Daubert attack blows away lost profits calculation built on client’s ‘self-serving’ statements

Russell v. Allianz Life Insurance Co. of North America, 2015 U.S. Dist. LEXIS 1946 (Jan. 8, 2015)

Managing client expectations can pose a particular challenge to valuation experts. The appraiser runs the risk of alienating the client if he or she insists on testing assumptions related to damages. But not doing due diligence comes with the risk of being precluded from testifying at trial. This dilemma played out to disastrous effect for the expert in a recent Daubert case concerning a 70-year-old insurance agent who was terminated by the insurance carrier and sued for breach of contract.

The plaintiff retained an experienced expert whose lost profits calculation assumed, among other things, that the plaintiff would continue to live and work for another 10 years. This period was based on nothing more than the plaintiff’s assurances that he was in good health, loved working as an insurance agent, and thought of the work as “retirement work.”

By the expert's own account, he normally would use several objective work-life expectancy studies in his damages calculation. But he opted not do so in this instance, in part because the plaintiff’s age made using the tables unworkable.

This deviation from the objective standard provided a perfect opening for the defendant’s Daubert attack. The court lambasted the expert for building his valuation on the plaintiff’s “self-serving” statements. It also found other serious flaws in the damages analysis.

Find out more about the case here.