study.

The hydrology experts offered the opinion that the plaintiff’s facility in the Rojana Industrial Park was situated in a 100-year floodplain. The plaintiff sought to have the testimony of the hydrology experts excluded for three reasons: (1) it was not based on a scientifically valid methodology, (2) it did not satisfy Rule 702, and (3) the opinion was unfairly prejudicial.

Court Discussion

Under Rule 702, expert opinion evidence must help the trier of fact determine a fact in issue. A valid scientific connection to the pertinent inquiry as a precondition to admissibility. The plaintiff argued that the hydrology experts’ opinion does not satisfy Rule 702’s fit requirement because they used the 2011 flood data in their calculations and to form their opinions. The plaintiff claimed their opinions and testimony would not help the jury to determine the facts at issue—i.e., whether the Rojana Facility was located in a 100-year floodplain at the time of the 2011 flood. The plaintiff further argued that by including the data from 2011 flood itself in its calculations—the largest ever recorded in Thailand—the Experts’ opinion does not speak directly to the disputed issue.

The defendant responded that it was proper to include the 2011 data to support their conclusion and that using the data from the 2011 flood was evidence of the area’s propensity for flooding. One of the hydrology experts explained that “including that reliable data provides a more accurate statistical frequency analysis to determine the 100-year return period for that indicator, would improve the result, and because it was a matter of good hydrological practice.”

However, the other hydrology expert testified that their results would have been different if they had not included the 2011 data. When asked whether the 2011 data skewed the results toward larger flooding, he answered, “there would definitely be a change but how much, I’m not sure.” This expert stated further that “if they took out 2011, the recurrence intervals would … go up” for their estimates for large floods.

Held

This court previously rejected the defendant’s suggestion that a post-loss floodplain could be created using the 2011 flood. Notably, the court did not suggest that what was expected to occur may be established by using data from what actually occurred. The court concluded that because the opinion evidence utilized data from the flood at issue, it would not help the jury determine the disputed fact of whether the Rojana Facility was located in a 100-year floodplain at the time of the 2011 flood. Accordingly, the opinion and testimony of the hydrology experts were excluded.