SNR Denton on James River Insurance Co v. Rapid Funding, Inc.: Inadmissible Expert Opinions May Not Be Presented as Lay Opinions

William Barker   By William T. Barker, Partner, SNR Denton

Expert opinions are admissible only if they satisfy usually stringent standards.  But lay opinions are admissible in some circumstances.  In James River Insurance Co v. Rapid Funding, Inc., 658 F.3d 1207 (10th Cir. 2011), an insurance bad faith case, the Tenth Circuit held that inadmissible expert opinions may not be presented as lay opinions.  This commentary examines the case.

The key contested issue was the actual cash value of a dilapidated apartment building that was destroyed by fire.  The principal of the company that owned the building sought to testify as to its value.  The district court concluded that, as an expert opinion, his testimony lacked the foundation and reliability required by Daubert.  But it allowed the testimony as lay opinion, cautioning the jury that it was not an expert opinion.  The Tenth Circuit reversed and remanded.

As the commentary explains,

"The question that must be posed prior to the admission of any expert evidence is whether, on balance, the evidence will be helpful to the finder of fact." Helpfulness depends upon "whether the subject is within the knowledge or experience of the average individual." However, "it is not necessary that the subject of the testimony be so erudite or arcane that the jurors could not possibly understand it without the aid of expert testimony, nor is it a requirement that the subject be beyond the comprehension of each and every juror." "This 'helpfulness standard' also implicates Rule 403 considerations, since if the evidence is confusing or unfairly prejudicial it will hinder rather than aid jury decision making."

The Federal Rules of Evidence implement the requirement of helpfulness by precluding expert testimony unless "(1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case."  But they also permit certain lay opinion testimony.  As the court explained:

Rule 701 allows lay witnesses to offer "observations [that] are common enough and require ... a limited amount of expertise, if any." The Third Circuit has explained:

The prototypical example of the type of evidence contemplated by the adoption of Rule 701 relates to the appearance of persons or things, identity, the manner of conduct, competency of a person, degrees of light or darkness, sound, size, weight, distance, and an endless number of items that cannot be described factually in words apart from inferences.

But, as explained in the commentary, the testimony at issue here was not a permissible lay opinion.

William T. Barker is a member of SNR Denton's Insurance Litigation & Coverage Practice Group and practices in the firm's Chicago office.  He has a nationwide practice in the area of complex commercial insurance litigation, including coverage, claim practices, sales practices, risk classification and selection, agent relationships, and regulatory matters. He is the co-author, with Ronald D. Kent of THE NEW APPLEMAN INSURANCE BAD FAITH LITIGATION, SECOND EDITION and with Charles Silver of the forthcoming PROFESSIONAL RESPONSIBILITIES OF INSURANCE DEFENSE COUNSEL; he has written over 100 published articles on insurance and litigation subjects.  He has been described as "[t]he leading lawyer commentator" on the relationships between insurance and civil procedure.  Charles Silver & Kent Syverud, The Professional Responsibilities of Insurance Defense Lawyers, 45 Duke L.J. 255, 257 & n.4 (1995).  He is an Adviser to the American Law Institute project on Principles of the Law of Liability Insurance.  He is a member of the EDITORIAL BOARD OF THE NEW APPLEMAN ON INSURANCE LAW LIBRARY EDITION and THE NEW APPLEMAN INSURANCE LAW PRACTICE GUIDE.  He is Editorial Board Director and Senior Contributing Editor of INSURANCE LITIGATION REPORTER and a member of the Board of Editors of DEFENSE COUNSEL JOURNAL.

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