James River Insurance v. Rapid Funding, LLC
658 F.3d 1207
| 10th Cir. | 2011Background
- Fire destroyed a dilapidated Michigan apartment complex (Amsterdam Gardens). Rapid Funding sought $3 million under its insurance policy with James River; James River denied the claim, deeming pre-fire value negative. Rapid Funding sued in federal court for breach of contract and bad faith; jury awarded $3 million compensatory and $2.35 million punitive damages. Miller valued the North Building at $4.489 million pre-fire using a 40% depreciation based on replacement-cost estimate; James River moved to exclude this testimony. Colorado’s new 10-3-1116 statute, enacted Aug. 5, 2008, provides double benefits for unreasonable denial or delay, and relates to a post-statement claim. District court admitted Miller’s lay testimony; jury credited Miller’s figures alongside other lay and expert testimony. Post-trial motions contested Miller’s testimony’s admissibility and potential remittitur; court denied, then this appeal followed. The district court ultimately held Miller’s testimony inadmissible under Rule 701(c) and remanded for a new damages trial; Colorado’s 10-3-1116 claim was dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of Miller’s valuation testimony | Miller testified as lay witness to explain his claim amount | Testimony relied on specialized knowledge and should be excluded | Testimony inadmissible under Rule 701(c); reversible error. |
| Do Rule 701(c) and Colorado law conflict in diversity case? | Colorado landowner rule justifies lay valuation | Federal Rule 701(c) controls in diversity; no direct collision | No direct collision; Rule 701(c) applies; reversal warranted. |
| Whether admission of Miller’s testimony was harmless error | Other evidence supported damages without Miller | Admissibility error could have influenced the verdict | Error not harmless; requires new trial on damages. |
| Whether Colorado’s C.R.S. § 10-3-1116 applies retroactively or to post-8/5/2008 bad-faith acts | Statute applies to post-enactment bad-faith acts | Statute not retroactive and not triggered by pre-enactment denial | Statute not retroactive; dismissed as to new damages; remanded for damages only. |
Key Cases Cited
- Bryant v. Farmers Insurance Exchange, 432 F.3d 1114 (10th Cir. 2005) (lay vs. expert opinion on math operations)
- LifeWise Master Funding v. Telebank, 374 F.3d 917 (10th Cir. 2004) (Rule 701(c) not admit expert-like testimony as lay testimony)
- Sims v. Great American Life Insurance Company, 469 F.3d 870 (10th Cir. 2006) (application of original Federal Rules in diversity cases; rules Enabling Act context)
- Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) (framework for federal-rule/state-law conflict under Rules Enabling Act)
- Erie R.R. v. Tompkins, 304 U.S. 64 (1938) (state substantive law governs in federal diversity cases)
- Hanna v. Plumer, 263 U.S. 460 (1965) (Rules Enabling Act governs when to apply federal rules vs. state law)
- Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993) (reliability standards for expert testimony)
- United States v. Contreras, 536 F.3d 1167 (10th Cir. 2008) (standard for abuse of discretion in evidentiary rulings)
- James River Ins. Co. v. Rapid Funding, LLC, 648 F.3d 1134 (10th Cir. 2011) (opinion's core holdings summarized herein)