Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

In the first trial, a jury found in favor of Aunt Sally’s on all claims and awarded civil penalties. United Fire moved for a new trial, and the court granted its request but only to determine the period of restoration and the quantum of the business income loss at one of the stores.

During the second trial, Aunt Sally’s CEO testified about Aunt Sally’s business, the damages incurred, its efforts to recover from the storm and the potential net income of the store had Katrina not occurred. The CEO’s testimony was the only evidence introduced by Aunt Sally’s to support its loss of income claim during the second trial. United Fire objected alleging that the CEO’s testimony was improper speculation, but the trial court overruled its objection, holding that the CEO’s testimony was permissible lay opinion testimony. After a long procedural battle, a jury again returned a verdict for Aunt Sally’s and awarded additional damages and penalties. United Fire appealed the second jury award challenging the sufficiency of the evidence to support the jury’s verdict, among other issues.

In its published opinion, the Fifth Circuit stated that:

It is well-settled that a business owner or officer who has personal knowledge of the facts may testify as to the business prospects of that business. See Versai Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729, 737 (5th Cir. 2010) (permitting a business’s president to testify as to the losses in income as a result of a hurricane); see also Texas A&M Research Found. v. Magna Transp., Inc., 338 F.3d 394, 403 (5th Cir. 2003) (citing with approval Miss. Chem. Corp. v. Dresser-Rand Co., 287 F.3d 359, 373-374 (5th Cir. 2002) (holding that a corporation’s director of risk management could testify to lost profits)).

Here, it is evident from the record that, as CEO, Simoncioni had personal knowledge of Aunt Sally’s business prospects and could properly testify as to Aunt Sally’s potential net income. That Simoncioni’s testimony was based on new investments in equipment rather than purely historical figures does nothing to change that conclusion. In fact, the only case on which United Fire relies supports the propriety of Simoncioni’s testimony. In DIJO Inc. v. Hilton Hotels Corp., 351 F.3d 679 (5th Cir. 2003), this court found that a financial consultant who was not an employee or officer of the company at issue could not offer lay testimony as to the company’s value. In so holding, the court observed that Federal Rule of Evidence 701 does not “place any restrictions on the . . . practice of allowing business owners or officers to testify based on particularized knowledge derived from their position.” DIJO, 351 F.3d at 685. Therefore, there was no error in permitting Simoncioni to testify.

I believe this opinion is consistent with the recent holdings of the Fifth Circuit in Catlin Syndicate Limited v. Imperial Palace, No. 09-60209, 2010 WL 9008731 (5th Cir. March 15, 2010) and Consolidated Companies, Inc. v. Lexington Insurance Company, No. 09-30178 (5th Cir. August 17, 2010) where although the Court declined to consider post loss market conduct in business income losses, the court has also held that an insured is “not required to draw a bright line in its evidence between loss stemming from property damage and loss stemming from market conditions.”