Before we call the jury back in, all motions to strike or otherwise limit the claims handling experts' or "bad-faith" experts' testimony are denied. In order to allow this testimony to proceed efficiently, I am going to allow both parties to have standing objections to such testimony based upon their motions in limine that state as grounds for their objections lack of expert qualification, lack of proper legal foundation, that such testimony invades the province of the Court or jury, and that any probative value of the testimony is outweighed by its unfair prejudicial value. Nevertheless, if during the testimony, you have any other, and I repeat other, specific legal objections to a particular question to such a witness, you may make it at that time. Otherwise, I expect no interruptions. Counsel do we understand each other?

Yes, Your Honor.

Very well. Bailiff, please bring the jury back in. (The jury is seated). Mr. Monet, please call your next witness.

Yes, thank you, Your Honor. At this time the Plaintiffs' call Mr. Gollum to the stand.

Mr. Gollum, do you solemnly swear to tell the truth and nothing but the truth so help you God?

Yes, I do.

Please be seated.

Mr. Gollum, good afternoon.

Good afternoon.

Mr. Gollum, do you have an area or field of expertise as it relates to this case?

Yes, I do.

And what is that, sir?

I consider myself an expert in the area of insurance adjustment and insurance claims handling and what is good faith claims handling and what is bad-faith claims handling.

Have you reached expert opinions concerning those topics based upon the facts and circumstances surrounding this particular insurance claim?

Yes, I have.

Before we get to those actual opinions, Mr. Gollum, I'd like to talk about your qualifications and experience that qualify you as an expert in these areas. First, please share with the members of the jury your formal education.

Well, after high school, I received a two-year Associate degree. After working for a few years, I returned to college, and received my Bachelor of Arts. I majored in Theology. Now do you want me to talk about my educational experiences after college?

Yes, sir.

Okay, well, over the past 35 years I have attended over 100 courses and seminars on the proper adjustment of insurance claims and insurance claims handling. I have taken the appropriate tests and submit the appropriate applications to be a licensed adjuster in more than fifteen states, including this one. Not only have I attended these seminars in workshops, but I have also been asked to speak as part of the faculty at many of them. I believe I have lectured or otherwise participated as part of a faculty in more than fifty workshops and seminars on these topics of insurance claims handling and good faith or bad-faith claims handling practices. I am past President of our State's Public Adjuster Association and am still on its Board of Directors.

Mr. Gollum, before we go further, what is a Public Adjuster?

A Public Adjuster is an insurance adjuster who is licensed and dedicated to representing the interests of the insured in the adjustment of an insurance claim with its insurance company. The insurance company has its own adjusters representing it. A public adjuster represents the insured.

Thank you, Mr. Gollum. Now would you also share with the members of the jury your employment history and experiences in this field of insurance claims adjusting that brings you current--up to date?

Yes, sir. Well, as I have stated before, I am now a public adjuster, and have been a public adjuster representing insureds for the past 20 years. But I did not start out that way. After I received my degree in Theology, like most young men looking to payoff their student loans, I needed a job and, unfortunately, I could not find one in the area of Theology, at least not one that would allow me to pay off my student loans. A friend of mine was working for an insurance company as an adjuster and said they were looking for college students to employ as adjusters. I applied and got the job. But that was not a public adjuster. This was a licensed adjuster representing an insurance company. That began my long career in the area of insurance. I worked there for about three years handling mostly small homeowner property claims - anywhere from a limb of a tree damaging a roof, to a grease fire in the kitchen, to a toilet overflowing. I can't tell you how many houses I must have walked into those first three years, but there were many.

Then I got a job with BAG Adjusting Company. BAG Adjusting Company was what is called an independent adjusting company. They represented any insurance company that wants to hire them, but are not employed by any particular insurance company. Again, we were adjusters representing the interests of the insurance company that hired us in that particular claim. During those five years I adjusted claims for probably over 100 different insurance companies.

After spending about eight years representing insurance companies and their interests, I was still a relatively young man and I became a little disillusioned with the side that I was on. Therefore, I made the biggest decision of my life. I decided to renounce my independent adjuster's license and in fact obtain a public adjuster's license and I became a public adjuster, working on my own, the name of the company has been Gollum Public Adjusters, Inc., which has been my vocation for more than the past 25 years. During the past 25 years I have represented well over 1,000 insureds who had property insurance claims against their insurance company. These involved anything from water damage claims, windstorm claims, fire losses, earthquakes, collapse claims, and even theft claims or burglaries.

Now, Mr. Gollum, briefly, and I mean briefly, please share with the members of the Jury what it is about this background, formal and vocational, that qualifies you as an expert in opining about proper claims adjustment practices and improper claims adjustment practices.

Well, that's simple. I have been qualified in Court several times before. I had been engaged in property claims adjustment essentially every working day of my life, which has been almost all of them, for more than 35 years. I have seen proper property claims adjustment and I have seen improper property claims adjustments. I, myself, have engaged in proper claims adjustment practices, and, unfortunately, must admit on occasion have engaged in improper claims adjustments. I have seen practices and procedures promulgated and encouraged by those in the industry that are improper claims practices. I know what constitutes a proper claims practice and what constitutes an improper claims practice and I know what motivates adjusters to engage in such practices. I have been on both sides of the fence on claims, representing the first eight years of my career the insurance companies and the insurance industry, and representing the past 25 years or so insureds in the adjustment of claims. In those years, I have dealt with many adjusters representing insurance companies and have seen both the good and the bad. Thus, based upon my educational experiences, my training, and my vocational experiences, I believe I am qualified to opine in matters that I have reached in this particular case.

Your Honor at this time we would like to tender Mr. Gollum as an expert in the areas of property claims adjustment, good faith claims adjustment, and bad-faith claims handling.

All objections noted, counsel you may proceed.

Mr. Gollum, in this particular matter, have you, as an expert in claims handling reviewed documents particular to this insurance claim?

Yes, I have.

What have you reviewed?

Essentially, I have reviewed everything. I have reviewed the insurance company's entire claims file. I have reviewed their attorney's file. I have reviewed the insurance company's claims manuals as well as a voluminous amount of their internal documentation that relate to their practices and protocol and policies concerning the adjustment of property claims. I have reviewed their internal documentation concerning their compensation programs for their adjusters concerning their performance reviews and promotional guidelines for their adjusters and supervisors of adjusters and even upper management. I have reviewed their internal documentation concerning how they measure best claims practices and I have reviewed their guidelines, both formal and otherwise, in the handling of property insurance claims and reviewed motivations the corporate bureaucracy creates concerning those, all documented by their internal documentation. I have also reviewed all the deposition transcripts in this matter, most of them several times over. In particularly the deposition transcripts of the corporate representatives of the insurance company and their adjusters including many depositions transcripts of their past employees who use to adjust claims for that insurance company. Of course, I have also reviewed some of the legal papers in this matter including the insurance company's Answers to Interrogatories and things like that.

Mr. Gollum, approximately how many hours have you spent reviewing all these documents and records and boxes of papers relating to this particular insurance company and this particular claim to prepare you to render the expert opinions you have in this matter?

Well, before I was deposed in this matter by counsel for the insurance company, I had put in approximately 200 hours in reviewing the documentation and the deposition testimony and the like. Since then, I have probably put in an additional 100 hours. So I would say it is very close to 300 hours I have spent educating myself about this insurance company and this insurance claim.

Thank you Mr. Gollum. Now, if you would, please share briefly with the members of the Jury the expert opinions you have reached concerning this insurance company's claims practices as it relates to this matter and after you do that, I will then explore the reasons for such opinions with you afterwards.

Yes, sir. In my opinion, this insurance company in the handling of this particular insurance claim for Mr. and Mrs. Neighbors violated almost every good faith and proper insurance adjustment claims practice that exists. Not only did they fail to pay Mr. and Mrs. Neighbors what Mr. and Mrs. Neighbors were entitled to by the terms of the insurance contract for which they paid substantial premiums for many years, but they failed to even pay them the amount that the insurance company knew was undisputed. That is, the amount that they knew they owed all along, at the very least. Moreover, they and their adjustment team along with their legal counsel put up every obstacle that they could possibly put up to deny Mr. and Mrs. Neighbors any insurance proceeds whatsoever, including but not limited too wrongfully calling them insurance frauds.

Of course, the jury returned a verdict against the insurance company for the entire amount of the claim and of course rejected the insurance company's claims that Mr. and Mrs. Neighbors were insurance frauds.^[2]

But, consistent with this company's wrongful claims practices of placing every obstacle it could in the way of a legitimate insurance claim and honest insureds, all to increase their profits, the insurance company did not even pay the judgment at that time, but instead, forced an appeal upon Mr. and Mrs. Neighbors. Only a year and half later, only after that Appellate Court unanimously confirmed the jury's verdict did this insurance company pay Mr. and Mrs. Neighbors what they should have been paid five years before.

Now, the reasons why this insurance company did what they did is apparent from the review of their own documentation. There was pressure from up top in the corporate bureaucracy and hierarchy traveling all the way down to the field adjuster, in this case Mrs. Week, essentially putting economic pressure, employment pressure, and peer pressure upon these individuals to not only not give the benefit of the doubt to their insureds in terms of coverage and scope and pricing of the claim, but rather to put pressure upon them to deny coverage, even where coverage clearly existed. And this is exactly what happened here. The adjusters simply succumbed to the corporate practices and policies and protocol, and guidelines and procedures of this behemoth insurance company that literally weighed on top of them forcing them to make decisions that were wrongful decisions, that were decisions clearly intended to harm Mr. and Mrs. Neighbors. Decisions that constituted not good faith claims handling, but rather, bad-faith claims handling.

Thank you, Mr. Gollum, now you mentioned many things in that answer, the jury has already heard much about the underlying coverage claim and the history of that litigation resulting in the Appellate Court unanimously affirming the jury's decision. However, if you would, could you please focus upon the basis of your opinions as it relates to the corporate practices of this insurance company.

Certainly. First and foremost, it's the way this insurance company evaluates its personnel and rewards its personnel in terms of peer approval, peer pressure and compensation. The documentation clearly reveals that the officers and directors of the company receive a year-end bonus based upon the profitability of the company. Now in a normal company, there is nothing wrong with this. Even in an insurance company, if the officers and directors are in marketing, or sales, or underwriting, or in investments, there is nothing wrong with this. But, when your insurance claims division officers get higher compensation based upon the profitability of the company, there is everything wrong with this. The only way claims officers can increase the profitability of the company is to pay out less on claims. This, of course, creates a corporate rule and culture that trickles all the way down to the field adjusters to lower claims payments, even if such claims payments are indeed owed to the insured.

Then, when you get down to the field adjusters, not just their bonuses are affected, but their actual employment status may be affected based upon such claim payments. In fact this insurance company creates "score cards" by which they actually have a checklist and give weighted values for each variable to their particular adjuster resulting in a score. If that adjuster exceeds that score, they are in a good stead with the insurance company. If, however, they fall below a certain score, they may be put on probation or even terminated. Some of the variables on that score sheet that are given weight are average claim payments by dollar value, that is, if that particular adjuster has over a course of a year on claims that adjuster is handling paid out more than the average dollar figure for claims and property, that would be scored negatively for that adjuster. Interestingly, the way the score sheet is weighted, if that particular adjuster has a lower than average dollar figure per claim payment, there is no commensurate negative score. What I mean by this is the corporate bureaucracy is encouraging that adjuster, by pressure of future employment and compensation, to reduce his or her average claim payments.

Also, at the Home Office level, that is the corporate headquarters of this insurance company, their own internal records indicate that they actually keep data upon their competitors that include average claim payments and the like and they provide goals or objectives to their entire claims department from top down to not just meet those average claim payments of their competitors, but rather, to actually encourage their entire claims department to "better" those average claim payments. That is, their goal or objective is to pay less per claim than the average of all their competitors combined.

And what does that tell you about this particular insurance company?

Well, obviously, if one accepts the premise that your five or six competitors are not gratuitously overpaying claims, then one would have to accept the premise that the average claim payment by your five or six other competitors in that same state is probably a good guideline of what indeed should be your average claim payment. Therefore, if your goal or objective is to pay less than that amount, in my opinion, that would constitute an unfair claims practice that would constitute improper claims procedure, bad-faith claims handling, and be indicative of willful and malicious intent to deny one's insurance proceeds that they are otherwise entitled to receive. And, I think that is exactly what happened to Mr. and Mrs. Neighbors.

Well, Mr. Gollum, were you able to, based upon your review of the internal documents, the underlying claim and litigation, all the deposition transcripts, and all the internal documents of this insurance company, able to reach an opinion as to whether the behavior in this claim was a mere accident or actually willful, and deliberate, and intentional?

Objection, Your Honor.

Denied. Please continue.

Again, let me repeat my question. Mr. Gollum, based upon your expertise, your 35 years in the business, your formal education, your vocational experiences, having been on both sides of the fence working for both the insurance company as well as for insureds, and your thorough review over 300 hours spending reviewing this particular insurance company, their internal documents and the litigation and deposition transcripts in this case, have you been able to reach an opinion as to whether or not the insurance company's behavior toward Mr. and Mrs. Neighbors was mere accidental or was actually willful, wanton, deliberate, and malicious?^[3]

Yes, I have.

What is that opinion, Sir?

My opinion is that it was willful, wanton, malicious, and deliberate. And the reason why I say that is because of the things that I already testified to; that is, these pressures and corporate guidelines and scorecards and compensation system have existed in this company for many, many years and still exist. Even during this litigation they have existed, and even after this verdict came down they existed, in fact, they exist as we speak here today. At no time has this insurance company changed any of its practices, guidelines, procedures, compensation and incentive programs, performance reviews, and the like that I described and discussed with you today. Not even after the verdict came down in this case two years ago, not even after the Appellate Court affirmed the verdict. At no time has this company or any of its adjusters even apologized to Mr. and Mrs. Neighbors for their behavior in this matter. At no time has the company, to my knowledge, ever admitted that they were wrong in the adjustment of this insurance claim with Mr. and Mrs. Neighbors. They only paid it because the Jury and Courts forced them to pay it.

Given all of this, and given my knowledge of the industry and what makes adjusters do what they do as adjusters on both sides of the fence, and given that the adjusters involved in this case including Mrs. Week who was responsible for the actual adjustment of this claim, are still employed by the insurance company, and as far as I know has never been reprimanded or not received full bonus compensation to date for each year this matter has been existence, even this past year, I must conclude that this particular insurance company maintains that its practices are willful, deliberate, and intentional, and for reasons I have already stated, not in the interest of its own insureds and in fact, malicious toward their interests, including those of Mr. and Mrs. Neighbors.

Now Mr. Gollum, over the 35 years, have you had occasion to be brought into a piece of litigation like this to render expert opinions concerning an insurance company's claims practices?

Yes sir, I have.

About how many times have you been called upon to evaluate such claims practices?

I would say over the past 35 years about 75 times.

And, in all your years of adjustment on both sides of the fence, including those cases where you were brought in to evaluate the claims practices - you just described about 75 of them, to date, how would you score the conduct of this particular insurance company on this particular claim with Mr. and Mrs. Neighbors?

I would give them a score of "0" or an "F." Quite frankly, their claims conduct on this claim with Mr. and Mrs. Neighbors to date has been literally the worst that I have ever seen, bar none.

Thank you Mr. Gollum.