Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-02742/USCOURTS-casd-3_12-cv-02742-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

MILLENNIUM LABORATORIES,

INC.,

Plaintiff,

CASE NO. 12-CV-2742 H (KSC)

ORDER DENYING

PLAINTIFF’S MOTION TO

EXCLUDE TESTIMONY TY R.

SAGALOW

[Doc. No. 74]

vs.

DARWIN SELECT INSURANCE

COMPANY,

Defendant.

On March 27, 2014,PlaintiffMillenniumLaboratories, Inc. (“MillenniumLabs”)

filed under seal a motion to exclude the expert opinion testimony of Ty R. Sagalow. 

(Doc. No. 68, filed under seal as Doc. No. 74.) On April 18, 2014, Defendant Darwin

Select Insurance Company (“Darwin”) filed a response in opposition to the motion to

exclude. (Doc. No. 91, sealed.) On April 22, 2014, Millennium Labs filed its reply. 

(Doc. No. 98.) The Court held a hearing on Millennium Labs’s motion to exclude on

April 25, 2014. Marc D. Halpern, Vincent H. Herron, and Anthony J. Matera appeared

for Millennium Labs. Ronald P. Schiller and Robert A. Wiygul appeared for Darwin. 

The Court denies Millennium Labs’s motion to exclude expert testimony without

prejudice.

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Background

This action involves an insurance coverage dispute. Plaintiff Millennium Labs

is a diagnostics laboratory that provides specialty testing services at the request of

health care providers. (Doc. No. 73-1, Declaration ofRobert Wiygul (“Wiygul Decl.”),

Ex. 1.) Specifically, Millennium Labs offers urine drug testing to identify the presence

or absence of medications, illegal drugs, and other substances present in a patient’s

system at the time of the test. (Id.; see also Wiygul Decl., Ex. 2.) Millennium Labs

obtained from Darwin a Miscellaneous Medical Facilities, Professional Employment

Practices and General Liability Insurance Policy No. 0305-0307 (“the policy”), issued

for the policy period of December 1, 2011 to December 1, 2012. (Doc. No. 73-2,

Wiygul Decl., Ex. 6.) The policy covers “claims alleging Personal or Advertising

Injury caused by an offense that takes place during the policy period” and defines

“Personal or Advertising injury” in pertinent part as “injury, other than bodily injury,

arising out of . . . [o]ral or written publication, in any manner, that slanders or libels a

person or organization or disparages a person’s or organization’s goods, product or

services.” (Id. at 17, §I.B.2; id. at III.CC.4.) The policy’s coverage includes “the right

and duty to defend any such Claim brought against” Millennium Labs. (Id. at 17,

§I.B.2.) 

The action concerns two underlying lawsuits that Millennium alleges trigger

Darwin’s duty to defend,Ameritox Ltd. v.MillenniumLaboratories, Inc. (“Ameritox”),

Case No. 11-cv-775 (M.D. Fla.), and Millennium Laboratories, Inc. v. Calloway

Laboratories, Inc. (“Calloway”), Case No. 10-3496 (Mass. Super. Ct.). On May 13,

2014, the Court granted Millennium Labs’s motion for summary judgment, and denied

Darwin’s cross-motion for summary judgment, ruling that the underlying actions

triggered Darwin’s duty to defend under the “potential for coverage” standard. (Doc.

No 112.) The Court also denied Darwin’s motion for summary judgment on

Millennium Labs’s allegation of bad faith. (Id.) Millennium now moves the Court to

exclude the testimony of Darwin’s expert Ty R. Sagalow under Federal Rules of

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Evidence 104, 402, 403, 702, and 703. (Doc. No. 74 at 2, sealed.) Specifically,

Millennium Labs moves to exclude Mr. Sagalow’s testimony on the grounds that his

opinions make impermissible findings of fact and conclusions of law, usurp the role of

the jury, depend on unreliable or inadmissible testimony, and are confusing and

prejudicial. (Doc. No. 74-1 at 11-18.) Darwin’s opposition argues that Mr. Sagalow’s

opinions are relevant and permissible, and that Millennium Labs’s objections go to the

weight of his testimony rather than its admissibility. (Doc. No. 91 at 10-17.)

Discussion

I. Legal Standards for Motions to Exclude Expert Testimony

Federal Rule of Evidence 702 requires that a testifying expert be “qualified as

an expert by knowledge, skill, experience, training, or education.” Fed. R. Evid. 702. 

Rule 702 “contemplates a broad conception of expert qualifications.” Thomas v.

Newton Int’l Enters., 42 F.3d 1266, 1269 (9th Cir. 1994). Moreover, “the advisory

committee notes emphasize that Rule 702 is broadly phrased and intended to embrace

more than a narrow definition of qualified expert.” Id. Rule 702 allows the Court to

admit as evidence the opinion of a qualified expert if his “scientific, technical, or other

specialized knowledge will help the trier of fact to understand the evidence or to

determine a fact in issue.” Fed. R. Evid. 702. The Ninth Circuit has interpreted Rule

702 to require that “[e]xpert testimony must be both relevant and reliable.” United

States v. Vallejo, 237 F.3d 1008, 1019 (9th Cir. 2001). The “test of reliability is

‘flexible,’ and Daubert’s list of specific factors neither necessarily nor exclusively

applies to all experts or in every case.” Kumho Tire Co. v. Carmichael, 526 U.S. 137,

141 (1999) (quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 595 (1993)). 

The district court is accorded broad latitude in determining the reliability of expert

testimony. Id. at 142. 

Rule 703 of the Federal Rules of Evidence permits experts to render opinions

even if based on inadmissible evidence so long as the inadmissible evidence is of the

type reasonably relied on by experts in that field. Daubert, 509 U.S. at 595. Such

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inadmissible facts or data may be admissible asthe basis for an expert’s opinion if their

“probative value in assisting the jury to evaluate the expert’s opinion substantially

outweighs their prejudicial effect.” Fed. R. Evid. 703. 

Courts are charged with a “gatekeeping function” to ensure expert testimony is

both reliable and relevant. Daubert, 509 U.S. at 597. The district court has broad

discretion in assessing the relevance and reliability of expert testimony. United States

v. Finley, 301 F.3d 1000, 1007 (9th Cir. 2002). The inquiry into admissibility of expert

opinion is a “flexible one,” where “[s]haky but admissible evidence is to be attacked

by cross examination, contrary evidence, and attention to the burden of proof, not

exclusion.” Primiano v. Cook, 598 F.3d 558, 564 (9th Cir. 2010). “Under Daubert,

the district judge is ‘a gatekeeper, not a fact finder.’ When an expert meets the

threshold established by Rule 702 as explained in Daubert, the expert may testify and

the jury decides how much weight to give that testimony.” Id. (quoting United States

v. Sandoval-Mendoza, 472 F.3d 645, 654 (9th Cir. 2006)). 

II. Analysis

Darwin retained Mr. Sagalow to provide expert testimony concerning the

insurance industry’s custom and practice as it relates to the policy provisions at issue

in this action. (See Doc. No. 91 at 8 (sealed).) Millennium Labs moves to exclude Mr.

Sagalow’s testimony on certain provisions of the policy, including their typicality in

the insurance industry and the possibility that they may be interpreted in a way to deny

Millennium Labs coverage in the underlying lawsuits. (Doc. No. 74-1 at 16-19.) 

Darwin opposes, arguing that Mr. Sagalow’s opinions on these matters are relevant and

permissible. (Doc. No. 91.)

Darwin’s expert, TyR. Sagalow, is qualified as an expert under Rule 702 by way

of his experience and education. Mr. Sagalow has over 30 years’ experience as an

insurance executive, and has served as both chief underwriting officer and general

counsel at one of the world’s largest insurance companies, AIG. (See Doc. No. 74-4,

Report of Ty R. Sagalow, at 3 (sealed).) His diverse professional experience at a

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variety of companies in the insurance industry demonstrates a breadth of experience

drafting and interpreting policies, making underwriting decisions, and claims handling. 

(See id.) Mr. Sagalow graduated with a bachelor’s degree from Long Island

University, a J.D. from the Georgetown University Law Center, and an L.L.M. from

New York University Law School. (Id.) In addition, he is an author of several works

in the field of liability insurance policies. (See id.) Mr. Sagalow produced a twentythree page expert report based on his review of the policy and Darwin’s underwriting

file, discussing industry custom and usage as well as the history and purpose of key

provisions of the policy at issue. (Doc. No. 74-4, Ex. C (sealed); see also Doc. No. 91

at 12-13 (sealed).) 

The Court concludes that Sagalow’s experience, training, and education

provided a sufficient foundation of reliability for his testimony. His specialized

knowledge in the insurance field may be helpful to the trier of fact in understanding the

evidence or determining facts in issue. See Fed. R. Evid. 702. After due

consideration, the Court denies Millennium Labs’s motion to exclude the expert

testimony of Mr. Sagalow without prejudice.

Conclusion

Darwin has shown that the expert testimony of Mr. Sagalow is relevant and

reliable. Vallejo, 237 F.3d at 1019. Accordingly, the Court denies Millennium Labs’s

motion to exclude his testimony at trial. 

IT IS SO ORDERED. 

DATED: May 14, 2014

______________________________

MARILYN L. HUFF, District Judge

UNITED STATES DISTRICT COURT

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