Am. Cas. Co. of Reading v. Reynolds Concrete Pumping, LLC

AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA,as subrogee of Pal-Con, LLC, doing business as Pal-Con, Ltd., et al., Plaintiffs, v. REYNOLDS CONCRETE PUMPING, LLC, Defendant

Civil Action No. 5: 19-488-DCR

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY CENTRAL DIVISION (at Lexington)

July 13, 2021

MEMORANDUM OPINION AND ORDER*** *** *** ***

This matter involves an industrial accident in which Reynolds Concrete Pumping, LLC ("Reynolds") damaged an air-cooled heat exchanger that Pal-Con, LLC ("Pal-Con") paid to replace. Pal-Con's insurer, American Casualty Company of Reading Pennsylvania ("ACC"), reimbursed Pal-Con's expenses, in part. Now, ACC and Pal-Con ("the plaintiffs") seek to recover their costs from Reynolds. The matter is pending for consideration of the plaintiffs' motion to exclude the opinions of Reynolds' expert witness, Jack Young. [Record No. 51] Likewise, Reynolds has filed a motion to exclude the opinions of the plaintiffs' expert witness, Wayne Taylor. [Record No. 52] Reynolds also has filed a motion for partial summary judgment. [Record No. 53]

For the reasons that follow, Reynolds' motions to exclude the opinions of Wayne Taylor and its motion for partial summary judgment will be granted. Further, the plaintiffs' motion to exclude Jack Young's opinions will be denied.

I. Background

Pal-Con is in the business of manufacturing and servicing heat exchangers for commercial customers. Sometime prior to June 8, 2018, Texas Eastern Transmission, LP ("Enbridge") hired Pal-Con to build a compressor station at its natural gas plant in Owingsville, Kentucky. On June 15, 2018, Pal-Con sub-contracted with Reynolds Concrete to provide concrete pumping services at the work site.

On June 18, 2018, a Reynolds employee arrived at the natural gas plant with a boom concrete pump, which the employee positioned directly over one of Enbridge's existing compressor stations. The compressor station contained a horizontal air-cooled heat exchanger, alternatively referred to as a closed-loop cooler or "fin-fan," which forces air over a set of coils to cool machinery. As the Reynolds employee began to prime the pump with concrete, a portion of the boom broke, and concrete "rained down onto the fin-fan, the fin-fan's component parts, and the Pal-Con employees ('the Incident')." [Record No. 19, ¶ 13] It appears the damaged equipment was not part of Pal-Con's ongoing construction project, as the parties agree that the damaged unit had been in operation since the late 1960s.

Pal-Con employee Jeff Piele directed the Reynolds driver to swing the boom so that the concrete would stop pouring onto the fin-fan. Once the boom concrete pump stopped pumping concrete, Pal-Con employees immediately began to remove the concrete from the fin-fan and its component parts. However, the weight of the concrete and the velocity of the spill caused the fin-fan coils to bow and the fin-fan fins to crush. Id. ¶ 16. During clean up, Piele directed the Reynolds employee to a location where he could clean off the surface of the boom concrete pump. According to the plaintiff, the Reynolds employee advised Piele that Reynolds knewthe pipe that comprised the boom was thin and needed to be replaced. The Reynolds employee then presented Piele with paperwork, which Piele did not review and refused to sign. Id. ¶ 20.

For reasons not stated by the plaintiffs, Pal-Con took on the responsibility of repairing or replacing Enbridge's damaged equipment. After determining that the damage was beyond repair, Pal-Con contracted with Smithco Engineering to manufacture a new closed loop cooler. While the final cost of the new cooler was $198,085.00, Pal-Con contends it sustained a total loss of $330,370.40 in parts and labor to clean the concrete spill and remove and replace the damaged equipment. Pal-Con submitted a claim to ACC and, pursuant to the terms of its insurance policy, ACC reimbursed Pal-Con $193,841.56.

ACC filed this action as Pal-Con's subrogee on December 17, 2019, alleging that Reynolds breached the parties' oral contract to provide concrete pumping services and that it was negligent based on its conduct during the June 18, 2018 incident. ACC and Pal-Con subsequently amended the Complaint, asserting that ACC is subrogated to the rights of Pal-Con to the extent of $193,841.56, but seeking total recovery of $330,370.40.¹ The plaintiffs and defendant now seek to exclude the testimony of the other's expert witness and Reynolds has moved for partial summary judgment. The primary dispute between the parties is the fair market value of the damaged air-cooled heat exchanger, which was approximately fifty years old at the time of the loss.

II. The Motions to Exclude Expert Testimony

A. The Standard of Review

Testimony of expert witnesses is governed by Rule 702 of the Federal Rules of Evidence. It allows expert witnesses to provide opinion testimony 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." Fed. R. Evid. 702. These factors apply even if the expert's opinion is "technical" rather than scientific in nature. See Kuhmo Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 141 (1999).

The Sixth Circuit has determined, based on Rule 702, that an expert's opinion is admissible if it satisfies three requirements. "First, the witness must be qualified by knowledge, skill, experience, training, or education. Second, the testimony must be relevant, meaning that it will assist the trier of fact to understand the evidence or to determine a fact in issue. Third, the testimony must be reliable." In re Scrap Metal Antitrust Litigation, 527 F.3d 517, 529 (6th Cir. 2006) (internal quotation marks and citations omitted). And while the Court is not required to conduct a Daubert hearing to determine the admissibility of expert testimony, it must ensure that the disputed testimony is relevant and reliable. Cutter v. Ethicon, Inc.., 2020 WL 2060342, at *4 (E.D. Ky. Apr. 29, 2020) (citing Vaughn v. Konecranes, Inc., 2015 WL 163431, at *2 (E.D. Ky. Apr. 13, 2015)); Clay v. Ford Motor Co., 215 F.3d 663, 667 (6th Cir. 2000).

A. Reynolds' Motion to Exclude the Opinions and Testimony of Wayne Taylor

Wayne Taylor is Vice President and Senior Consultant of Industrial Loss Consultants, Inc. ("ILC"). Taylor explained that ILC serves the commercial property and casualty insurance industry, providing damage assessments following "peril events," which insurance adjusters use to settle claims with their clients. [Record No. 52-2, pp. 31, 37] CNA Insurance retained ILC on July 3, 2018, to investigate damage to the subject property.² The scope of Taylor's assignment was to inspect the damaged property; determine whether it could be repaired to its pre-loss condition; validate the Pal-Con's costs to restore the damaged unit; calculate the actual cash value of the restoration costs; and calculate the fair market value of the damaged heat exchanger.

Taylor worked in sales of closed-loop air coolers prior to being hired at ILC in 2000. [Record No. 52-2, pp. 33-34] At the time he issued his report, he held no professional licenses or certifications, but asserted that he learned to value machinery through on-the-job training at ILC. [Record No. 52-2, pp. 31, 39] During his time at ILC, he worked on approximately 24 cases involving damage to closed-loop coolers. He had not attended any continuing education courses focused on insurance adjusting, appraisal, or valuation techniques and methodology. Id. p. 40. Taylor conceded that he did not apply a particular standard of care to his methodology in this case. Instead, he applied ILC's protocol and "procedures on how [they] perform [their] work." Id. p. 53. He stated these procedures are not documented anywhere.Further, Taylor did not refer to any outside sources to assist him in determining the value of the damaged air cooler.

Taylor opined that, due to the extent of damage to the coils, repair of the closed-loop cooler to its pre-loss condition was not possible. This was because the fins were bent and deformed to the point that a process commonly known as "combing the fins" would not allow a comb to be inserted. Another alternative would have been to have a replacement for the top level of tubes and fins fabricated. However, this would have far exceeded the time permitted for Pal-Con's project.³

Taylor proceeded with a replacement cost analysis. He reported that ILC was unable to find a like kind and quality replacement for the damaged unit on the market. [Record No. 52-2, p. 154] ILC's market search was performed by an online internet search of used equipment dealers who commonly have closed-loop coolers for sale. When ILC was unable to find a replacement product on the market, it sought to obtain a construction bid from a vendor. ILC contacted Dan Pike with Flow Solutions in Muncie, Indiana. However, Flow Solutions declined to bid on the project due to the time constraints regarding delivery.

Taylor then set out to evaluate Pal-Con's proposed bid from Smithco to replace the cooler at a cost of $330,370.40.⁴ Smithco had previously provided a similar heat exchanger toPal-Con and was willing to use the design from the previous unit, therefore eliminating a design charge for the replacement unit. The Smithco estimate included $198,085.00 for a new unit. The remaining costs were for labor and other equipment, materials, and "handling." Taylor concluded that these costs were "in line with the scope of work which required Pal-Con to disconnect the damaged Closed-Loop Cooler from the operating system and power supply, extract the Closed-Loop Cooler and components, and finally ship then install the new Closed-Loop Cooler."...