In Betzel v. State Farm Lloyds 2007 WL 603036, *5 (C.A.5 (C.A.5 ( Tex. ),2007) a
homeowner sued his insurer in state court, seeking coverage for mold damage. The US District Court for Northern Texas excluded the insured's late-designated expert witnesses and granted the insurer summary judgment. The insured appealed.
Betzel insured his home in Arlington, Texas with State Farm. In December 2001, Betzel notified State Farm that mold was growing on sheet rock near his leaking A/C registers. State Farm confirmed the A/C leak and found several additional places where mold was growing. Six months later, State Farm opened additional claims. The first two claims were for losses that occurred while an HO-B policy was in effect. The third and fourth claims were for losses occurring under an HO-162A endorsement to the policy.
By the time State Farm had paid more than $160,000 to Betzel for remediation, living expenses, and repair, Betzel's estimate for repairs had reached $212,260.92. On November 17, 2003, State Farm denied further coverage, explaining that “the payments issued are appropriate and sufficient for the necessary remediation and rebuild of Mr. Betzel's home with regard to covered losses.” Betzel then sued State Farm in District Court for breach of the insurance contract, breach of the duty of good faith and fair dealing, and violation of articles 21.21 and 21.55 of the Texas Insurance Code.
On September 28, 2004, the federal district court entered a scheduling order which provided: “Each party shall designate experts by filing a written designation … of each expert who may be called to testify and make the disclosures required …. at least 120 days before the pretrial conference date …. Strict compliance with the terms of this Order … is required.” On May 23, 2005, nearly three months after that deadline, Betzel filed a motion, opposed by State Farm, styled “Plaintiff's Motion To Allow Opinion Testimony From Certain Witnesses.“ Betzel's motion sought to elicit expert testimony from Matlock and Frantz. This motion came three weeks after State Farm filed its motion for summary judgment; one week after the deadline to file Daubert motions; three days after State Farm had deposed Matlock (as a fact witness); and immediately after State Farm had deposed Frantz (also as a fact witness).
The district court denied the plaintiff's motion and five days later granted State Farm's motion for summary judgment. The district court found no triable issue of fact since that court had already ruled that a plaintiff may not elicit expert testimony as a result of his failure to comply with the court's scheduling order.
In overturning that ruling, the Superior Court concluded that the district court had abused its discretion in excluding Betzel's late-designated witnesses. The review considered four factors: “(1) the explanation for the failure to identify the witness; (2) the importance of the testimony; (3) potential prejudice in allowing the testimony; and (4) the availability of a continuance to cure such prejudice.
The first factor plainly favored State Farm since no explanation was given.
The second factor was the importance of the excluded testimony. Without his experts, Betzel could not prove damages. The experts were essential.
The third factor was the prejudice to State Farm. Betzel argued that State Farm was not surprised by the two experts because (1) the adjusters had met them during the remediation and (2) Betzel identified them in discovery as persons who may be called to testify. The substantive bulk of State Farm's motion relies on the legal contention that mold is not covered under the HO-B policy. Only four sentences of State Farm's 38 page motion for summary judgment were dedicated to the argument that Betzel had no evidence on his breach of contract claim.
What prejudice remains could have been cured with a continuance; the fourth factor. A continuance would have given State Farm an opportunity to depose Matlock and Frantz as expert witnesses, to file Daubert challenges, and to designate experts for rebuttal.
Because State Farm would have incurred no unwarranted additional expenses in filing a second motion for summary judgment and because the imposed sanction was dispositive of the case, the judgment of the district court was reversed and the case was remanded for further proceedings.