Eide Bailly LLP v. Humphreys

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UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Eide Bailly LLP,
Plaintiff and Counter-Defendant,
v.
Michael Humphreys, Acting
Insurance Commissioner of the
Commonwealth of Pennsylvania, in
his capacity as the Statutory
Rehabilitator of Senior Health
Insurance Company of Pennsylvania,
Defendant and Counter-Claimant.
ORDER ADOPTING REPORT
AND RECOMMENDATION
Civil File No. 22-03132 (MJD/SGE)
Lawrence M. Shapiro, Mark L. Johnson, Aaron P. Knoll, Emily M. McAdam,
Michelle Erickson Morrow, Greene Espel PLLP, Counsel for Plaintiff and
Counter-Defendant, Eide Bailly, LLP.
Heather L. Marx, Dexter R. Hamilton, Matthew J. Siegel, Michael Broadbent,
Cozen O’Connor and Leslie Miller Greenspan, Tucker Law Group, LLC,
Counsel for Defendant and Counter-Claimant, Michael Humphreys, Acting
Insurance Commissioner of the Commonwealth of Pennsylvania.
I. 	INTRODUCTION
The above-entitled matter comes before the Court upon the Report and
Recommendation (“R&R”) of United States Magistrate Judge Shannon G. Elkins
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dated January 31, 2026. Magistrate Judge Elkins issued the R&R on Eide Bailly’s
motion for summary judgment, Eide Bailly’s three motions to exclude expert
testimony (“Daubert motions”), and the Rehabilitator’s three Daubert motions.
The R&R recommends that the Court deny all the Daubert motions and
that the Court grant Eide Bailly’s motion for summary judgment. The parties
have filed objections to the recommendations. Pursuant to statute, the Court has
conducted a de novo review upon the record. 28 U.S.C. § 636(b)(1); D. Minn. LR
72.2(b).
Based upon that review, the Court overrules the parties’ objections to the
recommendations on the Daubert motions and the Rehabilitator’s objections to
the recommendation on the summary judgment motion; sustains Eide Bailly’s
objection to the recommendation on the summary judgment motion, and adopts
the Report and Recommendation (“R&R”) with modification.
II. 	FACTS
Before the Court begins its discussion, it must address Eide Bailly’s
Objection to the R&R’s Reliance on Unsupported Facts. (Doc. 176 at 2.) Eide
Bailly (“EB”) states that Senior Health Insurance Company of Pennsylvania’s
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(“SHIP’s”) briefs in response to EB’s motions contained “numerous factual
assertions without citations to affidavits or exhibits.” (Id. (citing Docs. 140 at 3-5;
141 at 4; 142 at 3-4; 143 at 3-4).) EB argues that to “the extent the [R&R] relies on
these unsupported factual recitations, it errs” and the Court should not consider
SHIP’s statements of facts that are not supported by citations to the record. (Id.)1
Of the documents EB cites, only docket number 140 is cited in the R&R and
the pages cited by EB are not the pages cited in the R&R. As for any broader
objection EB makes about “numerous” issues with SHIP’s briefs, the Court
understands how to weigh arguments and evidence. This objection is overruled.
Accordingly, the Court adopts the Facts presented in the R&R as its own.
See Eide Bailly, LLP v. Humphreys, No. 22-cv-3132 (MJD/SGE), 2026 WL 597791,
at *1-3 for a recitation of the facts.
1 Both the Court and the parties variously use “SHIP,” “PID” (for Pennsylvania
Insurance Department), and “the Rehabilitator” to refer to plaintiff in this action,
even though the Rehabilitator is the named plaintiff. All of these entities acted
(or arguably could have acted) at various times in this litigation, so use of all
names is appropriate.
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III. 	DISCUSSION
The Court first addresses objections to recommendations on the parties’
Daubert motions. The Court then turns to objections to the recommendation that
the Court grant Eide Bailley’s motion for summary judgment.
A. 	Eide Bailly’s Daubert Objections
EB argues that SHIP’s “purported” damages expert Lisa Kuklinski and
“purported” actuarial expert Carl Harris should be excluded from testifying at
trial. (Doc. 176 at 5-13.) EB also argues that the Court should limit the testimony
of SHIP’s “purported regulatory expert James Wren.” (Id. at 13-14.)
1. 	Federal Rule of Evidence 702 and Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993)
Rule 702 of the Federal Rules of Evidence provides:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or
otherwise 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.
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The role of trial courts is to serve as “gatekeepers to ‘ensure that the
proffered expert testimony is both relevant and reliable.’” Wagner v. Hesston
Corp., 450 F.3d 756, 758 (8th Cir. 2006) (quoting Anderson v. Raymond Corp., 340
F.3d 520, 523 (8th Cir. 2003)). In Daubert v. Merrell Dow Pharmaceuticals, Inc.,
the Supreme Court provided some general observations for the lower courts to
consider in making determinations as to whether an expert’s testimony is
relevant and reliable, such as whether it has been tested, subjected to peer review
and publication, the known or potential rate of error, and whether it is generally
accepted. 509 U.S. 579, 592-95 (1993).
In Kumho Tire Company, Ltd. v. Carmichael, the Court extended the
Daubert reasoning to non-scientist experts stating:
We conclude that Daubert’s general principles apply to the expert
matters described in Rule 702. The Rule, in respect to all such
matters, establishes a standard of evidentiary reliability. It requires
a valid . . . connection to the pertinent inquiry as a precondition to
admissibility. And where such testimony’s factual basis, data,
principles, methods, or their application are called sufficiently into
question, . . . the trial judge must determine whether the testimony
has a reliable basis in the knowledge and experience of the relevant
discipline.
526 U.S. 137, 149 (1999) (internal quotations omitted and cleaned up).
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Challenges to the factual basis of expert testimony go “to the credibility of
the testimony, not the admissibility, and it is up to the opposing party to examine
the factual basis for the opinion on cross-examination. Only if the expert’s
opinion is so fundamentally unsupported that it can offer no assistance to the
jury must such testimony be excluded.” Bonner v. ISP Tech, Inc., 259 F.3d 924,
929-30 (8th Cir. 2001) (quotation omitted).
2. 	Eide Bailly’s Motion to Exclude the Proffered Expert Testimony
of Lisa Kuklinski
The Rehabilitator retained Lisa Kuklinski, a practicing actuary, Fellow of
the Society of Actuaries, member of the American Academy of Actuaries, and
Managing Director at FTI in the Life and health actuarial team, to provide
opinions regarding SHIP’s damages. (Ex. 52 ¶¶ 1, 5-7.)2
EB objects to the R&R’s recommendation to deny its motion to exclude Ms.
Kuklinski’s expert testimony, arguing that she has no basis in her experience,
training, or identified methodology to opine on how quickly an insurer like SHIP
might have entered and progressed through rehabilitation as a result of a
2 “Ex.” refers to exhibits to the Declaration of Mark L. Johnson (Doc. 112).
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different audit outcome. (Doc. 176 at 5.) EB also states that Ms. Kuklinski’s
opinions must be excluded as speculative, unsupported, and based on an
unreliable method because they are based solely on her own ipse dixit, which is
“uninformed by any experience, training, or study of other comparable
situations” and are also based on the opinions of SHIP expert Carl Harris. (Id. at
6.) Finally, EB argues that Ms. Kuklinski should not be permitted to testify to
matters that are “mere arithmetic, within the ken of the ordinary juror.” (Id. at
7.)
The Court disagrees. First, the R&R is correct that Ms. Kuklinski’s
credentials and over 30 years’ actuarial experience focusing on insurance
companies and working on other “substantial rehabilitation events” qualifies her
to offer her expert opinion as to the extent of damages. (R&R at 13.) In addition,
the idea that the matters upon which Ms. Kuklinski will testify are “simple
arithmetic” is without merit and, as the R&R states, “belied by a cursory review
of the report itself.” (Id.) The rest of the objections go to the weight, and not the
admissibility, of the opinion. Accordingly, the objection is overruled.
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3. 	Eide Bailly’s Motion to Exclude the Proffered Expert
Testimony of Carl Harris
The Rehabilitator retained Carl Harris, a consulting actuary and principal
of Oliver Wyman Actuarial Consulting, Inc., who has worked in the accounting
industry since 1979; is a Fellow of the Society of Actuaries; member of the
American Academy of Actuaries; and a Fellow of the Conference of Consulting
Actuaries, among other professional affiliations, to provide specific opinions
regarding SHIP’s damages. (Ex. 51 App’x A.)
EB objects to the R&R’s recommendation to deny its motion to exclude the
expert testimony of Mr. Harris, arguing that his independent reserve analysis is
irrelevant and could be prejudicial because SHIP’s negligence claim is based on
how EB responded to Lewis & Ellis’s concerns with Milliman’s work, not based
on a claim that “all of SHIP’s actuarial assumptions and methods were
indefensible and that SHIP’s reserves were understated by more than a billion
dollars, and that Eide Bailly’s audit missed all of this.” (Doc. 176 at 10, 11
(arguing that “it would be highly prejudicial to present the jury with an opinion
that dozens of SHIP’s actuarial assumptions were fatally flawed (when that was
not L&E’s view and is not a claim before the Court)” (emphasis in original).)
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However, as the R&R found, Mr. Harris’s “reserves estimates and independent
evaluation address not only concerns raised by L&E, but also ‘those that should
otherwise have been considered by Eide Bailly.’” (R&R at 15 (quoting Doc. 133
(Br. Opp. to Mot. Exclude Harris Expert Test.) at 8) (cleaned up).)
Not only is this testimony relevant regarding the accuracy and
reasonability of Milliman’s calculations, but also regarding whether EB’s
response to L&E’s concerns with Milliman’s work was reasonable. Therefore,
Mr. Harris’s testimony will likely aid the jury in deciding this issue.
Mr. Harris determined that an average 60.8% rate increase was actuarially
justified based on his actuarial evaluation of SHIP’s historical and projected
premium and claims experience that would have been used as of December 31,
2016. (Ex. 51 ¶ 2.3.) He further opined that 100% of policy holders would accept
and pay these new rates. (Id. ¶ 4.2.1.4.) EB argues that not only did Mr. Harris
adopt Ms. Kuklinski’s timing assumptions, he added his own opinion that the
60.8% rate increase could have been actuarially justified by the end of 2016 based
on his independent reserving methodologies and deficiency calculation, which
was belied by “undisputed reality” and the real-life results of SHIP’s
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rehabilitation. Very few policy holders paid any rate increase, even fewer saw
rate increases approaching or exceeding 60.8%, and it took years, not months, for
SHIP’s rehabilitation to generate new revenues or policy modifications. (Doc.
176 at 12.)
The Court overrules these objections. Mr. Harris set forth the
methodology that he used to reach his opinions. Disagreements over the factual
basis underlying Mr. Harris’s opinion go to the weight, not the admissibility, of
this evidence. Mr. Harris’s opinions could help a jury determine the issues of
liability and damages. After a de novo review, the Court cannot say that the
opinion is “so fundamentally unsupported that it can offer no assistance to the
jury.” Bonner, 259 F.3d at 929-30; Evans ex rel. Evans v. Krook, 680 F. Supp. 3d
1080, 1104 (D. Minn. 2023). This objection is overruled.
4. 	Eide Bailly’s Motion to Limit the Proffered Expert Testimony of
Regulatory Expert James Wrynn
The Rehabilitator retained James Wrynn, a licensed attorney and a Senior
managing director in the Global Insurance Services practice of FTI Consulting,
Inc. (“FTI”) with expertise in insurance matters, who also has extensive
experience litigating insurance issues since 1982. (Ex. 57 ¶¶ 2-3.) Mr. Wrynn has
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served in several roles in New York State entities, including as Executive
Director of the New York State Insurance Fund in April 2009, superintendent of
the New York State Department of Insurance, and First Deputy Superintendent
of the New York State Department of Financial Services. (Id. ¶¶ 4-7, App’x 1.)
He has also worked in the private sector on a variety of insurance and
reinsurance matters. (Id. ¶¶ 8-14.)
Mr. Wrynn opines that audit opinions are of critical importance [to
regulators] in assessing the financial condition of the insurer. He
further opines that if Eide Bailly had issued a modified opinion or
not signed any audit opinion in June 2016, PID could have taken
“prompt regulatory action.” Mr. Wrynn also opines that PID’s
actions after June 2016 would have significantly changed had there
been a different audit outcome. In his deposition testimony, Mr.
Wrynn stated that it was “unlikely” that SHIP would have been
placed into rehabilitation within six months. He also testified that a
different audit outcome might have caused PID to examine SHIP
sooner.
(R&R at 10-11 (citations omitted) (brackets in original).)
Although EB states that Mr. Wrynn is “generally qualified to testify as an
expert on insurance regulation,” that his opinions will likely be helpful to the
jury; and that he should be allowed to testify regarding how unlikely it was that
SHIP would have entered rehabilitation within six months and that the claim
that SHIP would have generated new premium dollars within 18 months of a
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different audit was “hypothetical without facts and circumstances to base it on,”
but that he should not be allowed to testify beyond that. (Doc. 176 at 13 (quoting
Doc. 142 (EB Reply Br. citing Wrynn Dep.) at 14).) EB asserts that Mr. Wrynn’s
other opinions are “too vague, ambiguous, and potentially misleading to be
allowed at trial.” (Id. (citations omitted).) Thus, EB objects to the
recommendation to deny its motion.
The Court disagrees. To the extent EB rests its objections on the fact the
Mr. Wrynn has never seen a modified audit report or placed a long-term
insurance company into rehabilitation, the Court agrees with the R&R that Mr.
Wrynn’s other experiences, especially those serving on a state body that ensured
the solvency of insurance carriers, his long-time experience with insurance
regulation, including the importance of statutory audits, render him qualified to
testify to the opinions included in his report. (R&R at 12.) As Magistrate Judge
Elkins said, EB’s view “narrows what courts accept as relevant experience
beyond the vanishing point.” (Id. at 11.) EB’s objections go to weight not
admissibility. This objection is overruled.
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B. 	The Parties’ Objections to Recommendations on the Motion for
Summary Judgment
Summary judgment is appropriate if, viewing all facts in the light most
favorable to the non-moving party, there is no genuine dispute as to any material
fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The party seeking
summary judgment bears the burden of showing that there is no disputed issue
of material fact. Celotex, 477 U.S. at 323. “A dispute is genuine if the evidence is
such that it could cause a reasonable jury to return a verdict for either party; a
fact is material if its resolution affects the outcome of the case.” Amini v. City of
Minneapolis, 643 F.3d 1068, 1074 (8th Cir. 2011) (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 252 (1986)).
In its remaining counterclaim, SHIP asserts professional
negligence/accounting malpractice against EB. (Doc. 30 at 44.) The R&R
recommends granting EB’s motion for summary judgment on this claim. For
purposes of the motion, EB conceded the elements of duty and breach. (R&R at
25.) The R&R recommends finding that the Rehabilitator had not established
that a genuine issue of material fact existed on the issue of but-for causation
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because the evidence that he relies on to establish causation is speculative. On
the other hand, the R&R recommends finding that the Rehabilitator “produced
expert testimony and analysis that gives a basis from which a jury could
determine damages” and a genuine issue of material fact exists on that issue.
1. 	The Rehabilitator’s Objections to the R&R’s Conclusion that no
Genuine Issue of Material Fact Exists on the Issue of Causation
a. 	The R&R Decision
After an extensive discussion, the R&R recommends finding that PID had
not established that a genuine issue of material fact existed on the issue of but-for
causation because the evidence that it relies on to establish causation is
speculative. (Id. at 25-33.) The R&R concludes that there is “no concrete
evidence as to what actually would have happened but for Eide Bailly’s alleged
negligence.” (Id. at 30-31 (citing testimony of Patrick Cantillo, who stated that if
EB had notified regulators in 2016 of SHIP’s true financial condition, then
“corrective action would have been followed either by management or
regulators,” that “management would have felt compelled to take corrective
action,” but that it would “call for speculation” to comment on what corrective
action would “look like”).) The R&R also states that other expert testimony
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offered by the Rehabilitator was not concrete evidence as to what PID’s course of
action would have been or how it would have exercised its discretion if EB had
issued a modified audit opinion in 2016. (Id. at 31-32 (citing Wrynn’s test.
providing that “the PID was not required to place SHIP in rehabilitation in 2016;
it could have exercised its discretion to begin an investigation instead” (citing Ex.
13 at 24-25, 34); Kuklinski test. that “PID could have exercised its discretion by
taking action other than immediately placing SHIP in rehabilitation” (citing Ex.
10 at 108-09) and stating that Kuklinski calculated damages “on the premise that,
but for Eide Bailly’s failure to perform a proper audit, . . . management and the
PID would have sooner become aware of SHIP’s true financial condition . . . and
would have sooner been placed under PID control or taken other remedial
measures,” which was merely an “opinion based on the premise that SHIP
would have drawn PID’s attention sooner,” and “is not itself evidence of how
PID would have acted” ) (citing Ex. 52 at 9)).)
Relatedly, the R&R also holds that there is no concrete evidence that the
outcome would have been better for SHIP if Eide Bailly had issued a modified
audit report in 2016. (Id. at 32 (noting that although the Rehabilitator states that
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if EB would have reported that SHIP’s risk-based capital level was below 70%,
PID would have been required “to take immediate control of the company by
operation of law,” SHIP expert James Wrynn testified that in that situation, PID
would not have to immediately put SHIP into rehabilitation, but that the
Commissioner could choose a different tool) (emphasis in original).) The R&R
states that given these various options, it is up to the Rehabilitator to “untangle
the multiple decisions that result in a single net-loss figure and explain how that
figure would have changed ‘but for’ some alleged negligence.” (Id. (quoting
Christians v. Grant Thornton, LLP, 733 N.W.2d 803, 813 (Minn. Ct. App. 2007)).)
Accordingly, the R&R concluded that the Rehabilitator’s evidence is
speculative as to what action PID could have taken or even that PID might have
been motivated to act sooner. Therefore, the evidence was insufficient to
establish a genuine issue of material fact regarding causation.
b. The Rehabilitator’s Objections
The Rehabilitator first argues that the R&R rests on an unduly restrictive
view of “but for causation” and applies a causation standard that is inconsistent
with Minnesota law and the summary judgment framework. (Doc. 177 at 3-4.)
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He argues that SHIP is not required to prove with certainty the precise
regulatory action PID or management would have taken absent EB’s
wrongdoing. Rather, it need only present evidence from which a reasonable jury
could conclude that EB’s unqualified 2015 audit was a substantial factor in
delaying intervention and thereby worsened SHIP’s financial condition. (Id. at 4
(citations omitted).) The Rehabilitator states that it has satisfied this burden. (Id.)
The Rehabilitator argues that on summary judgment, he is not required to
eliminate all uncertainty, but need only present evidence that EB’s misconduct
“materially altered the decision-making landscape to the plaintiff’s detriment.”
(Id. at 8 (citing Jerry’s Enters., Inc. v. Larkin, Hoffman, Daly & Lindgren, Ltd.,
711 N.W.2d 811, 819-20 (Minn. 2006)).) He asserts that the injury alleged is not
the failure to impose one specific regulatory outcome at a specific moment, but
rather it is the loss caused by years of regulatory delay (i.e., “SHIP’s argument is
not that PID had only one lawful option, but that [EB’s] negligence foreclosed a
range of earlier and more effective responses that would have narrowed SHIP’s
funding gap”). (Id. at 8-9.)
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The Rehabilitator further argues that the R&R misapplies Minnesota
precedent, citing to Minnesota cases stating that on summary judgment, it is not
the Court’s job to weigh evidence or draw inferences and that fact questions
preclude summary judgment. (Id. at 9 (citations omitted).) Specifically, he
asserts that the facts and evidence in this case are analogous to those of Jerry’s
and therefore the result should be the same.
The R&R discussed this case in depth. In Jerry’s, the Larkin Hoffman law
firm represented Jerry’s Enterprises in the purchase of undeveloped land. 711
N.W.2d at 815. The R&R went on to describe what happened after that:
Part of the agreement included a buy-back option, where the seller
could repurchase the entire property if Jerry’s Enterprises had not
begun construction of improvements within two years of the
purchase. Larkin Hoffman did not discuss the provision with Jerry’s
Enterprises, and the closing documents did not include the buy-back
option. Just over two years after Jerry’s Enterprises purchased the
land, the seller acted to exercise his buy-back option. Jerry’s
Enterprises had to defend against a suit brought by the seller, and
when it lost, paid the seller $4.2m to retain ownership of the
property. Jerry’s Enterprises then sued Larkin Hoffman for
malpractice. The Minnesota Supreme Court determined that Jerry’s
Enterprises had provided enough evidence to create a fact question
as to whether, but for Larkin Hoffman’s alleged negligence, Jerry’s
Enterprises would have obtained a more favorable result in the
transaction. Jerry’s Enterprises argued that if Larkin had informed
Jerry’s of the possible cloud on its title to the property, it would have
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begun construction within the two-year time period and prevented
[the seller] from exercising his buy-back option. The president of
Jerry’s Enterprises testified at trial that had he known of the possible
survival of the buy-back option, Jerry’s would have ensured that the
option was extinguished, either by beginning construction or
otherwise.
(R&R at 29 (brackets in original) (citing Jerry’s, 711 N.W.2d at 815-820).)
c. 	Analysis
The Court disagrees with the Rehabilitator. First, the R&R applies the
proper legal causation standard for a professional malpractice case. Christians v.
Grant Thornton, LLP, 733 N.W.2d 803, 813 (Minn. Ct. App. 2007) (holding that in
a professional malpractice case (auditor malpractice in that instance), the plaintiff
“needed to introduce concrete evidence of what [the plaintiff] would have done
but for [the defendant’s] negligence and what those actions would have
reasonably produced”).
The Rehabilitator distinguishes the instant case from Christians because
the evidence asserted in that case was “paper thin” compared to the
Rehabilitator’s evidence that “identified specific regulatory consequences tied to
statutory insolvency thresholds and showed that PID would absolutely have
acted [and] identified what PID did in 2019 and 2020 when faced with financial
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results exactly like those concealed by Eide Bailly in 2016.” (Doc. 177 at 11.)
However, the Rehabilitator’s expert Patrick Cantilo testified that he could only
speculate as to how the PID might have responded to a different EB audit result.
(Ex. 3 (Cantilo Dep.) at 37-39.) In addition, Expert Wrynn testified that “a
modified [audit] report in and of itself . . . would not be enough to put someone
right into rehabilitation or liquidation. . . . I never said that in my report. . . . That
is not my opinion.” (Ex. 13 (Wrynn Dep.) at 13; see also Ex. 10 (Kuklinski Dep.) at
184-85 (the 100% rate increase acceptance rate was an “assumption” to simplify
damages calculations), 108-09 (PID had discretion to take action other than
immediately placing SHIP into rehabilitation); Ex. 8 (Harris Dep.) at 292-93
(Harris accepted the 100% assumption for calculation purposes without opining
as to whether all insureds would have agreed to this).)
For the reasons articulated in the R&R, this case can be distinguished from
Jerry’s. The business owner in Jerry’s articulated a specific course of action that
he would have taken had he known about the buy-back provision. 7ll N.W.2d at
820. To the contrary, the Rehabilitator’s experts only provide opinions about
actions that the PID could have taken had EB issued a modified audit opinion in
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2016 because the PID was not required to put SHIP into rehabilitation in 2016.
The menu of options the experts state that PID and SHIP could have chosen and
the outcomes are too speculative. There is nothing in the record establishing that
PID would have exercised its discretion to immediately put SHIP into
rehabilitation if EB had issued a modified audit report in 2016 or exercised its
discretion to take any other action.3
For all the reasons articulated in the R&R, this objection is overruled.
2. 	Eide Bailly’s Objection to the R&R’s Conclusion that a
Genuine Issue of Material Fact Exists on the Issue of SHIP’s
Damages
Despite finding that “the Rehabilitator’s proffered damages evidence
amounts to speculation [as to] how quickly SHIP would have entered
rehabilitation, how quickly the rehabilitation would have progressed, and how
quickly its newly calculated premium increases could have been approved, and
how quickly those new premiums would have generated revenue,” the R &R
3 This discussion does not even mention the variables potentially introduced by
actions taken internally by SHIP management such as cutting costs or other
measures because the R&R does not discuss these variables. (See Doc. 178 (EB’s
Resp. to Obj. to R&R) (discussing measures SHIP might have taken).)
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concludes that the Rehabilitator “produced expert testimony and analysis that
gives a basis from which a jury could determine damages.” (R&R at 35 (citing
Unique Sys., Inc. v. Zotos Int’l, Inc., 622 F.2d 373, 378 (8th Cir. 1980) (stating that
“[t]he law does not require mathematical precision in the proof of loss but only
proof to a reasonable, although not necessarily absolute, certainty”).)
Therefore, the R&R concluded that the Rehabilitator had demonstrated
that a genuine issue would exist for a trier of fact to conclude what damages
SHIP has suffered. (Id.) This made no difference, however, to the ultimate
recommendation to grant EB’s motion for summary judgment because there
exists no genuine issue of material fact on the issue of causation.
EB objects to this finding, arguing that it “cannot be squared with the
R&R’s correct finding that SHIP’s alleged damages are impermissibly
speculative.” (Doc. 176 at 2 (emphasis omitted).)
Speculative, remote, or conjectural damages are not recoverable at
law. A claimant must present competent evidence sufficient to
permit a jury to conclude not only that the defendant’s negligence
caused damages, but evidence tending to show what would have
been the outcome had the negligence not taken place. . . . There is
no general test for determining whether damages are remote or
speculative, so these matters are generally left to the judgment of the
district court. The law does not require mathematical precision in
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proof of loss, but only proof to a reasonable, although not
necessarily absolute, certainty.
Courts apply this as best they can under the circumstances of each
case. When a plaintiff improperly attributes all losses to a
defendant’s illegal acts, despite the presence of significant other
factors, the evidence does not permit a jury to make a reasonable
and principled estimate of the amount of damage. The claimant
must produce evidence that would permit reasonable jurors to reach
a nonspeculative conclusion about damages. Damages claims based
on “sheer speculation” and an “unsubstantiated, self-serving
prediction” of foregone profits are not recoverable. Additionally,
Minnesota law does not recognize deepening insolvency as a theory
of damages.
(R&R at 33-34 (citations omitted) (cleaned up).)
EB asserts that SHIP proffers no admissible evidence, evidence from
people with first-hand knowledge for example,
that a different audit result would in fact have caused [PID] to force
SHIP into immediate rehabilitation, that the Pennsylvania courts
would then in fact have promptly approved a rehabilitation plan
involving rate increases, and that SHIP’s insureds would then in fact
have started paying massive new rates on an accelerated timeframe.
(Doc. 176 at 3 (emphasis in original).) EB states that even SHIP’s own regulatory
expert, James Wrynn, rejects these claims. (Id. (citing Doc. 142 at 14-15).) Thus,
EB states that SHIP lacks evidence from which a trier of fact could assess and
award damages and EB is entitled to summary judgment on this issue. (Id. at 4.)
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The Rehabilitator responds that the R&R recognized that its experts Carl
Harris and Lisa Kuklinski “used recognized actuarial methodologies, industry
data, and SHIP-specific experience to quantify damages.” (Doc. 179 at 3.) The
experts “supported their conclusions with long-standing industry approaches to
rate increase modeling and reserve adequacy,” which is not “the kind of
conjectural or ‘self serving prediction’ rejected in cases cited by Eide Bailly and in
the R&R.” (Id. & n.2 (citing Christians, 733 N.W.2d 803; Sievert v. First Nat’l
Bank in Lakefield, 358 N.W.2d 409 (Minn. Ct. App. 1984)).)
The Rehabilitator argues that disagreements with these assumptions about
timing, regulatory response, and policyholder behavior and EB’s competing
theory of how damages should be calculated is the kind of difference of opinion
that should be resolved at trial. (Id. at 3-4 (citing Olson v. Naymark, 225 N.W.
275, 275 (1929) (“When a breach is committed [the law] is inclined to accept the
challenge of the wrongdoer that damages cannot be ascertained; and within
reasonable limits it will make an effort to ascertain them through the jury or
other tribunal trying facts. For that purpose there are courts and juries”).
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In Christians, the Minnesota Court of Appeals rejected a trustee’s claim for
“[possible] lost profits . . . if it can be determined that a successful reorganization
under Chapter 11 would have been feasible had the case been filed shortly after
receipt of accurate audited financial statements in 1997.” 733 N.W.2d at 812
(ellipses in original). The court held that “[w]ithout a reasonable prediction of
what Technimar’s financial results would have been but for Grant Thornton’s
alleged malpractice, the trustee’s claims are too remote or speculative.” Id.
(citations omitted). Likewise, in Sievert, the Court reversed a damages award
because, inter alia, many of the damages were too uncertain and speculative. 358
N.W.2d at 415. The damages rejected on these grounds were not supported by
any expert testimony. Accordingly, these cases are not directly on point with our
case in which SHIP’s damages claims are supported by expert evidence.
That being said, although the Court agrees with the R&R that this is a close
issue, the Court disagrees with the R&R’s conclusion that despite that SHIP and
its experts speculate as to how quickly all the following relevant events would
have happened, if at all: 1) SHIP would have entered rehabilitation; 2) the
rehabilitation would have progressed; 3) its newly calculated premium increases
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could have been approved, and 4) those new premiums would have generated
revenue, SHIP’s experts still proffer testimony and analysis containing a
sufficient basis from which a jury could determine damages. (R&R at 35.)
After conducting a de novo review of the record, the Court is convinced
that SHIP’s damages rest on unsupported speculation that the listed actions
could have happened. The experts are not unified in their opinions as to when or
whether these actions would have occurred. Rather, the speculative nature of the
evidence that all of these things could have happened or, as the Court discussed
regarding causation, that some other series of things could have happened,
means that a trier of fact cannot assess and award damages. While the Court
realizes that proof of loss need only be established to a reasonable, although not
necessarily absolute, certainty, the evidence before the Court is too speculative to
satisfy even that standard. See Unique Sys., 622 F.2d at 378.
Accordingly, the Court sustains this objection. Summary judgment will be
granted with this modification.
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3. 	In Pari Delicto
The equitable doctrine of in pari delicto is an equitable defense that
“embodies the principle that a plaintiff who has participated in wrongdoing may
not recover damages resulting from the wrongdoing.” (R&R at 23 (quotation
omitted).) In Minnesota, the defense bars recovery “when the plaintiff’s fraud
was no less than that of the defendant.” (Id. (quotations omitted).)
The parties disagree as to how the Rehabilitator, who was appointed
under Pennsylvania law, should be treated under Minnesota law and whether
the in pari delicto defense applies. (Id. at 24.) The R&R did not resolve the issue
because it decided summary judgment on other grounds. (Id. at 25.)
The Rehabilitator asserts that the R&R properly declined to expand
Minnesota jurisprudence on the in pari delicto defense. (Doc. 179 at 5-7.) EB
agrees that the Court need not reach this issue if it grants EB summary judgment
on other grounds. (Doc. 176 at 5.) Thus, the Court declines to reach this issue.
IV. 	ORDER
Based upon the files, records, and proceedings herein, IT IS HEREBY
ORDERED:
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1. 	The Court ADOPTS as modified the Report and Recommendation of
United States Magistrate Judge Shannon G. Elkins dated January 31,
2026 [Doc. 175];
2. 	Plaintiff Eide Bailly’s Motion for Summary Judgment [Doc. 92] is
GRANTED as detailed herein;
3. 	Plaintiff Eide Bailly’s Motion to Exclude the Proffered Expert
Testimony of Carl Harris [Doc. 97] is DENIED;
4. 	Plaintiff Eide Bailly’s Motion to Exclude the Proffered Expert
Testimony of Lisa Kuklinski [Doc. 102] is DENIED;
5. 	Plaintiff Eide Bailly’s Motion to Exclude the Proffered Expert
Testimony of James Wrynn [Doc. 107] is DENIED; and
6. 	Defendant Michael Humphreys’ Motion to Exclude Expert Testimony
of Tucker, Gustafson, and Cohen [Doc. 117] is DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: March 31, 2026 	s/Michael J. Davis
Michael J. Davis
United States District Court
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