2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-20-2014

Arch Insurance Company v. Carol & Dave's

Roadhouse, Inc.

Precedential or Non-Precedential: Non-Precedential

Docket No. 13-2631

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Recommended Citation

"Arch Insurance Company v. Carol & Dave's Roadhouse, Inc." (2014). 2014 Decisions. Paper 511.

http://digitalcommons.law.villanova.edu/thirdcircuit_2014/511
NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT 

_____________

No. 13-2631

_____________

ARCH INSURANCE COMPANY

As Subrogee of 

FAIRFIELD TOWNSHIP 

VOLUNTEER FIRE COMPANY NO. 1,

 Appellant

v.

CAROL & DAVE’S ROADHOUSE, INC.;

v.

DEAN CALDWELL

_____________

 

On Appeal from the United States District Court

for the Western District of Pennsylvania 

District Court No. 2:11-cv-00801

District Judge: The Honorable Terrence F. McVerry

 

Submitted Pursuant to Third Circuit L.A.R. 34.1(a)

May 13, 2014

Before: SMITH, VANASKIE, and SHWARTZ, Circuit Judges

(Filed: May 20, 2014)
2

 

_____________________

 OPINION

_____________________ 

SMITH, Circuit Judge.

Arch Insurance Company (“Arch”) filed this subrogation action against 

Carol & Dave’s Roadhouse, Inc. (“Carol & Dave’s”), seeking to recover damages 

in the amount of insurance benefits that Arch paid to its insured, Fairfield 

Township Volunteer Fire Company No. 1 (“Fairfield”), after a fire destroyed a 

building on Fairfield’s premises. Arch alleges the fire was caused by the negligent 

actions of Carol & Dave’s employees, who were catering a wedding reception in 

Fairfield’s fire hall. While attempting to light a stove in the fire hall’s kitchen, 

Carol & Dave’s employees opened the valve of a propane gas line that was 

uncapped and not connected to any kitchen appliance. On a subsequent attempt to 

light the stove, the escaping propane ignited, causing a fire which ultimately 

destroyed the building.

During the course of this litigation, Arch made a self-executing disclosure 

on March 27, 2011, listing its damages, including $563,158.28 (actual cash value 

(“ACV”) of the building); $126,525.39 (personal property); and $3,825.00 (extra 

expense). On October 24, 2012, Arch filed a pretrial statement listing the 

replacement cost of the building ($1,309,268.03) as its measure of damages instead 

of the ACV. 
3

Prior to trial, Carol & Dave’s filed a motion in limine asking the Court to 

permit Arch to present evidence only as to the building’s ACV as set out in the 

March 27, 2011 disclosure, and to not allow evidence as to the building’s 

replacement cost. The District Court granted the motion on February 19, 2013, 

concluding that, under Babich v. Pittsburgh & New England Trucking Co., 563

A.2d 168 (Pa. Super. Ct. 1989) and other Pennsylvania authorities, the proper 

measure of damages for a destroyed building is the decrease in fair market value 

(“FMV”) of the property. The Court rejected Arch’s argument that this case fell 

within the exception recognized in Pennsylvania Department of Transportation v. 

Estate of Crea, 483 A.2d 996, 1001 (Pa. Commw. Ct. 1997) (allowing plaintiff to 

use replacement cost for collapsed bridge because there was no “value in the 

market place” for a public bridge that is a component part of a highway system).

Jury selection was originally scheduled for March 11, 2013, but was 

postponed after the District Court learned that significant unresolved issues 

remained as to the measure of damages and the evidence which could be produced 

to establish those damages. Arch contended it should be permitted to introduce 

evidence as to the repair cost of the building and argued that the burden of proof 

would then shift to Carol & Dave’s to show that the FMV was less than the cost of 

repairs. Alternatively, Arch argued it should be allowed to present the testimony of 

Fire Chief Kevin Stiffler (“Stiffler”) to establish the FMV of the building. 
4

Carol & Dave’s responded to Arch’s arguments and also moved for partial 

summary judgment on the damages issue, arguing that Arch had failed to produce 

any evidence that would be admissible for the purpose of establishing the 

building’s FMV. On April 16, 2013, the District Court issued an order consistent 

with its February 19, 2013 decision, and held that Arch would be limited to 

recovery of the reduction in FMV of the destroyed building. The Court rejected 

Arch’s “novel burden-shifting theory,” noting that Arch “has the burden to prove 

its damages.” The Court further held that Stiffler would be able to testify as to the 

building’s FMV only “if Arch is able to lay a proper foundation as to his 

knowledge of the real value of real estate in the vicinity[] and his particular 

knowledge of the value of the Fairfield building before and after the fire.” The 

Court then instructed Arch to file a “proffer of Fire Chief Stiffler’s qualifications to 

testify as to FMV.” 

Arch filed the requested proffer on April 26, 2013. Arch claimed that Stiffler 

would testify that the replacement cost of the structure was $1,309,268.03, and that 

this amount should be reduced by 50 percent for depreciation, resulting in a FMV 

of $654,634.01. In addition to the fact that this proposed calculation began with the

building’s replacement cost, which the District Court had previously rejected as a 

basis for damages, the proffer did not demonstrate that Stiffler possessed any 

knowledge of real estate in the area, nor did it explain how he was qualified to 

assign a percentage of depreciation. 
5

In view of these deficiencies, on May 7, 2013, the District Court issued an 

order stating that “Stiffler will not be permitted to testify as to the FMV of the 

Fairfield Fire Company building.” Because Arch had not presented any other 

evidence establishing the FMV of the building, the District Court granted partial 

summary judgment in favor of Carol & Dave’s on the claim for damages to the 

building. The case then proceeded to trial and the jury found Carol & Dave’s to be 

55% negligent for the fire. The jury awarded damages only for personal property 

and extra expenses in amounts that were stipulated to by the parties before trial. 

Arch timely appealed.1

We find no error in the District Court’s refusal to allow Fire Chief Stiffler to 

testify regarding the FMV of the destroyed property. Under Pennsylvania law, 

three types of witnesses may testify as to the market value of damaged property: 

(1) the owner of the property, (2) expert witnesses, or (3) persons with knowledge 

and experience qualifying them to form a reasonably intelligent judgment as to 

value. Westinghouse Air Brake Co. v. City of Pittsburgh, 176 A. 13, 15 (Pa. 1934). 

Arch asks us to treat Stiffler as an “owner” of the Fairfield building, which would 

lower the burden for admissibility because owners may testify as to a property’s 

 

1

The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have 

jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. We review a district court’s 

evidentiary rulings for abuse of discretion, Donlin v. Philips Lighting N. Am. Corp., 581 

F.3d 73, 80 (3d Cir. 2009), including its admissions or exclusions of evidence, United 

States v. Versaint, 849 F.2d 827, 831 (3d Cir. 1988), and admissions of lay opinion 

testimony, United States v. Stadtmauer, 620 F.3d 238, 260 (3d Cir. 2010). Our review of 

the District Court’s interpretation and application of Pennsylvania law is plenary. Salve 

Regina Coll. v. Russell, 499 U.S. 225, 239 (1991).
6

value despite not “possess[ing] all the qualifications that would be required of 

others who testify as to value.” Id. But Stiffler is not the building’s owner, and we 

see no reason to treat him as such. Arch has not identified any authority 

establishing that Stiffler’s qualifications should be evaluated under the more 

lenient standard applied to individuals with an ownership interest. The District 

Court did not abuse its discretion by requiring Arch to demonstrate that Stiffler 

possessed the requisite qualifications before allowing him to testify regarding the 

building’s FMV. Because Arch failed to lay the proper foundation, the District 

Court acted properly in excluding Stiffler’s testimony.

2

Further, the District Court did not err by limiting Arch’s recovery to the 

FMV of the building instead of its replacement cost. Pennsylvania law is clear that 

“the measure of damages for injury to property is the cost of repairs where that 

injury is repairable; however, where the injury is characterized as permanent [as 

when a building is completely destroyed], the measure of damages becomes the 

decrease in the fair market value of the property.” Babich, 563 A.2d at 170. 

“Repair and replacement costs are irrelevant when the damage is permanent, only 

the reduction in market value can be considered.” Id. The exception to this rule 

recognized in Crea and Pennsylvania Department of General Services v. United 

 

2 Arch also contends that Stiffler should have been permitted to testify as a person 

with knowledge and experience qualifying him to form a reasonably intelligent judgment 

as to value. See Westinghouse, 176 A. at 15. Arch’s proffer, however, fails to show that 

Stiffler had knowledge or experience concerning the actual FMV of the building or the 

values of similar property in the area. Therefore, the District Court correctly barred him 

from testifying about the building’s FMV.
7

States Mineral Products Co., 898 A.2d 590, 599 (Pa. 2006), is inapplicable 

because this is not a situation where there is no value in the market place for the 

destroyed property.

The FMV was the appropriate measure of damages for the building 

destroyed in the fire. Due to its litigation decisions, Arch failed to produce any 

admissible or competent evidence to establish a market value for the building. 

Without the necessary evidence, the District Court acted appropriately in granting 

partial summary judgment in favor of Carol & Dave’s. For these reasons, we will 

affirm.