UNITED STATES CO URT OF APPEALS FOR THE TENTH CIRCUIT

PAUL MORTON, Plaintiff-Appellant,

v. PROGRESSIVE NORTHERN INSURANCE COMPANY, Defendant-Appellee. No. 11-6082 (D.C. No. 5:09-CV-01406-W) (W.D. Okla.)

ORDER AND JUDGMENT *

Before TYMKOVICH , HOLLOWAY , and MATHESON , Circuit Judges.

While boating over a Memorial Day week end, Paul Morton’s boat motor was damaged, he claims from a submerged object. His insu rer, Progressive Northern Insurance Company, concluded the dama ge was caused by wear and tear and mechanical failure, and refuse d to pay for the repair. Morton sued Progressive for breach of duty to deal fairly and to act in good faith. A jury found in favor of

* After examining the briefs and appella te record, this pa nel has determined unanimously to grant the parties’ request for a decision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctr ines of law of the case, res judicata, and collateral estoppel. It may be cite d, however, for its persuasi ve value consistent with Fed. R. App. P. 32.1 a nd 10th Cir. R. 32.1. FILED United States Court of Appeals Tenth Circuit 

### October 10, 2012 Elisabeth A. Shumaker Clerk of Court- 2 - Progressive. Mr. Morton appeals, challe nging several of the district court’s evidentiary rulings and its grant of Progr essive’s motion for a ttorneys’ fees. We first address Progressi ve’s motion to dismiss th e appeal as untimely. Mr. Morton filed his notice of appeal af ter the thirty-day deadline imposed by Fed. R. App. P. 4(a)(1)(A), a fact that would normally deprive us of jurisdiction to entertain his appeal, see Bowles v. Russell , 551 U.S. 205, 21 4 (2007). But Mr. Morton filed a timely Motion for Exte nsion of Time to File Appeal under Fed. R. App. P. 4(a)(5), which allows th e district court to extend the deadline for filing a notice of appeal if “a party so moves no later than 30 days after the time prescribed by this Rule 4(a) expires; and . . . that part y shows excusable neglect or good cause.” Fed. R. A pp. P. 4(a)(5)(A). Mr. Morton’s counsel stated that his wife , who is his law firm ’s sole secretary and paralegal, was the victim of an as sault and battery afte r the conclusion of Mr. Morton’s trial, and the distractions caus ed by that crime and her related injuries and medical treatment negativel y affected his law firm such that he filed an untimely new trial motion in this matter . Had that motion been timely filed, the time to file the appeal would have been tolled. The distri ct court carefully c onsidered all of the factors articulated by the Supreme Court as relevant to determin ing whether a motion to extend should be granted, see Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship , 507 U.S. 380, 395 (1993), and fou nd that Mr. Morton had established excusable neglect. The distri ct court granted the extensi on of time, and accepted the- 3 - notice of appeal as timely fi led. We conclude the distri ct court’s extension of time did not constitute a “cl ear abuse of discretion,” Romero v. Peterson , 930 F.2d 1502, 1505 (10th Cir. 1991), and, accordingly, that Mr. Morton’s notice of appeal was timely filed. Thus, we deny Progressive’s mo tion to dismiss this appeal for lack of jurisdiction. For the reasons set forth below, we affirm. BACKGROUND Mr. Morton was boating with friends wh en they felt a jolt and the boat stopped. A portion of the boat motor was br oken. Mr. Morton asked a friend and his son to repair his boat. Several weeks la ter, Mr. Morton called Progressive to report the claim. Progressive’s claims adjustor, Moha mmad Qazi, investig ated the claim by looking at photographs of the boat’s parts and speaki ng with Mr. Morton and his friend. Mr. Qazi had been taught in his training that if a boat had hit a submerged object, there would be a trail of damage on the boat’s lower unit. The photographs of the boat’s parts and lower unit showed no trai l of damage, and he testified that the person who made the repairs told him there had been no damage to the lower unit or the propeller. From this, Mr. Qazi concluded the dama ge to the motor part was caused by wear and tear and mechanical failure, not by hitting a submerged object. Mr. Qazi’s supervisors concurred after revi ewing the results of his investigation. Because damage to the boat caused by mech anical failure or wear and tear is excluded from coverage, Progressive denied Mr. Morton’s claim.- 4 - Mr. Morton brought suit in Oklahoma stat e court, but Progre ssive removed the action to federal court. Afte r a four-day trial, a jury fo und in favor of Progressive. Mr. Morton appeals, claiming the district court erred in admitting or excluding certain evidence and in awarding Progressive its attorney fees. DISCUSSION A. Claims of Evidentiary Error We review the district court’s decision to admit or exclude evidence, including expert witness testimony, fo r an abuse of discretion. James River Ins. Co. v. Rapid Funding, LLC , 658 F.3d 1207, 1213 (10th Cir. 2011) . “A trial court’s decision will not be disturbed unless this Court has a de finite and firm convi ction that the trial court has made a clear erro r of judgment or exceeded the bounds of permissible choice in the circumstances.” Ralston v. Smith & Nephew Richards, Inc ., 275 F.3d 965, 968-69 (10th Cir. 2001) (internal quotation marks and a lterations omitted). 1. Exclusion of Opinion Testimony Mr. Morton first contends the district court erred in ruling the two men who repaired the boat could not te stify about their opinion as to what caused the damage to his boat motor. The district court ru led that such causation testimony required scientific or specialized kno wledge and, because Mr. Mort on did not list either of the men as expert witnesses, th eir causation testimony must be excluded. We find no error in the district court’s exclusion of the propos ed testimony as to causation.- 5 - It is undisputed that Mr. Morton did not disclose th e repair men as expert witnesses as required by Fed. R. Civ. P. 26(a)(2). Mr. Morton identified one of the men in his initial discovery di sclosures as a fact witness who would testify about his examination and repair of the motor, but he did not identify the ot her as a witness. After the deadline passed for disclosing expe rt witnesses, Mr. Morton added the other man to his final pretrial w itness list to testify that th e boat’s damage was caused by impact. Further, it appeared from the or iginally listed witness’s deposition that he was going to offer the same opinion testimo ny. Progressive move d to strike this causation testimony for failure to comply w ith Rule 26(a)(2). The district court granted the motion, ruling that the two me n could give factual testimony about what they observed on the boat and what they re paired, but could not offer any opinion as to what they concluded, opined or guessed from those observations. The consequence of failing to comply with Rule 26(a)(2) is the mandatory exclusion of the expert’s testimony unless th e failure was substantia lly justified or is harmless. Fed. R. Civ. P. 37(c)(1). The “duty to disclose a witness as an expert is

not excused when a witness who w ill testify as a fact witness and as an expert witness is disclosed as a fact witness.” Tribble v. Evangelides , 670 F.3d 753, 759 (7th Cir. 2012). “Without proper disclosu res, a party may miss its opportunity to disqualify the expert, retain rebuttal experts, or hold de positions for an expert not required to provide a report.” Id . at 759-60.- 6 - But Mr. Morton argues that he was not re quired to disclose the men as expert witnesses under Rule 26(a )(2) because, as the boat m echanics who repaired his motor, they were lay witne sses testifying as observers of the cause of the damage. He argues the district court should theref ore have admitted their causation testimony under Fed. R. Evid. 701. Under Rule 701, lay witnesses may give opinion testimony on ly if the opinion is “(a) rationally based on the witness’s perception; (b) helpful to clearly understanding the witness’s tes timony or to determining a f act in issue; and (c) not based on scientific, technical, or other sp ecialized knowledge within the scope of [expert testimony] Rule 702.” Id . “Rule 701 ‘does not permit a lay witness to express an opinion as to matters which are beyond the realm of common experience and which require the special skill and knowledge of an e xpert witness.’” James River , 658 F.3d at 1214 (quoting Randolph v. Collectramatic, Inc ., 590 F.2d 844, 846 (10th Cir. 1979)). Rule 701 only “allows lay witnesses to offer observations that are common enough and require a limited amount of expertise, if any.” Id . (internal quotation marks and alteration omitted). “[T]he type of evid ence contemplated by . . . Rule 701 relates to th e appearance of persons or th ings, identity, the manner of conduct, competency of a pe rson, degrees of li ght or darkness, so und, size, weight, distance, and . . . items th at cannot be described fa ctually in words apart from inferences.” Id . (internal quotation marks omitted).- 7 - We conclude that the dist rict court reasonably ruled that the determination of what caused the damage to Mr. Morton’s boa t motor is a matter which is beyond the realm of common experience and required technical, sp ecialized knowledge and professional training. See James River, 658 F.3d at 1214-15. Progressive presented evidence that knowledge of what causes fail ure and damage to bo ats and boat motors requires specialized training and knowledge , which the men admitted they did not have. Because the two men we re not present when the da mage occurred, they could not provide any factual te stimony about the incident based on their own personal knowledge, only their inferences and gue sses. They had no personal knowledge of the boat’s speed or location, the lake bottom, or weather conditions at the time of the incident. In sum, the district court did not abus e its discretion in excluding the proposed causation testimony under Fed. R. Civ. P. 37(c)(1) and Fed. R. Evid. 701(c). 2. Evidence of Morton’s Use of Racial Epithets Mr. Morton claims the district court s hould have excluded, as irrelevant and prejudicial, evidence that he called Mr. Qazi racially o ffensive names. Mr. Morton argues the racial-epithet evidence was not relevant because he was not on trial and does not owe his insurer any duty of good faith . Further, he asse rts the prejudicial effect of depicting hi m as prejudiced outweighe d any relevance. A Progressive manager testified in he r deposition that after Mr. Qazi told Mr. Morton that Progressive was denying his claim, Mr. Morton called her to- 8 - complain, during which he referred to Mr. Qazi using a racial epithet and called him “a terrorist and demanded that [Mr. Qazi] go back to his own country” and that he should never have been here to begin with. Aplee. Su ppl. App., Vol. VIII, at 1741- 42. Mr. Morton filed a pre-trial motion in lim ine seeking to excl ude this evidence under Fed. R. Evid. 401, 402 and 403. Pr ogressive argued this evidence was relevant to counter Mr. Morton’s allegations that Mr . Qazi made him feel like an insurance cheat and laughed at Mr. Mort on’s spouse. The district court denied Mr. Morton’s motion in limine, and the manager’s deposition was read to the jury. Progressive asserts that Mr. Morton failed to preserve this issue for appellate review because he did not renew his object ion when the deposition was read to the jury. We disagree. Because the district court definitiv ely ruled on the admissibility of this evidence, Mr. Morton was not obligated to renew his objection at trial. Fed. R. Evid. 103(b) (“Once the court rules defi nitively on the record--either before or at trial--a party need not rene w an objection or offer of pr oof to preserve a claim of error for appeal.”). Exclusion of evidence under Rule 403 is an extraordinary remedy that should be used sparingly. World Wide Ass’n of Specialty Programs v. Pure, Inc ., 450 F.3d 1132, 1139 (10th Cir. 2006). Absent a clear abuse of discretion, we defer to the district court as to whet her the probative value of evidence is substantially outweighed by the danger of unfair prejudice, because the district court is familiar- 9 - with the full array of evidence in the case. Id . Based on our review of the record and the trial transcript, we find no abuse of disc retion. Mr. Morton testified that Mr. Qazi did not help with Mr. Morton’s claim; inferred Mr. Morton was a liar; treated Mr. Morton like a cheat; lied about his conve rsation with a repa ir man; and laughed when Mr. Morton’s wife asked him to spell his name. Further, Mr. Morton introduced evidence about hi s own character and credib ility; testified he did not recall calling Mr. Qazi any names; and de nied that he refe rred to Mr. Qazi’s Middle Eastern national origin. The evidence is therefore at least marginally relevant to rebut Mr. Morton’s character and credib ility evidence as well as to rebut his characterization of his intera ctions with Mr. Qazi and ot her Progressive employees. We do not find the district court’s Ru le 403 balancing to be arbitrary or irrational. 3. Testimony of Ms. La ir and Mr. Benton Next, Mr. Morton claims the district court abused its di scretion in denying several of his evidentiary obj ections at trial. First, Ms. Lair, a certified marine investigator and Progressive’s corporate trainer, testifie d she trains claims handlers that they need not interview every passenger on a boat at the time of an incident. In her experience, these witn esses are unable to discern the difference between mechanical failure of the engine versus hi tting a submerged object . She was asked to provide the reasons for this training, giving relevant personal and professional experiences.- 10 - Mr. Morton’s counsel objected to he r describing any of her personal experiences, but gave no reason for his obj ection. On appeal, Mr. Morton contends that Ms. Lair’s personal-experience te stimony was an unfair surprise. Progressive disclosed that Ms. Lair would testify about how to properly investigate a boat-related insurance claim. Ms. Lair’s descri ptions of both her personal and professional expe riences supported her asser tion that interviewing boat passengers was not necessary in a claim’s investigation because mechanical failure feels the same to a passenger as hitting a submerge d object. Mr. Morton did not explain the basis of his objection to Ms. Lai r’s personal experience s, and the district court cannot be expected to know the basis of an evidentiary obj ection if it is not stated. See Fed. R. Evid. 103(a)(1)(B) (requiring the party to state the specific ground of objection, if the specific ground was not appare nt from the context). The district court did not abuse its di scretion in denying this objection. Next, Mr. Benton, an indepe ndent investigator and ma rine surveyor, testified that in the three-to-four t housand claims he had investig ated, he had never taken a recorded statement of a mech anic because the boat parts tell the story. Although Mr. Morton now claims on appeal this te stimony was an unfair surprise, we see no objection to this testimony by Mr. Morton’s c ounsel in the trial tr anscripts. Nor do we discern any pl ain error. Mr. Benton also testified that Progressive ’s training materials were superior to other insurance companies’ tr aining materials that he ha d seen. Progressive then- 11 - sought to introduce the traini ng materials of another insu rer. Mr. Morton objected to the admission of this exhib it because it was not informa tion Progressive relied upon in denying his claim, citing Buzzard v. Farme rs Insurance Co. , 824 P.2d 1105, 1109 (Okla. 1991) (“The knowledge and belief of the insurer during the time period the claim is being reviewed is th e focus of a bad-faith claim.”) . The district court denied the objection, and allowed the exhibit to be admitted, but allowed Mr. Benton to express his opinion only as to these materials co mpared to Progressive’s. Again, we conclude the district court did not abuse its discretion in admitting this exhibit. Based upon our review of the record and the trial transcript, it is clear that Mr. Morton based much of his bad-faith cl aim on his allegation that Progressive’s investigation fell below industry standards. The training material of another insurer was therefore properly-adm itted rebuttal evidence. B. Award of Attorney Fees Mr. Morton also contends the distri ct court should not have awarded Progressive attorneys’ fees as a prevailing party under Okla . Stat. tit. 36, § 3629(B) because the “core element” of his case was not the insured loss. In diversity cases, an award of attorneys’ fees is a substantive legal issu e determined by state law. N. Tex. Prod. Credit Ass’n v. McCurtain Cnty. Nat’l Bank , 222 F.3d 800, 817 (10th Cir. 2000). We revi ew the district court’s le gal conclusions regarding attorneys’ fees de novo and the reasonableness and amount of the award for abuse of discretion. Id

.- 12 - Under the Oklahoma Insurance Code, th e statute authorizing awards of attorneys’ fees to the prev ailing party states in part: It shall be the duty of the insure r, receiving a proof of loss, to submit a written offer of settlement or rejecti on of the claim to the insured within ninety (90) days of re ceipt of that proof of loss. Upon a judgment rendered to either party, costs and attorney fees shall be allowable to the prevailing party. For purposes of this section, the prevailing party is the insurer in those cases where judgment does not exceed the written offer of settlement. Okla. Stat. tit. 36, § 3629(B). Mr. Morton argues that Progressive ma y not recover attorneys’ fees under § 3629(B) because the primary focus of hi s claim was not the benefits he sought under the insurance policy, but his damages for the anger, embarrassment and mental and emotional distress caused him by Progres sive’s unreasonable i nvestigation of his claim. But as the district court correctly recognized in awarding § 3629(B) fees to Progressive, Oklahoma courts have clearly held that “[r]ecovery authorized by § 3629(B) embraces bot h contract-and tort-related theori es of liability so long as the ‘core element’ of the damages sought . . . is composed of the insured loss.” Taylor v. State Farm Fire & Cas. Co ., 981 P.2d 1253, 1256 (Okla. 1999). Mr. Morton’s complaint asserted that Progr essive wrongfully denied hi s insurance cl aim and acted in bad faith by denying the benefits he was entitled to under the insurance policy, and he sought damages, “inc luding, but not limited to, [the] lo ss of insurance benefits.” Aplt. App., Vol. 1, Ex. 2, at 3-5. Further, it is undisputed that he had to prove that Progressive was required to pay his insura nce claim under the insurance policy to- 13 - prevail on his bad-faith claim. Thus, the r ecord supports the district court’s ruling that the insured loss was a core element of Mr. Morton’s claim. Mr. Morton also argues that after he notif ied Progressive of his claim, it did not send him a proof of loss form and, ther efore, Progressive did not comply with § 3629(A), which states that “[a]n insurer shall furnish, upon wr itten request of any insured claiming to have a loss under an in surance contract issu ed by such insurer, forms of proof of loss for completion by such person.” The district court rejected this argument, relying upon our holding that any notice of a claim that the insurance contract requires satisf ies any proof of loss re quirement in § 3629. Regional Air, Inc. v. Canal Ins. Co ., 639 F.3d 1229, 1235-36 (10th Cir. 2011) (“ if a proof of loss is a predicate to recovery under § 3629, it is a requirement easily me t: an insured need only provide the kind of noti ce its policy requires for r eceiving coverage.” (citation omitted)). Progressive did not require a written pr oof of loss form fr om Mr. Morton and Mr. Morton did not ask Progressi ve to provide him with one. We find no error in the district court’s holding th at Progressive complied wi th the terms of § 3629. The judgment of the dist rict court is AFFIRMED.

Entered for the Court
Timothy M. Tymkovich Circuit Judge